Four thousand customers who thought they were repaying their spiralling debts have lost a massive £7million after being allegedly swindled by two financial bosses.
Christine Whitehurst ran debt management firm First Step Finance between 2007 and 2013. The firm promised to help financially vulnerable people get control of debts and gradually repay them over time.
First Step was supposed to collect customer payments and then pass them on to mortgage lenders and credit card companies that were owed money by First Step’s customers.
However, according to the UK’s financial watchdog, Whitehurst took the money for herself and spent it on luxury holidays and cars for herself and her husband Adrian Whitehurst.
More than £200,000 of customer money was spent on luxury cars including a Bentley
According to an investigation by the Financial Conduct Authority, the pair spent over £500,000 on holidays, bars and restaurants, including stays at five-star luxury hotels in Marbella, Venice, Vienna and Greece.
More than £200,000 of customer money was spent on luxury cars including a Bentley, a Range Rover and a Ducati.
Significant sums were also frittered on luxury brands, including goods from Hermes and Louis Vuitton.
Then in 2013, Christine Whitehurst agreed to sell First Step Finance to Darren Newton – another financial boss.
However, the FCA claims that he didn’t use his own money to buy the firm – which was already in £6million of debt – he used even more of the firm’s own customers’ money to pay Christine Whitehurst a further £322,500.
The City watchdog investigated both the Whitehursts and Newton and has now, four years after the firm went bust having ‘lost’ £7.1million of customers’ cash, banned all three from operating in financial services ever again.
The FCA isn’t the only official body to have accused the Whitehursts and Newton.
A separate investigation into the firm by the Government’s Insolvency Service published similar findings in 2016.
It also found that the Whitehursts ‘withdrew money from the company in breach of the regulations and treated it as directors’ drawings’.
An official statement said: ‘They then set off their liability for the amounts they owed the company by selling their shares in both a speculative overseas property development and the company itself at prices that could not be explained and to their own advantage.
‘Furthermore funds taken from client accounts were loaned to companies owned and controlled by family members.’
The Insolvency Service also banned both Whitehursts from being limited company directors for a total of 24 years. Darren Newton was also banned by the Insolvency Service for three years.
Who was affected?
First Step’s clients were largely vulnerable individuals who went to the firm for help to pay off their debts.
The firm told customers that it would build a pot of money for each customer and use this to make a full and final settlement of their debts.
First Step received monthly payments from their customers, who were told that the money would be held in a ring-fenced account as required by the Office of Fair Trading.
After the purchase of First Step on 18 October 2013 by Newton, customers were meant to be transferred to another of his businesses – Debt Help and Advice.
This transfer did not take place and First Step continued to receive payments from existing clients until it was placed into administration in May 2014 with debts totally £7.1million.
Newton failed to repay customers’ debts as promised.
However, last month Newton appealed his latest ban by the FCA – meaning he is still legally allowed to run a financial firm until the Upper Tribunal backs up the watchdog’s decision.
If they rule in favour of Newton, he’ll be free to run a business with access to customer cash again in the future.
Newton, Christine Whitehurst or Adrian Whitehurst – who the FCA alleges were collectively responsible for the loss of over £7million of money belonging to 4,000 customers – are not facing any further investigation or criminal charges.
This is in spite of the watchdog confirming it reported the case to the City of London Police in both May 2016 and again in May 2017.
According to sources at the regulator, the police decided not to pursue the couple and as such, the FCA did not report Newton to the police again this week when it published its decision to ban him.
Mark Garnier, Conservative MP for Wyre Forest and a former member of the Treasury Select Committee, called the whole debacle ‘completely outrageous’ and called on the regulator and police to do more to hold all three to account.
He said: ‘The FCA is acting as the agent of regulation. If they think that these people have done enough to be banned from financial services, then why are they not referring this case for investigation by the Crown Prosecution Service?
‘Regulation needs to be seen to have teeth. The bottom line is that we create these rules so that people have confidence in our financial system. What is the point unless these laws are taken seriously and investigated when they are broken?’
He added: ‘There has got to be criminal accountability for instances such as this where so much money has gone missing.’
The FCA declined to comment further on the case, other than to reiterate what it had already said on the matter in both banning orders.
A statement from the City of London police said: ‘In May 2016, the Financial Conduct Authority passed a file to the City of London Police for review regarding suspected fraud within a debt management company and the decision was taken not to progress to an investigation.
‘In May 2017 the Financial Conduct Authority passed an additional file to City of London Police for review regarding suspected fraud within a debt management company.
‘Following a thorough review of the file, we have taken the decision not to progress with an investigation. We reviewed the case and found that there was little chance of a successful criminal prosecution.’
According to Companies House, Christine Whitehurst and her husband Adrian are now partners in a property development firm, Omega Design and Build, whose website promises to help you ‘build the home of your dreams’.
This is Money attempted to contact the Whitehursts but have yet to receive a response.
According to Companies House, Newton’s last correspondence address matches that of accountancy and financial advice firm Howard Worth based in Nantwich, Cheshire.
This is Money contacted the firm, however a spokeswoman said she was unable to confirm or deny that Newton worked or was based there and declined to make any comment.