When losing your house could be the high price of loyalty

THE human face of one of the more unedifying rural financial disasters of the past two years is Lynda Hughes. On the eve of a meeting to discuss Rural Forum Scotland (in liquidation) she is still hoping for £6,500 owed to her as a former member of staff.

If she doesn’t, and as Rural Forum went down 15 months ago with debts of at least 596,000 compared with amount available to pay ordinary creditors of 79,000, her chances are remote. She could lose the house she has been fighting to keep.

Speaking from that house at Kintessack, near Forres, Morayshire, Rural Forum’s former Highlands and Islands development officer said that in her previous jobs she had been used to a certain level of professionalism. Previous jobs had included developments as diverse as Moray Trust and Ferguslie Park, at Paisley.

"I joined Rural Forum in May 1998 and by July could see the warning lights. By October, I was concerned. But I was a lonely voice, it was an organisation which was not used to that."

The chief executive of Rural Forum at that time was Dermot Grimson. Ms Hughes believes that he was naive.

Those of us who had wondered for several years what Rural Forum actually did would agree. Signs of life from an organisation set up to "bring together a number of non-governmental organisations with the aim of forming an alliance to tackle a range of issues facing communities in rural Scotland" were few.

It is one of many ironies when Mr Grimson left to take a job with Shell that the concerns of Ms Hughes and an increasing number of other staff were confirmed. The report to the first meeting of creditors, held on 15 September, 1999 says: "The company appointed a new chief executive (Nick Reiter) who attended the meeting of the board of directors by invitation on 30 April 1999 together with a representative of the auditors.

"The board were advised that there was a significant anticipated loss for the year to 31 March, 1999, of which the board had only become aware over the previous two weeks."

The cashflow for 1999/2000 was also discussed. The balance sheet showed a deficit of about 250,000. Possible actions were discussed. But at a further meeting on 28 May, 1999, it was decided that Rural Forum was insolvent and could not continue.

Main creditors include Department of Trade and Industry, 18,856; Enterprise Connacht/Ulster, 11,699; Esmee Fairbairn Charitable 16,855; LloydsTSB Funding for Scotland, 55,000; La Kalle 20,552; National Lottery Charity Board, 85,538; Stichting Aktie Strohaln 49,856; the University of Stirling 12,180.

That list indicates an unusual range of activity for an organisation which should have been concentrating on rural Scotland. It also indicates why some members of staff and directors argued that if Rural Forum had been allowed to continue trading, a number of projects which were on their way to completion would have collected final grants and reduced the final debt considerably.

Ms Hughes is not convinced. She blames the chief executive and the directors who should have been directing him, not, as she sees it, washing their hands of any responsbility.

She said: "I’m told that none of them intend to show up at the liquidator’s meeting in Perth tomorrow. The least they could do is appear and apologise. You take a job as director of an organisation like that because you have skills to offer. You don’t go in for the champagne and kudos. The directors have not taken responsibility, and I want the liquidator to tell them that."

In a letter to the liquidator, Drew Kennedy of Morris & Young, Ms Hughes said: "I should like an answer and an official apology from the board as to why, considering they were informed of an anticipate shortfall of funds in January 1999, staff were not given 90 days notice and a directive not to incur further costs."

Instead staff were told problems were abating, funds from the Charities Aid Foundation were imminent, and it would be "jam tomorrow."

Dermot Grimson, she said, should not take all the blame; another of the many ironies is that Mr Grimson is one of Rural Forum’s more than 160 creditors, owed 805.54.

Ms Hughes, with a claim for 6,668.72 outstanding for salary in lieu of notice, car allowance, expenses andholiday pay, can see the funny side of that even though she believes her own case, and those of more than 20 other former employees, some owed more than 10,000, is stronger.

"Loyal staff got hit with the biggest financial burden," she said. "Some of us are now in penury because we believed in what we were doing when we worked for the organisation."

A farmer’s daughter from Durham, Ms Hughes, 50, said: "I’ve always been independent, provided for myself, worked hard. I put everything I had in to my work at Rural Forum. Now I try for other jobs and it’s not easy when they see my age and that I’ve been out of work for a year - not helped by someone driving into my car and hurting my back when, it’s almost laughable, I was going to the first liquidator’s meeting last September."

Along with other members of staff, she did get a letter in May 1999. It thanked them for being "so wonderfully loyal and supportive".

It explained that Rural Forum "like many other voluntary organisations did not receive sufficient core funding to cover its costs and increasingly took on projects" to meet these.

It also pinted out that Dermot Grimson had been unable to deal with the increasing complexity of these projects.

A rising deficit was masked, according to Rural Forum chairman Deirdre Hutton, by cash from the projects. By the time he handed over, the problem was out of control. Ms Hughes, like the others, was wished "the greatest possible good fortune in finding another job."

She was not impressed then and is not now: "My concern is that if the liquidator delays submitting a report to the Department of Trade and Industry, or even chooses not to, nothing can be done legally to make the directors accept responsibility. I now have 2.50 in my savings. If I don’t get what they owe me, I’ll have to sell my house. The least I want is for the directors to come to the meeting tomorrow and have the decency to apologise."