Bosses of a healthcare firm have been convicted of a £1.2 million scam, the Serious Fraud Office said today.
Christopher Lynch, 59, administration manager of Insight Ltd, was yesterday found guilty at Manchester Crown Court of conspiring to defraud London finance firm Resource Partners.
Insight's managing director, James Frauts, 62, pleaded guilty at earlier hearings to conspiracy to defraud, fraudulent trading and false accounting between May 2002 and July 2004.
Frauts and Lynch operated Insight, a company based in Salford, Greater Manchester, providing specialist healthcare services to young people and adults who suffer from autism spectrum disorder (ASD).
Local authorities in the north west of England paid Insight for the provision of specialist care for individuals who suffered from ASD and related conditions such as Asperger's syndrome.
By 2004 Insight had grown into a substantial business in its sector with an annual turnover of around £3 million, employing more than 150 people and operating 13 care homes.
Payments to Insight were made through Resource Partners which provides funding to companies undertaking private healthcare by making immediate payments to them on their invoices to local authorities for the care work they undertake.
Rather than Insight having to wait on payments from local authorities, Resource paid Insight up front on each invoice and then Resource would wait for payment on that invoice from the local authority.
But an investigation into Insight by the Serious Fraud Office (SFO) exposed its finances to be a mess with the company owing money to suppliers.
The fraud started in 2002 with the two defendants repeatedly deceiving Resource by supplying forged invoices and creating false accounting documents for care services that had not been provided. The defendants continued to send invoices to Resource for real people that Insight had stopped caring for and they sent invoices for people Insight had never cared for.
More than 170 false invoices were identified relating to 12 individuals.
Insight eventually collapsed due to cash flow difficulties and Resource had paid out over £1.2 million on false invoices.
Some of these losses were passed on to the local authorities who had to take money out of their social service budgets.
The local authorities concerned are Stockport Metropolitan Borough Council, Rochdale Borough Council, Lancashire County Council, Bury Metropolitan Council and Warrington Borough Council.
Frauts was charged in December 2009 after being extradited from Canada.
He pleaded guilty on March 19 this year to one count of fraudulent trading and 12 counts of false accounting. On September 6 he pleaded guilty to one count of conspiracy to defraud.
Lynch was charged in March. He was convicted of conspiracy to defraud on October 4 after a two-week trial at Manchester Crown Court.
The defendants are to be sentenced on December 3.
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