• 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.

The comments below have not been moderated.

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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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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Look up the addresses of the Farepack Directors - and anyone who lives near, pay them a visit. You won't get any money, but neither will they sleep well at night.

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=====Banks are businesses not charities. - John S, Bromley, 21/6/2012 9:56==="businesses"??? Alongside having no compassion, you also can't spell. All round loser. - The angel, London, 21/6/2012 11:22====== The angel, London: What is wrong with "businesses" ? It is the correct plural of "Business"

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Banks are businesses not charities. - John S, Bromley, 21/6/2012 9:56>>>>>>>>>>>>>>> 47 red arrows already. So banks should operate like charities. Charities rely on donations. What would banks use as donations? Your savings? ....BTW There is a bug in the DM's sofware. Avoid using the quote sign. The apostrophe seems to be okay.

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Every time I see the ads for Christmas catalogues etc. I think_why not save in a piggy bank? After all the money paid to these schemes does not attract interest either and add to that the fact that the goods on offer are generally sold at premium prices and you are losing out yet again! More than that even_ You could buy the gifts through the year instead of leaving it all until Christmas, if you feel you might spend the cash on something else. That way you can get even better value. Stupid way to pay for Christmas_it comes every year, so it ain't a surprise expense, is it?

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bailouts here bailouts there for our hard pressed bankers. oh, poor diddums.

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Banks are businesses not charities. - John S, Bromley, 21/6/2012 9:56==='businesses'??? Alongside having no compassion, you also can't spell. All round loser. - The angel, London, 21/6/2012 11:22------ Have would you spell 'businesses'? Doesn't that make you a double all-round (with a hyphen!) loser?

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