Black Monday set the stage for Ferriday's disgrace: Paul Durman traces the events leading to yesterday's conviction

THE roots of John Ferriday's demise and the Eagle Trust scandal lie in the company's takeover of a film and lighting equipment company called Samuelson - a deal announced, with catastrophic timing, one week before the October 1987 stock market crash, writes Paul Durman.

In those pre-crash days of upwards- only share prices, Ferriday had won himself a certain City following after putting together his private business, MCP, with two listed companies. With Ferriday at the reins, the new- born Eagle Trust quickly set out on the takeover trail.

Eagle was a principal casualty of the evaporation of confidence in the wake of Black Monday, its shares slumping below the price at which it was issuing shares to buy Samuelson.

Rather than scupper the deal, Ferriday undertook to find the money to buy a vast number of the new shares. The money he found he stole from Eagle.

He disguised it by channelling pounds 13.5m through Connect, a start-up parcel delivery firm that did not become part of Eagle until the following April, then on through a Jersey trust company, eventually to reach SBCI Savory Milln, Eagle's stockbrokers.

Internal concern about the missing money came to a head during April 1988, as Austin Knight of KPMG Peat Marwick completed the audit of Eagle's accounts. Ferriday said he had invested a large sum in the Laforza car project based in Turin. A deputation was despatched to verify this, Mr Knight taking time out to ask the car firm's boss how he could get hold of a Ferrari. The trip seemed to satisfy him and he signed off Eagle's accounts without qualification.

Leslie Thomas, Eagle Trust's chairman, reprimanded Ferriday for his 'outrageous' behaviour in exceeding his authority to invest in the car project. The memo that accompanied the reprimand said: 'I have been requested to send you this letter. Keep at it, your mate Leslie.'

The full story started to become public when Ferriday agreed to sell his stake in Eagle to Malcolm Stockdale, a Yorkshire businessman, in May 1989. Within weeks, Eagle Express (the renamed Connect) was in liquidation, MCP Building Supplies called in administrators, and millions of pounds were discovered to be missing.

Mr Stockdale called in the Department of Trade and Industry and the Serious Fraud Office joined the hunt. Dogged by controversy, Mr Stockdale was himself replaced in September by David James, a company doctor with the confidence of the banks.

Mr James is trying to rescue something for Eagle's 33,000 shareholders by building up Samuelson and by suing Peat Marwick and Swiss Bank Corporation (owner of SBC Securities) for damages.

Mr James has said: 'In my time in the rescuing of businesses . . . I have never seen one which has been so subjected to abuse and misuse as this company. The shareholders have been seriously afflicted in their loss.'

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