The Royal Institution of Chartered Surveyors has today published the paperwork behind the recent Countrywide £10m accounting controversy.
Published on the RICS website, it reveals that the £10m of unclaimed client funds transferred from the client account into a company account was not intentional deceit.
The unconventional move was discovered during a routine inspection, as part of Countrywide's membership of RICS. The paperwork released this morning also shows the effort that Countrywide went to, to investigate the issue when it was identified.
“After an internal review, I put an immediate stop to the practice” explains group managing director Paul Creffield in his lengthy evidence to the RICS.
He says that each movement of funds to the office account from the client account was “quite modest in quantum terms” but added up to a vast amount over the course of 10 years.
Creffield tells the RICS that Countrywide's policy has now changed and that unclaimed client funds whose owners cannot be identified will, in appropriate circumstances, be paid to charity in line with industry custom.
Countrywide has repaid all sums from the office account to the client account and says that in any area of doubt, the sum was repaid - meaning that an overpayment of £100,000 has probably been made to the client account.
It appears from today's release that a former employee of the firm - a senior manager - was responsible for the original problem; he or she is now no longer with Countrywide.
“The decision to retain these funds was a policy decision made at a senior management level by personnel employed at the time by the firm and was not the product of deceit” says the RICS.
“Management at the firm has since changed, and the current CEO, appointed in 2018, provides a witness statement setting out his disapproval of the firm’s decisions and actions” it continues.
Last week Countrywide admitted two charges of breaching RICS’ codes.
One was that £10,093,866 of unidentified client funds in Countrywide’s lettings division - which had remained unclaimed for six years or more - had been diverted from the agency’s client account to its office account. This involved an alleged failure by Countrywide to safeguard its clients’ funds, RICS claimed.
The second was that the firm’s conduct represented “a serious and prolonged disregard to professional obligations set out in RICS’ client money guidance document.”
In response, RICS imposed on Countrywide a £100,000 fine; the agency also received a reprimand and was ordered to pay £600 costs.
The RICS paperwork in full is here.
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The reporting on this stinks, Countrywide has been accused of stealing their customer's dead balances by moving them from their client account to their office account in 2008 having fully investigated each dead balance exhaustively while putting in place an indemnity policy to pay out any future claimant.
If you have a dead balance indemnity in place it is perfectly legal to keep the money after 6 years so the fine of £100k looks like a nice little earner for RICS as this is a fine for breaching RIC'S guidelines and not the law. Im not a fan of large corporate agents however from where I'm sitting, whichever senior manager made the decision to use the funds should be praised for using their initiative. After all Countrywide was heading for the rocks and this decision quite possibly safeguarding over 10,000 jobs albeit to the detriment of the Cat's Protection League. This perpetual agent bashing has to stop.
Not sure thats the case James. They have signed up to RICS guidelines (They did not have to) and they went against best practice.
You cant choose what guidelines you want to abide by and which you want to ignore.
Otherwise it makes a mockery of signing up to them in the first place.
You are of course right, rules are rules but didn't it pay off?
Hi James, how does the reporting stink?
If you read all of the documentation on the case, it goes like this, Countrywide between 2008 and 2018 had in place a policy agreed at CEO level to keep the money in the company account, all 10M of it. Paul Creffield when alerted to it, fully co-operated with the RICS investigation, but - Paul Creffield did not become CEO discover the deceit and report it as a whistle- blower.
No it was an outside audit that picked up on the situation, which if let undetected may well have continued.
In fact if you look closely at Paul's statement in mitigation he seems very much to make the case that because Countrywide does billions of pounds worth of mortgages a year, have a massive RIICs prescence, and has a huge 800 (?) strong office presence with many branches in all the towns and villages, it would be a travesty if Countrywide were too badly damaged by the affair as it would possibly upset the property industry as a whole. (TOO BIG TO FAIL).
In other words - Countrywide had in place by its own admission a questionable practice, the internal transfer of client funds, which was company policy. Then by chance an outsider found out about it, and of course if your are the CEO of the day you are going to be as helpful as you can, but I think that to play the card of TOO BIG TO FAIL, is a dangerous one, because if Countrywide is founded upon financial services and has within in very notable and trustworthy RICCS personnel, shouldn't the bar be set higher rather than lower, as a warning to all.
The panel in their judgement under mitigating and aggravating matters, actually states that Countrywide were using the fund to inflate their profit provision.
As a matter of balance I am told by those who know that Paul is a very good at what he does, but I wonder if the matter had not come to light, would anyone at Countrywide have seized the nettle. Also where does the leave the likes of former CEO's Amanda Platt for example, and the auditors and the Chief financial officers?
You may not think it but I actually love Countrywide, it is just a shame that all the talent was sacrificed during various regime purges, maybe they should invite some of those who can do the job back, as I feel unfortunately there are other icebergs about to present themselves in front of HMS Countrywide.
I agree Andrew, what they did was against RICS guidelines however it was not illegal.
My issue is that they were reported to have 'raided their dead balances' and 'stolen £10,000,000' which was not true. A crime needs a victim and there were none. Hence my comment that the reporting stinks.
Incidentally RICs check dead balances as part of their annual compliance audit so RICs would have known about this since 2008. I would like to hear how RICS missed/ignored a missing £10mill for ten audits. Wouldn't you?
Yes, it would be good hear from RICS as well. How come they did not identify the issue since 2008?
Can EstateAgentToday put the following questions to Paul Crefffield as well?
1. Given his long career with Countrywide at senior level, was he part of Senior Management that made the policy decision collectively? He cannot blame ex-employees just like that. Given his seniority since 2008, surely he knew of such policy decision.
2. Was he not aware of the practice? He was the MD for the Conveyancing and Surveying Division for quite some times. Both businesses operate client accounts.
3. Purely on a cost saving drive, CWD outsourced their in-house Internal Audit function. Can he confirm that previous audit findings did not brought up this issue?
4. Since 2008, how much was released to the Profit & Loss Account as income; thus inflating reported profit?
5. Can he confirm that there is no such similar practice in the Surveying and Conveyancing Division?
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