Just 5p in 1 for unhappy Globespan holidaymakers
Would-be holidaymakers caught up in the collapse of Globespan, the Scottish travel firm, are unlikely to see much more than 5p for every 1 that they are owed.
The 50,000 creditors of Globespan, which collapsed last December with the loss of 600 jobs, are owed 40 million. Nearly all are holidaymakers who paid, on average, between 350 and 400 for flights with FlyGlobespan or package holidays with the Globespan group.
Those who paid by credit card have so far claimed back 12 million from card companies, but others owed an estimated 20 million are dependent on what can be salvaged from the business.
Bruce Cartwright, an accountant with PricewaterhouseCoopers and who is now winding up the business, said that any hopes of boosting the payout depends on whether any money can be recovered from E-Clear, the credit card processing firm which caused Globespans failure.
Related LinksHow E-Clear tycoon Elias Elia lost 100mBehind Globespan collapse, lies a sorry taleBut he indicated it was unlikely much would come from E-Clear, which owed Globespan 35 million plus an estimated 65 million to other travel firms and which had been put into administration following a court action. So far he has realised 700,000.
E-Clear, which was owned and run by Greek Cypriot Elias Elia, processed payments for flights and holidays mainly for travel companies. Last year, it delayed transferring the payments to Globespan until the travel firm ran out of money to pay bills and was put into administration.
Administering accountants BDO established that E-Clear owed about 100 million, including an estimated 46 million to Sunwing, a Canadian travel firm, and 5.5 million to SkyEurope, a Slovak budget airline which went bust last September. However, E-Clears bank accounts contained only about 100,000.
An investigation by The Times established where most of the money went. E-Clears problems began in autumn 2008 when XL, Britains third biggest tour operator, and Zoom, a transatlantic budget airline, went bust.
Customers who had booked future travel with these firms by credit card claimed back about 57 million. But E-Clear, which was the last link in the financial chain and was ultimately liable to repay the disappointed travellers, no longer had the money which had already been passed on to the failed travel firms.
To meet the claims, Mr Elia resorted to using money coming in from customers of other companies, including Globespan. But the problems multiplied last spring when Sunwing stopped using E-Clear and SkyEurope went bust because it was not receiving payments due to it from E-Clear.
The Times also established that Mr Elia had spent 15 million buying NordFinanz, a small German bank, and 17 million to buy Allbury Travel, both in a bid to prop up his failing credit card payment business. He is also believed to have put about 2 million into property ventures in Cyprus.
These efforts went disastrously wrong. BaFin, the German financial regulator, judged Mr Elia to be an unreliable person to own a bank and ordered that his 98 per cent shareholding be sold, and Allbury Travel went bust at the same time as Globespan. The Elian Group of property firms, jointly owned by Mr Elia and a Cypriot businessman, was hit by the recession and its trading is believed to have stopped.
Associates of Mr Elia, who is understood to be still living in London, told of how the Cypriot arrived penniless in London in the late 1990s and boasted of how he intended to become the richest man in Cyprus.
But, they said, the vast sums flowing through E-Clear, which at the peak of its trading activity was handling nearly 1 billion a year, went to Mr Elias head. One said: He saw millions and millions and millions of pounds coming through the bank account. Given his nature he thought he was untouchable, invincible. He went crazy.
They also said that they did not believe that Mr Elia had benefited personally from the missing 100 million, rather that its disappearance was due to incompetence.
A meeting of E-Clears creditors is due to be held in London today. They are expected to be told that there is not much hope of recovering significant sums.
Ian Oakley-Smith, a PWC accountant who has been working closely with BDO, said: I think it is fair to say that the assets that they have managed to find so far are relatively modest in the grand scheme of things.
Some money is believed to be recoverable from properties in Cyprus, although the property market there is depressed, and NordFinanz bank is thought to be worth far less than Mr Elia paid for it.
Mr Cartwright said that Globespan assets still to be sold included a hotel in Majorca, offices in Edinburgh and Glasgow, and one aircraft. Former employees owed salaries were being recompensed through a government scheme and because of the complexity of processing 50,000 claims, he expected it would be up to two years before there was a final settlement.
