Farepak

Susan Elan Jones Excerpts

Wednesday 14th December 2011 Westminster Hall

[Jessica Morden]

I thank my hon. Friend for his intervention, which was well made. Many victims have called for Sir Clive Thompson to have his knighthood removed if he loses the case, and perhaps the Minister will also address that point.

A survey posted on Twitter and the Farepak victims committee Facebook page reveals what Farepak victims think: 95% of the respondents thought that the liquidators had taken too long, and should have finished by now; 79% did not think that there are enough regulations to protect consumers from anything like the Farepak collapse happening again and 95% thought that all Christmas savings schemes should be tightly regulated. Many Farepak customers are upset about how the administrators, BDO, have handled the liquidation process. BDO struck an agreement with some of the ex-directors of Farepak to pay a total of £4 million in compensation, which is about 15p per pound owed. Not only are Farepak victims angry, as they should be, at receiving only 15p in the pound, they find it deeply unfair that as part of the deal the directors accept no liability for Farepak going bust. Will the Minister say whether that is common practice?

I am aware that some agents and customers received some money back in 2009 under a court order. That was a repayment to customers who had made payments as the company collapsed and which Farepak tried to put into trust accounts. Customers received some compensation from a response fund just after the company went bust, but as yet no customer has received any money via the administrators. BDO will argue that the reason is that it is still chasing, and that it is standard practice for administrators not to pay out any dividend until all avenues have been exhausted. However, as widely reported in the news last month, BDO has so far cost in excess of £8.2 million, which includes, for example, £50,000 for public relations work. That is an eye-watering sum, especially when BDO has managed to obtain only £5.5 million back for the victims. So far, the process hardly seems fair.

I understand that there is a possibility that ex-customers could receive less than 15p in the pound. If the administrators fail to recoup any more money from ongoing operations, they will take their costs from the moneys already recouped. I accept that the ongoing actions, if successful, could result in ex-customers receiving more money, but either way the administrators will accrue more and more costs, making customers even more resentful.

[Susan Elan Jones (Clwyd South) (Lab)]

I am grateful to my hon. Friend for securing this important debate. Does she agree that some of the practices that she describes are at best ethically questionable and, looking at them more strategically in terms of how victims have been affected, downright wrong?

[Jessica Morden]

I thank my hon. Friend for her intervention. I agree that the matter is downright wrong, and I hope that the Government will act.

I would like the Minister to say whether he believes that the insolvency process is fit for purpose in dealing with the aftermath of cases such as Farepak. Should there not be a limit on how much administrators can demand—perhaps a percentage of the total amount accrued? I have spoken to Farepak victims and agents, and the process is incomprehensible from the outside. Victims need to know what is going on, and why it is taking so long.