THE firm responsible for running Durham's £14m Gala Theatre amassed debts of almost £700,000 within four months of opening.

And creditors have been told by Alan Marlor, liquidator for The Entertainment Team (Durham) Limited, that it is unlikely any of them will recover their cash. This includes the city council, leaving taxpayers £209,000 out of pocket.

Mr Marlor highlighted the two company directors' lack of credentials and suggested the council should have been more careful in choosing who should run the venue.

The city council took over the Gala's running last month after The Entertainment Team, part of the London-based firm Full House Management, went into liquidation. The move followed the council's decision to grant an interest free loan of £75,000 the month before, after the firm complained of a shortfall in working capital.

This week city council chief executive Colin Shearsmith, who recommended the loan along with the council's director of finance, said he had no idea of the extent of the financial problems.

He said: "The assistance offered was commensurate with the scale of the problem as it was presented by the contractor to the council. Unbeknown to the city council, the situation was worse than had been disclosed."

The Entertainment Team was chosen, he said, after it was the only viable respondent to a Europe-wide advert and Full House Management's credentials - a firm said to be behind successful West End shows - were thoroughly checked.

But Mr Marlor said the newly established Entertainment Team's co-directors, Michael Power and Nicholas Rule, should never have been entrusted with the venture.

He said: "If they (the council) had applied the accepted techniques, they probably wouldn't have employed them. There are a lot of lessons to be learned."

Tuesday's meeting was attended by some of the near 200 creditors - including Newsquest, publishers of The Advertiser. They heard the directors' only financial contribution to Gala was supplying the kitchen equipment.

The directors blamed the company's failure on delays in work on the bars, restaurant and caf, which were not finished in time for the opening, and 'disastrous' ticket sales for the opening concert by pop group Westlife.

Mr Power said: "We were deeply shocked and Westlife's view was complete amazement after the amount of money we spent on marketing and sponsorship. I have never seen anything like it."

He denied most of the theatre seats were allocated to councillors and that a marquee event allowing fans to watch the concert on a giant screen, which had to be cancelled, was poorly publicised.

Creditor Joe Simpson, whose firm North-East Catering Hire is owed £4,700, said: "To me, the whole thing is a sham. The company should never have been given the job."