Charity trustee prosecuted and disqualified following embezzlement: OSCR takes action

OSCR, the Scottish Charity Regulator, have appointed an interim judicial factor to the Dr Robert Malcolm Trust (“the charity”) to manage the charity’s affairs. OSCR have taken this action as there was evident misconduct within the administration of the charity, resulting in the criminal conviction and statutory disqualification of one of the charity trustees.

The charity

The charity was set up in 1987, and was considered a charity by HMRC prior to the establishment of the Scottish Charity Register under the Charities and Trustee Investment (Scotland) Act 2005. The charity’s purposes are to provide financial support via a loan, grant, bursary, prize or other means, for the education of promising UK students who had the desire to study medicine, medical science, or related disciplines, and to further the medical education of British doctors who practice medicine within the UK.

Inquiry and prosecution

OSCR started an inquiry into the charity in 2012 when they received information that the charity and its assets were at considerable risk, due to alleged failures in governance within it. OSCR’s inquiry suggested that criminal conduct had occurred and, following OSCR’s policies, a report was submitted to the Crown Office Procurator Fiscal Service (COPFS).

OSCR have fully cooperated with COPFS to support the prosecution of Ian Brash, a charity trustee. Brash pled guilty on 14 May to embezzling a total of £358,832 between 12 August 2010 and 10 September 2014 from Robert Malcolm Investments Limited, the charity’s wholly owned trading subsidiary. Prosecutors disclosed that they are seeking the increased amount of £1,590,512.69 from Mr Brash under the Proceeds of Crime (Scotland) Act 1995 following the embezzlement, as Brash transferred the profits of the sale of a house bought using the charity’s funds into a personal bank account, and the profits from the purchase of shares in companies. Brash will be sentenced on 15 July 2019.

Under section 69 of the 2005 Act, an individual will be disqualified as a charity trustee if they are convicted of a crime of dishonesty. OSCR believed that the two remaining charity trustees, Mr Brash’s children, failed in their duties as trustees following the misconduct in the charity’s administration.

OSCR’s actions

Following the inquiry and the apparent misconduct in the charity’s administration, it is necessary for OSCR to act to ensure the property of the charity is protected.

On 16 April 2019, OSCR ordered the bank not to make any payments from the charity’s bank account without OSCR’s consent (OSCR have the power to issue such a direction under section 31(7) of the 2005 Act).

OSCR petitioned the Court of Session to remove the two remaining trustees from the control and management of the charity, and to appoint a Judicial Factor to manage the charity’s affairs. Emma Porter of Aver Chartered Accountants was appointed as the interim Judicial Factor on 9 May 2019.

How can we help?

It is crucial that charity trustees undertake their duties diligently. We advise a number of third sector clients in relation to their trustees' duties. Please do not hesitate to get in touch with our team if you have any queries regarding your charity.

This article was co-written by Rachel Gillan.

Latest updates from @MacRoberts