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MPs to investigate £80m P&H pension black hole after 1000s of staff are laid off weeks before Christmas

  •  P&H executives received almost £70m in dividends from 2009 to 2016
  •  Payments of at least £8.2m a year continued even as losses at the company rose
  •  A Change.org petition attracted 7000 signatures in one day demanding an investigation into firm's collapse

The collapse of Palmer & Harvey is to be investigated by MPs as concern mounts about a huge pension fund deficit.

Frank Field, chairman of the Commons Work and Pensions Committee, said he was also ‘massively concerned’ by news that bosses received millions of pounds from the wholesaler as losses grew.

He said the committee would look into the matter as part of a wider probe into those ‘raiding’ firms that then need rescuing.

High life: The £4m home of Christopher Adams  Inset: Christopher Etherington

High life: The £4m home of Christopher Adams  Inset: Christopher Etherington

His comments came after thousands of staff were laid off by P&H weeks before Christmas, with trustees of its pension scheme warning the Pension Protection Fund of an estimated £80 million black hole.

Even if the fund steps in to rescue the scheme, thousands of former staff face having their nest eggs reduced.

Meanwhile, it has also emerged that a small group of P&H executives received almost £70 million in dividends from 2009 to 2016 after a debt-fueled management buyout.

The payments – of at least £8.2 million a year – continued even as losses at the company rose.

Last night, Field said: ‘I’m massively concerned about this. It is not just a one-off.

‘We are beginning to see a pattern of people raiding companies, then leaving them to be rescued by the Pension Protection Fund.

‘As a committee, we have got to propose to Government how we can exercise some clawback when it looks as though stewards of a company have fleeced it for their own benefit and left pensioners to face increasing cuts.

‘Public opinion on this has hardened – people want the Commons to act. It is not just pensioners who have been affected, people’s jobs have gone as well. It’s a doubly unforgivable act by people who have a duty of ownership.

‘You should not have the advantages and wealth that come from a successful business if you have actually failed that business.’ Struggling P&H, which is based in Hove, East Sussex, had been kept afloat by the tobacco companies that supplied it as bosses tried to negotiate a rescue deal.

Frank Field: Expressed concern after it was revealed that P&H may have £80m pension deficit

Frank Field: Expressed concern after it was revealed that P&H may have £80m pension deficit

Last week, however, it ran out of cash and administrators were called in – leading to an immediate decision to shed 2,500 staff.

Chief executive Tony Reed said he was ‘dreadfully sorry’.

But questions are being asked about why the firm continued to pay vast sums in dividends to shareholders even as it struggled.

Latest accounts show that P&H, the fifth-biggest private firm in the UK, paid £8.2 million to preference shareholders, despite losing £17.3 million in the year to April 2016.

It had already paid them the same amount the year before, despite an £8.5m loss.

The payouts began after the firm’s structure changed following a management buyout in 2008 that valued it at £345 million, led by former chairman Christopher Adams, 65, and former chief executive Christopher Etherington, 64.

Some of the directors, including Etherington, funded their share purchases using interest-free loans from P&H’s staff benefit trust.

P&H had to pay further millions for bank interest payments, refinancing and other fees related to the 2008 buyout.

But administrators will be unable to access millions of pounds in a ring-fenced firm, Buildtrue, that was set up to provide security to preference and dividend shareholders who want to redeem their holdings. It had £42 million last year, according to accounts.

A Change.org petition set up on Saturday to call for an investigation into the firm’s collapse had nearly 7,000 signatures last night.

Administrators at PwC, who are acting for P&H, did not respond to requests for comment last night.

 Life of luxury as firm failed

Ex-chairman Christopher Adams, 65, and former chief executive Christopher Etherington, 64, received millions from the failing firm.

Adams, who resigned in 2013, lived in luxury while at the firm, owning a Grade II listed, ten-bedroom rectory in East Hoathly, East Sussex. The £4m Georgian property includes a coach house, swimming pool and gardener’s cottage.

Etherington quit this April and set up a firm in Chichester, West Sussex, called Chris Etherington Ltd, along with Caroline Etherington, 57. Neither the Etheringtons nor Adams could be reached for comments.

 

 

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Journalist, writer and broadcaster, based in London and Paris, her latest book is Touché: A French Woman's Take on the English. Read more articles from Agnes.

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