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Faulds Final Fallout

By The Drum | Administrator

September 22, 2006 | 5 min read

As news stories go, the collapse of Faulds Advertising has had a longer life than most. Once Scotland’s leading advertising agency, the company suffered several high-profile and expensive account losses and officially closed its doors in September 2003.

For the vast majority of agencies the story would end there. Not so for Faulds, however.

Instead the Faulds’ story continued unabated, due to the large number of staff and companies owed money by the agency when it closed and, more specifically, because the company’s chairman, Dennis Chester, had removed a large sum of money from the agency’s coffers just before it shut (£750, 000 to be exact) and seemed to have no intention of sharing it. Rumours abounded about Chester being spotted in a new Ferrari while former staff of the agency had received nothing after it collapsed.

Enter accountancy firm KPMG, who was appointed as receiver of Faulds Advertising. Several short months after the closure of Faulds, KPMG declared its intent to pursue Chester in order to recover some of the (reportedly) £2.7m-worth of debt owed to various creditors.

At a creditors’ meeting in December of 2003, KPMG’s Blair Nimmo stated that the matter would “inevitably end up in a legal dispute.” He was right.

For the next three years, KPMG pursued Chester through the Court of Session, and it emerged last week that he was not only forced to return £640,000 of the money he took from Faulds to KMPG, but has also been disqualified from being a director of any UK company for the next twelve years, the first time a Scottish ad agency director has met that fate.

According to the Department for Trade and Industry (DTI) – which imposed the ban – Chester was disqualified under Section Seven of the Company Directors Disqualification Act 1986 (CDDA) in July this year and will remain so until July 2018. The details of the ban will forbid him from being involved in the management or promotion of any registered company, meaning that any management activity, even under a different job title, would result in further action against him. Chester can, however, appeal to the court to allow him to become director of a specific company during this time, and it would be up to the court to decide whether to let him take up the position despite the ban.

Although unwilling to be named, several former employees have welcomed the ruling. One told The Drum: “Everybody’s relieved there’s been some kind of line drawn under it and an appropriate penalty has been meted out. A lot of people were put out of jobs and led down the garden path. Dennis took the view that taking the money was perhaps slightly immoral but I’m glad it’s been proved to be illegal..”

Another former colleague stated: “I’m just delighted that he got what was coming to him. I think if you’d opened your windows on Sunday morning you probably could have heard the whole of Edinburgh cheering.”

A third source remarked: “In September, when the agency went down, the people still at the company got bugger all. Some of them only got their holiday pay. If he’d been fair some of those people might have got what they deserved. Even if he’s banned for life he deserves everything he gets.”

At time of going to the press, KPMG was legally unable to provide a comment on the ruling.

Chester took over as chairman of Faulds Advertising in 2001 following a management buy-out from agency founder Jim Faulds. Speaking to The Drum, Faulds said: “It all happened well after I was away. It would be improper and wrong for me to comment. What I will say is that when I left the business it was in good health and I was very sad to see what happened and felt very sorry for the staff that had lost their jobs. It was a great team and I’m glad to see that most of them have landed on their feet. I’m delighted that some of the creditors have got their money back as well.

“Faulds was the biggest agency in Scotland before and since then by a long way and we never felt we got the credit we deserved for that. To me, Faulds was a brand name and I took the view that once I sold the business it was none of my business. I wasn’t going to take the money and then start bleating. I’ve got very fond memories of the company and particularly the people. It’s very sad what happened.”

David McGlone, managing director of Faulds Advertising at the time of its demise and now planning director at McCann Erickson Manchester, was equally keen to remember the positive aspects of working for the company. He said: “I think it’s a shame that the last few years have been tarred by all this stuff about money and debts. I enjoyed working with the people at Faulds and, looking back, everyone has ended up in a better place and is doing really well. Everyone is in the position now where they’re sweeping it under the carpet and moving on.”

Although the £600, 000 regained from Chester by KPMG through the Court of Session will go some way to placating the various creditors owed money by Faulds Advertising, there will still be many fighting for what is owed to them. What the DTI’s ruling may achieve, however, is to help soothe the anger felt by many people at the time of the agency’s collapse. It may also, at long last, help to close the story of Faulds Advertising once and for all.

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