Farepak

Still the story continues, for those who are perhaps not familiar with the shenanigans let me enlighten you.

Farepak were a Christmas savings scheme, you send them money, they save it and then send you a food/wine hamper for Christmas. It is in essence the jar on the shelf, with the benefits that you can't grab the cash for 'emergencies' and one supposes that the bulk buying power means that you get a hamper that would normally be beyond your means.

It seems a safe bet, they'd been trading since 1969 so were obviously not some fly-by-night company, they had celebrity endorsements such as the chef Antony Worrall Thompson back in 2005, and after all they were simply collecting the money and banking it all nice and secure they even said that they

adhere to the HITA Code of Practice to ensure the security of your savings

What could go wrong?

Well they're part of the EHR group and apparently that was having problems, according to their own report to the Stock Exchange on the 30th June they were experiencing cashflow problems, and on the 23rd of August HBOS said they were no longer lending them money as the company was beyond saving. HITA, they of the Code of Practice, contacted EHR to ensure that the Farepak money would be ringfenced ie protected, the reply to HITA

They said they didn't have to

According to records Farepak then made payments totalling £40m to EHR completely legally. Despite all warnings the DTI have been informed that Farepak were still pressing for payments just as the parent company was going into receivership.

Contradictions abound as to the timing of this, some reports indicate that EHR used £35m of Farepak money to buy DMG in 2000 and borrowed the same amount from HBOS to replenish the fund. When DMG toppled and was subsequently sold for £5m the loan could not be repaid and HBOS seized the funds that were held in Farepak's name.

So what's with the big fuss, lots of companies go bankrupt leaving plenty of people out of pocket?
Well for starters there's the question over the way the finances were handled, there's the fact that we're dealing with £40m of individual people's money, but the biggest problem lies in the basis of the operation. People didn't deal with Farepak directly, they dealt with self-employed agents; these signed up and became an agent then persuaded others to start saving up with the company; others like family, friends, neighbours and other social groups.

This collapse hasn't left a group of disassociated individuals in trouble; it's struck at entire familes, entire neighbourhoods, whole collections of people who will no longer be able to look forward to Christmas. As for the people at the top of the company, those who presided over this entire affair, apparently they're doing fine thanks for asking.