Administrators managing the break-up of The Accident Group (TAG) are investigating if directors stripped it of cash by paying themselves bumper dividends before the beleaguered no-win, no-fee personal injury company collapsed two months ago.
Creditors have been alerted to the investigation by PriceWaterhouseCoopers ahead of a meeting of hundreds of angry employees and business partners in Manchester today.
PwC are understood to be examining allegations that the company's vetting procedure allowed a rash of fraudulent claims to be passed through its books.
PwC indicated in its letter to creditors that it was investigating whether claims-managers may have deliberately manipulated the system so that they pocketed cash even on cases which had little chance of success. TAG's parent company, Amulet Group, went into administration at the end of June. Its 2,521 employees were sacked by text message and creditors were left owed hundreds of thousands of pounds.
PwC said in its letter: "A number of issues have been brought to our attention, both as a result of our investigations and by third parties. We are therefore carrying out further investigations including, but not limited to, the following: voids/cancellations; vetting procedures and dividend policy."
TAG's directors received a dividend of £7.6m in 2002 in a year that the company posted pre-tax profits of £17.8m.
However, losses then spiralled to £50m in the eight months to 30 April. While this was partly mitigated by £30m of gains at two other parts of Amulet Group - Accident Investigations Limited and Claims Support Services - the figures show that the company went into a very rapid decline in the first half of the year.
The dramatic decline has raised eyebrows among creditors and competitors as to why the company's directors took out such a large dividend last year. There has also been speculation that it was obvious for some months before TAG collapsed that its business model had become unviable.
The company went under because as many as half of the personal injury claims on its books failed in court - far more than anticipated.
This in itself did not push TAG over the edge, because TAG did not take money directly from customers. But the failures made insurers, which wrote policies to cover the legal costs of fighting each case, nervous and prompted them to stop agreeing new business with TAG in April.
Mark Langford, the founder of TAG, is understood to have wanted to float the company a few years ago in a move that would have netted him significant funds because he owned a large proportion of the company. However, the float never went ahead, partly because the so-called ambulance-chasing market took a battering after the implosion of Claims Direct.
However, as one of TAG's largest shareholders, Mr Langford would have taken a significant slice of the company's dividend in 2002.
A TAG spokesperson refused to comment on PwC's letter. The TUC said it would attend today's creditors' meeting in order to fight for TAG employees to get some compensation for their sudden dismissal. Bryan Slater, a lawyer working for the TUC, said he hoped to secure about £1,000 for each employee under a "protective claim award".Reuse content