FSA sees its £750,000 fine for 'Plumber' flushed away

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The Independent Online

When Paul Davidson, the entrepreneur and share trader known as "the Plumber", was declared bankrupt just before Christmas, regulators at the Financial Services Authority (FSA) must have though Santa had it in for them.

Already struggling to hold together a settlement in the split- capital trust scandal - which was announced on Christmas Eve to general disappointment - the City watchdog saw the prospect of recovering a £750,000 fine that it had levied on Davidson virtually disappear.

The 49-year-old former pipe welder first came to prominence in 2001 when he floated Oystertec, the company founded to exploit the "Oyster converter", a fitting he'd invented that revolutionised plumbing.

A year later, he hit the headlines for another reason, after making an unusual £6m "spread bet" on the shares of Cyprotex, another company being floated on the stock market, where he held more than a third of the shares. It was said that the bet in effect supported the flotation.

The FSA investigated - and found Davidson and City stockbroker Nigel Howe guilty of wrongdoing. Mr Howe was fined £300,000, later reduced to £50,000 on appeal, and Davidson £750,000.

Davidson has appealed but a date has yet to be set for the tribunal. However, there are doubts as to whether the tribunal will now take place, because of Davidson's financial difficulties. He has applied for legal aid for lawyers to represent him at the hearing, but it is far from certain whether this will be granted.

Davidson was not available to comment on whether he would proceed with the appeal if aid was not granted.

The past few months have not been good for a man who once boasted he owned five Bentleys, 19 other cars and two drivers to ferry him, his family and friends around in them - as well as a mansion in the posh Manchester satellite town of Prestbury, a "palace" in Spain and another two homes.

Having fallen out with Oystertec, he was sued by the company he once ran. At the hearing, he failed to provide a statement of his financial position, and in October, despite claiming he was unfit to attend court because he could only "concentrate for one and a half hours a day", he was held in contempt of court and handed a three-month prison sentence, suspended for a year.

He has yet to pay Oystertec the £750,000 he was found to owe it. In addition, he owes more than £800,000 to City legal firm Norton Rose - which has been granted an order to sell Davidson's Prestbury home - as well as £100,000 to Manchester solicitors Wacks Caller.

It was Wacks Caller, which petitioned for his bankruptcy, granted on 22 December.

Davidson asked another law firm, Saunders & Co, to act for him opposing the bankruptcy petition. But when the lawyers asked for money up-front, he was unable to pay and they resigned.

Philip Long of accountants PKF, who is joint trustee in bankruptcy, said that Davidson's total debt to creditors exceeded £20m. "It may be more than that, nobody knows yet."

Mr Long said he had no idea of the value of Davidson's assets, but did not think they would be likely to cover his debts.

As for the £750,000 FSA fine - that had not been included in the current list of creditors. "It will be listed as a contingent creditor in due course," Mr Long said.

The accountant said he would be trying to interview Davidson to get an idea where his assets were, including those that he had offshore. Reuben Berg of Berg & Co, the solicitors which acted for Oystertec, said that Davidson needed to be careful that he fully disclosed everything to PKF, given his recent contempt conviction.

"The trustee has very wide powers to investigate transactions," Mr Berg said. "If [Davidson] does not co-operate and the trustee has to apply to the court for disclosure, he will have a substantial problem."