At the end of 2018, a £13.8m contract was awarded to a ferry company, Seaborne Freight, in preparation for the potential consequences of a ‘no-deal’ Brexit. The company is expected to run ferry services between Ramsgate and Ostend from March onwards. However, in a very public outing, it was revealed that there was a string of potential risks in association with this company. We ask the question; how did this one slip through the net and would there have been any areas of concern or potential risks that our management due diligence would have flagged?

Initial searches into the company’s Directors show a clear potential risk indicator almost immediately. John Edmund Paul Sharp (also known as Ben Sharpe) was the director of Mercator International Ltd, Mercator Ship Chartering Ltd and Mercator Platforms Ltd. These companies were all subject to compulsory liquidation, and Mercator International Ltd showed debts of £1.46m at the time of dissolution in 2016.

The company’s website also displays other areas of concern, for instance the website’s ‘Portal Login’ is only an image and not interactive. This may have potentially indicated even higher risks associated with signing a large contract deal. The Terms and Conditions on the company website appeared to be copied directly from a food delivery website. This has since been amended, but cached versions of the web page can still be found that reference “placing a meal / order”. Another potential area of interest, entails the company’s Twitter page – it only includes weather forecasts from June to September 2018.

According to Chris Grayling, the Secretary of State for Transport, due diligence checks were carried out and searches were conducted on the Directors. These searches raised nothing of interest that would have prevented a contract from being signed or the deal being questioned at the due diligence stage.

Andy McDonald, the Shadow Transport Secretary, said: “Awarding a contract to a ferry company with no ships is yet another disgraceful misuse of public money by the transport secretary.”

For a sizeable deal of almost £14m, it is unsurprising that deeper due diligence checks (including management due diligence) were expected to be taken regarding the company and its Directors. The checks that were claimed to have been made had been considered satisfactory. And yet, in the fall-out, numerous issues have surfaced.

Conducting more rigorous checks for a new contract deal, on the company and its directors, provides an added layer of protection against fraud and reputational risk, better inform the decision-making process and ultimately safeguard any investments. The case of Seaborne Freight is just one example of the limitations of existing due diligence processes. It calls for management due diligence that delves deeper, especially for government contracts.

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