Sally Clark

Following Turnbull’s resignation in 2015, the university discovered its spend on cleaning products increased from around £48,000 per year in 2005 to more than £800,000 annually over a decade. Turnbull had authorised a spend of £1.2m for Johar’s company, Universal Solutions (International) Limited, despite the fact that another company has been providing these supplies with a substantially lower budget.

The cleaning goods ordered by Turnbull, who has since died, were not required by the university and were rarely delivered. The court proceedings reported how Johar received an 8% commission on escalating sales with the institution while Mr Turnbull received gifts, vouchers and hospitality. When police searched his North Berwick home, they discovered gift cards, vouchers, iPads, iPhones and Apple watches all linked to the fraudulent scheme.

The court heard how Johar and Turnbull took advantage of lax financial controls at the university in a case which provides a stark warning to larger companies and public sector bodies about the prevalence of procurement fraud and the particular risk it poses. There are, however, a number of relatively simple yet effective measures which can be implemented to minimise the risk to this type of crime.

Firstly, it’s essential for employers to be aware of potential indicators of fraud including whether any of their procurement colleagues appear to favour a particular supplier over others. It’s also important to have effective processes in place to confirm that goods or services ordered dovetail with what is actually delivered.

Procurement policies and procedures are put in place for good reason so it’s key that these are followed. It’s important for employers to scrutinise how companies find their way onto preferred suppliers lists with supporting documentation and transparency over who took this decision and why.

When it comes to procurement, it’s important that too much power doesn’t lie in the hands of one person as they could be targeted by fraudsters. Ideally, the individual who decides which suppliers they will appoint should be different to the person placing the orders and confirming receipt of goods or services.

Examining spending patterns and ensuring these are in line with anticipated projections is another key aspect of good procurement practice. This can help ensure that supplier orders will not exceed a tender threshold unless there is a bona fide reason for doing so.

An effective whistleblowing policy can also encourage colleagues to come forward and raise any potential concerns about fraudulent practices before they escalate.

Whilst business and public sector bodies will seek to avoid becoming victims, the organisations providing services to them must also ensure their own house is in order, particularly since the Economic Crime and Corporate Transparency Act 2023 (ECCTA) came into law in 2023. Under this legislation, a supplier could find itself guilty of any fraudulent activity carried out by one of its employees.

The ECCTA covers a wide list of relevant offences beyond fraud including theft, embezzlement, money laundering and other offences perpetrated under the sanctions regime. It also covers attempts, conspiracies to commit, aiding, abetting and counselling or procuring the commission of a relevant offence. These measures apply to companies incorporated within or beyond the UK, as well as to partnerships formed in the UK and some that are formed abroad.

While this case involving University of Edinburgh pre-dates the ECCTA, employers should take heed of it, both as a reminder of the threat of procurement fraud within their own companies or organisations and of the legal sanctions they could now face as suppliers of goods or services.

Prosecutors and investigating bodies alike will be looking further in their investigations. Even if there is a rogue agent acting within an organisation, it’s likely their investigations will cover greater detail focused on what an individual was authorised to do, what part of the business they presided over and whether this represented a substantial part of their employer’s business. This will inherently involve consideration of the wider business interests of the company or organisation to determine the level of responsibility of an employee who carried out a fraudulent offence.

These factors combined with the type of offence under consideration will ultimately determine whether a company or organisation’s directors or officers might also find their conduct under scrutiny. Should this lead to a prosecution, it could result in a fine, director disqualification and, in extreme cases, imprisonment.

It is therefore essential for employers to understand the risks they face under ECCTA legislation and ensure they take appropriate measures to weed out the potential for fraudulent activities to be carried out under their name.

Sally Clark is an Of Counsel and legal specialist advising in corporate & financial crime at law firm CMS