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Government mulls Farepak legal fight

12/05/2008

The government is considering taking legal action against the directors of collapsed Christmas hamper company Farepak.

The Companies Investigations Branch (CIB) of the Department for Business, Enterprise & Regulatory Reform (BERR) has completed its investigation into the failed firm, which left many families facing a lean Christmas in 2006.

CIB said it is taking advice on whether the evidence found in the report merits legal action.

The body has the power to apply to the court to have the directors disqualified and refer evidence to the police or the Serious Fraud Squad.

Consumer affairs minister Gareth Thomas said: "The collapse of Farepak was dreadful for the thousands of people who lost money. The government is working hard to prevent other families suffering similar problems in the future.

"We initiated a comprehensive investigation to establish the facts. We are now getting legal advice on whether there are grounds for further action."

According to the CIB, the investigation involved thousands of documents and numerous interviews with the directors and other parties.

The government is considering whether a new regulatory framework is needed after the debacle, in which thousands were left with no savings when the popular hamper company went bankrupt in October 2006.

Farepak collected money from participants on a monthly basis, issuing vouchers for high street stores at the end of the year in return. Families could also purchase hampers of food with the scheme.

But when the vouchers firm went bust, retailers demanded to be paid for the vouchers up front rather than after Christmas, and Farepak's bank HBOS refused to extend credit to the firm, triggering its collapse.