How can fraudsters get off scot-free in bankruptcy cases?
In the media image: Frank van Hulst on Unsplash+
In many Dutch bankruptcy cases, ‘irregularities’ occur such as mismanagement or funds being diverted. Jessie Pool, Associate Professor, spoke to ‘Follow the Money’ about suspicious bankruptcies: ‘Litigation can last a long time, cost a lot, and ultimately yield nothing.’
Bankruptcy trustees in the Netherlands are responsible for managing and liquidating bankrupt estates. Since 2017, they are also responsible for investigating possible fraud in bankruptcies. However, they have no obligation to report any suspicions to the Public Prosecution Service (OM) and the Fiscal Intelligence and Investigation Service (FIOD). As a result, bankruptcy trustees can often use the suspicion of fraud as a means to exert pressure on fraudulent parties to reach a settlement. Dutch investigative journalism platform ‘Follow the Money’ has revealed that since 2021, ‘irregularities’ such as mismanagement or funds being diverted were reported in 38 per cent of the 3041 cases of bankruptcy in the Netherlands. Jessie Pool: ‘I arrived at a figure of 45 per cent after an analysis of almost 2000 files and a survey among almost 200 bankruptcy trustees’.
‘The FIOD complains that bankruptcy trustees often fail to cooperate with fraud investigations. But when the FIOD eventually gets round to investigating a case, a settlement will have been reached long before then’, says Pool. ‘Which is logical, because an agreement means there will immediately be money in the liquidation account [the account administered by the bankruptcy trustee which is also used to pay the trustee, Ed.]. Litigation can last a long time, cost a lot and ultimately yield nothing.’ A settlement also makes it possible to avoid a criminal investigation. Pool calls this a 'perverse incentive': the company director goes free, the bankruptcy trustee receives their remuneration, while creditors and investigative authorities are left empty-handed.
More information?
Read the full article in Follow the Money (€, in Dutch)