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EDITIONS
Monday, 28 October, 2002, 16:02 GMT
Claims Direct faces investor wrath
Claims Direct picture from its website
Claims Direct's logo was "If we don't win your claim, you don't pay us a penny".
Claims Direct, the failed personal injury group which briefly prospered by handling compensation claims on behalf of accident victims, is itself facing legal action.


What happened to shareholders of Claims Direct is unacceptable

Robert Fields, Judica
And it could prove very expensive: A group of shareholders who lost money when the company collapsed in July this year are putting together a compensation claim for 200m.

The Claims Direct Action Group (CDAG) is taking the unusual step of filing a lawsuit against the company to claw back the money they lost when the value of their investment dwindled.

The action group believes shareholders were misled about the financial obligations of Claims Direct both at the time of its listing on the London Stock Exchange, and in the subsequent months.

Shares in Claims Direct were finally suspended at 3.25 pence, down sharply from a peak of 350p in September 2000.

Inaccurate information?

The CDAG was established in September 2002 by the consultancy group Judica.

The group is made up of almost 1,500 existing and previous Claims Direct investors.

Richard Fields, managing director of Judica, told BBC News Online that potential investors "were not given complete and accurate information" about the state of Claims Direct's finances.

One of the key sticking points is the suggestion that Claims Direct had liabilities of over 50m to First National Bank, part of the Abbey National Group.

The CDAG claims that investors were not told of these, nor of the 16m liability Claims Direct had guaranteed its underwriters, Lloyds of London.

"What happened to shareholders of Claims Direct is unacceptable," said Mr Fields.

US model

Group action cases are fairly new in England, but widespread in the US where Mr Fields previously worked.

"There are only about 26 action groups in the UK, whereas in the US there are about 26 in any one city," Mr Fields said.

Mr Fields said the action group would file a lawsuit before Christmas, both against the company itself and another against the directors in charge at the time of the company's flotation on the London Stock Exchange in July 2000.

Until its demise, Claims Direct had been seen as a classic "rags to riches" company, founded by former taxi driver Tony Sullman.

Shares leapt from 180p to 353p within two months of its stock market debut.,

CDAG says its strong stock market performance partly reflected investors' ignorance of its financial obligations.

See also:

13 Sep 02 | Business
10 Jul 02 | Business
28 Mar 02 | Business
30 Aug 01 | Business
19 Jun 02 | Business
10 Jul 02 | Business
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