City in dark over probe into Claims Direct boss

The former chief executive of Claims Direct, the collapsed personal injury company, was found to have breached rules of the trade body for personal injury lawyers months before the controversial group floated on the stock exchange.

However, the information didn't appear in the company's flotation prospectus that was given to shareholders before they made their decision to invest in the company.

Last week, Claims Direct was placed into administrative receivership by a division of Abbey National. The company has been the subject of much controversy, particularly over the fees that its clients have to pay.

Colin Poole, who was chief executive of Claims Direct at flotation, was found by the Association of Personal Injury Lawyers to have breached its code of conduct on two counts in September 1999, 10 months before the group joined the stock market.

The APIL deemed that the lack of transparency in Claims Direct's charging structure breached its rule that "members will act in the best interests of the client".

Secondly, Mr Poole was deemed to have breached the association's rule that "no member shall make excessive or unnecessary monetary charges to the client". At issue was the fact that Claims Direct's clients had to pay 35.25 per cent of any claim they received in fees.

APIL did not recommend that his membership should be cancelled, because of "the assurances of Mr Poole about the changes in the Claims Direct scheme".

However, a spokesperson said: "Mr Poole assured us he would put it right. His membership was not renewed [in March 2001] because he did not uphold the assurances."

Mr Poole said that he had not applied to have his membership renewed.

Mr Poole has been a controversial figure. The company floated with its shares priced at 180p in July 2000, although its problems later led to a slump in the price. Following this slump, Mr Poole and Tony Sullman, the founder of the company, bought back many of the shares at 10p. Class Law solicitors is currently preparing legal action against the company on behalf of shareholders.

Mr Poole told The Independent on Sunday that the disciplinary hearing was disclosed to the board and advisers before flotation.

However, the prospectus states "none of the directors has been the subject of any public criticism by any statutory or regulatory authority".

It is believed that Investec, the sponsor and financial adviser for the flotation, thought the relevant authority was the Law Society, which had not investigated Mr Poole. David Curry, the head of corporate finance at Investec, said: "We did due diligence and went to the Law Society – we were satisfied that there was no information that needed to be disclosed."

Mr Poole questioned the validity of APIL because many of the solicitors Claims Direct used were also members. Mr Poole said, "Having made a finding, why didn't [APIL] make similar findings against 20 per cent of members who were participating in the [Claims Direct] scheme that was in breach of the rules?"

He also pointed out that that same year, he had been nominated for an APIL award.