Belfast Telegraph

The bungling bosses who left £275m in unpaid bills

Half was run up by failed church savings company Presbyterian Mutual Society

By Adrian Rutherford

The disturbing extent of debt run up by failed company directors across Northern Ireland can today be revealed by the Belfast Telegraph.

Bad practice led to more than 170 people being disqualified from boardrooms across Northern Ireland since April 2012, with their failed businesses leaving behind losses of £275m.

In almost a quarter of cases they were responsible for debts in excess of £1m.

It has led to a spectacular fall from grace for some of Ulster's once high-flying business figures.

The biggest case relates to the Presbyterian Mutual Society, which had to be bailed out with £225m of public money after entering administration in 2008.

Five PMS directors and the company secretary were disqualified last May after nearly 10,000 people lost access to their savings. The total estimated debt was £122,652,000.

In another high-profile case Teresa Townsley, a board member of the failed Bioscience and Technology Institute, was handed a nine-year boardroom ban.

The project, which collapsed costing the taxpayer £2.2m, was severely criticised in a report by a Stormont spending watchdog.

A disqualification order is made by the High Court under the Company Directors Disqualification (Northern Ireland) Order 2002.

According to the Department of Enterprise, Trade and Investment, proceedings are brought against directors of failed companies who have "abused the privilege of limited liability status through negligence, incompetence or lack of commercial probity".

A disqualification prevents an individual being named as a director or even acting as a director of a limited company – effectively banning them from holding any senior position of influence in a company.

They can be disqualified for between two and 15 years.

Proceedings are taken under civil law, but a criminal court may also decide to make a disqualification order after conviction for certain criminal offences.

The most common incidents which lead to disqualification include failing to keep proper accounting records and failing to submit tax returns.

Failing to comply with the terms of an order is a serious criminal offence and usually leads to prison.

In some cases, such as Mrs Townsley, directors can – with DETI's agreement – offer a disqualification undertaking. It has the same legal effect as an order, but without the requirement for a court hearing.

An investigation by this newspaper found that 174 directors have been disqualified since April 2012; 89 in 2012/13 and 85 in the first nine months of 2013/14.

The total value of debt was £275,187,131.

Twenty-two of the cases in 2012/13 involved debts of £1m-plus. The biggest was £12,369,436, accumulated by Colin Richard Fletcher, of Ballymacrea Road in Portrush.

Mr Fletcher accepted several instances of misconduct as a director, including abusing the directors' loan account by allowing it to lend more than the statutory limit.

He also accepted that he had wrongly used company funds of nearly £660,000 to buy properties in Portugal and Spain.

Meanwhile, 18 of the 85 disqualifications in 2013/14 related to debts running to over £1m.

Financial commentator Paul Gosling said disqualification was a serious setback.

"It means someone cannot be a director of a company for the period of the coverage and it implies that they have been guilty of failing to exercise their duties properly," he said.

"If anyone has got any sense in terms of trade dealings, they would also be very wary about dealing with a business associated with that individual – not only for the period of coverage but also in the longer term."

The biggest debt was racked up by the PMS.

Five former directors of the collapsed lender were disqualified. An adviser to the society was also banned.

David Ferguson, described as a "de facto director", agreed a disqualification undertaking for six years.

David Clements, the Rev David McConaghy, Herbert McCormick and the Rev Samuel McFarland agreed four-year disqualifications.

Philip Black, another former director, agreed a three-year disqualification.

PMS conducted banking business without a banking licence; it carried on a deposit-taking business without authorisation from the Bank of England; and it entered into mortgage lending without being authorised to do so.

 

BANNED FROM THE BOARDROOM: The directors handed disqualifications after their businesses collapsed owing millions to creditors

Presbyterian Mutual Society

Five former directors of the collapsed Presbyterian Mutual Society, which handled the savings of many members of the Church, were disqualified from being company directors in June 2013. An adviser to the society was also banned.

The longest ban was for David Ferguson, who was described as a "de facto director" of the society.

He agreed a disqualification undertaking for six years.

PMS directors David Clements, the Rev David McConaghy, Herbert McCormick and the Rev Samuel McFarland all agreed four-year disqualifications. Philip Black, another former director, agreed a three-year disqualification.

Nearly 10,000 people lost access to their savings when the PMS went into administration in November 2008 with debts of around £123m.

The directors and "de facto director" accepted the society had acted in an unfit manner and went beyond its legal authority.

PMS conducted banking business without having a banking licence; it carried on a deposit-taking business without authorisation from the Bank of England, and it entered into mortgage lending without being authorised to do so.

The society was also found to have loaned at least £52m to non-members in breach of its own rules.

Around £100m of PMS money was lent to developers who were speculating on the property market.

Teresa Townsley

Teresa Townsley received a nine-year boardroom ban following a high-level investigation into her role in the failed Bioscience and Technology Institute.

The project was launched with high-level Government backing but collapsed without delivering on any of its goals at a cost to the taxpayer of £2.2m.

It was later branded one of the starkest examples of incompetence and mismanagement ever seen in Northern Ireland.

Mrs Townsley, one of four original board members, accepted a voluntary director's disqualification of nine years, which took effect from December 2012.

She later said she had been unfairly singled out.

Stormont's Public Accounts Committee delivered a damning verdict on the BTI fiasco, concluding that it "would be difficult to overstate just how badly" it was handled.

BTI was established in 1998 as a not-for-profit company to provide biotechnology incubator facilities at Belfast City Hospital, receiving £2.2m in public funding.

It bought a second building, Harbourgate in east Belfast, but this was unfit for purpose and was never used. According to the report, BTI paid over the odds for Harbourgate.

Mrs Townsley shared a £100,000 'finder's fee' relating to the building, with £25,000 paid into an offshore bank account in her family's name.

Lynda Coulter and Brian Smyth

Two directors of a landmark Belfast restaurant were disqualified as directors for five years last July.

Lynda Coulter and her ex-husband Brian Smyth were directors of BSLC Ltd, which operated Bourbon on Great Victoria Street.

The business failed in the downturn and went into administration in October 2009, owing nearly £500,000.

Ms Coulter, of Deramore Park on Belfast's Malone Road, and Mr Smyth of Gosford Castle in Markethill, Co Armagh, accepted that they had withheld around £280,000 in PAYE, VAT and national insurance from the Crown.

This consisted of £44,596 in respect of PAYE, and £76,310 in respect of national insurance for the years 2008/09 and 2009/10; and £160,721 in respect of VAT for the quarterly periods ending January 2009 to October 2009.

Bourbon was closed two years ago, but later re-opened as Restaurant Victoria.

Stephen Lavery and Ian Newell

Former Wineworld bosses Stephen Lavery and Ian Newell were barred from the boardroom for a decade each after their firms went bust owing £3m.

Wineworld, which had six pubs and off licences in Co Down, owed £1.57m when it went under.

Mr Lavery, of Cleland Park North in Bangor, Mr Newell, and his wife Vanessa (38), both from Warren Road in Donaghadee, accepted unfit conduct including misusing company funds by lending to connected parties, depriving Wineworld of £673,000; going into deals of no commercial benefit, and failing to file records on time on three occasions.

Lecale Inns owed £303,000 when it folded.

The two men admitted trading while insolvent for nearly two years and failing to file records on time twice.

The bans handed to Mr Lavery and his wife Colette, also of Cleland Park North, sanctions them for dealings at Begney Property, while Mr Newell and his wife were sanctioned for their conduct at Jewell Developments. Mrs Lavery was disqualified for three years and Mrs Newell for five years.

Begney Property, which ran two pubs, owed £23,900 when it folded. Mr and Mrs Lavery accepted wrongdoing including failing to file annual returns on time on three occasions, wrongly lending company money to connected parties, misusing funds and entering into transactions of no commercial benefit.

Jewell Developments went into administration owing £86,000. Mr and Mrs Newell accepted misusing company funds by lending to connected parties, depriving the company of cash assets of £648,600, deals that did not benefit the company and failing to file records on time three times.

Sean and Noel Convery

Two brothers who ran a haulage business in Co Antrim were disqualified for close to the maximum period for smuggling, using laundered fuel and other misconduct.

Sean Convery (41), from Cherry Hill in Maghera, and 33-year-old Noel Convery, from Moyagall Road in Portglenone, had led Convery Haulage Ltd, which went bust owing £1.6m.

Sean was disqualified for 12 years and Noel for 11 – close to the maximum sanction of 15 years reserved for the most serious of cases.

They admitted the company diverted excise goods to try and avoid full duty and smuggled goods to avoid excise duty.

They also used laundered fuel to avoid duty, failed to account for all company assets during the liquidation and withheld over £228,600 in PAYE, national insurance and VAT.

They also bounced nearly 200 cheques, totalling £829,000, with seven bouncing twice, and brought needless bank charges to the company by lodging personal cheques totalling £575,000 without enough funds to cover them.

They also failed to file annual returns on time.

Sean Convery accepted he had failed to account for money paid for the sale of company property and did not record the transaction in the accounting records.

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