Thursday 13 July 2023

Multiple items of "personal expenditure" in director's loan account

EXCLUSIVE by OUR BUSINESS STAFF

Liquidators investigating the affairs of the insolvent Omega Infinite PLC uncovered details of what appear to have been numerous personal purchases made on a Director's Loan Account [DLA] by the company's chairman, 'visionary' businessman Martin Frost.

Among items included in the account were credit entries for luxury food retailers Fortnum & Mason, upmarket Edinburgh restaurant Bar Frizzante, and the highly acclaimed Bells Fish & Chips. The liquidators also asked Mr Frost to justify a series of payments made from the account, and totalling £121,000, to a company called Scottish Academic Press (SAP), of which he was a director/sole trader.

The full list of  alleged 'non-company' purchases and transactions via the DLA were put to Mr Frost in a liquidators' Letter of Claim in September 2021. The document formed part of the application made to the court by the liquidators who are seeking to recover two luxury apartments in Scarborough, bought by Mr Frost using £425,000 of Omega's funds.

The letter showed that as of 9th November 2019, Mr Frost's DLA was overdrawn in the sum of £850,747.

And the liquidators from insolvency practitioners Begbies Traynor required: "On behalf of the Company, our clients demand immediate payment of the said sum o £850,747 albeit it is considered that this figure understates the extent of your indebtedness to the Company."

In his written evidence to a recent court hearing, Mr Frost claimed the DLA had been 'fabricated'.

Despite an assertion by the liquidators that Omega was insolvent by January 2017, Mr Frost, in a witness statement, signed by him in April of this year, declared: "In January 2019, Martin Frost was chairman and CEO of an intellectual property group (Omega Infinite PLC) independently valued in excess of £200 million".

He dismissed the liquidators' application statement to a judge in the Leeds courts as "a diatribe of half truths".

Mr Frost concluded his statement with: "Finally, not only should the Orrites and 'insolvency folk' be ex-communicated from society, but also should their lapdogs to wit; the dishonest Jeffrey clan; the crystallised journalist Bill Chisholm", and one other named individual.

The Letter of Claim specifically mentions the payments to Fortnum & Mason, Bar Frizzante and Bells Fish & Chips before going on to state: "or items which did not otherwise benefit the Company (e.g. car tax for your personal vehicles, gas and electricity for the Chandlery [a building in Berwick-on-Tweed] which is not a property owned by the Company). It is incumbent on you as a director of the Company to justify any of your entitlement to credits to the DLA and you will be required to do so."

The document outlines payments in the sum of £121,510 made between 13 June 2019 and 20 November 2019  to Scottish Academic Press which "we consider are payments made to you personally and which were not for the benefit of the Company or its business".

As the Letter of Claim explains: "The DLA ledger includes a number of substantial payments to SAP. Those payments are habitually referenced 'Scottish Academic Press – trfr to SAP – essentially M Frost'.

It is also revealed that in a conference call with the liquidators' representatives which also involved Omega director Dr  Bob Jennings held on 18 January 2021, Mr Frost was asked to provide background in relation to SAP and to explain why the Company had made payments to it.

"You explained that SAP is a publishing house that had been trading for some 200 years. You were introduced to the opportunity to purchase the SAP business by a friend at Edinburgh University. The business had been operated through a limited company but was later transferred to you to operate as a sole trader."

Mr Frost had stated in Infinite's 2017 accounts which were approved by the board and signed by him that the business and brand of SAP was sold to Avocet Faculties Limited, a subsidiary of Omega in 2018 for £300,000.

But the liquidators state in their letter to Mr Frost: "However notwithstanding the claimed transfer of the business and brand of SAP, our clients believe that payments by the Company to SAP recorded in the DLA ledger were payments which were made to you personally.

"Our clients consider that each of the payments to SAP recorded in the ledger of your DLA have been correctly debited from your DLA as they are payments to you personally and for your personal benefit. Those payments total £949,160. As indicated, our clients believe that a further £121,510 was paid to your account in the name of SAP but such payments were not posted to the ledger of your DLA.

"Our clients believe that you utilised monies paid to your account in the name of SAP to purchase land and buildings."


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