Do you want to be a millionaire: Transcript

NB: THIS TRANSCRIPT WAS TYPED FROM A TRANSCRIPTION UNIT RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT: BECAUSE OF THE POSSIBILITY OF MIS-HEARING AND THE DIFFICULTY, IN SOME CASES OF IDENTIFYING INDIVIDUAL SPEAKERS, THE BBC CANNOT VOUCH FOR ITS ACCURACY.

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PANORAMA
Do you want to be a millionaire?
RECORDED FROM TRANSMISSION: BBC-1 DATE: 16:07:06

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JUSTIN ROWLATT: Imagine pulling off the perfect crime. One day you're a white van man, the next a multi millionaire. So how do you go from driving something like this¿. to driving something like this in just a matter of months and all courtesy of you, the British taxpayer. This man discovered how. In 18 months pipe fitter Ray Woolley went from a council house in Stoke on Trent, to a million Euros Spanish villa. He owned a fleet of luxury vehicles including - a Ferrari! And all thanks to a scam made possible by the creation of the European single market.

RAY WOOLLEY: You've worked hard seven days a week, twelve hours a day earned shite all your life, but now you're sitting and you're pushing a few bits of paper about and you're earning great money. I just thought this is great. Anybody would.

JUSTIN ROWLATT Ray Woolley the pipe fitter had become Riviera Ray, the kingpin of a criminal gang that had raked in 38 million pounds from the VAT man. Tonight on Panorama we'll reveal how the scam works and ask why politicians continue to allow fraudsters like Ray Woolley to take British taxpayers for a ride. The fraudsters call it "the spin" and with the help of a fictitious firm, let's find out just how easy the scam can be. It exploits the VAT trading rules of the European single market to drain millions of pounds a day out of the Treasury and into the pockets of fraudsters, like Ray Woolley. In its simplest form VAT fraud is easy. You don't have to ask the audience or phone a friend. Frankly pretty much anybody could do it. The key to these frauds is having a limited company, but crucially one that's VAT registered.

SANDRA: Good morning Mr Rowlatt.

ROWLATT: Morning Sandra. Can you get us a number for Franco Phones in Brittany please luv.

SANDRA: Of course, Mr Rowlatt.

ROWLATT: Next, you order some goods from another country in the European Union. This is what makes the fraud possible. Under European single market rules you don't pay any VAT when you import goods from another member country.

[On telephone] Oh bonjour Pierre. Listen, could I have a million pounds worth of mobile phones, please, mon ami.

You could buy any goods on which VAT is chargeable. But the current fashion among practitioners of the spin is for mobile phones and computer chips. They're small, they're high value and they're in high demand.

[On telephone] Yeah, merci beaucoup Pierre. Listen - love to the wife.

Next, all I have to do is sell the phones on in the UK, adding of course 17 ½ % VAT.

ROWLATT: Sandra!

SANDRA: Yes Mr Rowlatt?

ROWLATT: Get us Colin on the line, would you?

SANDRA: Yes Mr Rowlatt.

ROWLATT; As a VAT registered company, I am obliged to collect VAT on behalf of her Majesty's Revenue and Customs.

Yeah, hi Coll, yeah no, I've got the phones. Yeah, a million pounds plus VAT, that'll be £1 million one hundred and seventy-five thousand pounds please Coll. Yeah, if you could. Yeah, pop it in the post. Cheers mate, bye bye.

The law requires that once every three months I pay any VAT I've collected to the tax man. These fraudsters flout that law. They don't hand over a penny. Once the cheque comes in¿.. Cheers Sandra. All I have to do is pocket my profit, £175,000 on this deal, and then disappear to enjoy the cash. I've become what those who know the jargon call "a missing trader". In case you missed that, when you buy goods here in the UK like mobile phones, you pay 17 ½ VAT. Now what these guys are doing is importing goods VAT free from Europe, selling them on in the UK plus VAT, and then, instead of paying that money to the government, they do a runner with it. Simple as that.

SIMON DRAYCOT QC
It's something that can be operated not necessarily by very, very sophisticated criminals. Indeed ordinary criminals, once they understand it, can operate this fraud.

ROWLATT: Simon Draycot is a senior barrister. He's prosecuted some of the biggest VAT fraudsters including Ray Woolley. He says the beauty of this fraud is that it's usually only detected when it's already too late.

DRAYCOTT: It is difficult for Customs to detect the fraud because they have to come across one of these companies, follow it until they get to what we call the missing trader, the person who apparently disappears with the VAT. But of course, by the time they get there, he's long gone.

ROWLATT: What's the scale of the problem with missing traders?

Sir DAVID VARNEY
Chairman, HM Revenue and Customs
In 2004-2005 somewhere between 1.1 billion and 1.9 billion.

ROWLATT: Up to 1.9 billion pounds!

VARNEY: Yeah, the last set of figures we've got for 2004-2005 show it's down by about 30% on its peak in 2001-2002.

ROWLATT: But this is a huge amount of money, isn't it.

VARNEY: This is a huge amount of money. It's a lot of hospitals, it's a lot of schools, it's a lot of public services.

ROWLATT: To be precise, 2 billion pounds would by you 20 brand new hospitals, 100 new schools, or would give every single old age pensioner in Britain a £200 cash hand out. So why is the VAT system so vulnerable to fraud? Well the reason dates back to the creation of the European single market back in 1993, that's when it was agreed that goods and services would be allowed to move freely across all the borders of the European Union. There'd be none of the Customs checks and charges that apply to goods from other countries, and crucially no VAT would be charged on those transactions.

This man was a senior Customs official at the time Britain joined the single market. We arranged to meet at the London Eye. He believes the architect of the European single market wrote what was in effect a fraudsters charter.

DAVID RAYNES
HM Customs and Excise, 1964-2000
The single market rules facilitate it because we have the tax-free movement of goods from one country to another or even from one country to another and then to another country. So goods are moving all the time with no tax being charged on them. Governments.. our government is trusting somebody with a VAT number who imports goods to pay the tax over when it sells the goods, and of course, if they disappear, the tax disappears with them.

ROWLETT: And disappear is exactly what Riviera Ray Woolley did, except that Ray was one of the few VAT fraudsters Customs have prosecuted. He was arrested at Amsterdam Airport following a business trip to Hong Kong. He received a record sentence - 9 years and was ordered to pay back 9 ½ million pounds. It was one of Customs biggest victories in the fight against the VAT fraud. The only problem, they put Ray Woolley in here HMP Sudbury - an open prison. In February last year he simply walked out the front gate and was off. Riviera Ray had become the ultimate missing trader.

It must have been quite frustrating to discover that Ray Woolley had walked out of an open prison.

Sir DAVID VARNEY
Chairman, HM Revenue and Customs
Yes, it is frustrating and I do hope that the viewers of your programme will watch this programme and if any of them have any knowledge about his whereabouts we'd like to return him to Her Majesty's hospitality suite.

ROWLETT: We'd also like to find out where Ray Woolley is. Riviera Ray was not involved in a run of the mill VAT fraud, the operation he was running was more complicated and much more profitable. The likes of Ray call it 'the spin'. Customs officers call it 'carousel fraud'.

SIMON DRAYCOTT QC
The whole point of the fraud is to make millions and millions of pounds and disappear before Customs are on to you. that's why it's such a good fraud. Within 3 or 4 months you can be sitting out in the Bahamas and the Customs don't even know that the fraud has been committed.

ROWLETT: This advanced version of the scam takes a little more work and, to avoid suspicion, the fraudsters need to exploit a legitimate business. Ray Woolley's target came in the unlikely form of self-employed roofer Martin Bethell who sold the Woolley gang his company "Roof Smart".

MARTIN BETHELL
It had been VAT registered and it had bank accounts. It met the criteria that they were interested in and we agreed a figure and eventually I sold it to them for £2,400.

ROWLETT: They were buying Roof Smart's VAT number because controlling VAT registered companies is essential to the fraud.

And what happened to the company?

BETHELL: They started using it for importing mobile telephones.

ROWLETT: Unbeknownst to Mr Bethell, his roofing company became the engine at the heart of Ray Woolley's multi million pound scam. It also led Customs officers to arrest Martin.

BETHELL: The desk sergeant said: "Right, okay, why have we got Mr Bethell here?" And the investigating officer which was stood to my left behind me turned round and said words to such a¿ as.. "We are arresting Mr Bethell because we believe he's done away 20 million of our pounds." At which point my knees buckle. I turn round and I say: "Twenty million pounds?! I have 20 odd pounds on the desk. I want to know where the other 19 million 999,970 odd quid is because I haven't got it.

ROWLETT: Of course they were asking the wrong man. But Martin was amazed by how much cash Customs said was involved. So how did the scam manage to generate so much money? That's where the carousel comes in.

VARNEY: They call them the carousel fraud because the goods go round and round. They come into the country, go out the country, and all the while picking up illicitly VAT.

ROWLETT: The Woolley gang set up a classic carousel by importing phones VAT free into Britain from Ireland. They then sold them on in the UK plus VAT and stole the tax. Through a smokescreen of companies, some of them legitimate, Riviera Ray then exported the phones back to Ireland. Once the carousel was working, the same goods were sent around again, and again, and again, and each time Riviera's gang was stealing more VAT.

DRAYCOT: What would inevitably happen was that the phones would be exported out of the United Kingdom to a company in Southern Ireland, Bilton, which belonged to Mr Raymond Woolley.

ROWLETT: So effectively it was a circle. Ray was selling the phones and then buying them back himself.

DRAYCOT: It was a carousel.

ROWLETT: So if Ray Woolley was buying and selling the phones for himself, where did all the money his gang stole come from? From here, that's where - Her Majesty's Treasury - because every time the phones were exported, the exporter would claim back the VAT Ray's gang had stolen. The exporter has bought millions of pounds worth of mobile phones and has paid out huge sums of VAT to the company it bought the phones from. That gives the exporter the right to say to the Customs, look, I've paid millions of pounds worth of VAT, I need t claim and I want to claim that VAT back. The Customs are statutory bound to pay that VAT. The fuels the fraud.

ROWLETT: So the taxpayer was picking up the tab. Each time the mobile phones went round the so-called Carousel, the Woolley gang would collect tens of thousands of pounds of VAT. That's why carousel fraud is so lucrative. You can do hundreds of thousands of pounds worth of trade every single day. Which is exactly what Ray Woolley did. Well, Panorama has managed to obtain the invoices Customs used to convict him and here they are. So let's take a look. [totting up on adding machine] £184,000¿ £237,900¿ £92,000¿ £400,000¿ It's £218,968,840. And now of course, we have to add 17 ½% VAT which gives £38,319,547 which is what Ray Woolley's gang stole from her Majesty's Revenue and Customs in one six month period alone. With so much money at stake, you'd have thought the solution would be straightforward. Target the fraudsters and refuse to pay out VAT claims. But as always things aren't that simple. The man I'm going to meet is one of Her Majesty's Revenue and Customs senior investigators. He had the job of catching Ray Woolley. We can't show his face for fear of compromising his current investigations.

Ray Woolley's companies were doing huge amounts of business, £218,000,000 in just a few months. They stole £38,000,000 from the Revenue in that period. Why on earth didn't you just stop this?

INVESTIGATOR: These types of fraud are immensely complex and involve quite a number of traders which on the face of it are doing legitimate trade. They produce their invoices, the majority of them pay their VAT and it's not until sometimes several months have passed before it is then realised that it's part of a fraud.

ROWLETT: What you seem to be saying is it's almost impossible to stop.

INVESTIGATOR: It's very, very difficult to stop. It's extremely difficult to stop.

ROWLETT: I mean for the Fraudster it sounds almost like the perfect crime.

INVESTIGATOR: It is for some of them, yes.

ROWLETT: And for all we or Customs know, Ray Woolley, wise to the mistakes which landed him in prison, may still be trying to pull off the perfect carousel from the safety of a foreign hideaway. Naturally Panorama wanted to speak to Mr Ray Woolley about his activities. There was only one thing for it, I'd have to phone a friend, Ray's friends.

[Automated response] Thank you for calling Her Majesty's Prison Sudbury.

ROWLETT: Oh good evening. I'm trying to contact one of your prisoners, a guy called Robert Gana. I want to speak to him about a friend of his, Ray Woolley.

Oh hello, I'm trying to contact Paul Wintom Norris, a friend of Ray Woolley's.

[Automated response] Your call cannot be taken at the moment.

They're not friends anymore?

[Automated response] The number called has been changed to¿.

I'm trying to contact one of your members, he was the British Amateur Golf Champion back in 1980, a guy called Duncan Evans.

You're a former associate of Ray Woolley's, is that right?

Spain please. Ray Woolley, I think in Marbella.

And my calls seem to have paid off. A message has been forwarded to my mobile.

RAY WOOLLEY: Hi Justin, it's Ray Woolley. I'm just checking you are who you say you are. As you can imagine, I'm always a little bit wary of when people want to talk to me, so yes, you obviously just checked out, so thanks a lot, bye.

ROWLATT: I'd checked out, but would Riviera Ray be back in touch. He's not the only VAT fraudster, there are lots of them out there. So many in fact that some former Customs officials say many missing trader VAT frauds go completely uninvestigated.

DAVID RAYNES
HM Customs and Excise, 1964-2000
Customs investigators are not coping, they're overwhelmed. I was dealing with a case recently as a private investigator where I was getting information from a bank and giving the information to Customs. They couldn't take on the fraud, and I know that there are other cases they can't take on. I speak to ex-colleagues, they're totally overwhelmed. These cases are taking too long to put together and they're too complex.

ROWLATT: So how significant was this case that you were involved in?

RAYNES: The case I was involved in recently was millions of pounds a day of trading.

ROWLATT: So perhaps half a million pounds a day of lost revenue.

RAYNES: Perhaps half a million pounds a day of lost revenue.

ROWLATT: And that case is going uninvestigated as far as¿

RAYNES: Uninvestigated.

ROWLATT: So is every case investigated?

Sir DAVID VARNEY
Chairman, HM Revenue and Customs
Proportionate to what.. we obviously have to make a decision about which ones are likely to be prosecuted¿ prosecutable, which one and how much is involved. So obviously we prioritise cases where we've got the information to be able to mount a successful prosecution.

ROWLATT: So that's a no, not every case is investigated.

VARNEY: Well no tax authority in the world can do every case. It has to make priority decisions.

ROWLATT: There are so many fraudsters running so many frauds it actually affects the British trade figures. Here's a recent government press release. It says things are looking pretty rosy for the British economy. Exports are up which is great news for the government. It loves to see British business doing well in the world market. But there's a problem, and here it is in the small print. These figures may be inaccurate because, and I quote: "They may be distorted by changes in the pattern of missing trader VAT fraud." That's because the scale of the fraud is now so vast it twists the trade figures. The fraud only began to take off in the late 90s. By 2002 the official estimates showed that 11 ½ billion pounds worth of exports were associated with this fraud. That's more than 6% of all British exports, almost 2 ½ billion pounds were stolen from the British taxpayer alone.

VARNEY: It's quite difficult to pick out in the transaction flow that's going on every day in the country which has got open borders and is part of the common market where there were fraudulent transactions. Customs sharpened up their act and managed to cut back fraud by a third. But some of Customs tough new tactics, although in the short-term highly effective, have now become mired in controversy. Mike Cheetham's Bond House Systems was one of many legitimate exporters caught up in the desperate Customs crackdown on carousel fraud.

How much trade were you doing every day?

MIKE CHEETHAM: Over a million pounds a day.

ROWLATT: A million pounds of trade. That's a big business you were running.

CHEETHAM: We were one of the best. We were one of the biggest legitimate companies in the UK.

ROWLATT: But, unknown to Mike Cheetham, there were missing traders in his supply chains, and one rainy morning in June 2002 a Customs officer came to call. He told Mike he would not be receiving the 13 million pound VAT repayment he was owed.

And how did that change the day that Customs came round and told you they weren't going to repay your VAT?

CHEETHAM: At that instant it stopped.

ROWLATT: It stopped dead?

CHEETHAM: We had to stop trading, yeah, we had to stop trading.

ROWLATT: But you had ongoing trade and stuff.

CHEETHAM: The company was in that moment rendered insolvent.

ROWLATT: How do you justify taking action against companies which, by Customs own admission, are unwittingly involved in a fraud?

VARNEY: Well we've got to defeat fraud. If somebody is unwittingly involved in a fraud we've still got to take action to defeat the fraud. This is quite a substantial fraud against the public, and what we've got to do is to do is do measures commensurate with that. So we're trying to use our powers in a proportionate and appropriate way.

ROWLATT: But just how did Customs use its powers against Bond House Systems? Was it proportionate? Was it appropriate?

MIKE CHEETHAM
Director, Bondhouse Systems
Before we started trading we sat down with Customs and Excise and we said what should we do? They said you provide the intelligence, we will police your supply chains and we will remove the bad people. We did exactly that. They were meant to police the chain of supply, they didn't do it, we couldn't understand why. Then lo and behold, several months later, we discovered confidential Customs documentation that showed that they had allowed this to run.

ROWLATT: Here are those documents. What they show is that Customs had detected a fraud by April 2002. They were already down 40 million pounds. The problem - they didn't have enough evidence to prosecute. That's when Customs officers decided to let the fraud run. It was a high stakes gamble.

CHEETHAM: Had Customs done as they'd promised, had they policed the chains, had they removed the bad people from our chain of supply, then this wouldn't have happened. But they didn't. They deliberately allowed this to run, and they destroyed my company in the process costing this country hundreds of millions of pounds.

Sir DAVID VARNEY
Chairman, HM Revenue and Customs
We're engaged in fighting organised criminality, and in that we have to make judgements all the way along the case, of when can we bring it to a prosecution which will successfully stop and eradicate a particular form of attack against the public revenue.

But doesn't there come a point where you say we've lost 40 million, you know, we stand to lose a lot more if we let this run, the risks are just too high?

VARNEY: Well clearly we're obviously making decisions as we go in the individual cases. I am not going to comment on a specific case, but we are very clear that what we do is stop and prevent large amounts of fraudulent activity.

ROWLATT: After months of surveillance the case was thrown out of court on a point of law. Even worse, Customs and the British taxpayer have lost 120 million pounds. Mike fought Customs all the way to the European Court of Justice, and earlier this year he won. In future it will be more difficult for Customs to refuse to pay innocent exporters unwittingly caught up in VAT fraud but that could cost the Treasury hundreds of millions of pounds. Despite what he's been through, Mike Cheetham doesn't blame Customs.

CHEETHAM: We have to change the system, it is the only option. Customs have an impossible task at the moment and we're very sympathetic. They're trying to catch highly organised crime who are stealing VAT, and the only way to sort the problem out is to change the VAT system. There has to be the will at a very high political level to change European or UK VAT rules.

ROWLATT: And levels of carousel fraud are on the increase again. Figures released on Friday show that up to 7.4 billion pounds worth of trade was associated with fraud in the last financial quarter alone. That's over 10% of all British exports. So is one of Britain's most wanted VAT fraudsters back in business? I was getting closer to answering that question. Back at the office one cold November afternoon the phone rang.

What I'd like to suggest is that we meet up and have a chat about this.

WOOLLEY: Well you're gonna have to fly then because I'm not in the UK.

ROWLATT: Well I would be happy to fly. Well if I can get it past my editor I certainly would, it depends where you¿ are you somewhere nice?

WOOLLEY: Well I'm somewhere where I think is nice. (Laugh) It's not a hot climate. It's about an hour from London or an hour and a half.

ROWLATT: An hour and a half from London?

WOOLLEY: I'm in Europe. You'd never find me anyway, so I can tell you where I am. I'm in Switzerland.

ROWLATT: The problem for Customs is that VAT fraudsters like Ray Woolley are constantly changing their tactics. They've learnt to maximise profits by operating carousels across a number of European countries. The rewards can be astronomical. One gang being investigated by Customs is reckoned to have made away with more than 350,000,000 in Britain alone. It's this man's job to try and reduce VAT fraud in Europe. He's the Commissioner in charge of the European tax system. VAT fraud has become one of his main priorities.

LAZLO KOVACS
EU TAX COMMISSIONER
The estimate is that it can reach 10% of the total of VAT receipt which is a huge amount of money.

ROWLATT: 10% of all VAT.

KOVACS: 10% of VAT receipt.

ROWLATT: That's something like 100 million¿ 100 billion Euros, isn't it?

KOVACS: Yes, yes exactly. Therefore, one of my ambition is to fight successfully the tax fraud, the VAT fraud.

ROWLATT: But this is a vast amount of money.

KOVACS: Yes, it is.

ROWLATT: It's almost the entire budget of the European Commission. The problem is, he presides over a system which is very vulnerable to fraud, thanks of course to the creation of the single market and the decision that cross border transactions would carry no VAT. What's more politicians were well aware of the risks of fraud when they signed up to the single market rules, at least according to one former Customs insider.

DAVID RAYNES
HM Customs and Excise, 1964-2000
I'm sure that policy makers understood the risk of fraud. After all, we had had in the early 80s we'd had massive frauds of exactly the type that are going on now, and we knew how those frauds worked. Certainly investigators understood it. We were warning of that type of fraud. We were warning policy makers of that. We were trying to get changes in VAT control system.

ROWLATT: In fact the current VAT system was always intended to be a temporary stop gap, a transitional system. The plan was to move within a couple of years to something called "the origin system" it's known as the origin system because you pay VAT in the country your company buys the goods. So if you bought some phones from say Brussels to import into the UK you'd pay VAT here in Belgium. There'd be no zero rating for imports and no right to reclaim VAT at export. In fact, there'd be no opportunities for missing trader fraud. But 12 years on and we are still operating under the transitional system - why?

The problem is, different European countries charge very different rates of VAT. Anything from 15 to 25 percent. The origin system requires rates to be harmonised. They need to be harmonised because if I'm paying VAT on phones bought here in Brussels but selling them on in the UK, then the Belgium Government pockets the tax, even though the phones are being used in Britain. What was envisaged was that there'd be a clearing house divvying up receipts of VAT between countries. But, without harmonisation of rates, the cash flows would be enormous. And some countries are not keen on giving up their right to decide how much VAT is charged. One of the most prominent opponents was¿ that's right, Great Britain.

LAZLO KOVACS
EU Tax Commissioner
There are some member states, I do not say all but some member states that are very keen on this tax sovereignty and they respect it as a kind of a sacred cow.

ROWLATT: States like Great Britain.

KOVACS: Yes, and Ireland and some other countries.

ROWLATT: And the present government has said it has no intention of surrendering control of VAT rates to Brussels.

You're the Tax Commissioner. What are you doing about it?

KOVACS: The final responsibility lays with the member states. The question is whether we want to do away, or to reduce considerably tax fraud by changing the VAT legislation and accept a higher level of harmonisation, or we accept that 10% of the total VAT revenue will be stolen by fraudsters.

ROWLATT: Until member states take action the VAT system remains open to attack from fraudsters like the man I'm on my way to meet. Mr Raymond Woolley had suggested a rendezvous in Switzerland.

Two million pounds of the proceeds of Ray Woolley's fraud were deposited here in Zurich in an account in his wife's name, according to documents obtained by Panorama. Now it was just a question of waiting for Ray to call.

[telephone rings] Hello. Is that Ray?

[Secret filming caption]
Riviera Ray wanted to meet in a plush Zurich hotel. He's agreed to meet us because Ray is adamant he had no idea that his companies were involved in a fraud.

WOOLLEY: I'm obviously Ray, this is my wife Bernadette. Are you Justin?

ROWLATT: Hi, I'm Justin.

And after a 2 hour meeting with Ray and his wife Bernadette Ray did agree to an interview, but not before he told us how he'd escaped from prison.

WOOLLEY: What an open prison means, it's open. There's a perimeter fence around the outside, you can jump over any time you like.

ROWLATT: So you could just walk out through the door onto the street, catch a bus, whatever, off you go.

WOOLLEY: A taxi actually.

ROWLATT: The following day one of Britain's most wanted VAT fraudsters arrived for our interview in a hotel suite we'd booked.

You did get a nickname, didn't you.

WOOLLEY: Which was?

ROWLATT: Riviera Ray.

RAY WOOLLEY: Oh yes, yeah, I believe there was a name put to me. We're not 100% sure where the nickname came from but I actually lived on the Spanish Riviera and my name is Ray.

ROWLATT: So do you now accept that there was a fraud going on?

WOOLLEY: Yes, yeah, I accept a fraud going on.

ROWLATT: And did you benefit from the fraud?

WOOLLEY: Yes, I personally profited.

ROWLATT: So it seems to me there are two ways of looking at this, one of which is that you knew exactly what was going on, or the other of which is you're a very stupid man. And Ray, as far as I can see, you're not a very stupid man.

WOOLLEY: Well I've got to disagree with you there because you're looking at everything with all the hindsight that I never had at the time. So looking at it from where I am now, knowing what I know now, yes, there's a fraud. Knowing what I knew then, no I didn't realise there was a fraud.

ROWLATT: Didn't you ever stop and think this is just too good to be true.

WOOLLEY: I just thought this is great. Anybody would. You would, if you were in my position you'd think this was fabulous. I've got two children and a wife, I've now got security for my family for the rest of their life. That's my way of thinking, security for my family, this is great. We don't have to worry anymore.

ROWLATT: Now you've studied Ray Woolley's involvement in this fraud. Now he has claimed that he had no idea that he was involved in a fraud. As far as he was concerned he was running a legitimate business. Now in your view, is that a plausible argument.

SIMON DRAYCOTT QC
Well let's just think about it for a moment. There's Mr Woolley, sitting in a back room on a mobile phone with no secretary, no accountant, conducting a business that had a gross turnover almost twice that of Manchester United Football Company. It absolutely beggars belief that that man thought that he was running a legitimate business. I'm afraid Mr Raymond Woolley lives in cloud cuckoo land.

ROWLATT: In fact the £38,000,000 profit of the fraud was the subject of a court confiscation hearing in March of last year.

The judge lists a series of assets¿.

WOOLLEY: The just doesn't list¿ the judge lists a series of imaginary assets. The judge can't come up and say them are your assets, because they're not there. He can't come up and say there you go, this asset's there and this assets there.

ROWLATT: Ray, you told me you bought yourself a Bentley.

WOOLLEY: Yes I did.

ROWLATT: You've told me that you bought yourself a Ferrari.

WOOLLEY: Yes I did.

ROWLATT: You've told me that you bought property in Spain.

WOOLLEY: So here we go, here we go.

ROWLATT: You've told me that you made millions of pounds out of the fraud.

WOOLLEY: Here we go, we've now got two cars, we've now got two cars you keep throwing about. How much do you think two cars cost?

ROWLATT: Well apparently your Bentley cost you £218,000.

WOOLLEY: And - the Ferrari?

ROWLATT: It was something like 78.

WOOLLEY: No, you're wrong again, it was actually 120, 78 is the figure that's on my confiscation order. So there again, even you yourself know¿

ROWLATT: Sorry, Ray, your cars cost you more than I estimated.

WOOLLEY: But even you know¿

ROWLATT: So you spent 300 grand on two cars.

WOOLLEY: Even you now are making¿.

ROWLATT: £300,000 of taxpayers' money on two cars.

WOOLLEY: No, not taxpayers' money. Business profit.

ROWLATT: That's what you say, it's business profit.

WOOLLEY: That's what I say, yes.

ROWLATT: And what does the court say about it?

WOOLLEY: Well the courts say it's fraud.

ROWLATT: They say you're the biggest¿ you've been convicted of a £38,000,000 fraud.

WOOLLEY: Well we can prove that it wasn't £38,000,000 anyway.

ROWLATT: Ray Woolley's lawyers gave us these documents which Ray claims prove that he only benefited to the tune of 1.8 million pounds.

DRAYCOTT: Well it beggars belief that anyone still maintains that Raymond Woolley only benefited by 1.8 million pounds. He had something like 38 million pounds of British taxpayers' money through his bank accounts, his cut was at least 9 ½ million pounds of which a great deal was simply squandered on luxury goods.

ROWLATT: Tomorrow Mr Kovaks, the tax commissioner, is expected to allow Britain to change the way VAT is charged on the goods most often used for carousel fraud, mobile phones and computer chips. The Treasury reckons this will save half a billion pounds a year.

Sir DAVID VARNEY
Chairman, HM Revenue and Customs
We think it will make a substantial difference but in terms of seeing what actually happens, what we'll have to see is whether behaviour on the ground. We've done a lot of disruption to the criminal attacks on the system already. We think this will make it easier, but there will still be attempts to defraud the system. It will move to some other goods.

ROWLATT: Indeed, according to the tax commissioner the changes may open the VAT system to new fraud risks. He believes the solution is a fundamental change in the way VAT is charged, a move to the origin system. But, as a seasoned European politician, he doesn't expect that to happen any time soon.

LAZLO KOVACS
EU Tax Commissioner
And if we want to introduce it on EU level, then of course we need the approval of the Ecofin Council, the Council of the Ministers of Finance.

ROWLATT: Do you imagine that would be a problem?

KOVACS: Certainly, everything is a problem which goes to the Ecofin Council because there are 25 member states for the time being. Soon there'll be 27. There are 25 different national interests and the respect of the national tax or fiscal sovereignty, it's not easy to harmonise.

DAVID RAYNES
HM Customs and Excise, 1964-2000
Until somebody grasps this political hot potato millions of pounds.. billions of pounds will leak out of the system here. Billions of pounds of Euros will leak out of systems in other countries and the fraudsters will benefit and the money is going to organised crime.

ROWLATT: Ray, you're a convicted fraudster.

RAY WOOLLEY: Yes. I can do nothing about that. Whether I agree with it or not I can't do anything about it.

ROWLATT: So my question for you is, you escaped from prison. You think you walked out but you escaped from your responsibilities, your duties to serve your sentence and you came here to Switzerland to enjoy the benefits of your fraud and that's the truth of it, isn't it Ray.

WOOLLEY: [Ray leaves seat, moves out of view of camera] You just switch it off or else I'll snap it to bits.

ROWLATT: Snap it to bits then.

MAN: There's no need for that Mr Woolley.

ROWLATT: Ray, are you going to pay back the money that you stole? [calling after disappearing figure of Ray] Ray are you going to pay back the money you stole.

[Camera follows the fleeing figures of Ray and wife down hotel corridor]

ROWLATT: Ray, you were involved in the theft of 38 million pounds from the British taxpayer. Are you going to pay back any of that money? Are you going to pay back the money Mr Woolley?

[door closes in face of camera]

ROWLATT: I think that was a no. Ray Woolley was arrested by the Swiss authorities when he entered the country but he was released. VAT fraud is not an extraditable offence in Switzerland. An international arrest warrant for Riviera Ray still stands and Interpol remain on the lookout for him.

The government says it's pouring resources into the fight against fraud. Gordon Brown recently boasted in the House that there are now 1000 Customs officers dedicated to tackling VAT fraud, yet the latest figures show that 16 ½ billion pounds worth of trade was associated with VAT fraud in the last financial year. That's an all time record. It would seem the government has yet to find the silver bullet which will stop the fraudsters. And all the while the carousels continue to turn siphoning billions of pounds of taxpayers money out of the Treasury every year. It is no exaggeration to say that missing trader VAT fraud amounts to the biggest heist in British history, and remember - it's your money!

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