Fake clothing boss from Lancashire convicted of £150m fraud

Sock manufacturer Arif Patel, 55, of Preston, and his criminal gang tried to steal £97 million through VAT repayment claims on false exports of textiles and mobile phones.

They also imported and sold counterfeit clothes that would have been worth at least £50 million, had they been genuine. The proceeds were used to buy property across Preston and London through offshore bank accounts.

Following a joint investigation between HM Revenue and Customs (HMRC) and Lancashire Police, Patel was yesterday (April 11) found guilty of false accounting, conspiracy to cheat the public revenue, the onward sale of counterfeit clothing and money laundering.

Co-accused Mohamed Jaffar Ali, 58, of Dubai, was also found guilty of conspiracy to cheat the revenue and money laundering yesterday.

The convictions follow a 14-week trial at Chester Crown Court.

Counterfeit clothes seized (Image: HMRC)

Reporting restrictions have now been lifted and it can be revealed for the first time that 24 members of the criminal empire were convicted in five trials between 2011 and 2014 and jailed for a total of more than 116 years.

HMRC has also restrained more than £78 million of the gang’s UK assets and proceedings are now underway to recover these funds for the public purse.

Richard Las, Director, Fraud Investigation Service, HMRC, said: “These guilty verdicts close a significant chapter in one of the biggest tax fraud cases ever investigated by HMRC.

“For more than a decade HMRC and our partners have worked tirelessly and together to bring this gang to justice.

“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 and other vital public services we all rely on.

Counterfeit clothes seized in boxes (Image: CPS)

“Our work doesn’t stop here. We have more than £78 million of the gang’s UK assets restrained and have begun the process to recover all those proceeds of crime.”  

Sam Mackenzie, Assistant Chief Constable, Lancashire Constabulary, said: “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.

“This is money that should have been used to fund the vital public services which we all rely on and to which most of us contribute our fair share by working hard and paying tax.

“I welcome these guilty verdicts which are the culmination of a lengthy and complex investigation which has involved many years of hard work and dedication by police officers and staff and partners from HMRC who have worked together in a truly joint operation.”

Patel was convicted in his absence, having remained in Dubai throughout the trial.

The CPS will now pursue confiscation proceedings against the defendants, to prevent them enjoying the benefits of their criminal enterprise.

Counterfeit clothes seized (Image: HMRC)

Patel’s Preston-based company, Faisaltex Ltd, was the heart of his criminal empire. From here, he ran the counterfeit clothing import operation and false export business.

As well as being a major player in the overall criminal conspiracy, Jaffar Ali also laundered the proceeds through bank accounts he set up in Dubai and offshore.

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.

He also used the business, from 2004, to make fraudulent VAT repayment claims on supposed high-value goods and yarns. In total, the gang fraudulently claimed £97 million on false exports of textiles and mobile phones, but HMRC stopped £64 million of the claims.

The 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 VAT. 

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

Money was sent to British Virgin Island-registered companies, which Patel then used to buy property in his hometown of Preston, including commercial properties on Fishergate, the city’s main shopping street.

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 public Revenue and money laundering.

Yogesh Patel was jailed for five years and seven months after being found guilty of conspiracy to cheat the public revenue and money laundering.

Patel travelled to Dubai in July 2011 and failed to return. He was tried in his absence at Chester Crown Court where he was found guilty of all charges yesterday, April 11. He will be sentenced next month.

Jaffar Ali was also found guilty of conspiracy to cheat the public revenue and money laundering. After attending the majority of the trial, he failed to attend court on March 27 and a warrant was issued for his arrest. He will also be sentenced next month.

Arif Patel’s brothers Munaf Umarji Patel and Faisal Patel are on Lancashire Police’s wanted list.

Anyone with information about their whereabouts should phone 101, call Crimestoppers anonymously on 0800 555 111 or email contactmanagementfcr@lancashire.pnn.police.uk.