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Last Updated: Monday, 13 November 2006, 14:21 GMT
Row over Farepak collapse deepens
Farepak depot in Swindon
Farepak was hit hard by the collapse of one of its suppliers
The dispute over who was responsible for the collapse of the Christmas savings scheme Farepak has escalated.

The boss of Farepak's owner said its bank, Halifax Bank of Scotland, blocked several proposals to rescue the firm and ringfence money paid by customers.

The bank rejected these claims, saying it stood "firmly behind" the business.

More than 150,000 customers have lost money following Farepak's collapse last month, which is now being investigated by the Department of Trade.

Ministers have asked the Office of Fair Trading to look at regulations applying to Farepak and whether its customers and those involved in similar schemes need greater protection.

Apologies

The former bosses of Farepak and its owner, European Home Retail (EHR), have apologised to customers hit by its collapse and pledged to contribute money to its support fund.

Ex-Farepak managing director Nick Gilodi-Johnson said his family was "devastated" for the many customers who had lost money.

"My heart really goes out to all our customers," he told the BBC.

Sir Clive Thompson, former EHR chairman
They really failed to give us the support they indicated they would
Sir Clive Thompson, European Home Retail Chairman

But the row over the reason for its collapse shows no sign of dying down.

Sir Clive Thompson, former chairman of EHR, has accused HBOS of triggering its downfall, claiming that just 1.5m was needed to keep it trading.

HBOS provided an overdraft facility to EHR and the decision not to extend this eventually led to administrators being called in.

"They really failed to give us the support they indicated they would," Sir Clive, a former CBI president, told the BBC.

Rescue plans

He said Farepak's board presented six "rescue plans" to HBOS earlier this year, when it was clear it was in financial difficulty, but all were turned down.

HBOS also twice rejected proposals that money paid into the scheme on behalf of customers should be ringfenced.

"They pulled the plug over what we believed was really a small amount of money."

HBOS, which has pledged 2m to the Farepak fund, said it was "puzzled and disappointed" by Sir Clive's comments.

The owners of the company declined to contribute any more cash to support the business
Shane O'Riordan, HBOS

"Banks are often accused of running away from companies when they are in financial difficulty," said spokesman Shane O'Riordan.

"We didn't do that. We stood firmly behind EHR through a very difficult period."

HBOS said there was no money to ringfence as the funds had been used as "working capital" to develop the business.

It also said mooted rescue plans were proposals and not considered "viable and durable" solutions.

"The situation was further complicated by the fact that the owners of the company declined to contribute any more cash to support the business," he added.

Scant returns

Farepak customers lost an average of 400 each when the Swindon firm ceased trading in October, although some lost closer to 2,000.

"The collapse of Farepak has basically ripped Christmas from right under the feet of approximately 170,000 people," Susie Hall, who is leading a campaign for compensation, said.

Farepak's accounts for the current year have not been published but it made an 850,000 operating loss in 2004-5.

Administrators for Farepak said its savers - who put aside money for vouchers for Christmas hampers and other goods - were unlikely to see any of their money returned.

"We are dealing with very small pennies being available for return to these savers," Dermot Power, from BDO Stoy Hayward, said.




VIDEO AND AUDIO NEWS
Nicholas Gilodi-Johnson speaks to Five Live



SEE ALSO
Farepak boss 'sorry' for collapse
13 Nov 06 |  Business
Farepak bosses may face MPs quiz
12 Nov 06 |  Business
Farepak families fund is launched
07 Nov 06 |  Business
Hamper rescue plan is 'unlikely'
03 Nov 06 |  Wiltshire
Government to probe hamper firm
24 Oct 06 |  Business
Farepak agents speak of sadness
17 Oct 06 |  Business
Bleak Christmas for hamper firm
16 Oct 06 |  Business

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