150 officers and staff
500,000 pieces of evidence
The result of one of the largest investigations into fraud in the UK
Six people, including two former HBOS bankers, following a six year Thames Valley investigation into complex multi-million pound fraud have been convicted of fraud and money-laundering offences.
The investigation uncovered a network of associations where genuine struggling businesses were exploited by their bank manager who directed them to employ the services of expensive external consultants in return for return for bank loans.
Lynden Scourfield, a former manager with HBOS, pleaded guilty to six counts including corruption. Five other defendants, including so-called turnaround consultants, were also convicted. In exchange for bribes, Scourfield told customers to use the turnaround firm.
Mark Dobson, who was also a manager at HBOS, David Mills, and Michael Bancroft, were convicted at Southwark Crown Court on counts including bribery, fraud and money laundering. Alison Mills and John Cartwright were also convicted for their parts in the conspiracy.
Scourfield agreed inappropriate loans to struggling business, which allowed Mills and his associates to profit from high consultancy fees. Many of the businesses went bankrupt as a result and some of the owners lost their homes.
The profits that the bankers obtained were squandered on luxury holidays, expensive jewellery and high-end prostitutes.
“Scourfield advanced huge sums to the businesses, and continued to do so well past the point when it would have been obvious to any honest banker that the bank debt could and would never be repaid,” Brian O’Neill QC, prosecuting, told the court.
Lloyds Bank, took over HBOS when it was rescued by the taxpayer and was subsequently forced to write off £250m from its impaired assets division. Of that sum £245m related to bank customers under Scourfield’s management.
Campaigners have criticised the Bank’s lax controls as the Court heard how the HBOS computer system permitted bankers to approve credit positions of clients without approval. The manager who discovered the scam described the failings as “astounding”. Giving evidence in court, Tom Angus, who took control of the bank’s impaired assets in July 2006, recalled how he had produced an internal review in 2007 focussing on 38 struggling businesses, each of which had received “irregular” loans and which together owed the bank £375m. All 38 were supervised by Scourfield.
Some of the bank’s former clients told the Guardian they were stunned to hear from the trial that HBOS had investigated loans presided over by Scourfield before the bank told them there had been no fraud.
Lloyds Bank insisted on Monday it was only the police that had the ability to investigate if there had been a fraud and added: “The trial highlighted criminal actions that bear no reflection on the behaviours of the vast majority of the employees of HBOS at the time or in the group today.”
As commented by berg Chief Executive Alison Loveday when interviewed by BBC Radio Five Live ” this case raises serious questions regarding the risk and compliance procedures within the bank, the involvement of the regulator (the FCA/FSA), and the bank’s external auditors KPMG. The ultimate victims of this fraud are the business owners who are yet to receive compensation. It is likely that civil proceedings may ultimately have to be brought if proper compensation is to be recovered.
berg has extensive experience of dealing with financial and regulatory disputes and our expert team is available to discuss any issues arising out of this case.
To find out more about the issues raised in this post, or to discuss any queries regarding banking disputes in general get in touch with our expert Banking and Litigation team or call +44 (0) 161 829 2599.
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