Updated: 07:33 EST, 30 October 2011>
Pressure is intensifying on outsourcing giant Capita to justify its role in the Arch Cru investment funds scandal that has resulted in 20,000 investors nursing big losses and waiting anxiously to see how much of their savings will be returned to them.
The heat on the FTSE 100-listed company, a big winner of lucrative Government contracts, follows a debate ten days ago on the Arch Cru affair in the House of Commons when MPs from all sides criticised it for failing to safeguard investors’ assets in the run-up to the suspension of the Arch Cru funds in March 2009.
As authorised corporate director to the Arch Cru funds, Capita’s role was to ensure investors’ money was used as promised and that the funds were then priced properly.
‘Fiasco’: Peter Coates says Capita and the FSA have failed all the investors
Capita was paid handsomely (£400,000 a year) for providing such services but was found wanting as savers’ money was then invested in dubious assets – everything from Greek ferries through to property in Dubai. This is despite the fact the funds were marketed as ‘cautious managed’. Investigations since they were suspended in 2009 have also focused on allegations of misappropriation of assets. The spotlight on
Capita’s failures comes as it sends letters to Arch Cru investors, detailing their share of a £54 million redress scheme agreed behind closed doors between itself, the Financial Services Authority and other parties (BNY Mellon and HSBC) that were meant to oversee the funds.
The cash offer being made by Capita, which investors have until the end of next year to accept, will help to reduce investors’ losses, though it is likely that most of them still stand to walk away from Arch Cru nursing overall losses of about 40 per cent.
- MPs increase pressure on Capita to compensate 20,000 Arch Cru victims
- Flaws in a closed doors deal between Capita Group and FSA over Arch Cru
- Arch Cru investment funds scandal: The fight for compensation
Investors, independent financial advisers who recommended the funds and MPs are united in their belief that the deal on the table is inadequate. But they have yet to convince the Government – and in particular Financial Secretary Mark Hoban – that more pressure should be put on Capita to increase its redress package.
Led by Tom Greatrex, Labour member for Rutherglen and Hamilton West, and Conservatives Guy Opperman (Hexham) and Alun Cairns (Vale of Glamorgan), MPs are now forming an all-party Select Committee to deal with the Arch Cru scandal. The objective, as exclusively reported in Financial Mail last week, will be to get Capita to pay full compensation.
Greatrex has already persuaded the FSA to come to the Commons late next month to discuss Arch Cru. ‘We are seeking answers from those involved – Capita and the regulator,’ he says. ‘By doing this, we hope to help the Government understand the significance of this issue and the need for a better offer. Ours is a cross-party initiative on behalf of thousands of investors who deserve fairness.’
Iain McKenzie, Labour MP for Inverclyde, says he has many constituents who have lost life savings in Arch Cru. ‘They and many up and down the country should not be left to absorb the pain of this financial debacle,’ he says. ‘Capita should be called to explain its position to a Select Committee. Nothing less is sufficient.’
Nearly all Arch Cru investors who have contacted Financial Mail in recent days are united in their belief that Capita and the FSA are culpable for the losses they have suffered. They do not attach blame to the IFAs who sold them the funds and who they say were persuaded by the marketing spin put on the funds, the involvement of Capita and the regulation of the funds by the FSA.
Peter Coates, from Dalwood, Devon, switched a big part of his pension fund into Arch Cru funds in September 2007 on the back of advice from his IFA. He says he now stands to lose £40,000. Peter, 65, is an artist of repute and also designs greeting cards for Canoodle Art, a business he set up with his wife, Gill, 53, four-and-a-half years ago.
Angry victim: Rose Heaword says
justice must prevail for the investors
He says his adviser was ‘meticulous’ in his research into Arch Cru and holds him blameless. Instead, Peter’s anger is aimed at Capita and the FSA.
‘The regulator failed in its statutory duty to protect individuals,’ he says. ‘Similarly, Capita failed to oversee the proper running of the funds.
‘I believe investors are entitled not only to the full amount they invested, but the interest they have lost since the funds were frozen. Only then will Arch Cru investors be compensated for the wrongdoing of the companies involved in this appalling fiasco.’
Peter has complained to the FSA but he considered its response was so underwhelming that he has now approached the Office of the Complaints Commissioner, which handles complaints against the regulator. He has yet to receive a response.
Rose Heaword, 77, a former civil servant from Frome, Somerset, was exposed after her investment in a Canada Life bond held with Insinger de Beaufort was taken over by Arch Cru. In 2008, her investment was worth £55,000 but the last valuation, in August, puts it at just below £14,000.
Rose says: ‘The FSA allowed an unsustainable business to slip through the net for far too long. And Capita was asleep at the wheel. I am prepared to go down fighting over this – justice must prevail.’
The FSA has long maintained the £54 million redress scheme represents the best outcome for Arch Cru investors.
Margaret Cole, head of its Conduct of Business Unit, told Financial Mail in July: ‘The package was agreed after complex negotiations in which we had to make a balanced judgment about what would be the best outcome for investors.’
On Friday, Capita said the £54 million offer was fair and that ‘other parties’ bore much responsibility for the losses. It said it did not market or sell the funds, give advice or describe Arch Cru funds as low risk.
It said: ‘We sympathise with the position of investors and have set up and contributed to the payment scheme to make funds available to investors quickly to improve their position.’
Parliament could compel the boss to break his silence
If some MPs get their way, Capita boss Paul Pindar will be hauled before Parliament to explain his company’s failure to protect Arch Cru fund investors and pay adequate compensation.
So far Pindar, who last year was paid £901,360 for running the country’s 62nd-biggest company, has remained silent on Capita’s involvement in Arch Cru.
In the past week, both Energy Secretary Chris Huhne, Liberal Democrat MP for Eastleigh, and David Ruffley, Conservative MP for Bury St Edmunds, have written to Pindar, urging him to respond to issues raised about Capita in the recent House of Commons debate on Arch Cru.
Joe Egerton, head of Justice in Financial Services, is behind a campaign launched by IFAs, who advised clients to buy into Arch Cru, to press for a judicial review into the whole affair. ‘The decision by Capita to press ahead with its inadequate offer after the Arch Cru debate in the Commons is disgraceful,’ he says. ‘MPs want Capita to pay up and our campaign will continue until Pindar accepts that Capita must pay proper compensation.’
Investors who are unhappy with Capita’s involvement in the Arch Cru affair should write to: Paul Pindar, chief executive, Capita Group, 71 Victoria Street, London SW1H OXA.
Source : http://www.thisismoney.co.uk/money/investing/article-2055042/Capita-feels-heat-MPs-Arch-Cru-lost-millions.html