The company’s collapse in 2008, which affected some 2,000 weddings, was dubbed a Farepak crisis for the middle classes and left newlyweds so incensed that outraged brides organised a protest march waving placards emblazoned with the words “Crapit.”
At the time of the demise retail director Pepita Diamand and managing director Peter Gelardi blamed lender HSBC for the firm’s demise.
In 2006 Pepita’s profile was such that she was invited to tea with the Queen and was named as one of Management Today magazine’s ‘top 35 women under 35 to watch’ after building the business to be the third largest gift-list service in the UK.
Gelardi was the former founder of Jazz FM and had resigned from eight companies between 1991 and 2004, one of which, World Telecom, was put into administration.
However, an Insolvency Service investigation has revealed that between June 2008 and July 2008 Wrapit made a number of false credit card refunds totalling £243,445.
These “refunds” were processed through the company’s merchant card processing facility even though no underlying sales transactions had taken place.
The money was then used to pay staff salaries, certain suppliers of goods and services, and Gelardi and Diamand.
The Insolvency Service said that this improper action enabled Wrapit to continue trading, and to continue taking advance payments of at least £872,000 from new customers, at a time when the company was already insolvent.
Gelardi made the decision to make the false refunds and Diamand assisted in implementing the decision.
Wrapit began trading in 2001 to provide an internet based wedding gift service. Wrapit’s accounts show that the company never made a profit and when it collapsed in August 2008 there were 72,000 undelivered wedding gifts for which the company owed over £4m.
The company entered administration in August 2008 with debts of over £7m. Gelardi and Diamand have been disqualified for eight years and seven years respectively
Commenting on the investigation, Vicky Bagnall, director of company investigations for The Insolvency Service said: “In this sad case thousands of newly-weds have had their big day spoilt following the wrong-doing of Wrapits directors. The undertakings signed by Gelardi and Diamand send a clear message to other company directors; if you run a business in a way that is detrimental to either its customers or its creditors you could be investigated by The Insolvency Service and as a result removed from the business environment.”
R3 president Steven Law said that the decision sends out a clear signal that company directors cannot act wrongfully without fear of repercussion.
But the insolvency trade body warned there were many more directors “simply getting away with it” as the number of as the number of cases of suspected misconduct by company directors has nearly doubled in recent times.
Insolvency practitioners sent in over 7,000 reports (7,030) for 2009-10 compared to 4,752 in 2008-9.
The disqualification against Ms Diamand will take effect on 6 August and against Mr Gelardi on 19 August 2010.