Farepak - The wider implications & the injustice

Farepak...






'When Christmas ended up in Court'

We take a look at the wider implications and the injustice


Both ilegal & Mylegal have been pleased to add what support we can to Louise McDaid and Debra Harvey's campaign for better regulatory control of firms like Farepak. They fearlessly set up the Farepak Victims Committee to help over 116,400 customers who had paid into the Farepak scheme. In October 2006 Farepak Food and Gifts had gone into administration leaving the consumers more than £37 Million pounds out of pocket. You can listen to a video of a campaign speech given by Louise McDaid in May of this year here. As of November last year not one single customer had received a single penny of their cash back.

Members of Parliament Jessica Morden and Katy Clark tabled a Parliamentary Early Day Motion in November 2011 to get better regulations and compensation for those who had lost out. The indications so far indicate that the victims of the Farepak scandal are only going to get back around 15p for every pound they paid over to the firm. It's important to remember that by and large Farepak victims are on low incomes and chose to save carefully for the benefit of their families to ease the financial burden which always comes at Christmas time. They had no reason to believe that a large firm such as Farepak would not live up to all of its well promoted promises.


The promises...







Turned to fairy dust & Santa never arrived..


Far from enjoying a carefully saved for festive Christmas, the turkey and tinsel has given way to a bitter legal battle in which hours upon hours of campaigning have yielded little in the way of proper answers to a whole host of probing questions. It has now become a political battle during which over 207 Farepak victims have sadly died throughout the duration of the relentless campaign - they never lived long enough to see justice because the wheels of the whole sorry process just grind far too slowly. The HMRC issued a costly high court action seeking disqualification of the Farepak directors but the trial recently collapsed as His Honour Judge Peter Smith absolved the directors of blame. On the 21st June in a statement issued by the Trial judge it was the firm's financiers - the Royal Bank of Scotland - rather than the Farepak directors who appear to have been most heavily rebuked.


Social Injustice hits cautious savers


Mylegal is primarily concerned with social injustice which is why it is quite appropriate to take up the Farepak story. We spend the vast majority of our time arguing the case for proper access to justice for people (typically benefit claimants) who the government has labeled as scroungers of the State, they unfairly tar them all as the 'feckless' and 'reckless'. The same targeted injustice continues for the victims of Farepak, many of whom worked hard and chose to save cautiously with a firm they put all their trust in. The Farepak story highlights how government appears to have unfairly waged war on the poorer classes regardless of whether they are on benefits, in or out of work and with no regard to how responsibly they may have acted. It's almost as though government sees being poor as villainous; there seems to be a pronounced lack of will on the part of government to afford the poor any protection - in Farepak there was certainly no reward for those who carefully saved.


Who's really to blame?


In this article we hope to highlight how the winners are the directors, the lawyers, the banks and the liquidators whilst the losers are the great unrepresented; those who put all their faith in Farepak and expected something which never arrived - goods which they had paid for in advance and which never found their way under the Christmas trees of those who thought they had done the right thing by paying 'up front'. For the victims it was anything but a 'fair pack'. Is it morally right that the consumer comes last?


Overly litigious court action?


Our predominant focus on Mylegal is over access to justice for those who do not have the means to pursue their own remedy in Court. Government pays out millions of pounds in overly litigious cases such as Farepak. Yet perversely Government condemns hard working social welfare practitioners like us who spend hours battling with the State at a piffling fixed fee of just £150 per case (paid to our organisations) whilst they happily allow HMRC lawyers to run up millions in legal fees. Surely we should look on these overly expensive publicly funded cases as amongst the worst form of 'legal aid' in the UK? It's about time we took a long hard look at how much of the tax - payer's cash is wasted by HMRC lawyers & treasury solicitors. The Farepak case is yet another HMRC legal action which has done little for the victims and added insult to injury as the tax paying victims pay out even more. Lloyds bank ( a derivative of RBS) has promised a £10 million pay out which they say will be paid to the victims, so far they've only paid out £2 million into the creditor's fund. Following the HMRC trial collapse they have pledged a further [url=http://www.bbc.co.uk/news/business-18743363
]£8 million following an intervention by Vince Cable[/url] who has indicated he will meet with representative of the Farepak victims this week. Only today Cable has accused the banks of 'throttling British industry' - he appears less inclined to voice his discontent at those who indulge in questionable business practice. We should be looking at precisely where the blame lay in the Farepak case and asking why this has all taken so long, not to mention question why the costs have been allowed to escalate with legal actions set destined to fail well before the lawyers even set foot in court. Couldn't all of this been prevented by clearer regulation & more of an earlier inclination to settle the victim's claims?


It's the tax payer & Farepak victims who lose out!


We cannot dismiss how it is that however much the banks reluctantly fork out will be passed straight back on to the consumer, the banks just pass the costs back to the consumer via higher charges and elevated interests rates; they never lose out. Remember who it is who bails the banks out, it's not the government - it's the tax payer. The same will apply to all the disproportionate court costs and those of the HMRC. The directors in this failed action will potentially be able to look for recovery of their costs from the HMRC because the judgment was in their favour. The question we should all be asking is over whether the Government is simply shifting the blame on to the bankers to court public popularity whilst it seems prepared to protect those in commerce at any price. Government is desperate for economic growth but should this extend to throwing away the regularity rule book just to allow business to profit; whatever happened to consumer protection?

The inescapable fact is that 116,400 diligent savers handed over £37 million in cash for goods which they never received; thus they are the hardest hit and it is they who deserve to be treated with priority when it comes to being in the queue for some much needed 'cash back'. It's all about returning what's rightfully owed to those who were duped into believing that Farepak was a credible trader. The victims also deserve proper regulation to be put in place to ensure this can never happen again. Instead government steadfastly opposes regulation; it chooses instead to conveniently join the hue and cry as it joins the public in blaming the banks. When Government failed to impose regulatory capping of how much cash could be lent by pay day loan firms like Wonga why should we even start to believe they will be any different with firms like Farepak? Indeed even with the LIBOR scandal why should we have any faith in believing they will ever impose tighter regulation of the financial sector? The fact is government likes a free market to attract investors, it is why it dislikes the idea of regulating commerce and indeed the financial sector which feeds it. What government neglects to think about is consumer confidence. The saying 'once bitten - twice shy' will spring to mind whenever a wronged consumer recalls how they've been ripped off before and won't be again. A suspicious consumer is far less likely to buy from a market place where consumer protection has taken second place to prospective economic growth. I doubt whether many budding entrepreneurs will think of hampers when thinking of how to make some cash; it has a damaging effect on investors as well.

You can't blame all of this on the banks though, after all the Farepak directors will hardly be going without this Christmas. Indeed far from facing disqualification they seem to be well and truly up and running with a number of fingers in many other business pies; let's just hope they don't crumble like the ones made of all that mince in those never to be seen hampers which failed to arrive on 116,400 victim's doorsteps.

What has yet to be worked out is how much of the Lloyds £10 million offer will actually end up in the hands of the Farepak victims, whilst it is of course good news that they appear to be going to get some return it will only be a small fraction of how much they handed over to Farepak. Why didn't the directors have a clear cut responsibility to let their customers know when they were in obvious financial difficulty? What 116,400 victims really want to know is where all of their £37 million actually went. Let us also not forget that even if the victims get back a paltry 15 pence back for every pound they saved they will still as consumers be paying for it in one way or another as tax payer's pick up the tab for bailing out the banks.

Let's be clear it's the tax - payer and the victims who lose out in all of this. Why are we bailing out finance and commerce in the hope they will bring us economic growth when we so readily damn the consumer with so little protection. Why doesn't government see how consumer confidence will plummet for as long as we allow this kind of injustice to continue?
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