Pepperall: The fraud went so far as forging false files
The practice of making fraudulent legal aid claims was “endemic” at Blavo & Co, which at its height was one of the largest legal aid firms in the country, the High Court has found.
Mr Justice Pepperall ruled [1] that founder and owner John Blavo was liable to repay £22.1m in claims for thousands of cases which never took place.
The 18-office firm, which the Solicitors Regulation Authority closed in October 2015 [2] on the grounds of suspected dishonesty shortly after its legal aid contracts were terminated, employed 200 staff and had contracts with 150 consultants.
A Legal Aid Agency (LAA) investigation identified 24,658 cases in which the law firm had claimed fees for mental health tribunal hearings between 1 April 2012 and 31 March 2015.
However, it found that a hearing had been held in only 1,485 of them.
The LAA had first started seeking to recover money in 2014, when Blavo & Co was opening more cases than it was contractually allowed to do. A routine audit then threw up issues that began the process which led to the proceedings.
Blavo & Co only provided a small percentage of the files for the LAA to review, the circumstances around which were questioned in depth during the proceedings.
The case was not pleaded in fraud even though that was the central allegation. Pepperall J said he required cogent evidence before accepting on the balance of probabilities that Blavo & Co had been party to fraud.
The judge found the detailed investigation into individual cases “particularly illuminating”, highlighting two cases involving clients of opposite genders whose detailed backgrounds were all but identical.
The “extraordinary similarities… are plainly well beyond anything that could sensibly be attributed to coincidence”, the judge said, and the only submission Mr Blavo’s counsel could make was that the files indicated that the fee-earner concerned might have herself committed a fraud.
The judge said: “In my judgment, there are only two credible explanations: either one or both were not genuine files.
“Given the fact that the named fee-earner did not appear in the lists of employees, and that neither [client appeared on the tribunals] database, I find on the balance of probabilities that neither file was genuine.
“I do not, however, accept that the [two] files evidence an isolated instance of fraud that can be solely attributed to one individual fee-earner.
“Indeed, I find that 42 out of the 49 files audited [by the LAA] in July 2015 were not genuine files but were falsely created in order to justify dishonest claims for payment.”
Pepperall J accepted that that he should treat “with some scepticism” the proposition that a law firm might make dishonest claims for payment, but continued: “Once the dam has burst, there is no reason to treat the discrepancies on the remaining files with the same caution. To quote Baroness Hale, the threshold of incredulity has been surmounted.
“Put another way, it is not inherently unlikely that the fraud was more extensive than the relatively small number of sample files on which the agency was able to devote the resources to contact the NHS trusts and carry out a full forensic investigation.
“The fact that the agency was able to find cases of fraud in 42 of the 49 files presented for audit in 2015 indicates that this was no needle in a haystack.
“Indeed, on the balance of probabilities, I find that the practice of making fraudulent claims on the legal aid fund was endemic at Blavo & Co.
“In some instances, the fraud went so far as forging false files… In many more cases, false files were not created and consequently there was nothing to deliver up in response to the LAA’s requests.”
Neither Mr Blavo, nor his brother Frederic – who was the practice manager – gave evidence. “Even if they could not have dealt with specifics, one would expect the brothers to have wanted to give evidence to deny their knowledge of or involvement in any fraud upon the legal aid fund,” Pepperall J said.
No good reason was offered for the decision not to call either man. “In my judgment, I am therefore entitled to, and do, draw the adverse inference that the Blavo brothers did not give evidence because they had no satisfactory explanation to give.
“I do not, however, decide this case either solely or mainly upon such inference.”
Last October, the Court of Appeal ruled [3] that the Solicitors Regulation Authority could try and recover the £800,000 it spent intervening in Blavo & Co.