Wednesday 28 February 2024

Living the good life…with other people’s money

This blog post first appeared on Malta Today 

On any random afternoon you can watch people whizzing by in flashy cars and talking about their boats or their new property or their latest holiday to some far-flung destination. And even if you don’t hear this talk directly, they very helpfully provide you with snapshots of their latest purchases on Facebook. Of course, there are those who have legitimately acquired their material wealth due to good old-fashioned hard work, and they deserve everything they have.

But then you sometimes come across the occasional odd photo where things simply don’t add up. You sit there and think to yourself, hmmm…this person seems to be on an average wage, so how come he/she can afford this kind of lifestyle? You can be forgiven for casting your mind back over how long you have been working and wondering what it is you have been doing wrong all these years.

And (one would think) the same question would also be popping into the heads of the folks over at the Tax Compliance Unit within the Internal Revenue Department, who have complete access to how much income everyone makes (well, the income of most of us anyway), and yet seem incapable of tracking down those who are clearly living in a way which does not tally with what they are declaring. Red flags should be everywhere…and yet, mysteriously, it is only when some story comes out of our Courts that the truth emerges.

On Sunday, the Times carried a report about a 35-year-old accounts clerk who had stolen more than €345,000 from his employer over a period of two years (2007 – 2009) to buy expensive cars, a Harley Davidson, as well as a Rolex. He was responsible for the company’s bank accounts and payments to its clients, suppliers and creditors.
Just three months after he joined the company, he began transferring the company’s funds into the names of various people, including his father, in order to purchase the luxury items. Initially it didn’t start off that way. As the report states, “He had been going through a difficult financial patch, so he decided to use company funds for his personal use, with the intention to immediately replace them. However, when no one realised what was happening, he continued siphoning off the funds.”

He had devised “a meticulous plan to get rich with other people’s money over a long period of time, which fed his greed and made him want even more. Once his financial position did not allow him to live such a lavish life, he devised a plan to live a good life to the detriment of people who had trusted him and had given him a job,” the magistrate said in her judgment.

Apart from being ordered to pay the money back to his employer, he has been jailed for 10 years and ordered to pay a fine of €95,000.

I wonder, at what point did someone realise that it was rather bizarre how an accounts clerk was able to afford all these expensive things? It’s great that he was finally caught, and is being made to pay, but it is incredible how he got away with it for two whole years.

Of course, there are many other ways in which those who are basically, crooks, succeed in going through life by living off other people’s money. You have those in business who delay paying their creditors for months and months, while fobbing them off with one excuse after another while they splash money around. They amass fortunes, while those to whom they owe money are reduced to almost begging for what is rightfully theirs.

You then have the worst case scenarios where supposedly successful businesses go belly up, leaving everyone high and dry such as happened with several high-profile cases (Price Club, Mambra electronics and More supermarkets come readily to mind). In the latter two cases, the directors absconded, fleeing the island and leaving a trial of bad debts.

Reporting on the Price Club case back in 2004, the late Julian Manduca together with Kurt Sansone and Matthew Vella, reported:
“Today, Price club is no more and the directors are enjoying the fruits of their labour while creditors and suppliers are still chasing the thousands owed to them by the defunct supermarket chain.”
A long-drawn out court case ensued and finally, in 2010, the Court concluded that “the directors were personally liable without limitation for the debts of Price Club Operators Ltd.”

Also in 2010, when the owner of Mambra was brought to Court, it was reported that, “Mr Pavia owes the government a total of €1,313,565, including €350,000 in VAT and eco contributions and €500,000 in fines and penalties for late payments to the VAT Department.”

In 2014, Ryan Schembri, the former owner of More Supermarkets (now defunct) fled the island leaving debts of millions of Euros after selling off the supermarket chain to third parties. To date, his whereabouts are still unknown.

These are just the more notorious cases, as there are others, of businessmen who are allowed to amass enormous debts in tax and VAT while simultaneously living “the good life”. Meanwhile, their creditors have to waste their lives in and out of Court so that one day, perhaps, they might see some of the money they are owed.

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