Revealed, the Massive Debt Built Up by Credit Card Processing [Pounds sterling]150M [Pounds sterling]150M Firm That Owed Cash to Collapsed Scots Travel Operator Globespan
Byline: Jane Simpson
THE company at the centre of the collapse of Scots travel firm Globespan operated in a culture of debt, owing almost [pounds sterling]150 million to clients.
Financial experts have called credit card processor E-Clear's accounts 'highly unusual'.
The latest accounts for the Cypriotowned company reveal it had debts of [pounds sterling]144,914,000 - yet was being audited by a 'sole trader' rather than one of the 'big five' accountancy practitioners which usually handle such firms.
This suggests that E-Clear, which was linked with the collapse of four airlines in little more than a year, had been sitting on mountains of cash owed to other struggling businesses.
According to accountancy specialists, E-Clear's official accounts 'lack transparency' and appear to include no financial guarantor - another highly unusual practice for a firm dealing in such sums of money. It was also being backed by a German bank in which it had a financial stake, marking what sources have described as a conflict of interest.
At the time its accounts were filed, the company, based in London's Mayfair, had only [pounds sterling]6 million in the bank, a relatively small figure compared to the massive amounts is stands accused of owing to others. The accounts also show E-Clear was owed [pounds sterling]152 million.
Specialists say the culture of debt and credit in which the company operated reveal a precarious business model.
Now it faces a Government probe after Scottish Finance Secretary John Swinney called on the Department of Business Regulation to look into the collapse of Globespan and its dealings with E-Clear and its owner, Elias Elia.
Central to the issue is why payments were held back from Globespan, which, despite making a [pounds sterling]1.2 million profit last year, had suffered a devastating [pounds sterling]19 million loss the year before.
Administrators for the Edinburghbased airline and tour operator, which collapsed ten days ago leaving thousands of passengers stranded and 550 employees out of work, want to know why the money was not passed on.
Last night, a leading accountancy source who has seen E-Clear's latest accounts, dating to the end of February 2008, said: 'These accounts appear to be lacking in the normal sort of transparency you would expect from a company moving such large sums of money around. …