ID check: BT bill was one document provided
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A solicitor who failed to ask for either personal or professional references before recruiting a conveyancer who went on to carry out a series of frauds, has been struck off by the Solicitors Disciplinary Tribunal (SDT).
The tribunal said Ernest Mugadza recruited the man, referred as NK, as a non-practising solicitor employed under a consultancy agreement.
NK went on to carry out five suspected fraudulent transactions, leaving client account with a cash shortage of £2.69m.
Before recruiting NK, Mr Mugadza obtained a copy of his expired passport, a BT utility bill and a copy of his practising certificate for the previous year.
The tribunal ruling did not say where NK was from but Mr Mugadza said concerns about his right to work in the UK were allayed by a five-year visa he said he saw in the passport.
An investigating officer from the Solicitors Regulation Authority (SRA) checked the passport and found that the details were false. She was told by the Home Office that they had no record of NK having leave to remain or work in the UK.
She also obtained a copy of the practising certificate for NK. “The unique SRA reference number quoted on the certificate related to another individual, a practising solicitor, and not NK. The SRA number appeared to have been superimposed onto the practising certificate with NK’s name.”
Mr Mugadza was sole director of Denning Solicitors in East London from April 2016 until its closure by the SRA in October that year. He was also the COLP, and also later the COFA.
Most of the firm’s work was immigration (65%), followed by crime (10%) and commercial (8%).
He recruited an office manager in May 2016, referred to as RW. RW provided Mr Mugadza with a copy of his passport, driving licence, bank statement and bank cards as proof of his identity, but once again provided no personal or professional references.
The SDT said NK was recruited three weeks after the arrival of RW, who recommended him, because NK “had experience of conveyancing work and would bring in new clients to the firm”.
Mr Mugadza, who was the sole signatory of the firm’s client account, told the SRA there was a “two-part process” for the approval of payments to avoid any irregularities: NK would provide a completion statement and RW, who had online banking access via a dongle, would generate a payment request online and inform Mr Mugadza.
The SRA identified five transactions that “bore the hallmarks of mortgage fraud”, from which 10 payments were made to third parties.
In the first and biggest of them, Denning Solicitors received £1.74m from a lender as a loan for the purchase of a property. Mr Mugadza then authorised four payments, ranging in size from £803,000 to £145,600, to third parties.
“There was no evidence that any of the payments were made in respect of the transaction,” the SDT said. “The respondent authorised the payments, amounting to the entire loan monies received.”
Mr Mugadza admitted failing to carry out adequate enquiries into NK and RWs’ employment histories, right to work and practising status.
He admitted failing to exercise adequate supervision of NK, permitting him to carry out conveyancing transactions which “bore the hallmarks of mortgage fraud”.
The sole practitioner admitted failing to comply with Money Laundering Regulations, failing to maintain client ledgers and, as his firm’s COLP and COFA, failing to ensure compliance with the solicitors’ accounts rules and money laundering regulations.
Mr Mugadza also admitted authorising payments from client account to third parties without enquiring about the size of payments or identity of the recipients, but he denied doing this recklessly or with a lack of integrity.
He told the tribunal that he believed NK was a “genuine, practising solicitor who had expertise in conveyancing” and that “the payment requests he submitted were genuine”.
However, the SDT said that, as sole director, Mr Mugadza had ultimate responsibility for the firm and, although he had no conveyancing experience, he had 12 years of post-qualification experience and would have understood the importance of protecting client money. He was found to have acted recklessly and with a lack of integrity.
On sanction, the SDT said the solicitor “had not heeded the lesson of his previous appearance before the tribunal” in 2011, when he was fined £15,000 and ordered to pay costs of £7,500 for accounts rule breaches, failing to ensure the SRA was notified of the closure of a firm and failing to ensure proper supervision.
Mr Mugadza was struck off and ordered to pay costs of £14,300.
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