• When firm went into administration cash was used towards repaying the bank's 31million loan

PUBLISHED: 18:46 EST, 20 June 2012 | UPDATED: 01:14 EST, 21 June 2012

Anger: Thousands of Farepak Christmas hamper customers were cheated out of justice yesterday

Anger: Thousands of Farepak Christmas hamper customers were cheated out of justice yesterday

Thousands of customers who lost money in the Farepak Christmas hamper firm scandal were cheated out of justice yesterday.

As a high-profile court case against the directors of the failed firm collapsed, it emerged that bankers had referred to customers' cash as 'Doris money'.

It was also revealed that bankers, HBOS, twice refused to protect 4million saved by customers, mainly on low incomes, to buy a hamper.

The Insolvency Service abandoned its five-year Farepak investigation after extraordinary new evidence showed that HBOS turned down the option of placing the money in a trust.

This meant that when the firm collapsed into administration in  2006 the cash was used towards repaying the bank's 31million loan rather than refunded to Farepak's vulnerable customers, many of  them elderly.

More than 150,000 customers who had paid regular instalments for a Christmas hamper were left on average 400 out of pocket and offered just 15p in the pound.

Hugely embarrassing emails from senior bankers at HBOS, which is now owned by Lloyds Banking Group, showed they referred to the cash from Farepak's vulnerable customers as 'Doris money'.

The new evidence will heap further pressure on Peter Cummings, known as the banker to the stars of the financial world, who was handed a 'warning notice' and punitive fine by the Financial Services Authority in April as part of its investigation into HBOS.

It has been reported that  Mr Cummings, who is challenging the FSA's rebuke, had been the  'ultimate arbiter' of what happened with Farepak.

This is the second collapse of a case brought by a government department this week – the Insolvency Service falls under the responsibility of the Department of Business.

Rich pickings: When the firm went into administration in 2006 the cash was used towards repaying the bank's 31million loan not vulnerable customers

Rich pickings: When the firm went into administration in 2006 the cash was used towards repaying the bank's 31million loan not vulnerable customers

On Monday the Serious Fraud Office dropped its investigation into property tycoon Vincent Tchenguiz.

On Farepak, lawyers representing the Insolvency Service had asked Mr Justice Peter Smith in the High Court to disqualify its former bosses from being company directors, accusing them of 'unfit conduct'.

The former bosses, including  Sir Clive Thompson, an ex-president of the Confederation of British Industry, contested the disqualification applications.

But yesterday the government's companies watchdog abandoned its bid to penalise the directors after the new evidence emerged that included the fact that they had twice tried to protect the cash of customers.

Business Secretary Vince Cable said he felt 'huge' sympathy  for 'those who lost out' and would  reflect on the decision by the  Insolvency Service.

A spokesman for Lloyds Banking Group said: 'As this matter is subject to ongoing legal proceedings, it would be inappropriate to comment.

'We have assisted the relevant authorities at all times during  their investigation of European Home Retail plc and Farepak and the conduct of their directors.'

Here's what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.

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All these corporates and the rich brigade need to STOP treating the public like OIKS and Losers and laughing down their noses at our less than £20K salariees and get a reality check. WE HAVE HAD ENOUGH OF YOUR SELF SERVING AVARICIOUS CONTEMPT FOR US. And to our politicians to whom the above also applies: You need to put a foot back into the real world and live it as we do, then you may gain an idea of how to sort out this coun try, instead of lining your pockets in the short-term and not caring about the future mess you all leave this country in.

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I+just+do+not+understand+the+point+of+putting+your+money+in+companies+like+Farepak+and+end+up+buying+goods+provided+by+the+same+company.+People+should+be+wise+and+start+a+saving+account+instead+and+come+christmas+they+can+buy+whatever+they+want+at+better+prices+from+shops+they+favour%2C+they+will+find+they+can+buy+more+with+that+money+%28as+companies+like+Farepak+have+to+make+a+profit%29

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2006 ....its now 2012, 06 years to finaly get no justice in the end, and are any of the legal costs down to the tax payers ??

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It would appear that BOS overstepped the Rubicon of work-out bankers and became shadow directors. EHR Group went into administration at the point of time when Farepak deposits were at their highest for the year circa £35m and were applied to repay BOS loan made in 2000 to finance acqisition of DMG Group for £45m. It is surprising that this was not discovered by Department of Trade whose report has still not been made public. Where is the major law firm that will take action on pro bono basis against BOS as if they acted as shadow directors they would be liable to all group creditors including Farefak depositors. This would be considerable more than the £3m gesture to Farepak depositors made at the time of collapse

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Why has this only come to light now? Didn't the Directors tell the Prosecutors as part of their defence? Did the Directors try to change Banks?

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Why did they do it? Because they were allowed to and more or less knew nothing would happen. Does anyone actually think these people don't think out what could happen to them before they do anything a bit 'iffy' and take expert advise on such?

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HBOS knew very well that it was customer money. Just like MF Global knew the 1.2 billion dollars was customer money. They stole it, pure and simple. These people should apply to the Criminal Compensation Scheme for redress and the return of their money. Remember the first law of banking - There is no law in this business.

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Just obscene how banks get richer off the backs of lower income families. The thought of Christmas ruined for children makes my blood boil!!!- The angel, London, 21/6/2012 11:18------ Read the articles again. I think it says that HBOS lost their £31m Loan they made to the company. Part of the reason that HBOS was rotten when it was foisted onto Lloyds without Brown, Darling and King disclosing what they knew. Put the blame where poperly belongs and that is with the Directors of Farepak and nobody else. They conned HBOS as the deceived their customers. WE ended up paying for it. What should truly worry you is that Mr Cable is hounding the banks to lend to SMEs whatever the cost. Just throw money at new companies who might be more dodgy than Farepak - the directors run with the money and the banks lose their investment resulting in another bail-out for which we pay. Farepak customers should be grateful they only lost £400. Saved in a bank their money would have been safe.

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What I can't understand is: why would anyone save in one of those schemes anyway? Can't they save in a bank/building society account - or a credit union?

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Why can't the Farepak directors be made to sell their houses to compensate those who have been duped?

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