Spectac Ltd.

Prayers – in the House of Commons at 12:59 pm on 22nd February 1995.

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Photo of John Hutton John Hutton , Barrow and Furness

I am grateful for the opportunity today to draw attention to what I believe to be a serious risk to many of our citizen—the unscrupulous way in which many foreign-based overseas recruitment companies operate in the United Kingdom.

I want to illustrate a particular instance of this abuse. In the weeks leading up to Christmas 1994, 27 people became the innocent victims of a carefully orchestrated criminal conspiracy. They each lost £8,000, money that none of them could afford to lose. The 27 came from all parts of the United Kingdom, but mostly from our shipbuilding towns and cities. Eleven of them are from my constituency, where, as the Minister will know, unemployment has rocketed over the past few years as Vickers Shipbuilding and Engineering Ltd. yard has declined.

All 11 constituents were recruited by a Dutch company, Spectac, based in Dordrecht and operated as a one-man business by Colin Martin. The workers, who were welders, platers, riggers and electricians—many of them used to work in shipbuilding—were told that they would he working on five-year fixed-term contracts in Guam, and would be paid £4,000 a month tax-free.

Before signing any of the contracts, many of my constituents took advice from their financial advisers, who told them that this was a safe bet and to proceed with the contracts. Many of them borrowed money, some remortgaged their properties.

Spectac recruited these workers from a variety of sources. The company placed advertisements in several British regional newspapers, and it certainly used the jobshop operated by a local enterprise council in Invergordon. I am grateful to the Minister for providing me with that information. Others recruited have testified that they were notified by local jobcentres, but in the main, details of the recruitment were circulated through a network of word-of-mouth contacts of the type common in the offshore construction industry.

The company in Guam, Offshore Corporation, would require each worker to deposit a confidence or integrity bond worth nearly £8,000, which would be repaid monthly over the duration of the five-year contract. The downpayment of £5,000 was supposed to be a sign of good faith on the part of the workers towards Offshore Corporation.

Inevitably, the confidence bond money was duly handed over to Spectac. The workers and their money were flown out to Thailand and later to the Philippines. The tickets, I believe, were paid for out of the proceeds of the integrity bonds.

After a few days in Thailand and the Philippines, the truth became apparent. There was no company called Offshore Corporation. There were no jobs in Guam, and the money—by this time totalling more than £200,000—had disappeared, along with the villains of this whole dismal episode: Ronnie Hydes, Gerry O'Connor and Colin Martin himself.

There is some doubt about whether Colin Martin was a participant in the conspiracy. I have no opinion on that matter one way or the other, but I am alarmed by some evidence that I received today purporting to come from Spectac in Holland and claiming to provide evidence of a payment guarantee that it had lodged with Barclays bank in Jersey to cover any problems with the non-repayment of the integrity bond. That document, I am confident, is completely fraudulent—and it raises doubts about Colin Martin's participation in the whole business.

Unfortunately, the whereabouts of Ronny Hydes and Gerry O'Connor are not known; and the chances of recovering the stolen moneys are small. On 14 February, Spectac ceased to exist as a legal entity under Dutch law. Colin Martin is thought to be somewhere in Thailand, outside the effective reach of any legal action in the United Kingdom, and probably anywhere else.

My constituents have been devastated by these events. In short, they have been exploited and ripped off.

Photo of Angela Eagle Angela Eagle , Wallasey

I congratulate my hon. Friend on securing a debate on this important subject. Bob Neil, a constituent of mine—the shipbuilding connection is again obvious—was also one of the 27 people affected. I can confirm that exactly the same happened to him as happened to my hon. Friend's 11 constituents. He too stands to lose £8,000 under the contract exposed by the good work that my hon. Friend is doing.

Photo of John Hutton John Hutton , Barrow and Furness

I am aware of the difficulties that my hon. Friend's constituent, Mr. Bob Neil, is experiencing. They are exactly the same as those experienced by the other 27 innocent victims of the crime.

This is not the first time that Ronny Hydes and Gerry O'Connor have perpetrated this kind of fraud. They were well known conmen and cowboys. The sad fact is that they are still able to perpetrate this fraud in the United Kingdom.

I want to discuss how the Government can respond to what I believe is an acute problem. We are dealing not just with work outside the European Union. There is also well documented evidence of abuse on construction sites in Germany, where many skilled British workers have found themselves ripped off—their wages have not been paid, and so on. Mr. Bob Neil's case is a stark reminder of just how vulnerable many of our fellow citizens are. They never expected to be out of work, but they possess valuable skills, and they find themselves facing the dismal prospect of years out of work in this country. Naturally, they tend to look overseas for employment opportunities.

I do not believe it fair to say that the 27 people involved were gullible: they were innocent victims of a crime. These events highlight deficiencies and loopholes in what is left of our regulatory framework after deregulation. They also highlight a number of gaps and loopholes in the law. Unless we deal with those problems, it is likely that they will be repeated again and again in the years ahead.

We know that cowboys operate in the overseas recruitment business, often through front companies that act as agents for undisclosed principals. We need seriously to tackle and confront such problems.

Probably no regulatory system can he foolproof, but we can do a number of things to make it harder for the cowboys to operate. First, the Government should look at the arrangements for checking the bona fides of foreign-based recruitment companies that operate in the United Kingdom. A recruitment company that has no operational base in the United Kingdom falls outside the scope of the Employment Agencies Act 1973, so it is not possible under UK domestic legislation for enforcement action to be taken against a foreign-based recruitment agency.

Effective action will require co-operation between European Union member states if we are to deal with the problem satisfactorily. I hope that there will be a chance, under the French presidency, of another look at the posted workers directive to see whether there is any prospect of breathing life into that initiative. I recognise that, if it has life left in it, it might benefit only workers who work in the EU. Of course, the case that I am highlighting goes outside the EU, and would not be covered by the posted workers directive.

Secondly, the Department of Employment should ensure that all Government agencies are properly advised about consulting the overseas placing unit when handling overseas job places. That is especially necessary when job places are being advertised by a recruitment company. I understand that that did not happen in the case of the Invergordon job shop, which is run by the local enterprise company and is part of the Highlands and Islands enterprise agency.

If an overseas recruitment company were able to operate in this country through agencies established by central Government without any effective procedures for ensuring that proper information was disclosed between the agencies, there would be a serious abrogation of responsibility. I am prepared to accept that this case may be an example of a one-off, a mistake, but there were guidelines. It seems that they were not followed in this instance. I hope that it is a one-off. If it is not, the Minister should seriously consider what has happened. It is one of the ways in which we should have regard to how recruitment agencies are operating.

We must, of course, operate within a framework of European law in partnership with European Union member states, but there is a case for the Government examining the operation of the Employment Agencies Act 1973 and tightening some of their administrative arrangements for disseminating information and best practice in advising local job shops, job clubs and jobcentres about overseas recruitment and vacancies.

Thirdly, measures need to be taken to deal with integrity bonds. It is this aspect of the Spectac case that concerns me most. The Government should consider making it unlawful for companies to require the payment of such bonds in the United Kingdom. At the least, there should be more effective control over how the moneys are to be handled.

If it is considered inappropriate to make the payment of integrity bonds unlawful, there is a case for saying, for example, that any payments should be held on account by trustees and not, as in the Spectac case, paid directly by the 27 workers recruited by Spectac to the recruitment agency. When that happens, there is little or no effective control over the moneys, including where they eventually end up. In the Spectac case, we still do not know where the moneys ended up.

The Government should consider amending the guidelines issued by the overseas placing unit to overseas jobseekers. In particular, the guidance should be amended to warn against paying into integrity or confidence bonds. There is nothing in the guidelines issued by the overseas placing unit that refers directly or indirectly to the problems associated with integrity bonds. There is a warning about working overseas and not being covered by United Kingdom employment protection legislation, but that misses the point. Most people working in the far east, for example, would assume that that legislation does not extend to Guam and Thailand.

The problem lies more with some of the sharp practices that are increasingly finding their way into the recruitment agency business. Integrity bonds are inherently dangerous and dodgy. The Government should carefully consider the guidance they have already issued to overseas job seekers, with a view to spelling out the problems associated with the payment of integrity bonds.

It may be appropriate, in the light or wake of the Spectac case, for the Department of Employment to consider advising the editors of British regional and national newspapers against handling any advertisement from foreign or domestic recruitment agencies that require payment of integrity bonds. That would involve the Government in recommending editors and newspapers generally to engage in an easy and standard form of inquiry.

Our newspapers provide the main forum for the cowboys' operations. The Government should require an investigation to determine whether any vacancy being handled or placed through any agency requires the payment of an integrity bond. If the Government are not convinced of the need to make such payments unlawful, they should introduce a requirement that advertisements should warn the public of the dangers or hazards associated with paying integrity or confidence bonds.

We must bring the perpetrators of these crimes to justice. I know that the Minister is extremely competent, but I do not believe that her jurisdiction extends into the Foreign and Commonwealth Office. I hope, however, that the Government will be in contact with the Dutch and Thai authorities to ensure that Hydes, O'Connor and Martin are all held to account for their actions.

It is clear that no criminal offence took place within the jurisdiction of the United Kingdom courts, but there may have been violations of the Dutch criminal code. I hope that the Government will raise the extradition of Hydes, O'Connor and Martin with the Dutch Government. British citizens have been the victims of an appalling fraud. That being so, I hope that the Government will do all they can to ensure that justice is seen to be done in this case.

Photo of Ann Widdecombe Ann Widdecombe , Maidstone 1:14 pm, 22nd February 1995

I congratulate the hon. Member for Barrow and Furness (Mr. Hutton) on obtaining the debate and on raising an important matter. He will have increased public awareness of the problem, and I congratulate him on that, too. I congratulate him also on having his debate at such a "seasonal" hour. I hope that afterwards I do not go on autopilot and go home forgetting that there is the rest of the parliamentary day.

First, I shall respond to some of the hon. Gentleman's specific points about what the Government might seek to do to counter what is, fortunately, a rare but serious type of fraud.

We shall strengthen the guidance that we give to warn job seekers about the dangers of integrity bonds. I take the opportunity to reinforce the advice that we already give job seekers, which is that, if they find in a magazine or newspaper an advertisement of employment abroad, they should take it up and have it checked through their jobcentre with our overseas placing unit, about which I wish to say more in a moment. That is a sensible measure, which will greatly increase the protection offered to job seekers.

European legislation will not help in dealing with the tiny minority of fraudsters who come within the terms of the debate. The Department has, however, taken up with the Dutch Minister with employment responsibilities the matter of illegal agencies that are based in the Netherlands. Officials will be taking discussions forward.

We have already taken steps to warn job seekers about bogus agencies, through a poster and leaflet campaign. In the light of the debate and in the light of the Spectac incident, I shall examine the need to refresh the campaign.

I do not entirely share the hon. Gentleman's view that we should be making representations to newspapers. Newspapers are already well aware that it is not in their interests to carry advertisements that place their readers at risk. On the other hand, I am sure that the hon. Gentleman will acknowledge that bogus agencies do not make their purposes entirely clear in newspaper advertisements. I think that he will accept that it is quite difficult for newspapers to come to judgments. Often, however, they contact the Department for advice when they think that there is an element of doubt. There is already some contact between newspapers and the Department.

Photo of Angela Eagle Angela Eagle , Wallasey

Is there a list of companies that are known to have been fraudulent in the past that the Department of Employment could refer to or begin to keep, if it does not do so already? At least those companies would have to keep changing their names and taking on new forms if they were intent on trying to perpetrate the same fraud over and over again.

Photo of Ann Widdecombe Ann Widdecombe , Maidstone

When I come to discuss the overseas placing unit, I shall explain that one of the purposes is to check on the bona fides of job vacancies that are advertised from abroad. Given its experience, the unit would obviously have knowledge of companies where there was established fault or doubt. That is not information that would be held centrally in every jobcentre. We have the unit as a point of referral, so that we can try to keep a level of expertise.

I turn to the specific case that the hon. Member for Barrow and Furness has raised.

I wrote to him on 12 February and set out the steps that the Employment Service had taken to establish how the vacancies had been drawn to the attention of job seekers. I confirmed that it was not, in fact, through the Employment Service, and I also told him the checks that the Employment Service makes on vacancies that come to it from employers in other countries.

Of course we deplore completely the activities of bogus employers who trade in entirely fictitious jobs overseas with the sole intention of defrauding job seekers. It is a practice that is known to us, but it is, as I said earlier, thankfully, still rare. Where and when we can, we are taking steps to ensure that it happens even less often. I would advise anybody considering paying an integrity bond to take legal advice before doing so. They may well end up having to pay a solicitor, only to find that they are advised not to take the job, but that is infinitely better than losing thousands of pounds on an integrity bond.

This very unfortunate incident must be seen in context so that we can tackle it appropriately. About 5.7 million people change jobs each year. Many do so through informal channels, such as friends, colleagues or newspaper advertisements. The Employment Service and the private sector recruitment agencies have a valuable part to play, both in helping people to find work and in stimulating a flexible labour market.

The Employment Service is charged by the Government, of course, with offering unemployed people—especially the long-term unemployed and others at a disadvantage in the labour market—help and advice in finding work. In the last full year, 1.64 million people were placed into work and 2.27 million vacancies were handled, so that puts this problem into context.

From those volumes of business, therefore, we must bear in mind the infrequency of the type of incident that we are debating. Although we need remedies—and we do—we must keep them in proportion to the problem; otherwise, we would run the risk of prejudicing a wide range of good practices for all parties in the labour market, and thus reduce our ability to service legitimate vacancies from employers, including employers overseas, which can bring real benefit to skilled individuals from Britain. In that context, the posted workers directive, even if fully implemented, would have had nil impact on this case.

The Employment Service will therefore continue to deal with vacancies overseas, as do UK-based private employment agencies. Sadly, we cannot take direct action on foreign-based employment agencies, but I will come back to what the employment agencies, the Employment Service and its overseas placing unit can do, and in most cases what they are already carrying out, to minimise the risks of sharp practice.

The case that the hon. Gentleman has rightly drawn to the attention of the House is highly serious. The company that he has described—Spectac—is reported to have responded to an advertisement placed in a Dutch newspaper calling for the submission of tenders for the supply of labour to work on a barge on the north Pacific ocean island of Guam. The company that placed the advertisement, variously described as the "Offshore Corporation of Chicago" or the "Offshore Corporation of Bangkok", is bogus. Spectac, a Dutch-based company, run by a director of British origin but resident in the Netherlands, had agreed to obtain an integrity bond of US$12,000 from applicants as a condition of securing the contract for the supply of labour.

Men were then recruited from various parts of Great Britain towards the end of 1994. Some were indeed unemployed; others gave up full-time jobs to take up the vacancies. As the hon. Gentleman rightly said, many of them ill-advisedly raised the money for the bond through taking out loans.

The men went to the far east in early December, only to become stranded in Manila, where it became clear to them that the jobs did not exist. The director of Spectac returned from Manila to Bangkok, with one of the men from the final group to leave Britain, and there they reported to the police the activities of the Offshore Corporation. One of the directors was then held by the Thai police for a few days, but, allegedly, was released by them after promising to find his partner. He and his partner have since disappeared. Spectac has now been investigated by the Dutch authorities and closed down.

It is known that the unfortunate victims of the fraud came from different parts of Britain. There is, however, evidence that areas of the country where men have recently been made redundant were specifically targeted by Spectac. That may well explain why men in the hon. Gentleman's constituency were particularly affected. Many of his constituents are skilled shipbuilding workers, who supposedly would have been able to find the money for the integrity bond from redundancy payments.

There is also evidence that the highlands region of Scotland was targeted by Spectac, probably because it, too, has a large number of ex-employees from the oil fabrication industry, who have skills and a source of capital. But after exhaustive inquiries throughout the Employment Service, concentrating particularly on the highlands region, there is no evidence that jobcentres were involved in what is a profoundly regrettable incident. I believe that the hon. Gentleman might have been led to suspect that my Department was involved, because many people learned of the bogus vacancies through the Invergordon job shop.

The Invergordon job shop is run by three local enterprise companies reporting to Highlands and Islands Enterprise. Two years ago, Highlands and Islands Enterprise recognised that the oil fabrication industry, on which the economy of the area around the Moray firth had depended heavily for two decades, was facing significant decline. Along with the increased efforts to ensure the survival of the existing businesses, and the provision of advisory services, Highlands and Islands Enterprise, in conjunction with the three local enterprise companies, set up a redundancy counselling and placement service, known as the job shop. The job shop has, to date, been successful in placing some 1,100 redundant oil fabrication workers.

I understand that, on 3 November, the Invergordon job shop was contacted by the director of Spectac Ltd. in the Netherlands, notifying the management there of an impending contract in Thailand between his company and the so-called Offshore Corporation of Chicago, with the potential of up to 500 jobs. Seven days later, Spectac again contacted the job shop to say that its director was in Thailand, preparing to sign the contract, and gave details of the staff required.

In total, 54 people on the job shop's books were contacted to find out whether they would be interested in the contract. But it was stressed to them at that stage that nothing was known about the job or the company, and that the approach at that point was entirely tentative, to ascertain—

Photo of John Hutton John Hutton , Barrow and Furness

Did the Invergordon job shop, at any time prior to contacting those 54 individuals, discuss Spectac and the contract with the overseas placing unit?

Photo of Ann Widdecombe Ann Widdecombe , Maidstone

I shall come to that point, and will also point out that, when doubts were raised in the job shop's mind, it went to great lengths to contact all those who were on its books and who had originally expressed interest, to point out to them that they absolutely should not enter into a contract with Spectac, because the company's bond was illegal. Job shop staff contacted all 54 individuals. They even contacted 20 or so other people from the Easter Ross area, who had come to them unsolicited. It then gave them the same advice.

In the short time left, I want to say something about the overseas placing unit, and so shall leave my rather fuller description of what went on. I hope that I have shown from that rather brief description that the job shop in Invergordon took every last possible step to inform people that there was a severe risk in paying over an integrity bond. Indeed, it did more than that, and advised them not to do it.

The overseas placing unit, which is based at the Employment Service head office in Sheffield, provides guidance to our jobcentres on giving advice to job seekers about work abroad. It supplies guidance to job seekers directly and to employers both in the UK and abroad on placing vacancies.

It is supported in Employment Service English regions, Scotland and Wales by a network of experts known as Euro-advisers. They are connected by information technology to a central clearing point in Brussels and to other Euroadvisers in the European Union, so that they can exchange details of vacancies and information on living and working conditions. On average, the unit receives 3,000 inquiries a month on all questions about working overseas, not only in Europe but many other parts of the world.

In 1994, 950 people were placed by the Employment Service in jobs overseas, but as we can see from the subject of the debate, there can be special difficulties with such vacancies. Because they are overseas, it makes it difficult for my officials in jobcentres. For that reason—I cannot stress this too strongly—jobcentres may not act on overseas vacancies until the vacancies have been vetted by the overseas placing unit.

The overseas placing unit runs several checks on the contract of employment and job description. It seeks a letter from a lawyer, written in English, stating that the company is bona fide and clarification on the availability of work permits. If the prospective employer cannot meet any of those stipulations, the vacancy is refused, and may not be handled by our jobcentres.