Luxury hotel marketing consortium Distinguished Hotels has ceased trading after racking up estimated debts of more than £1m, Caterer can exclusively reveal.
The debts were apparently accrued without the knowledge of two of its three directors.
The most recent revelations, that Distinguished's financial director, David Owen, failed to pay PAYE for five years, forced the abrupt closure of its London office on 25 April.
At a court hearing on 15 March, HM Revenue & Customs demanded a payment of £109,000 from Distinguished for PAYE for 2001.
It is understood tax returns may also not have been filed since 2001, meaning Distinguished could be liable for up to a further £600,000 in backdated tax.
The company's two remaining shareholders, Tim Hadcock-Mackay and US-based William Burruss, are now co-operating with the financial authorities and are considering legal action against Owen.
Burruss and Hadcock-Mackay claim they were oblivious to the mounting financial crisis until February 2006 and have been unsuccessfully trying to establish the exact figures ever since.
Hadcock-Mackay explained that upon learning of the tax liabilities, he and Burruss appointed external forensic accountants. But when Owen, as chief financial officer prevented their audit, Hadcock-Mackay was left with no choice but to resign.
He said: "This non-disclosure only compounded suspicions of improper accounting and financial irregularities. I resigned my position as chairman and director on 3 April] because of non-disclosure, misrepresentation and financial irregularities. I am absolutely furious about what has happened."
He added: "It's mind-numbing to dwell on which is worse, the abuse of trust from someone you've known for years, the collapse of the company, or the sheer impact the overall loss has on all the members and suppliers."
The collapse of Distinguished Hotels has not been explained to the company's 110 UK-based members, which include Cliveden in Berkshire,
Crewe Hall in Cheshire and the Rathbone Hotel in London.
Although it has now been confirmed that the company has ceased trading, it is unclear whether this is a temporary or permanent situation.
One Distinguished member told Caterer: "Nothing official has been communicated to us. We don't know what is going on and are all in the dark."
Former Distinguished employee Bruno Maini said: "The directors have chosen not to inform members directly of the situation and some are already receiving invoices for their next quarterly fees."
Chris Taylor, the management consultant brought in by Hadcock-Mackay and Burruss to assess the company's current situation, said: "It appears there has been a gross misrepresentation here. But until an independent due diligence audit is carried out, no one will know how much the company is truly in debt. Inevitably, legal action may arise if fraudulent activity is discovered."
It is understood that while Burruss remains as president of Distinguished, Owen is now the only remaining UK-based director, following the resignation of Hadcock-Mackay in April and another senior employee, Daniel Simmons, in March.
Caterer has also learnt that the company's seven staff are owed about £50,000 in unpaid wages, expenses and incentives. They were evicted from their Hammersmith offices last month, after learning it owed about £6,000 in rent arrears.
They have received no communication from Owen, now the sole director, and have since launched personal and group grievances against the company.
Simmons, who said he resigned from the company once its financial situation became clear, said: "I didn't want to be associated with it. I still have no clear indication of how much PAYE is owing. David Owen has 100% control over the finances of the company."
Suppliers are also thought to be owed thousands of pounds. One Distinguished member, AB hotels, is suing the company for £20,000 in outstanding bills, while Pegasus, the company's internet service provider, also claims to be owed about £100,000.
Pegasus has temporarily kept the Distinguished-linked internet reservation system up-and-running to enable hoteliers to continue to receive bookings. However, as of 19 May Pegasus is expected to contact members directly for business.
David Owen, who according to Company's House has a further 95 company appointments, and Distinguished president William Burruss, were unavailable for comment.
Distinguished had ceased trading but had not officially gone into liquidation at the time of going to press.
By Emily Manson