The UK’s Serious Fraud Office has joined the investigation into the collapse of Axiom Ince, a company which bought out the partnership of legal firm Ince, which had been in the shipping trade for more than 150 years.
The Metropolitan Police had been investigating the case, but its complexity meant that it decided to refer the case to the Serious Fraud Office (SFO), which is now assisting in the investigation.
More than 80 SFO investigators, accompanied by Metropolitan Police, visited locations across the South East of England early yesterday, searching for potential evidence. Certain individuals were brought in for questioning related to an alleged fraud that includes reports of approximately $82.5m going. Claims first surfaced in August this year that Axiom DWFM had used client monies to fund the purchases of Ince Group in April 2023 and law firm Plexus in July. Client funds were also claimed to have been used to renovate several properties.
The firm has no link to US-based Axiom Law, which has offices in London.
The SFO said that its investigators were examining how the money passed from the firm’s client accounts, which were held at Barclays, to the State Bank of India. The monies were then used, the SFO said, to fund the purchases made by Axiom DWFM. The SFO confirmed that it had launched a formal criminal investigation, and that it would be working with the police going forward.
SFO director Nick Ephgrave said that there were “a number of significant questions that need to be answered: clients from this law firm are missing many millions of pounds and more than 1,400 of its staff have lost their jobs. The impact on those affected is extremely serious. This morning, we have used our specialist powers to obtain important information that will help us get to the bottom of what happened.”
In August the firm’s managing partner Pragnesh Modhwadia and two other directors were suspended. Private accountants were brought in to review the record. In September the Solicitors Regulation Authority ordered the closure of the firm, including all of its divisions.
Lawyers representing Modhwadia said yesterday that he had been questioned during yesterday’s raids but that he was not arrested. The SFO had reported arresting seven individuals during the raids.
Modhwadia’s former firm has filed a claim for breach of fiduciary duty against him, according to the UK Law Gazette, alleging “the misappropriation by Pragnesh of very significant sums of money.”
The Ince disaster had two separate stages. Axiom DWFM was a smallish legal firm, reportedly with some 19 partners and 150 staff, that in April stepped in to save Ince Group, which collapsed into administration on April 12th.
The sequence of events that brought about this April collapse had noting to do with the old partnership firm of Ince (IMN, April 14th 2023). The immediate cause of the collapse was the refusal of a major creditor to support Ince Group any longer. Ince Group blamed its financial problems on a long-overdue audit that it said has sapped its cash flows.
Ince in April owed what was understood to be a significant amount to HM Revenue & Customs. Anglo-South African bank Investec was reported to have provided £17m in loans to Ince in 2021, which were secured against certain Ince entities.
But Ince’s problems had really begun a couple of years earlier when in 2019 the partnership company accepted a takeover bid from Gordon Dadds, which for a decade had undertaken an aggressive acquisition and consolidation strategy, buying up smaller firms and increasing its gearing. By 2019 the partnership firm of Ince & Co entered its sights. In a sense, Ince from that point on became a “brand” rather than the old Ince. Shortly after the acquisition, Gordon Dadds took on the name of Ince.
Come 2022 and Ince’s auditor found itself unable to resolve certain matters relating to the accounts at what was now called Ince’s Hong Kong office. In fact it was the previous Gordon Dadds satellite division in Hong Kong, and nothing to do with the Ince Partnership of old. The new Ince also delayed the release of the half-year results for April-September 2022.
In December Ince announced that its auditors could not complete the financial reports by a year-end deadline. The delivery date for the audit was pushed back to January 31st, then February 10th, then March 31st, and finally indefinitely. At this point the patience of a major creditor snapped.
That led to the announcement late on December 22nd, just before the long Christmas break, that trade in shares would be suspended (effective January 3rd 2023, the first day that trading on the London Stock Exchange restarted).
Many partners had left Ince during 2022. Also, in September last year it was announced that the previous CEO Adrian Biles had been removed as a director of the company with immediate effect. Biles had announced on July 28th 2022 that he intended to step down as CEO and resign from the board with effect from the conclusion of Ince’s latest round of fundraising, which was at a steep discount to the mid-market trading price at the time – never a reassuring sign.
Apart from the Hong Kong situation, Ince referred to “historical accounting treatments” and “technical items”.
It looked likely to be a sad end for the name of Ince, founded in 1870. It was a fixture in the maritime world and had grown to become one of London’s leading practices. However, the misery to which the once renowned name would be subjected turned out not to be over. Axiom’s purchase of the company out of administration in April meant that even worse was to come. After Ince merged into Axiom the firm was promptly rebranded Axiom Ince, and then things relatively quickly unravelled.
The eventual order to close the business encompassed all 14 branches of Axiom Ince, including the former Ince office in Bristol (IMN October 1st) – meaning that long-serving employees of the “old” Ince will have been victims of a situation not at al of their making. The firm had over 1,400 people on staff when it ceased operations last month.