Probe over Graphex Limited debts

Mar 14 2010 by Rob Pattinson, Sunday Sun

The £1.4m deficit staff were relying on to be made up by their firm was left unaddressed in March last year, when Graphex Limited entered administration.

Just months earlier Stephen uncovered directors’ plans to avoid responsibility for the shortfall.

In January he found an email sent by company secretary Nigel Ball, of Durham, to company director Mark Harrison, of Middlesex.

In it Mr Ball said: “I’m looking at stripping, relocating assets out of Graphex for cash before the pre-pack. The assets being stock, trade debtors and the investment /shareholding in Lucid Signs Ltd.

“The main creditors losing out are the tax man and the pension scheme . . . if everything goes to plan we’ll buy back the assets for £150k without pension liability.”

Also in January 2009 Ball received an email from company adviser John Barnsley. It said: “Nigel, one point we need to check with the lawyers. The main aim here is to get rid of pension liability.”

When the Pensions Regulator was contacted by the whistle-blower, they chose to appoint an independent trustee to the scheme.

A document outlining the watchdog’s decision stated: “An intention to strip out certain assets from the principal employer and then buy back the remaining assets in a pre-pack arrangement but without pension liability.”

A pre-pack administration is when a company plans to go into administration, to be bought back without debt, often on the same day.

The move, which is entirely legal, is quite common with struggling firms who are looking to protect jobs, and have no other option.

Concerned there was a risk to employees’ pensions on this occasion, the watchdog appointed experts to oversee the scheme in February last year, but they were powerless to stop the company being put into administration just nine days later, on March 4.

Less than three weeks later the assets that had belonged to Graphex Limited were bought by Rivermeade Signs Limited, on March 20, for £110,018. It continued to operate free of pension debt.

Employees entered their application for pension compensation from the Government in October, last year, and are waiting to find out if they have been successful.

A Pensions Regulator spokesperson said: “We are not in a position to discuss the details of this case.

“We take the protection of people’s pensions extremely seriously and always investigate allegations rigorously.

“We have strong powers to act where we believe an employer is attempting to avoid their pension obligations, leaving the Pension Protection Fund to pick up their pension liabilities.

“Where an insolvency has occurred, we seek to ensure that the pension scheme is treated fairly as one of the creditors.

“In certain circumstances, the regulator can look back up to six years and ‘pierce the corporate veil’ – including action to pursue assets that may have been removed into a different business.”

Company directors of Graphex Limited and Rivermead Signs Ltd were unavailable for comment.