Tuesday, November 14, 2006

One law for the rich...

When businesses collapse, the last to lose out are the banks, while the directors usually make sure they are alright too. As for the customers, the idea put about by capitalism that they call the shots is reduced to empty rhetoric when firms go bust. Such is the case with Farepak, the Swindon-based Christmas hamper company that crashed recently. Farepaks’ 300,000 customers were poorer households who were putting a little money aside each week so that they could plan for a decent Christmas. Now £40 million of their savings have gone, along with the promise Farepak made of the “best family Christmas ever”.

The company went into administration after its bank HBOS decided not to extend an overdraft. HBOS bank has been accused by MPs of knowingly accepting savers' money to pay off Farepak’s parent company loans instead of insisting the money was safeguarded in a separate account. It is alleged the bank pulled the plug on Farepak for an outstanding amount of just £1.5m. The bank naturally enough denies this. Farepak took cash in all year round but paid no interest and as such did not fall under the regulation of the Financial Services Authority. Who knows what was really going on at Farepak? No one, for example, can say exactly how many savers Farepak had as there were no central records - only the almost 25,000 local agents know who they dealt with. But it is estimated about 150,000 families are affected. Typical savers have lost £400 but some have lost thousands.

Meanwhile, Farepak director Nick Gilodi-Johnson, the son of Farepak's owner, had an estimated share dividend from the parent company EHR of £445,000, on top of his pay, and stands to inherit £75 million. He has called the collapse a “tragedy”. Yet unlike his former customers he won’t be scrimping and scraping this Christmas. Nor will the Farepak chairman, Sir Clive Thompson, who took £100,000 for this part-time job while earning £894,000 as deputy chairman of an investment company. In 2004, he quit as boss of Rentokill after the company’s shares plummeted. He left with a £14 million pension to soften the blow. Thompson was once head of the CBI, the employers’ organisation, and infamously denounced the minimum wage. The directors of HBOS will do alright this Christmas too. The bank’s profits in the last year amounted to £2.6 billion.

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