UPDATE Court Convicts £160m H2O Networks Fibre Broadband Fraudsters

After years of waiting the Southwark Crown Court has found four men guilty of a £160 million financing fraud, which is a case that began in 2010/11 (here) after the Serious Fraud Office (SFO) opened an investigation into one of the UK’s early pioneers of alternative fibre optic broadband networks.

The story began in 2010 after the SFO opened a misconduct investigation into Total Asset Finance (TAF), which was the main source of funding for H2O Networks. At the time H2O was still part of the defunct i3 Group and they had been busy trying to roll-out ultrafast FTTP/H broadband networks across several UK cities, such as Bournemouth and Dundee, albeit with limited success (contractor disputes, shoddy street works etc.).

However TAF ended up going out of business while owing Belgian bank KBC more than £133 million and this prompted the bank to launch an investigation into the contracts held between TAF and H2O. Unsurprisingly the situation resulted in the demise of H2O / i3 and their assets were later picked up by Cityfibre (controlled by Greg Mesch, i3’s former President and COO).

Fast forward to today and the courts have finally found four people guilty of “conspiracy to make corrupt payments” and “conspiracy to commit fraud against two business lenders” (Barclays Bank and KBC Lease (UK) Limited) in order to obtain almost £160 million between 2007 and 2010. The individuals first appeared at Westminster Magistrates Court on 9th January 2015 and the trial began on 5th September 2016 at Southwark Crown Court.

Director of the SFO, David Green CB QC, said:

“This was a carefully planned, complex and lucrative fraud which ran over three years. It took a determined investigation to ensure that those responsible for it were brought to justice. We will now turn our attention to securing confiscation of criminal assets from those convicted.”

Both Stephen Dartnell and George Alexander of TAF, as well as Carl Cumiskey of H2O and Simon Mundy who worked for KBC were found guilty. The jury was told that there was “no dispute that fraud on a massive scale had occurred, but the defendants denied involvement and, in the main, blamed each other.” However Kerry Lloyd of TAF and Elfed Thomas of H2O were both acquitted.

The court heard that Dartnell, Alexander and Cumiskey had conspired to “create, sign and sell falsely inflated or entirely false contracts” from the company H2O to business lenders, Barclays Bank and KBC. Meanwhile Mundy was paid nearly £900,000 as an “inside man” at KBC by Dartnell to approve the funding provided by KBC to TAF.

H2O supplied fibre optic infrastructure, with one of their unique selling points being to use sewers as channels for their cables. H2O targeted public institutions such as local authorities, universities, colleges and the NHS with long-term payment contracts.

The Verdicts

George Alexander – Guilty on two counts of conspiracy to commit fraud by false representation,

Stephen Dartnell – Guilty on two counts of conspiracy to commit fraud by false representation, One count of conspiracy to give corrupt payments,

Kerry Lloyd – Not guilty on two counts of conspiracy to commit fraud by false representation, Not guilty on one count of conspiracy to give corrupt payments,

Simon Mundy – Guilty on one count of conspiracy to commit fraud by false representation and one count of conspiracy to give corrupt payments

Carl Cumiskey – Guilty on two counts of conspiracy to commit fraud majority 10-2 on both counts.

Elfed Thomas – Not guilty on one count of conspiracy to commit fraud

A sentencing hearing is due to take place this Friday (10th Feb) at 10am at Southwark Crown Court.

UPDATE 13th Feb 2017

The four men have now been sentenced to a total of 44 years in jail (here).