The company, Link, is suing North Derbyshire Tertiary College, its principal and two of its staff for Pounds 3.2 million over a franchise dispute involving 7,000 students who enrolled on NVQ courses run by the company.
Karl Chapman, chief executive of CRT Group, of which Link is a wholly-owned subsidiary, told the Manchester High Court that it was after a phone conversation with Nigel Chilcott, secretary of the TEC national council, that he realised that his company's dispute with the college was not a little local difficulty but was a national problem.
Link was sponsoring TEC national council's annual conference, so Mr Chilcott was concerned about "adverse publicity" when he heard the Further Education Funding Council had launched a high-level inquiry into franchise agreements involving Link.
Mr Chapman said his company had taken on 12 extra tutors following Chilcott's warning phone call. He said he was aware that it was "going to explode politically and in the media and even if you are cleaner than clean you might get caught in the crossfire".
Both Link and the college have been critical of the role of the FEFC which changed the guidelines on funding for such courses after the contracts had been signed. Mr Chapman conceded that the college would have difficulty paying Link if FEFC funds were not forthcoming.
But he added "if the FEFC chose to change the rules half-way through the year that was between the funding council and the college. We had a contract to deliver services with the college. Link has become a victim of a battle primarily between the college and the FEFC."