SFO investigates Resort Hotels: Claims fly between past and present management as group battles to save its market listing

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The Independent Online
THE SERIOUS Fraud Office has been called in to investigate the financially distressed Resort Hotels company based in Brighton.

The SFO confirmed the investigation yesterday. It said: 'The SFO, in conjunction with Sussex Constabulary, is investigating matters relating to the past management of Resort Hotels.'

Resort, which operates largely three-star hotels in the South and Midlands, may also lose its share listing, suspended at 45p since 16 July. It said the Stock Exchange had warned that unless firm proposals were submitted by 31 March the listing would be cancelled.

On the SFO investigation, David Tonkinson, non-executive chairman of Resort, said: 'In August we went to the SFO and asked it to see if they would investigate. They have been investigating since then.

'The context of the investigation concerns accounting and reporting procedures. It would be improper to say anything else.'

However, he added: 'Obviously such a statement isn't made without apparent evidence to support it.'

Resort also said it was taking legal action seeking an account from Robert Feld, former managing director, of an estimated pounds 170,000 of work done on his private properties and of an approximate pounds 83,000 of expenses drawn by him. Mr Feld has three properties, including an apartment in the south of France.

Mr Feld, who co-founded the company with his parents 22 years ago, has denied the claim and has made a counter-claim for damages of around pounds 231,000 based on his service contract.

He relinquished his post as managing director nine months ago and resigned as a director two weeks ago, which coincided with Resort announcing a pounds 71.1m loss for the year to 30 April 1993.

Mr Feld said yesterday that he had not been interviewed by the SFO and denied that he had taken any money that was not due, or unapproved. 'They are trumped-up charges,' he said. 'As for the expenses, they go back 10 years.'

Resort yesterday also accused Mr Feld of misleading the board and its banks. It said: 'In the course of a meeting between National Westminster Bank and the finance director (Roland Lewis) on 6 July 1993, it became apparent that certain information provided to the banks by Mr Feld was not consistent with information previously supplied by Mr Feld to the board.'

Mr Lewis was recently appointed acting managing director. Colin Davies, director of group accounting, is acting finance director.

The company added: 'The group had exceeded its banking facilities, which was contrary to information provided by Mr Feld to the board, which believed that the group had available to it significant headroom within its facilities.'

Resort said that further discussions with banks showed that Midland Bank, the group's other principal banker, had also been misled.

Mr Feld yesterday denied the allegations. 'The non-executives have just run scared,' he said.

Resort suspended Mr Feld from his executive responsibilities in July because, it said, it had become clear he had lost the confidence of the board and of the bankers.

Despite Resort's desperate financial health and its other problems, Mr Tonkinson said the company still had the full support of its banks and believed it could be saved.

It yesterday reported a small pounds 127,000 operating profit for the six months to 28 October, against pounds 2m of losses in the comparable period. However, exceptional charges of pounds 1.4m and pounds 3.7m of interest costs left the group pounds 5m in the red.

The last published balance sheet, for the year to April, showed Resort had pounds 72m of debts and negative shareholders' funds of pounds 18.4m.

However, the group was well placed to take advantage of any upturn in the volume of business within the industry, Mr Tonkinson said. 'We do, however, have to solve the problem of our excessive indebtedness.'

Asked about the chances of negotiating a deal with banks before the Stock Exchange deadline expired, he said: 'I have not got a crystal ball, but we are working flat out. Roland Lewis has been working his butt off on the restructuring aspects.'