Hundreds of people in a former steel town in north-east England have been revealed to be directors of a range of pornography, dating, diet and travel websites.
An investigation by the Reuters news agency found that at least 429 residents of Consett, County Durham, had been or still were being paid to serve as directors of more than 1,000 shell companies.
People in the town were paid £50 cash to become directors, with a further £150 a year for forwarding company mail, in order to provide a range of online businesses with a UK address to meet requirements to trade in Europe.
Residents of the town told journalists they did not know what the companies did and had signed up to the scheme in order to make extra money.
Simon Dowson, who runs the business that arranges the directorships on behalf of the online firms, said everyone had been fully informed about what the companies did, their role and any documents they had to sign.
Dowson was paid between £2,500 and £3,000 per shell company, administering 1,200 at his peak, but he said his business had a turnover of less than £1m a year.
Dowson and some of the firms using his service have been investigated by the Insolvency Service, part of what is now the government’s Department for Business, Energy and Industrial Strategy. As a result, he agreed to close one of his businesses in 2015 and stop recruiting people in Consett to be company directors.
In 2010, 27 of the firms were closed down by the government when it found they were behind sites that trapped online customers through “free trial” offers into high credit card commitments on health supplements including colon cleansers, teeth whitening kits and Açaí berry detox pills.
There have been no sanctions brought against Dowson or any of the directors in Consett and there is no suggestion that Dowson’s business is illegal.
Frances Coulson, head of insolvency and litigation at Moon Beever Solicitors and a trustee director of an independent thinktank, the Fraud Advisory Panel, told Reuters the story highlighted flaws in the regulation and enforcement of company formation in Britain.
“Part of the raison d’etre for the enforcement is the protection of the public,” she said. “[This] doesn’t sound as if it’s happening.”
One of the directors in Consett, John Mawson, told BBC Newcastle he did not really know what his role involved. The 61-year-old was recruited by a neighbour who had already signed up.
“All we were told was that we would just get letters sent and all we had to do was hand them on,” he said. “Money was rather tight. All we wanted was a bit of extra cash.”