A group of 28 MPs and one peer have criticised Freshfields Bruckhaus Deringer and the Solicitors Regulation Authority (SRA) in a damning report into ScottishPower’s ‘cashback guarantee’ scandal, released today (20 April).
The report by an all-party parliamentary group (APPG) which looked into the scandal claimed Freshfields worked with ScottishPower to “foster misinformation” relating to its liability over a cashback promise to 625,000 customers.
The group also accused ScottishPower of lying to its customers about its liability to pay £79m in warranty refunds, supported by Freshfields.
The report said: “This group is shocked that a major utility and prominent law firm could act in such a way when the money belonging to 625,000 defenceless consumers was at stake.”
It went on to dub both entities’ behaviour as “very concerning” and accused Freshfields of using “strong arm tactics” in relation to ScottishPower’s sale of the guarantee contracts to now defunct company, Powerhouse.
“To this group the circumstances read as commercial blackmail” on the part of ScottishPower, the APPG said.
The report follows a parliamentary hearing on the scandal in February, in which the magic circle firm was accused of being “dishonest” by a whistleblower before MPs in its reports to regulators over ScottishPower’s multimillion-pound liability to its customers.
Conservative MP for Brigg and Goole Andrew Percy and Scottish National Party MP for Dumfries and Galloway Richard Arkless, who led the APPG, will present the findings to consumer affairs minister Nick Boles next week.
It has also emerged that the SRA has thrown out a complaint filed earlier this year in relation to Freshfields’ role in the ScottishPower scandal.
Whistleblower Alan Campbell asked the SRA to “examine the conduct of ScottishPower’s legal advisers, Freshfields, through this process”, the report revealed.
The SRA responded that “there is no such thing as a ‘true’ or ‘false’ statement of liability until a court has definitely determined the issue”, concluding Freshfields could not be said to have lied to regulators.
The APPG report criticised the SRA’s decision, stating: “Though the SRA’s reasoning on this issue may be technically correct, it only exemplified the backward logic applied to this entire scandal.
“This rationale completely disregards the rights of consumers,” the group added, saying: “This all-party parliament group (APPG) does not believe the SRA’s stance to be morally justifiable.”
In a statement to The Lawyer, a spokesperson for Freshfields said: “The SRA concluded after careful consideration of the evidence that there was no misconduct on the part of Freshfields, and decided they will not be taking any further action.”
A statement by the SRA read: “We now have a copy of the All-Party Parliamentary Group on the Scottish Power Cashback Mis-selling report and are looking at the detail. We have not been asked to meet with the APPG or contribute to their enquiry, but we are always happy to provide information on how we work.”
Freshfields was instructed by ScottishPower in 2003 on the sale of the warranty scheme to Powerhouse after the Glasgow company left former adviser McGrigor Donald. Freshfields lawyers acting for the client were partners Ian Terry, now at One Essex Court, Neil Golding and then-associate Rachel Couter, who is now a partner at King & Wood Mallesons.
Pinsent Masons acted for Powerhouse at the time of the deal.
February’s APPG hearing was the latest challenge to ScottishPower over concerns it deliberately evaded repaying its customers money owed in the extended-warranty agreements.
ScottishPower is accused of profiting from the collapse of the controversial warranty scheme, which went bust shortly after its sale in 2003. The collapse left 625,000 consumers unable to reclaim funds on ‘cashback’ warranties sold on white goods between 1998 and 2001.
Liquidators to PowerPlan, which launched a legal challenge against ScottishPower last year, say the company was misled when accepting a £6m settlement from the energy giant and claim it was a fraction of the sum that should have been provided to meet money-back promises.
Freshfields advised ScottishPower on the settlement with liquidators.
The liquidators, KSA, have instructed Stewarts Law partner Sean Upson on the claim, which is in the letter before action stage.