When substantial frauds continue for prolonged periods, say several years, an obvious question usually follows: “why was it missed?”
The matter connected to a very recent sentencing hearing at Southwark Crown Court, perhaps helps to illustrate this conundrum, leaving us to ponder (with the benefit of hindsight) whether there were warning signs that could have (or should have) led to earlier detection…
In this ‘Fraud in focus’ article, I explore the £70 million Ethical Forestry timber scam, the SFO’s investigation timeline, and the critical due diligence lessons stakeholders must learn to spot financial red flags.
On 3 September 2026 the former directors of Ethical Forestry Limited were sentenced for fraudulent trading. Matthew Pickard, Stephen Greenaway and Paul Laver received a combined 15 years and nine months’ imprisonment for their crimes.
Ethical Forestry was a Bournemouth based business, that operated tree plantations in Costa Rica. Over a period of seven years it (via a substantial and seemingly very persuasive sales team) convinced around 3,000 investors to invest approximately £70 million of their savings (and pension pots) in Costa Rican fast-growing hard-wood saplings, with the expectation of handsome future returns.
You can probably guess what happened…
So what did happen?
Potential investors were identified, many by third parties who were paid commissions for shepherding prospects towards the Ethical Forest, in conjunction with a pension review.
The business prepared glossy brochures supporting the opportunity. These appealed to investors keen to save the planet on the one hand and yet earn a good return on the other. It was quite true that the Costa Rican government had followed a successful strategy of stopping and reversing deforestation…on the face of it the investment opportunity made sense.
People accessed their pension pots and savings. The business’ cash coffers were filled. Some of that money did buy saplings planted in Costa Rica… but it also provided the directors with wealth. Dozens and dozens of luxury cars were bought, together with exotic holidays, fancy watches, jewellery and very substantial new homes. According to the BBC news reports, of the £70 million invested, £14 million was spent by the three directors.
However, the fundamental problem, later identified by the Serious Fraud Office, was that the business never set aside funds to maintain (or ultimately harvest) the grown trees. Consequently, the underlying investments would never generate the expected returns once the trees reached maturity.
To offer some comfort to early investors that all was well, a “thinning out harvest” return was paid. And in true Ponzi scheme style, those distributions were funded by later investors. But once the fuse on a Ponzi scheme has been lit, the end becomes inevitable. The business imploded and it went into liquidation in 2015, following which the SFO launched a formal probe as hundreds of investors reported their frustrations to the UKs financial regulators.
Investigation timeline
The SFO’s investigation commenced in March 2017 and the defendants were charged in June 2023. Originally the charges were fraudulent trading and conspiracy to commit fraud by false representation (the former being a criminal charge under s993 of the Companies Act 2006 and the later s2 of the Fraud Act 2006; each potentially carrying a custodial sentence of ten years). The defendants pleaded not guilty to those charges in March 2025.
However, by January 2026 the defendants (likely guided by wise counsel) pleaded guilty to the fraudulent trading charge.
This case should not be interpreted as evidence that the undetected scam represented an audit failure. It would be wrong, without the audit files and evidence of what information was available to the auditor, to conclude that the auditor ‘missed’ a fraud. Especially in this case, where the directors themselves were complicit in dishonest activity.
Auditors provide reasonable assurance that the financial statements are free from material misstatement caused by fraud or error and give an opinion on the truth and fairness of the business’ financial position and trading results. What they don’t do, is perform a forensic investigation and turn over every transaction to ‘root out’ (tree analogy) frauds. We can however, wonder whether these questions were asked:
Effective due diligence of any sort should examine whether any business makes commercial sense and who ultimately benefits from its existence. Testing the economic substance (rather than just the existence of supporting paperwork and accounting records) could give auditors and stakeholders a view on the wood itself and not just each tree.
Or, in this case, sapling.
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