Free From Scams
DIRECTORS OF UK'S MOST COMPLAINED ABOUT COMPANY DISQUALIFED FOLLOWING DTI
Companies warned to be on their guard against unsolicited calls The
DTI today warned companies to be on their guard against unscrupulous cold
callers offering services of little value, then aggressively demanding
payment of unexpected invoices.
The warning comes
following the disqualification, for a total of 25 years, of three
directors of a telesales business that was responsible for more than
70,000 cold calls a month.
Berger & Co, which at one point had the dubious honour
of being the most complained about company in the UK, cold called business
offering to send them reports giving advice and analysis on management and
The reports were offered on a "21 day free review", but
it was not always clear that an invoice would follow if the reports were
If the reports were not received back within 21 days, an
invoice was issued for between £295 and £395.
At its height, Berger & Co sent out around 1,200 reports
a week, knowing that many companies would be caught out and fail to return
the report within the 21 days.
The size of Berger's operation was reflected in the
amount of complaints received by Trading Standards: 796 between August
1999 and December 2000.
Demands for payment were often backed up by threats of
litigation, usually in a county court far away from where the company in
question was based. In one case, a business in Manchester had proceedings
issued in Guildford County Court, while another customer based in Poole
had proceedings issued in York. DTI investigations revealed that around 40
per cent of companies paid up, taking Berger & Co's annual turnover to
more than £1m.
The High Court heard that Filip Peter Lademacher of Howe
Street, Edinburgh was running a devious and misleading scheme, and was
responsible for a raft of business malpractice (see 'notes to editors').
Mr Ladermacher was disqualified from acting as a
director for 13 years; at an earlier hearding he had an order for £60,000
costs made against him.
Two other directors, Ian Armstrong and David Stirrat,
accepted disqualification undertakins of six years each.
Consumer Minister Gerry Sutcliffe said: "The reports
sent out by Berger & Co were virtually worthless, but the company knew
that if they sent out thousands of reports and aggressively pursued
payment, enough companies would pay up to make a tidy profit.
"What they didn't bank on was the ability of DTI
investigators to act swiftly and shut down this deception. This is an
unusually long disqualification and should serve as a warning to others."
Although the majority of businesses that cold call
companies offering goods and services are operating legitimately and
within the law, the DTI today warns companies to be on their guard.
* beware of calls made to junior members of staff, who are often
unaware that they have agreed to place an order;
* don't provide contact details unless you know you want to do
business with the company in question;
* don't agree to receive free products or services unless you are
fully aware of the terms and conditions first;
* if you receive goods or services you have not asked for, make
sure you know the terms and conditions; if not, send them back
1. On 17 May 2004, Ian Armstrong of Heriothill Terrace, Edinburgh gave
a six year disqualification undertaking to the Secretary of State which w
as accepted on 28 May 2004 and came into effect on 18 June 2004. On 12
June 2004, David Stirrat of Broughton Street, Edinburgh gave a six
year disqualification undertaking to the Secretary of State which was
accepted on 24 June 2004 and came into effect on 15 July 2004 The
disqualification order for a period of 13 years against Filip Peter
Lademacher of Howe Street, Edinburgh, was made in the High Court on 8
November 2004 and comes into effect on 29 November 2004.
2. The case against a fourth director continues.
3. Berger & Company plc was wound up by the High Court
in March 2003 (see DTI press notice: P/2003/153).
4. Companies Investigation Branch (CIB) is part of the
Corporate Law & Governance Directorate of the Department of Trade and
5. CIB carries out confidential enquiries under Section
447 of the Companies Act 1985 and, where necessary, takes further action
in the name of the Secretary of State. This can include winding up
proceedings in the public interest or disqualification proceedings against
6. Section 8 of the Company Directors Disqualification
Act 1986 allows the Court to make a disqualification order of up to 15
years for unfit conduct. On 2 April 2001, amendments were introduced by
the Insolvency Act 2000 allowing directors, with the agreement of the
Secretary of State, to avoid the need for a Court hearing by offering
an acceptable disqualification undertaking. This has the same legal effect
as a disqualification order made by the Court and usually includes a
schedule identifying the director's unfit conduct. The consequences of
breaching a disqualification undertaking are the same as those for
breaching a disqualification order.
7. Contravention of a disqualification order or a breach
of a disqualification undertaking is a criminal offence and may result in
a fine or imprisonment for up to two years. Information relating to
persons acting in contravention of this provision should be passed on to
the Department on 0845 601 3546.
The matters of unfitness recorded in the schedules to
the disqualification undertakings given by Mr Armstrong and Mr Stirrat
were that they:
Caused or allowed Berger to operate a disreputable business which was
seriously lacking in commercial probity and contrary to the public
interest in that it was dependent on a devious and misleading telesales
scheme to ensure that a small proportion of its customers (approximately
10%) actually paid.
Misled or deceived the public by operating a
cold-calling telesales scheme that included the following misleading
and/or disreputable elements:
* The cold call was often made to a junior employee without purchasing
* The initial pitch in the cold-call suggested that the report was being
offered for a free review without any commitment.
* The terms of the initial pitch were designed to get agreement to the
* The close of the call was calculated not to put off a sufficient number
of customers either because the recipient of the call had by then switched
off or because of the deliberately misleading way in which the sales
operatives expressed the price of the report.
* The refusal to give a reminder call or fax because this would have
alerted the customer to the need to return the report.
* The covering letter sent out with the report was itself covered up by
being placed inside the report such that, together with the fact that the
report might give the appearance of being junk mail, a sufficient number
of recipients may not have even seen the letter.
* The pricing of the report was calculated to be high enough to ensure
substantial turnover by Berger but low enough to ensure that a substantial
number of customers would not be bothered to contest the invoice.
* The fact that a certain number of people would not have returned the
report because they could not be bothered or they forgot to do so or they
had lost the report.
* The cold-calls were not recorded so it was not possible to check exactly
what was said.
* By willingly starting Court proceedings which would coerce a substantial
number of customers not to instruct solicitors to defend a claim for only
* By deliberately starting Court proceedings in inconvenient locations.
8. At the hearing on 8 November 2004, Registrar Derrett found that Mr
Lademacher was unfit to be a director for the same reasons as set out
above and in addition by reference to his further conduct in relation to
Berger and his conduct in relation to Berger & Company International Ltd,
HR Advisor Ltd, Field Publishing Ltd and Executive
Reports Ltd as follows:
* In breach of his duties to Berger and improperly, Mr Lademacher diverted
money from Berger to an associated company of his, Executive Reports Ltd
trading as Berger Publications, including at a time after the winding up
petition had been presented.
* He tampered with Berger's computer records by altering the return date
records so as to cause it to issue invoices to customers where none should
* He deleted a number of files critical to the operation of Berger's SAGE
accounting system on 20th January 2003.
* He removed certain company records of Berger, including customer letters
accompanying returned reports, from its premises over the weekend of 11th
* He caused Berger to charge certain customers' credit cards twice over.
* He caused Field Publishing Ltd to operate a similarly disreputable
business to that operated through Berger including while the Berger
winding up petition was pending.
* He caused Executive Reports Ltd, HR Advisor Ltd and Berger & Company
International Ltd to operate a misleading business in that the
subscription order forms sent out by direct mail were deliberately made to
look like invoices so that a sufficient number of customers might think
that they were obliged to pay.
ISSUED ON BEHALF OF THE DTI BY THE GOVERNMENT NEWS NETWORK (SCOTLAND)
TRADING STANDARDS OFFICERS
Trading Standards Officers from The Highland Council's Trading
Standards Unit received an email from a well known High Street Bank this
week - or at least that's what it first appeared to be. In fact the email
was a "phishing" scam probably coming from the USA. Phishing is defined as
the act of sending an e-mail to a user falsely claiming to be an
established legitimate enterprise in an attempt to scam the user into
surrendering private information that will be used for identity theft.
Normally the e-mail directs the user to visit a Web site where they are
asked to update personal information, such as passwords and bank account
numbers. Phishing is a variation on 'fishing', the idea being that
bait is thrown out with the hopes that while most will ignore the bait,
some will be tempted into biting.
What surprised Trading Standards was that the email was
designed to warn customers about internet scams and in particular 'phishing'
scams! The email contained extracts from the legitimate Bank's security
advice section, for example, "Be wary of emails/websites which ask you to
provide your personal or account information - they may be from a fake
The scam email goes on to ask you to 'validate your
personal online banking account by following the link below'. The link
appears to be genuine. It has the correct URL reference; however the true
destination of the link is hidden in the computer code making up the
email. The link is to a bogus website registered in the USA. The purpose
of the bogus site? To trick you into divulging your personal information
operators can steal your identity and run up bills or commit crimes in
your name. Fortunately the bogus website has been closed but it will
almost certainly have done some damage.
Nigel MacKenzie, The Highland Council's, Head of Trading
Standards, said: "Although most consumers will hopefully realise that
these emails are not genuine, it only takes a tiny percentage of those
targeted to respond to make it a worthwhile criminal pursuit. These
criminals are sending out millions of these emails at a time and it just
shows you that if we can get one sent to our mailbox- then anyone can. The
safest and best way to deal with these unwanted emails is to delete them
as soon as they are received. "
Mr MacKenzie added: "The UK Government is planning a
campaign designed to raise public awareness of computer and Internet
security. It is hoped that the initiative, named Project Endurance, will
bring together the wealth of IT Security information currently available
on various government websites, to provide one easily accessible and
user-friendly resource. The project involves various bodies, including law
enforcement agencies, computing and Internet companies and government
Consumers with any concerns over whether an email is a
genuine can contact Highland Council's Trading Standards Unit by
telephoning The Highland Council Consumer Helpline 0845 600 4222 (local
rate, mobile call costs may vary) or by e-mail to
For further information please contact: Bob Jones,
Standards Officer, Tel. 01463 228711
APACS, the trade association for payment processing companies, reported a
4,000% rise over the past year in phishing - a scam in which internet
users are sent an email claiming to be from their bank, which leads them
to a bogus website that tricks them into revealing their bank security
details. The information can then be used to siphon money from their banks
or steal their identity.