Mr Paul Skarbek of St Albans, United Kingdom CIMA Disciplinary Committee Meeting held on 23 November 2017 References in this decision to Regulations are to those in the Institute s Royal Charter, Byelaws and Regulations (reprint July 2015) and references to Rules are to the Institute s Disciplinary Committee Rules 2015, in both cases unless otherwise stated. The Charges 1. CHARGE 1 1.1 Mr Skarbek was a registered Member of CIMA. 1.2 He was Director of Verulam Business Services Limited. 1.3 In 2016, Verulam Business Services Ltd provided accountancy services to South West Uniforms Ltd and the company s Directors Mr Joseph Arafa and Mrs Katherine Arafa 1.4 Following termination of his engagement, Michael Trigg Accounting Ltd (trading as Bibbys) was instructed to act as accountants and tax advisors to the above named clients. In December 2016 and in January 2017, Bibbys requested him to provide professional clearance and working papers used for the preparation of the 2015 accounts and tax computations for South West Uniforms Ltd. Bibbys followed those requests with emails and telephone calls on multiple occasions. 1.5 Mr Skarbek failed to respond to any of Bibbys requests. 1.6 Amongst other matters, his failure to respond caused uncertainty regarding the tax position of all three clients. 1.7 By reason of the above, it was alleged that he was guilty of misconduct as defined by Byelaw 1 of the Institute s Royal Charter Byelaws and Regulations (July 2015), as failure to comply with the Laws of the Institute in that your actions constitute a breach of the fundamental principles of the Code of Ethics (January 2015). In particular it is alleged that your actions breached the following principles set out in that Code: (a) Professional Competence and Due Care (section 100.5 (c) and 130), which require you to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent
professional services based on current developments in practice legislation and techniques and act diligently and in accordance with applicable technical and professional standards ; and (b) Professional Behaviour (section 100.5 (e) and 150), which require you to comply with relevant laws and regulations and avoid any action that discredits the profession 2. CHARGE 2 2.1 When providing services to South West Uniforms Ltd, Mr Joseph Arafa and Mrs Katherine Arafa, Mr Sarbek was not registered as a member in practice, and did not hold a valid practicing certificate. 2.2 By reason of paragraph 2.1 above, it was alleged that he was guilty of misconduct as defined by Byelaw 1 of the Institute s Royal Charter Byelaws and Regulations (July 2015). In particular, he had failed to comply with the laws of the institute by breaching: (a) Regulation Part I.12, Member in Practice Rules 4 and 12 (September 2012 and June 2016 versions) which, among other matters, require all members providing accounting services to clients to be registered as a member in practice and to hold a current practicing certificate issued by the Institute; and (b) the Fundamental Principles of the Code of Ethics (January 2015), in particular: (i) Integrity (sections 100.5(a) and 110), which require you to be straightforward and honest in all professional and business relationships ; and (ii) Professional behavior (sections 100.5 (e) and 150), which require you to comply with relevant laws and regulations and avoid any action that discredits the profession The Decision (1) Preliminary Matters The Panel decided the following preliminary matters: Mr Skarbek was neither present nor represented. The Presenting Officer produced comprehensive evidence as to service, including a file of correspondence addressed to Mr Skarbek. He informed the Panel that nothing had been heard from Mr Skarbek. The Panel was satisfied that the Respondent had been served with a notice of hearing in accordance with the Disciplinary Committee Rules, a notice of hearing, containing the required information was dispatched by recorded delivery post to the address on CIMA s database and by
email, to several email addresses known to CIMA on 16 October 2017, more than 35 days ago. In considering whether to proceed in the absence of the member, the Panel bore in mind that this discretion must be exercised with great care. In exercising the discretion, the fairness to the member is of primary importance. But fairness to CIMA and the interests of the public must also be taken into account. The Panel noted that Mr Skarbek had not engaged with CIMA s processes and appeared to have ignored all of its attempts to communicate with him. The recorded delivery postal copy of the notice was not delivered; however, copies were sent by email to three email addresses. One of the emails was bounced but the other two appear to have been delivered. There had been earlier email communications to Mr Skarbek by email, which also appear to have been accepted by the receiving email server. Given the efforts that had been made to notify Mr Skarbek of the hearing, the Panel considered it very likely that he was aware of it. The Panel concluded that he had chosen not to attend the hearing. The Panel decided that no purpose would be served by postponing this hearing and it was in the public interest that the charges be dealt with without undue delay. The Panel therefore determined to proceed in Mr Skarbek s absence. (2) Findings of Fact The Panel found that the facts alleged in the Charges were proved on the balance of probabilities. The Panel s decision is as follows: This matter was brought to CIMA s attention by a complaint in or about February 2017, made by Mr Trigg of Michael Trigg Accounting Limited. He had been approached by and later instructed by Mr and Mrs Arafa to act as accountants and tax advisors in relation to their affairs and those of their company, South West Uniforms Limited. The existing accountant was Mr Skarbek, through his company, Verulam Business Services Limited. Mr Trigg claimed to have tried to contact Mr Skarbek numerous times to seek professional clearance and obtain information about the affairs of their mutual clients, but without any response. Following the complaint CIMA formed the view that at the relevant time Mr Skarbek was not registered as a member in practice. The Panel was provided with a bundle of documents, including witness statements from Mr Trigg and Ms Melanie Jagusch of CIMA, each with exhibits. There were also Companies House records, tax papers and correspondence from CIMA s files. The Panel accepted the witness statements of Mr Trigg and Ms Jagusch as their evidence. None of the evidence had been challenged and the Panel accepted it. The Panel made the following findings in relation to the charges:
Paragraph 1.1: this was proved by CIMA s records. Paragraph 1.2: this was proved by Companies House records. Paragraph 1.3: this was proved by the evidence of Mr Trigg and the unaudited accounts of South West Uniforms Limited for the year to 30 September 2015 prepared by Verulam Business Services Limited. Paragraph 1.4: this was proved by the evidence of Mr Trigg and the documents he produced. Paragraph 1.5: the evidence of Mr Trigg established that numerous attempts were made to contact Mr Skarbek in relation to professional clearance and the affairs of his clients. The Panel considered that Mr Skarbek s duties as a professional accountant required him to respond appropriately to letters about his clients affairs from persons apparently entitled to make such enquiries. Mr Hara drew the Panel s attention to paragraph 210 of CIMA s Code of Ethics, which required an accountant who had been asked to replace another accountant to seek certain information from the existing accountant. Mr Trigg, as a chartered accountant, would have been under such a duty and Mr Skarbek would have known this. The Panel considered that he was under a duty to respond to Mr Trigg s letters in a timely manner under the provisions of paragraph 130.4 of CIMA s Code of Ethics. The response might have been limited to saying he would seek authority from his clients, but some sort of response was required. Mr Skarbek appears simply to have ignored the contacts from Mr Trigg and his staff. The Panel therefore found this allegation proved on the balance of probabilities. Paragraph 1.6: this was proved by the evidence of Mr Trigg. And paragraph 2.1: this was proved by the evidence of Ms Jagusch and the documents she produced. (2) Misconduct Following its findings of fact, the Panel considered the issue of misconduct and found that the findings of fact arising from the Charges constitute misconduct. The Panel s decision is as follows: The facts having been proved, the Panel now consider the matter of misconduct. CIMA s Rules and Regulations define misconduct as 1. Failure to comply with the rules of the Institute or 2. Conduct resulting in any conviction or adverse finding by, or sanction or order of, or undertaking to, any tribunal, court or other body or authority relevant to their membership or registration with the Institute. In relation to paragraph 1.7 of the charge, the Panel found that the facts set out in paragraphs 1.1 to 1.6 amounted to breaches of the provisions of the code referred to. The Panel was therefore satisfied that CIMA had proved misconduct in this respect. In relation to paragraph 2.2 of the charge, the Panel found that the facts set out in paragraph 2.1 amounted to a breach of the Member in Practice Rules and the Code of Ethics as alleged. The Panel was therefore satisfied that CIMA had proved misconduct in this respect.
(3) Sanction Following its findings of misconduct, the Panel considered the issue of sanction. The Panel decided that the appropriate sanction in this case is expulsion from the Institute. The Panel s decision is as follows: Having found misconduct as alleged, the Panel went on to consider the questions of mitigation and sanction. In considering what sanction, if any, to impose the Panel had regard to the indicative sanctions guidance and to the advice of the Legal Assessor. It also had regard to the principle of proportionality and that the sanction imposed should be the least onerous suitable to reflect the seriousness of the misconduct. The Panel took into account the following aggravating and mitigating factors. Aggravating factors included the fact that significant inconvenience was caused to Mr Skarbek s clients and there was the potential for financial loss to be caused to them. His actions caused significant detriment to CIMA s reputation. For a member to ignore correspondence properly sent by another registered accountant reflects very badly on the profession. Mr Skarbek did not co-operate with CIMA s investigations. His breach of the Member in Practice Rules continued for a considerable period. He resigned as a member in practice in May 2010 but a search at Companies House made on 13 October 2017, concerning Verulam Business Services Limited, indicated that he was currently practising, or holding himself out as practising, as a chartered management accountant through his company. The only mitigating factor identified by the Panel was there were no previous disciplinary findings against Mr Skarbek. In view of the seriousness of the misconduct, particularly practising whilst not registered to do so, the Panel were satisfied that sanction was necessary. The Panel considered the available sanctions in increasing order of seriousness. The Panel was satisfied that the sanctions of admonishment and reprimand were not sufficient to mark the seriousness of the misconduct in this case. The guidance indicates that they are appropriate where the conduct is of a minor nature and there is no continuing risk to the public. In this case Mr Skarbek had wholly failed to reply or to respond to communications about his clients affairs, causing difficulties for the new accountants. In particular he had prepared accounts for South West Uniforms Limited for the year to 30 September 2015, which showed a figure for other creditors for about 85,000. This was a very substantial sum in relation to that company s business. Mr Trigg was unable to find any explanation, documentation or calculations to support the figure. He attempted to obtain information from Mr Skarbek but received no reply to his numerous attempts. At the relevant time Mr and Mrs Arafa were negotiating the sale of the business and this information was vital. Mr Skarbek s failure to respond was therefore a serious matter. Furthermore, Mr Skarbek s breach of the Member in Practice
(4) Costs Rules was also a serious matter. Practising when not registered to do so undermines the system of professional regulation and brings the profession into disrepute. The Panel next considered the sanction of severe reprimand. It noted that the Investigation Committee considered this matter on 14 July 2017. The complaint was then expressed in somewhat different terms but it was, in substance, the same as the charges before this Panel. The Investigation Committee concluded that there was a case to answer and that it would be sufficient to invite Mr Skarbek to consent to a sanction of severe reprimand together with a fine of 750. CIMA wrote to Mr Skarbek accordingly on 19 July 2017. There was no reply. In accordance with CIMA s rules the matter was therefore automatically referred for hearing by the Disciplinary Committee. The Panel considered a severe reprimand combined with a fine might have been a sufficient penalty for it to impose had it been clear that there was no risk of repetition. However, in view of the complete failure of Mr Skarbek to engage with the investigation, the Panel had to proceed on the basis that there was a risk of repetition and a continuing risk to the public. The Panel was particularly concerned that Mr Skarbek appears to be currently holding himself out as a CIMA member in practice through his company. A sanction of severe reprimand would not be sufficient to protect the public. For the same reason a sanction of conditions would not be sufficient to protect the public and the Panel had no information, which would allow it to formulate conditions and had no confidence the conditions would be complied with. The Panel next considered a suspension. During the period of suspension the public would be protected. However, at the end of a period of suspension, a member is automatically returned to full registration in the normal case without any further investigation of whether he or she is safe to do so. Again, therefore, this sanction would not be sufficient to protect the public. A fine could mark the seriousness of Mr Skarbek s misconduct, but it would not protect the public. The Panel concluded that the minimum sanction it could impose to ensure that the public was protected was that Mr Skarbek be expelled from membership of the Institute. The Panel then considered the issue of costs and ordered you to pay a contribution to CIMA s costs in the sum of 7,225.00. We considered the costs. CIMA applied for costs totaling 7,225.00. A schedule of estimated costs had been served on Mr Skarbek at the same time as the notice of hearing in October 2017. A final version, which was in fact the same as the estimate, was served yesterday. Mr Skarbek had not responded. The Panel had no information as to Mr Skarbek s means. The Panel was satisfied that this case
was properly brought and that, in principle, CIMA was entitled to recover a contribution towards its costs. The Panel considered that the time spent and the rates charged were reasonable, particularly given the lack of engagement by Mr Skarbek and the numerous efforts made to contact him. It noted that the total amount incurred was over 11,000 but the costs claimed had been limited to 7,225.00. In the circumstances the Panel that Mr Skarbek should be ordered to pay costs to CIMA, assessed at 7,225.00.