Imperial's drive to be global player hits more legal roadblocks

Court cases cost the troubled finance group £21,000 and a stop order

Imperial Consolidated, the accident-prone UK and offshore finance group, has had two further setbacks that raise fresh doubts over the group's ambition to become a major player in the international finance sector.

In the UK, a subsidiary of the group has been fined £12,500 plus costs of £8,516 in the High Court in Leeds after admitting contempt of court. In Australia the Securities and Investments Commission issued a final stop order on 25 July preventing the group offering securities there.

There has been a long set of problems facing the Lincolnshire company, which have been covered by the Independent on Sunday over the last year.

Imperial Consolidated has offices across the world, and mutual funds run through Grenada. The UK subsidiary Mirfield Financial, a small long-standing consumer credit company, was bought by Imperial Consolidated in early 2000. It offers high-interest, low-value, shorter-term loans to people on low incomes. Mirfield's aggressive strategy since takeover has brought it into legal conflict with rival credit companies. It was fined at the High Court after pleading guilty to breaching an undertaking it had given to the court on 18 April not to poach staff and clients of competitor CLC Finance.

In court, lawyers for Mirfield admitted it had tried on 30 May to poach CLC agent Judith Jackson to join the company.

Several court actions have been filed against Mirfield by rival consumer lenders in the north of England which were aimed at preventing the firm from inducing agents of other companies to break their contracts which stop them visiting former clients for up to 12 months.

These lawsuits have given a rare insight into the world of money-lending to low-income customers. Mirfield has settled an action brought by Wilson Tupholme. Eccles Finance, KDS Finance and Provident Financial Services have brought other actions.

The director of the 550-member Consumer Credit Association, John Lamidey, said yesterday that Mirfield was not a member of the association. "But I can confirm that member companies are taking action in the High Court against Mirfield."

In its settlement with CLC, Mirfield agreed to pay £35,000 plus costs. The magazine Offshore Alert says that Mirfield has expanded rapidly from 14 to 142 employees in 12 months, drawing staff from rival companies by offering lucrative employment packages including company cars. Mirfield has also been offering borrowing terms to clients that are better than those of most rivals. The sector standard is offer 25-week loans of around £200, at annual interest rate of 40 per cent. Mirfield is offering two-year loans of up to £2,000 at 25 per cent annual interest.

Experts are puzzled by the profit figures Mirfield is showing. "While it is obviously nice for staff and clients to be offered better terms, such activity is not considered to be profitable," said one industry source.

In this sector, there is such a high non-payment rate that sales staff receive their commission ­ usually 9 or 10 per cent ­ on what is repaid rather than lent. Even an efficient consumer lending company will get back only 75 per cent of what is owed each month.

A spokesman for Imperial Consolidated said yesterday: "The legal action against Mirfield Financial Services concerns restrictive covenants within consultant's contracts with previous employers. Since the legal action is ongoing we cannot discuss specific details of the cases."

Mirfield, he said, had "taken a number of steps to ensure that restrictive covenants are not broken in the future".

In Australia, an Imperial Consolidated subsidiary IC Mutual (Australasia) has been seeking approval for the sale of securities since last year, with the Australian Securities and Investment Commission (Asic0), but without success.

Imperial Consolidated had previously agreed "not to issue, allot or offer for sale securities on the basis of the prospectus lodged by the company on 18 September 2000". Two weeks ago Asic issued a final stop notice, "after the company advised Asic there had been a change in circumstances which the prospectus could not be issued in its original format".

A spokesman for Imperial Consolidated said the Commission had stopped the process at the group's request following the resignation of two of the group's senior directors named in the prospectus. "The group is now considering what they want to do in the area," he said.

Fact File: Imperial Consolidated

Dec 2000: Withdraws from joint Argentinian mining deal with infamous Syrian arms dealer Monzer al Kasser after dispute.

Jan 2001: Threatens to sue Spanish newspaper for libel after it prints al Kasser allegations that the company had links to the Islamic terrorist Osama bin Laden.

Feb 2001: Sues "Offshore Alert" newsletter in Miami, Florida, claiming libels in several articles that have been published about the group over two years.

Mar 2001: "Independent on Sunday" reveals that the group's chairman Lincoln Fraser and chief executive officer Jared Brook had been involved in the bankruptcy of a hotel management company in Morecambe, Lancashire, in the mid-Nineties. Lincoln Fraser, then 23, was made personally bankrupt by a creditor.

April 2001: Lincoln Fraser, now 29, and Jared Brook, 31, become co-founders of the Imperial Consolidated Group. "Jared and I are entrepreneurs at heart and new exciting challenges are stacking up," says Mr Fraser.

July 2001: Lincoln Fraser and Jared Brook are both disqualified as directors for four years at the request of the Official Receiver over the bankruptcy of the hotel in Morecambe.