Indian-origin designer clothing scam mastermind convicted in UK

An Indian-origin mastermind of a fake designer clothing scam, accused of trying to steal around GBP 97 million through VAT repayment claims on false exports of textiles and mobile phones with the help of a criminal gang, has been convicted of tax fraud in the UK.

Sock manufacturer Arif Patel, 55, was found guilty in what Britain's tax department has described as one of the country’s largest ever "carousel" tax frauds.

Patel was found guilty of false accounting, conspiracy to cheat the public revenue, the onward sale of counterfeit clothing and money laundering following a 14-week trial at Chester Crown Court on Tuesday.

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“Arif Patel lived a lavish lifestyle at the expense of the law-abiding majority. Tax crime is not victimless and fraudsters like this pair steal the money that funds the NHS (National Health Service) and other vital public services we all rely on,” said Richard Las, Director of the Fraud Investigation Service at His Majesty’s Revenue and Customs (HMRC), which was part of a joint investigation with the local Lancashire police.

“For more than a decade HMRC and our partners have worked tirelessly and together to bring this gang to justice...Our work doesn’t stop here. We have more than GBP 78 million of the gang’s UK assets restrained and have begun the process to recover all those proceeds of crime,” he said.

Patel and his gang imported and sold counterfeit clothes that would have been worth at least GBP 50 million had they been genuine and the proceeds were then used to buy property across Preston in northern England and London through offshore bank accounts. A co-accused, 58-year-old Mohamed Jaffar Ali from Dubai, was also found guilty of conspiracy to cheat HMRC and money laundering at the end of the trial this week.

Reporting restrictions have now been lifted to reveal for the first time that 24 members of the criminal empire have been convicted in five trials between 2011 and 2014 and jailed for a total of more than 116 years. Arif Patel and Ali are due to be sentenced next month.

“These guilty verdicts close a significant chapter in one of the biggest tax fraud cases ever investigated by HMRC,” added Richard Las.

The court heard how Patel’s Preston-based company, Faisaltex Ltd, was the heart of his criminal empire, from where he ran the counterfeit clothing import operation and false export business. As well as being a major player in the overall criminal conspiracy, co-accused Ali also laundered the proceeds through bank accounts he set up in Dubai and offshore.

“While presenting himself as a genuine and reputable businessman Arif Patel in fact used stolen taxpayers’ cash to line his own pockets and fund a lavish lifestyle,” said Sam Mackenzie, Assistant Chief Constable, Lancashire Constabulary.

Arif Patel travelled to Dubai in July 2011 and failed to return, to be convicted in the UK in his absence.

“The convictions of Arif Patel and Mohamed Jaffar Ali successfully conclude this part of an immense investigative and prosecution case against an organised criminal group, involved in counterfeit clothing, fraudulent VAT claims and money laundering.

The cost to the public purse was tens of millions, money that could have been used for essential public services in the NHS, social care and education,” noted Andrew Fox, Senior Prosecutor, Crown Prosecution Service (CPS).

Patel and the Faisaltex group of companies had turned to bulk imports of counterfeit clothing in 2004. During the next three years dozens of containers with fake designer clothing inside were stopped at ports across the UK, including Liverpool, Southampton and Felixstowe. Onward distribution to UK traders was confirmed when a delivery to a Glasgow wholesaler was intercepted by police and revealed to be poorly made designer rip-offs.

Patel also used the business to make fraudulent VAT repayment claims on supposed high-value goods and yarns, fraudulently claiming GBP 97 million but the HMRC stopped GBP 64 million of these.

Such a scam is known as a carousel fraud, where goods are purportedly sold to genuine buyers, but in fact the whole process is controlled by the criminal, who instigates a paper trail of alleged sales and exports in order to reclaim value added tax (VAT).

It emerged in court that Arif Patel frequently travelled to Dubai to meet Mohamed Jaffar Ali and also made trips to China and Turkey to set up deals with manufacturers of counterfeit clothing. The profits were laundered by Ali through freezone companies and bank accounts held in the UAE.

Money was sent to British Virgin Island registered companies, which Arif Patel then used to buy property in his hometown of Preston.

The HMRC said that Patel’s criminal enterprise relied on “dozens of lieutenants” around the UK, including professional enablers. This involved two chartered accountants from a Preston-based practice: Anil Hindocha, 69, from Preston, and Yogesh Patel, 66, from Aylesbury.

Hindocha was jailed for 12 years and 10 months in 2014 after being found guilty of false accounting, conspiracy to cheat the tax department and money laundering. Yogesh Patel was jailed for five years and seven months for the same offences.