Smooth Financial reported to police over missing client money

ADMINISTRATORS handling the collapse of debt management firm Smooth Financial have informed police about the £850,000 hole in the firm’s client account.

The Sale-based company went bust in July and administrators discovered that payments from 3,500 clients into debt management plans were being used to sustain the business.

At a creditors’ meeting in Manchester on Friday joint administrator Alan Coleman, of the Salford insolvency firm Royce Peeling Green, said the police had been informed but he had not yet been interviewed.

Administrators are now chasing cash that left the business through loans to directors and to sister companies. Mr Coleman said he was investigating an overdrawn directors’ loan account of at least £158,000 which was used for holidays and a deposit on a property.

And he believes client money may have been used to make loans of £590,000 to connected companies. Royce Peeling Green is now seeking to liquidate Contingence Ltd, Smooth Investment Group and Smooth Media which owe a total of £306,000. A further £233,500 is owed by Citizens Claims, controlled by the Smooth Investment Group, which is already in administration.

The administrators are also considering whether to sue six debt management companies they said bought Smooth’s database illegally after it was touted around by a former employee.

Mr Coleman said: “We need to work out if we are going to make claims against debt management companies that have acted illegally and breached data protection rules. This is personal data which they’ve acquired illegally. We will be reporting them to the data protection authorities and the Office of Fair Trading as well.”

He added: “With any insolvency we have to report to the directors’ conduct unit. I can’t disclose what I’ll be reporting because it’s privileged information. If the unit decides to bring proceedings and I’ve disclosed any information it could prejudice their claim in court. We have reported it to the police although I’m waiting for a formal interview.”

Around 50 staff lost their jobs at the business which was owned by the Smooth Investment Group whose largest shareholder is Mark Broadstock, pictured. He was a director along with his wife Josephine Broadstock. Robert Jones was the finance director from January 2012 until June.

People with debt management plans pay a regular amount which is held in a client account and distributed to creditors by a debt management company in return for a fee. Smooth’s client base has since been sold on to Surrey-based Money Expert in a deal worth up to £450,000.

Unaudited accounts for the year to January 2012 show the company made a net profit before tax of £114,136 on turnover of £2.6m. The company failed with debts of £1.3m, including the client account deficit, however, the administrators expect to make a return to unsecured creditors.

Greater Manchester Police said it had “no investigation ongoing at this moment in time”.