Council employee who stole £1m pays back £104,000

A council employee who stole more than £1m from a cash-strapped local authority has handed his former employers a compensation payment of £104,000, a court heard.

Michael Paterson, 60, sold a house in order to raise the cash he gave to Aberdeen City Council, judge Lord Summers heard.

The High Court in Edinburgh had previously heard how Paterson exploited his role with the local authority to embezzle a total of £1,087,444.47 from his employer over a 17-year period.

After he was caught, Paterson admitted he embarked on the crime because he was worried about debts, but conceded he was still in debt after spending stolen money on foreign holidays, dining out, buying Apple goods, shopping and his flat.

Paterson started siphoning off funds from the council in November 2006 and continued until a colleague became suspicious in September last year.

Prosecutors then brought a proceeds of crime action against Paterson, who is serving a four-year custodial term.

On Monday, Crown and defence lawyers agreed to bring the matter to an end.

Prosecutor Bryan Heaney said that Paterson had made £1,184,000 from his criminal activities.

Mr Heaney said that prosecutors could seize £167,698.71 from Paterson – and £104,000 of that was to go to Aberdeen City Council as compensation.

At earlier proceedings in Edinburgh, judge David Young KC told Paterson: “This is unquestionably a serious matter and it must therefore bring serious consequences for you today.”

Judge David Young KC pointed out that Paterson was able to perpetrate the crime because he was appointed to positions of trust by his employer, which he repeatedly breached over many years.

He said: “I am told today you spent money on family and friends but also there was significant spending on yourself.”

The judge told Paterson he would have faced a sentence of six years imprisonment but for his early guilty plea.

First offender Paterson, formerly of Aberdeen, had earlier admitted to embezzlement.

The court heard that he began work with the local authority in 1988 and rose to become a £35,000 a year council tax and recovery team leader, supervising a team of 12. The team administered council tax recovery and refunds due to taxpayers.

Prosecutor Brian Gill KC said: “Over a period of 17 years until he was discovered in September 2023, the accused exploited his position with the council to embezzle funds from it.

“He did so by using his access to the council’s computer systems to wrongfully pay council funds into his own bank account, purportedly as refunds of council tax to taxpayers.

“He had unsupervised authority to issue refunds of up to £3,000 and to change payee account details without authorisation or verification,” said the prosecutor.

“A refund would fall to be made where a taxpayer had left the relevant property and had not claimed a resulting overpayment of council tax,” he said.

In total, Paterson made 622 false refunds to himself while his crime went undetected as he had “unrestricted and unmonitored access” to two computer systems used by the local authority.

Paterson tried to cover his tracks by getting money paid into a second account in 2019 after he learnt that the council was introducing counter-corruption methods that would alert it to payments made to an employee’s bank account. He previously got funds paid into a building society account, which his salary was also paid into.

But in September 2024, a fellow employee noticed a transaction which she thought was odd and was troubled by an explanation offered by Paterson. She reported her concerns to a senior colleague.

The authority’s counter fraud department was alerted, and police were called in. Paterson was suspended on full pay before being dismissed in December last year.

Mr Gill said that when police interviewed Paterson he made a full admission. He said: “The accused expressed his remorse, saying ‘I know I’ve done wrong. I regret what I’ve done’.”

The prosecutor added: “He explained that he had had no intention of ever repaying any of the sums that he had taken. He had just been hoping that he would not be found out.”

Paterson told officers that when he began the crime spree, he was in debt to about £20,000 with credit and store cards and other loans.

Mr Gill said: “Although he had paid off his mortgage approximately 13 years previously, he had always spent more than his salary and had been in a state of perpetual debt.”

He began the embezzlement because of worries over his debts, but continued with his overspending as cash from the crime was deposited in his accounts.

“He had not in fact cleared his debts and was still in significant debt,” Mr Gill told the court.

During the time Paterson was committing the offence, the city council was faced with having to make millions of pounds in savings.

Defence solicitor advocate Iain Paterson KC told the court: “He is thoroughly ashamed of his actions and obviously, as a consequence,e was dismissed from the council.”

“He was generous to family and friends and clearly was living well outside of his situation as a consequence of the money he was embezzling from the council,” he said.

“He accepts what he did was totally wrong,” said Mr Paterson. He told the court that Paterson’s only asset was a two-bedroom flat in Aberdeen which he faced being taken from him under the proceeds of crime action.