Missing £100m at heart of Globespan's collapse

• Picture: PA

The dramatic black hole in the finances of E-Clear – the company that handled online sales for the failed Scottish travel giant – became clear last night, after accountants succeeded in pushing the company into administration.

A High Court judge granted the administration order after being told by one creditor that the company and its chief executive, Greek Cypriot tycoon Elias Elia, had "very little money in their bank accounts".

The order was requested by accountancy firm PricewaterhouseCoopers (PwC), Globespan's administrator.

PwC says that E-Clear withheld 35m from Globespan before its collapse last month, a sum understood to be a major factor in the business's failure. The administrator said it was now clear the funds were "no longer there".

Asked about E-Clear's debts, a source close to the investigation said: "It wouldn't surprise me if it was more than 100m (87m), which just shows the scale of the thing. We're probably going to see more claims going forward."

The news means it is highly unlikely that 15,000 customers who paid for flights with a non-Visa debit card will ever recoup their money.

The Scotsman has learned that forensic accountants are now expected to try to trace the missing millions across Europe.

PwC's Bruce Cartwright said there remained many questions to be answered about where Globespan's money was to be found. He said: "I am pleased that we have now got a bit nearer the truth, but I am disappointed that our worst fears have come true and that the Globespan money has not been found."

E-Clear and Mr Elia had been under pressure ever since Globespan – and its budget airline, Flyglobespan – went out of business on 16 December, leaving 3,400 holidaymakers stranded and more than 500 people, mostly in Scotland, out of work.

It has become clear that E-Clear also owed substantial sums to other businesses, including 13m to the creditors of Slovakian airline SkyEurope and an unspecified "substantial sum" to an affiliate of Deutsche Bank called Pago, whose technology was used to process cash from the flyglobespan.com website.

For weeks, E-Clear had insisted it would fight any attempt to force it into administration. As recently as last weekend, its executives were talking tough.

The company wheeled out one of the biggest names in the City of London, one-time Tory grandee Sir Edward du Cann, to declare its good financial health. In a statement to The Scotsman's sister paper, Scotland on Sunday, Sir Edward claimed that Globespan would have gone under as early as 2007 without the help of E-Clear.

The former MP, best known for helping to elevate Margaret Thatcher to the Tory leadership, said: "As a company, we are looking forward to clearing our name in the current legal process."

He made the statement last Saturday, a day after E-Clear had failed to meet a court-imposed deadline to prove it still held the 35m it had withheld from Globespan.

Within 48 hours, E-Clear's lawyers were singing a very different tune. The Scotsman understands the firm had "consented" to be put into administration on Monday afternoon. A court case on its future, scheduled for all day yesterday, lasted only an hour. E-Clear was not even represented.

Mr Elia was yesterday said to be helping the court-appointed administrator, accountancy firm BDO, work its way through his extraordinarily complicated books. E-Clear is a UK-registered firm, but is mostly owned by a company of the same name based in Mr Elia's native Cyprus.

A source close to the old E-Clear management said the company had come under persistent pressure over the past few days "as a result of adverse press publicity".

Mr Elia suffered another major business setback last month. His own holiday business, Allbury Travel Group, went into administration. It included the once-mighty Libra Holidays, a firm that specialised in trips to Greece and Cyprus.

It is understood E-Clear handled Allbury's payments, as well as those of several other big travel names to have gone under in recent years, including Zoom, the airline set up by the Scots entrepreneurs Hugh and John Boyle in Canada, and XL, Britain's fourth-largest tour operator.

Mr Elia, through Allbury, had tried to invest in XL as the firm fell apart. He had also acted as "midwife" for a much-mooted rescue deal for Globespan and Flyglobespan. It was the collapse of that deal last month that led to Flyglobespan losing its flying licence and the firm, and its parent, filing for administration.

The Serious Fraud Office was earlier this month reported to be "making preliminary inquiries" into E-Clear after receiving a complaint. It is not thought to have begun a formal inquiry.

A spokesman for E-Clear, speaking before the business went under, said "there was nothing to investigate" and stressed its dispute with PwC and other businesses was purely contractual.

Senior politicians, including First Minister Alex Salmond, have called for an inquiry into the circumstances surrounding the Globespan collapse.

Some had seen Flyglobespan as an embryonic national airline for a country that has long struggled to overcome poor connections to the rest of Europe.

The airline, however, suffered huge losses in 2007, amid chaotic attempts to open up the North American market. It was back in the black in 2008.

Shirley-Anne Somerville, an SNP back-bencher who sits on Holyrood's transport committee, hailed the court action against E-Clear. She said: "This is a welcome step forward .

"Globespan was clearly in difficulty, but it looks increasingly like the actions of E-Clear were the final straw.

"Former employees and the former owners must get satisfactory answers as to why and how E-clear was able to withhold such a large sum of money."

A Scottish Government spokesman said: "This is a worrying situation, and we will continue to press the UK government to investigate fully the circumstances behind the collapse of Globespan."

THOUSANDS LEFT OUT OF POCKET

ALMOST 15,000 people who booked with Flyglobespan prior to its collapse are unlikely to get their money back, administrators admitted yesterday.

The affected travellers are those who bought flights using debit cards, and who are not covered by travel insurance. Visa debit card holders are protected by consumer card legislation.

PricewaterhouseCoopers (PwC), which is handling Flyglobespan's administration, told The Scotsman that about 12 per cent of the 123,000 customers who were unable to fly following its collapse last month had booked using non-Visa debit cards.

They join the long list of creditors who are awaiting repayment, but the administrators fear those repayments many never come, following the administration of payment processing firm E-Clear yesterday.

PwC claims E-Clear owed the airline 35 million.

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