Duchess of York 'owes £5 m and faces bankruptcy'

Sarah Ferguson, the Duchess of York, debts have risen to almost £5 million (Dh29 million), causing alarm in Britain's royal family, which now fears her best option is bankruptcy.

The queen is said to be "deeply concerned" by the debts, which are more than previously thought. Prime Minister David Cameron has been briefed on the issue and the problem is believed to have been discussed recently during his weekly private audiences with the queen.

No senior member of the royal family has ever been declared bankrupt but this course of action is increasingly likely.

Bailout plans

"One key adviser believes the right thing is for the Duchess of York to go bankrupt. He says it will be a week-long wonder, then everyone will say: ‘It is not altogether surprising' and then forget about it," a senior royal source said.

However, the Duke of York, who, along with his private office, is masterminding the "rescue plan".

The near £5-million (Dh29-million) figure relates to the duchess's personal and business debts. It is believed that slightly more than half of the money owed relates to the US, where some of her legal fees have grown out of control.

Sued by lawyers

Here is how the Duchess of York's finances have slowly unravelled on both sides of the Atlantic over the past couple of years.

In April this year, Davenport Lyons, the London firm of solicitors, sued her for nearly £200,000 (Dh1.16 million) in alleged unpaid fees. According to the writ served on the duchess, some of the debts stretched back for a year: eight invoices ranging from £12,000-£65,000 (Dh69,722-Dh377,635) were sent to her between April and July of 2009.

By the summer of last year, she was also in growing financial trouble in the US. Lured by claims that her royal name was being undersold, the duchess had ended her lucrative £1.25-million (Dh7-million) one-year contract with WeightWatchers in America.

Instead, the duchess gambled by concentrating her American operations in Hartmoor, a company she set up to market her media, publishing and licensing work.

However, the anticipated earnings never materialised, the firm "bled" money and last October, Hartmoor folded with debts of £650,000 (Dh3.77 million). The interest alone on the debts runs to several thousand pounds a week.

The royal family has, typically, maintained a dignified public silence.

However, the patience of the queen and the Duke of Edinburgh were sorely tested in May when it emerged that the duchess had tried to sell access to their middle son, the Duke of York, for £500,000 (Dh2.9 million). During a tabloid sting, she twice told an undercover reporter that she had been given a divorce settlement of "zero" when her six-year marriage came to an end in 1992. She eventually upped that figure to £15,000 (Dh87,116).

The queen to the rescue

However, she and her daughters had, in fact, received about £3 million (Dh17 million) from the royal family. This included £1.4 million (Dh8 million) provided by the queen to set up a trust fund for princesses Beatrice and Eugenie and £500,000 (Dh2.9 million) for the duchess to buy a new house.

This money remains in a separate bank account and cannot be used to pay off debts. Furthermore, under the settlement reached in 1996, £350,000 (Dh2 million) in cash was provided by the queen, with no restrictions on its use. There was also an agreement that the Duke of York would pay his daughters' school and university fees. The duchess was also given a monthly allowance.

In a letter written 15 years ago in response to a bouquet the duchess had sent, Princess Margaret, the queen's sister had written: "You have done more to bring shame on the family than could ever have been imagined." The letter was said to have reduced the duchess to tears.

For well over a decade, the duchess appeared to behave more appropriately and earned millions of pounds in the US. Yet, just two years later, her spending has again spiralled out of control and her earnings have rapidly diminished. Recently, reports emerged from an unidentified former member of staff, claiming the duchess has been living a decadent lifestyle, ordering staff to prepare "Henry VIII-style" banquets.

"The waste and the cost are mind-blowing," it was claimed.

Recently, the duchess was forced to lay off 11 full-time and part-time staff but her debts, with interest payments, continue to grow. The queen and the royal family face a dilemma. Do they pay off the money owed in this country — and possibly even abroad — or do they face the short-term embarrassment that would follow from her being declared bankrupt?

As one friend of the Yorks put it: "The situation is sad but it is not surprising. This was an accident waiting to happen."

Living beyond means

II Duchess of York Sarah Ferguson's total debts stand at almost £5 million (Dh29 million).

II Davenport Lyons, the firm of solicitors, has sued the duchess for about £200,000 (Dh1,162,000) in alleged unpaid fees. Some of the debts stretched back for a year — invoices ranging from £12,000-£65,000 (Dh69,722-Dh377,635).

II Hartmoor, a company the duchess had set up to market her media, publishing and licensing work, folded up last October with debts of £650,000 (Dh3,775,493).

II The duchess is said to owe £65,000 (Dh377,545) to her fitness instructor and hefty amounts to her butcher, dry cleaners and a car-hire firm.