DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS

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1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Mohammed Shahjahan Heard on: Wednesday, 11 January 2017 Location: The Chartered Institute of Arbitrators, 12 Bloomsbury Square, London, WC1A 2LP Committee: HH Suzan Matthews QC (Chairman), Mr John Hamilton (Accountant) and Ms Lorna Jacobs (Lay) Legal Adviser: Mr Richard Ferry-Swainson Persons present and capacity: Mr Mohammed Ismail (ACCA Case Presenter) Ms Pamella Ramphal (Hearings Officer) Observers: Mrs Rosalind Wright (Appointments Board Member) INTRODUCTION 1. The Disciplinary Committee ( the Committee ) convened to consider two Allegations against Mr Shahjahan. The papers before the Committee were in three bundles numbered 1 to 265, 266 to 272 and 273 to 279. In addition there was a Service Bundle numbered 1 to 13. Mr Shahjahan was present and unrepresented. Mr Ismail appeared on behalf of ACCA.

2 PRELIMINARY MATTERS 2. At the outset of the hearing Mr Ismail made an application to amend the Allegations by withdrawing Allegation 1 in its entirety, to withdraw Allegation 2(b)(i) and to amend Allegation 2(b)(ii) to reflect the correct paragraph of the 2010 Rules. He explained that the reasons for this application were as follows. He said that Allegation 2 was an alternative to Allegation 1. In relation to Allegation 1, Mr Ismail said this case arose because of a complaint made by a client of Mr Shahjahan, Client A. He said that the case had recently undergone a review by in-house counsel at ACCA, it previously having been dealt with by external counsel. At that review it was apparent that what was in conflict was what Mr Shahjahan claimed took place and what Client A claimed took place. He said it was clear that the complaint by Client A was not supported by documentary evidence and he is now a convicted fraudster, whereas Mr Shahjahan was able to produce some documents relating to the dishonesty. He said the most relevant was the letter he faxed to Barclays on 12 October 2010 shortly after he had drafted the letter on 27 September He said that looking at the chronology of the case, Mr Shahjahan s acquittal in the Crown Court and on the point raised by Mr Shahjahan there appeared to have been some confusion about what prompted his letter to the bank putting the loan on hold. There had been an erroneous note made at ACCA that it had only followed after police contacted Mr Shahjahan, but in fact they only got in touch in March 2011, a considerable time after Mr Shahjahan had been in touch with the bank to stop the loan. Mr Ismail said that ACCA accepted that the Officer who made that note was wrong. He said that in light of all these reasons ACCA had considered the relevant legal test and were of the view that the more meritorious allegation was the alternative allegation. 3. On the issue of objectivity in Allegation 2(b)(i), Mr Ismail said that following a simple examination of the relevant requirements ACCA did not believe this allegation to be meritorious. He said there was no issue of bias or conflict of interest and although there was possibly a case of undue influence, ACCA considered there were no reasonable prospects of that being found proved.

3 4. Mr Ismail said that the issue in relation to Allegation 2(b)(ii) was no more than a typographical error with the wrong paragraph of the Rules being quoted. 5. Mr Shahjahan did not object to the applications. 6. The Committee considered the applications with care and accepted the advice of the Legal Adviser. It noted the reasons for the withdrawing of certain of the Allegations and accepted the reasons provided by Mr Ismail for this proposed course. The application to amend Allegation 2(b)(ii) was a minor change and did not affect the gravamen of the charge. In all the circumstances the Committee decided to allow all the requested amendments, which clearly did not prejudice Mr Shahjahan in the conduct of his defence. ALLEGATIONS/BRIEF BACKGROUND 7. Mr Shahjahan faced the following Allegations (as amended): Allegation 2 (a) On 27 September 2010 Mr Shahjahan failed to ensure the accuracy of the information, as set out in Schedule A, in a reference he submitted to Barclays Bank in support of a 4,000,000 (four million) loan application on behalf of Client A. (b) Mr Shahjahan's conduct in relation to 2(a) above was contrary to the Fundamental Principal of Professional Competence and Due care, paragraph 15(b) as applicable in (c) By reason of his conduct in respect of 2(a) and 2(b) above Mr Shahjahan is liable to disciplinary action pursuant to bye-law 8(a)(iii).

4 Schedule A 1. That Mr Shahjahan had been acting in connection with Client A s (business and offshore income) affairs since The net income of Client A declared by his off shore (Business, Rentals and other Investment) income was 610,000 for 2008/ For 2009/2010 the income was 690, That the above income has been steady for the last 4 years and increasing year by year. 5. Client A s shareholding in various ompanies as follows: Company A 35% Company B 30% Company C 50% 8. Mr Shahjahan was the sole practitioner at Shahjahan & Co ("the Firm") and held a Practising Certificate with ACCA from 2004 to 27 September On 23 September 2010, Client A retained Shahjahan & Co. It is unclear as to what exact work was to be undertaken on behalf of Client A but, according to Mr Shahjahan s account, he requested Mr Shahjahan to produce six years worth of accounts and to send a letter to a bank. On 23 September 2010, Client A signed and dated an HM Revenue & Customs Form allowing Mr Shahjahan to act as his agent. 10. On 24 September 2010, Client A sent an to Mr Shahjahan at 11:20 hours simply stating "hi this is the letter". Mr Shahjahan replied the same day asking for payment of invoices that were attached to the and providing his Firm's bank details. 11. On 27 September 2010, Client A responded to this asking that the letter be sent by fax to Ms B at Barclays Bank and then the invoices would be paid. A letter from Mr Shahjahan dated 27 September 2010 was then sent to Barclays bank with a handwritten comment that it was for the

5 attention of Ms B. The letter to Barclays Bank appeared to be a reference letter for Client A in support of a loan application for 4 million and included the following statement: "We have been acting in connection with our client's (business & off shore income) affairs since 2006 While we believe the above facts to be true but accept no liability arising on the basis of this information or for future activities of our client. 12. On the same date, Mr Shahjahan sent an to Client A saying the following: "Hi [Client A], Please the encloser [sic]. M Shahjahan" 13. There is no confirmation of what the 'enclosed' document was, although the Committee was invited to infer that it was a copy of the letter sent to Barclays. A comparison between the letter sent from Client A by to Mr Shahjahan and the letter Mr Shahjahan signed and faxed to Barclays Bank show them to be materially identical in content. The letter sent by Mr Shahjahan to Barclays Bank also included the following details relating to Client A: "Our client's net income declared by his off shore (Business, Rentals and other Investment) income was 610,000 for 2008/2009. For 2009/2010 income was 690,000. This income has been steady for the last 4 years and increasing year by year. Shareholding in various other companies of our above client is as follows: Company A 35% Company B 30% Company C 50%." 14. On 12 October 2010, Mr Shahjahan faxed a handwritten letter to Ms B at Barclays Bank asking the bank to "Please stop the loan ( 4m) process for the above client until further notice.

6 15. On 2 March 2011, Mr Shahjahan was interviewed by Leicestershire Police Force regarding his involvement in a possible mortgage fraud involving Client A and Barclays Bank. In the record of the interview, Mr Shahjahan confirmed that he had sent the letter to the bank, dated 27 September 2010, and that he had not carried out the necessary checks to confirm whether the information contained within the letter was accurate. Mr Shahjahan also confirmed that the statement within the letter stating he had acted for Client A since 2006 was not correct and that he had only met him a few weeks prior to the letter being sent. 16. Mr Shahjahan said his basis for stating he had acted for Client A since 2006 was that he had been instructed to prepare his 6 years accounts. In the police interview, Mr Shahjahan accepted that he had not seen any evidence that Client A did in fact own the shareholdings referred to above. 17. Mr Shahjahan confirmed that he was unable to confirm the share-holding position independently as, at that time, he did not have access to the records at Companies House. In relation to the stated income of Client A, Mr Shahjahan did not provide any clear answer as to how he obtained these figures other than from the information Client A had passed to him. 18. On 16 August 2011, ACCA were informed by Leicestershire Police that criminal charges were to be brought against Mr Shahjahan because of the information contained within the letter of reference he sent to Barclays Bank. Mr Shahjahan was subsequently charged with a single criminal allegation of: "Dishonestly make false representation to make gain for self/another or cause loss to other/expose other to risk for the period of 27/08/2010 to 12/11/2010" 19. On 17, 18 and 19 June 2014, Mr Shahjahan gave evidence at Leicester Crown Court and the Committee was provided with a transcript. On 18 June 2014, Mr Shahjahan accepted in evidence that he was not Client A s accountant in 2006 but rather he was, or would be, processing Client A s accounts from that year onwards and therefore denied trying to mislead the bank or that he lied to the bank. In relation to the answers that Mr Shahjahan provided to the police in interview, he stated that his answers

7 had effectively been misinterpreted and that the true position was the account he gave at court. 20. On 24 June 2014, the jury returned a not guilty verdict against Mr Shahjahan. Client A was also prosecuted and on 5 September 2014 pleaded guilty to one offence of fraud and two offences of converting criminal property. He received a sentence of five years imprisonment. Mr Shahjahan s case 21. In correspondence with ACCA, Mr Shahjahan said he relied on the shareholding amounts provided to him by Client A. He said that Client A provided bank statements that evidenced a few hundred thousand pounds were coming in every month. He also said that after a period of lack of contact with Client A he then wrote to Barclays Bank and told them to put a stop on the loan process on 12 October In a letter to ACCA dated 5 May 2015, Mr Shahjahan said that he was engaged by Client A to do his 4 years accounts and 2 years selfassessment. Fees were agreed and Mr Shahjahan thought that Client A would be a valued client. Client A then demanded a bank mortgage letter relating to buying his buy-to-let property. Mr Shahjahan suggested writing the letter once he had done the necessary accounts. However, Client A kept pressurising him into writing the letter, including by saying he would lose his business if he could not arrange the mortgage with Barclays Bank. Mr Shahjahan said that eventually, having been continuously pressurised by Client A to draft the bank letter, he reluctantly decided to do so. In his view the letter was basic and the bank would revert to him for more information, asking for at least two years accounts and reports. Mr Shahjahan thought that once he had such a response he could show it to Client A and explain that he had carried out his instructions but that the bank requested further information. He felt that in this way he would not upset his client and could show that it was not him who was holding up the application. 23. Mr Shahjahan said that after sending the letter on 27 September 2010, Client A disconnected his phone and he could no longer contact him. Having

8 waited for the promised documents, which did not arrive, he decided to write to Barclays Bank to stop the loan process. 24. Mr Shahjahan maintained that although he said we have been acting" for Client A for 4 years, what he meant was that he was doing Client A s accounts from 2006 onwards. With reference to the income referred to in the letter, Mr Shahjahan said that this information came from Client A and because at the time of writing the letter he had not been able to verify the figures he added the disclaimer While we believe the above facts to be true but accept no liability arising on the basis of this information or for future activities of our client. 25. On 10 January 2017 ACCA received a document from Mr Shahjahan entitled Statements of defence. In that document Mr Shahjahan largely repeated what he had written in the 5 May 2015 letter. In the context of the allegations made by ACCA against him he said, I do not agree that I deliberately included any false or misleading information to bank as I submitted to bank what my client provided me with honest and believe. He said that what he did was a mistake, which he rectified. He added, At the end [Client A] complained against me to ACCA by creating a false story and resulting him jail for minimum 5 years. Mr Shahjahan said that he had to go through the criminal investigation for a number of years which had ruined his professional career, despite the fact that he used his best efforts to stop the loan process as soon as he realised the truth. He said he was deeply saddened by the way in which he had been treated. He wanted ACCA to allow him to re-instate his Practice Certificate and to acquit me from the case. 26. Mr Shahjahan provided copies of his spreadsheet summaries of the Company B bank statements which he said Client A had provided him with and which, he said, showed the movements of significant funds into a particular bank account, which he believed to be linked to Client A. 27. In oral evidence before the Committee Mr Shahjahan maintained the same account.

9 DECISION ON FACTS/ALLEGATIONS AND REASONS 28. The Committee considered carefully all the evidence together with the submissions made by Mr Ismail and Mr Shahjahan. The Committee accepted the advice of the Legal Adviser. The Committee bore in mind that it was for ACCA to prove its case on the balance of probabilities, not for Mr Shahjahan to prove his innocence. 29. In relation to Allegation 2 Mr Shahjahan, by his own admission in his police interview, had not had an opportunity to ensure the accuracy of most of the information contained within the letter. He said he had only been acting for Client A for a very short time and that, although he had requested the records necessary to verify the information in the letter, he had not seen or received any documents other than a few bank statements. He was asked the question, At the point of sending this letter had you carried out the necessary checks to confirm that the information contained in the letter was true and accurate to the best of your knowledge? He answered, No I didn t. At that time no. He was also asked, You are a professional accountant with a duty to confirm what you are saying is correct according to your client s accounts. You have made a statement to Barclays Bank that the information you ve provided to them is correct. Do you agree with this? He answered, Yes. He was also asked, Have you carried out any checks to confirm that [Client A] has offshore holding in any of the companies he claims that he owns? He replied, I didn t have access to companies house to confirm the share holdings. 30. In oral evidence to the Committee, however, he said that he did not agree with all of what was in the police interview record. He said it was done at his home and the Officer wrote it, it was not recorded and he was effectively forced to sign each page by the Officer who said that if he didn't sign then he would be arrested and taken to the police station. He said he had not complained to the police about this behaviour but he did raise it at his trial, and this was supported in the Crown Court transcript. Mr Shahjahan said that he relied on his clients for information and that was the primary source of information. He said that in this instance he had secondary evidence too, provided by a third party, namely HSBC bank in the form of statement for Company B, provided by the client. Those bank statements showed that in a

10 few months the account received over 11 million pounds. From those bank statements he said he was able to determine that Client A had the ability to pay the monthly mortgage payments of 8,500. In addition it was a buy-tolet mortgage so Client A would also have the benefit of rental income. 31. When cross examined he said that the document he provided was not in fact the bank statements but rather his analysis of the bank statements. He said that the original bank statements were taken by the police. When asked by the Committee what evidence he had to link Company B to the client, he accepted it was only the client s word that such was the case. He said you have to believe your client. He added that if the bank required more information they would come back to him and ask for more detail. He maintained that he had done sufficient to ensure the accuracy of the information at the time and focused on the client s ability to pay the mortgage. 32. The Committee did not accept Mr Shahjahan s account that he had done enough. It was clear to the Committee that Mr Shahjahan had been happy to simply import Client A s suggested draft into his own letter and to send it to the bank without appropriately verifying its contents. On his account he relied heavily on what this recent client told him and also focussed on bank statements that he believed supported Client A s ability to pay the mortgage requested. However, his analysis of the bank statements did not show any link to Client A, nor did they provide any analysis of his outgoings. Mr Shahjahan had not carried out any steps to verify the net incomes that were quoted in the letter, nor had he carried out any steps to verify Client A s shareholding in the three companies named. Furthermore, by essentially simply copying the draft sent to him by Client A, Mr Shahjahan failed to verify the accuracy of the statement,"we have been acting in connection with our client's (business & off shore income) affairs since 2006, which was inaccurate because Client A had only been a client for a matter of days, not years. 33. On the evidence before it the Committee was satisfied that Mr Shahjahan had sent the letter of reference to the bank without ensuring the accuracy of its contents. He failed to undertake the necessary and basic checks to

11 ensure the accuracy of the reference. The Committee thus found Allegation 2(a) proved. 34. The Committee also found Allegation 2(b) proved. By failing to ensure the accuracy of the information contained within the letter which he drafted (albeit largely a copy of what Client A had suggested he write), Mr Shahjahan had not acted in accordance with the Fundamental Principle of Professional Competence and Due care. That Principle requires a professional accountant to act diligently in accordance with applicable technical and professional standards when providing professional services. Diligence encompasses the responsibility to act in accordance with the requirements of an assignment carefully, thoroughly and on a timely basis. By not ensuring the accuracy of the contents of the letter Mr Shahjahan had not acted diligently at all, in fact quite the opposite. He had allowed his eagerness to satisfy Client A, and his acceptance of Client A s representations, to compromise his professional judgement, which would have been to ensure the accuracy of the contents of the letter he was sending to the bank. The Committee is satisfied that as a professional accountant Mr Shahjahan would have been well aware of the influence such a letter written in these terms on the headed notepaper of a Chartered Certified Accountant could have. 35. Having found Allegations 2(a) and (b) proved it follows that by his conduct Mr Shahjahan was liable to disciplinary action pursuant to bye-law 8(a)(iii) and the Committee therefore found Allegation 2(c) proved. SANCTIONS AND REASONS 36. In reaching its decision on sanction, the Committee took into account all the evidence and the submissions made by the parties, together with all matters of personal mitigation. The Committee also referred to the Guidance for Disciplinary Sanctions issued by ACCA. The Committee had in mind the fact that the purpose of sanctions was not to punish Mr Shahjahan, but to protect the public, maintain public confidence in the profession and maintain proper standards of conduct, and that any sanction must be proportionate. The Committee accepted the advice of the Legal Adviser.

12 37. The Committee took into account the following mitigating factors: previous unblemished record; the long time from the end of the Crown Court trial to today s hearing and the delay in withdrawing the more serious charges of dishonesty, lack of integrity and misconduct; the error of the ACCA Officer in April 2011 who stated that Mr Shahjahan tried to withdraw the letter due to the police contacting him, which ACCA accepted was wrong; the letter Mr Shahjahan sent to the bank to stop the loan; cooperation with ACCA throughout the investigation and attendance at this hearing. 38. The Committee took into account the following aggravating factors: lack of insight into the need and importance of accurately verifying financial information in a reference letter sent to a bank by a professional accountant; lack of remorse; the size of the loan being sought. 39. The Committee did not think it appropriate to take no further action in this case. Mr Shahjahan had failed to verify the accuracy of financial statements he made in a letter to a bank on behalf of a client seeking a loan of 4million. The Committee considered it would not be in the public interest to take no further action in a case where an accountant had acted contrary to the Fundamental Principle of Professional Competence and Due Care in this way. 40. The Committee considered an admonishment, where a number of the factors referred to in the Guidance for Disciplinary Sanctions are present, namely: evidence of no loss or adverse effect on members of the public; an isolated incident. However, the Committee was concerned about the continued complete lack of insight demonstrated by Mr Shahjahan, who did not accept that he should have done more to ensure the accuracy of the letter he had sent to the bank, nor did he indicate that he would act differently if faced with the same set of facts again. The Committee therefore decided that an admonishment was not an appropriate sanction. 41. The Committee considered whether to reprimand Mr Shahjahan, but felt unable to do so because of the complete lack of insight and remorse. The Committee considered this aggravated the seriousness of the breach

13 because of the very real concern that if faced with the same circumstances again, Mr Shahjahan may well behave in the same way. 42. In all the circumstances the Committee decided to severely reprimand Mr Shahjahan. This was an isolated incident in an otherwise unblemished career. Mr Shahjahan has been through a difficult time with the Crown Court trial and has then had to wait a long time before ACCA decided to withdraw the most serious allegations he faced. However, had he, in 2010, refused to send the professional reference letter until such time as he had verified the accuracy of its contents, then doubtless, in light of the fact that Client A was a fraudster, the letter would never have in fact been sent. Banks and other institutions rely on professional accountants to provide them with accurate information. This reference was sent with a view to facilitate a significant loan. By sending this letter without verifying its contents Mr Shahjahan had acted recklessly and without due regard for the consequences. The Committee considered that in order to maintain public confidence and uphold proper standards in the profession it was necessary to send out a clear message that this sort of behaviour would not be tolerated. 43. The Committee did consider whether to exclude Mr Shahjahan from membership of ACCA, but decided that such a sanction would be disproportionate in all the circumstances considered by the Committee today. 44. The Committee revoked the Interim Suspension Order that had been in place. COSTS AND REASONS 45. ACCA applied for costs in the sum of 4,210, however Mr Ismail accepted that the case litigated today was significantly less than was originally alleged following the withdrawal of Allegation 1. However, it was, he said, still correct for ACCA to have brought this matter and that some costs ought therefore to be awarded. Mr Shahjahan provided a statement of his financial position and told the Committee he has been suspended as a member of ACCA and thus unable to practise and he has very little income. He said that he was thus not in a position to be able to pay any costs.

14 46. The Committee considered the sum requested needed to be reduced to reflect ACCA s decision to withdraw the most serious charges of dishonesty, lack of integrity and misconduct and also to reflect Mr Shahjahan s limited means. The result of the Crown Court trial was known in June The Committee considered it most unsatisfactory that the decision to withdraw the serious charges did not occur until the actual hearing some two and a half years after the result of the Crown Court trial was known. Mr Shahjahan has also been suspended from membership of ACCA for some time. That said the case was quite rightly brought and, on Allegation 2, found proved and therefore it was appropriate that a costs order reflected this. The Committee therefore reduced the sum and decided to make an order in the sum of 1,250. EFFECTIVE DATE OF ORDER 47. This order will come into effect at the expiry of the normal appeal period. HH Suzan Matthews QC Chairman 11 January 2017