Bosses at Halifax Bank of Scotland (HBOS) covered up a small business lending fraud, for which its former banker Lynden Scourfield was jailed in February, for nine years.
An internal report on the scam, seen by The Sunday Times, revealed it was hidden by a number of HBOS executives, who stressed the importance of not disclosing it to shareholders, as far back as 2008. The bank later merged with Lloyds, which said that it could not establish whether a crime had been committed.
Any uncertainty on that front was certainly removed in February when Scourfield, a former HBOS manager, was jailed for 11 years after being convicted of bribery and fraud. Five associates, including consultant David Mills and ex-HBOS banker Mark Dobson, were imprisoned for a combined 36 years and nine months.
Sentencing Scourfield, judge Martin Beddoe described him as a ‘thoroughly corrupt and devious man’ who ‘sold his soul for sex, luxury trips, bling and swag’.
Scourfield convinced small business customers to use corporate turnaround firm Quayside Corporate Services in exchange for bribes, between 2003 and 2007. Quayside, which was run by Mills, charged hefty fees and many of the businesses ended up going bust.
It was said that Mills and Michael Bancroft, another associate, who was jailed for 10 years, arranged sex parties and exotic holidays for Scourfield as they siphoned off the fees.
Prosecuter Brian O’Neill QC told the court: ‘What Scourfield gave Mills in addition to fees was the opportunity to take control of the various businesses and, in some cases, to acquire ownership of them. Mills and his associates used the bank's customers and the banks' money dishonestly to enrich themselves.’
The owners of a number of these small businesses went bankrupt and many are still seeking compensation. The fraud has so far cost Lloyds/HBOS £245 million, but estimates put the end bill at around £1 billion.
The Sunday Times’s article is likely to heap further pressure on the bank’s management to finally pay out more in compensation. The paper quoted Thames Valley police crime commissioner as saying: ‘It is quite clear that both the senior management of HBOS and Lloyds have known about this for the last nine years…I am determined to see that they are properly compensated’.
Lloyds told the Sunday Times that the internal report included ‘many unsubstantiated allegations’, but added that it is ‘now taking action at pace’ and will pay compensation ‘where appropriate, to ensure [those affected] are fairly recompensed’.