Monday, 22 January 2007

Farepak Scandal - Victims Offered 5p in the £

Administrators investigating the collapse of disgraced hamper club Farepak have issued proposals to provide former savers with only 5p for every £1 lost. Accountants BDO Stoy Hayward have so far received claims worth approximately £40 million from 113,000 customers that lost their savings when the firm went bust last year. On average each customer lost £400, and would receive only £20 in compensation from the plan.

The adminstrators report that Farepak failed to adequately protect the money paid in by savers and did not set up a ring-fenced account to keep it separated from other liabilities on the business and its parent company. The report also shows that Farepak lent its parent company, European Home Retail (EHR), £33 million and that this loan was subsequently defaulted on by EHR - the Directors of which include former CBI boss, Sir Clive Thompson.

In a move which is sure to have created added bitterness, the Directors of EHR are themselves claiming that they are owed money from the business totalling £80,000, although it is highly unlikely that any of them will receive a penny.

Late last year, the DTI's Farepak Response Fund raised £6.8 million for Farepak's customers and agents that had lost their savings and a DTI inquiry is ongoing to learn the lessons for future regulation of the industry.

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