Freshfields criticised over ScottishPower ‘cashback warranty scandal’ advice

Freshfields Bruckhaus Deringer has been criticised in a parliamentary hearing over its role as adviser to ScottishPower, which is embroiled in a £79m ‘cashback guarantee’ scandal.

The magic circle firm was accused of being “dishonest” by a whistleblower before MPs on Wednesday (3 February) in its reports to regulators over ScottishPower’s multimillion-pound liability to its customers.

Whistleblower Alan Campbell is a former director of credit company PowerPlan, which was set up as an independent entity to sell warranties to customers through ScottishPower’s high street stores.

Campbell said ScottishPower “entered into untruths” with regulators “supported by their lawyers” over the sale of PowerPlan to retailer Powerhouse, which is now in liquidation.

He has filed an 18-page complaint to the Solicitors Regulation Authority over “serious allegations of wrongdoing including dishonesty and knowingly telling untruths to the Office of Fair Trading”, a source revealed.

Freshfields was instructed by ScottishPower in 2003 on the sale of the scheme to Powerhouse after the Glasgow company left former adviser McGrigor Donald. Freshfields lawyers acting for the client were partners Ian Terry and 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. The firm merged with McGrigors in 2012.

Wednesday’s All-Party Parliamentary Group (APPG) hearing, chaired by Conservative MP for Brigg and Goole Andrew Percy, is the latest challenge to ScottishPower over concerns it deliberately evaded repaying its customers money owed in an extended-warranty agreement.

Scottish National Party MP Richard Arkless told The Lawyer following the hearing, “it is not yet clear whether Freshfields was operating on onerous instructions from ScottishPower” but that “serious questions” need to be asked about its role in the scandal that left one in four Scottish people out of pocket. He added the first aim of the APPG was to “get the money repaid” to Scottish consumers.

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.

A second liquidator, Douglas McDonald from TMP, said he believed Freshfields was “fundamentally responsible” for the £6m settlement, which he now wants ruled null and void.

TMP has instructed Spring Law partner James Russell on its own claim against ScottishPower.

Following the hearing, MPs will now compile a report based on the written submissions and oral evidence, which will be passed over to the Business Select Committee and various regulators.

ScottishPower remains an ongoing client of Freshfields.

A spokesperson for Freshfields said: “These allegations are entirely without merit and emphatically rejected.”

ScottishPower did not respond to requests for comment.