A former solicitor has been ordered to pay back £800,000 of the £2m he made from an elaborate tax-evasion scheme.

Malcolm Graham will have to pay the amount back within three months or face a default jail sentence of up to five and a half years.

Graham was a solicitor and director at Gateshead firm SFM Legal Services Limited, and he encouraged clients to sign up to a scheme to reduce their tax liabilities.

But the scheme was a fraud, with Graham using altered legal documents to make it appear legitimate, and signing up hundreds of wealthy clients.

The plan manipulated the clients’ property transactions and tax returns to fraudulently reduce the amount of stamp duty they owed to HM Revenue & Customs.

Following a Proceeds of Crime Act hearing at Newcastle Crown Court yesterday, Graham was ordered to pay back the £800,000.

Dave Cowie, assistant director of the fraud investigation service of HMRC, said: ‘Graham tried to pull the wool over his clients’ eyes in a failed bid to profit from an elaborate tax-avoidance scheme.

‘But HMRC saw the "scheme" for what it really was – fraud. Our work doesn’t end with a successful prosecution – we leave no stone unturned in the recovery of stolen public money.

‘The message is clear: rip off the taxpayer, and we will use the courts to empty your pockets.’

Graham, 40, was struck off by the Solicitors Disciplinary Tribunal in 2009 following a prosecution by the SRA, and also ordered to pay costs of £116,800.

The tribunal found his conduct had been ‘extremely serious involving huge losses to clients and considerable damage to the reputation of the profession’.

He pleaded guilty to seven counts of fraud by false representation at Newcastle Crown Court in October 2013. He received a two-year prison sentence on each count, to run concurrently, suspended for two years. He was also disqualified as a director for five years.

The solicitor had previously been the subject of glowing articles in the local press as a result of the rapid expansion of his practice during the property boom.

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