Warnings by the consumer watchdog were the final nail in the coffin of travel agency Fantasy Tours, whose dire financial situation took a turn for the worse, a court heard yesterday.

Johann Vella, who worked as an accounts clerk, said the company was trying to save itself from going belly up but, in the end, the losses and drop in sales led to “inevitable” bankruptcy.

Although the company had serious financial problems, it continued to operate, hoping it could manage a turnaround, he said.

He was testifying in the compilation of evidence against company director Karl Azzopardi, 44, from Santa Maria Estate in Mellieħa, who is pleading not guilty to defrauding clients and misappropriating their funds.

“He [Mr Azzopardi] was aware of the losses but continued to run the company in the hope of saving it and paying back his debts,” Mr Vella said.

The witness said that although the company already had financial difficulties when he joined, these worsened when the Malta Competition and Consumer Affairs Authority warned consumers not to trust the company.

He said Mr Azzopardi sent many e-mails to the consumer watchdog to withdraw the warning but this never materialised. At the time the warning was issued, the company had no pending claims with the regulator.

Mr Vella said the company suffered financially because of the “banal” cases filed against it, including by a client who requested a full refund because from her hotel window she had spotted a rat on a wall.

Describing the company’s relationship with the regulator as “very bad”, he said the company suffered further losses due to the refunds it had to pay to clients.

He said the main cause of the financial difficulties was a tour to Corfu that was operated at a loss because demand was inadequate.

The company chartered entire flights but it was not managing to break even because the planes were flying half full.

Still, the company had to pay about €12,000 for every chartered plane.

Staff had continued to accept bookings until the very end, because employees were not aware of what would happen in the future or that a decision had been taken to wind up the firm.

In February 2014, Golden Travel Club Limited – the operators of Fantasy Tours – was officially declared bankrupt after an auditor declared it was beyond recovery.

The police received 272 reports about the company, 268 at police stations and four at headquarters. The claims totalled €406,985.81.

The case continues in January.

Police Inspector Ian Abdilla is prosecuting. Lawyer Kris Borg is representing Mr Azzopardi.

Lawyers Franco Debono and Angie Muscat appeared parte civile for clients who had paid for tours that were cancelled.