Lloyds misses own deadline for HBOS compensation

Lloyds Banking Group has missed its own deadline to compensate victims of a £245m HBOS fraud scandal.

"Lloyds, which owns Hbos, had pledged to agree compensation deals worth £100m before the end of June" with 67 small businesses affected by the wrongdoing, says The Guardian.

The bank confirmed today it has "made final offers to just 16 customers and only five of these had been accepted".

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Adrian White, leading the Lloyds review into the affair, said: "We are now continuing to make progress in getting offers to victims of the HBOS Reading fraud.

"We have now either made offers or are in the detailed assessment stage for nearly half the victims in the review. It is important we get the fullest possible information from victims to ensure we can factor in everything that could contribute to their compensation offer."

Six individuals were sentenced to a total of 48 years and nine months in February for their part in the scam, which the judge said had left business owners "cheated, defeated and penniless", reports the BBC.

David Mills, owner of consultancy Quayside Corporate Services, bribed HBOS bankers - especially Lynden Scourfield, manager of the bank's distressed division - with "cash, gifts and prostitutes" and then "used their relationship with the bank to bully the business owners into handing over exorbitant fees and, eventually, control of their companies".

Victims complained that the bank is claiming not to have known about the fraud until last year, while complaints were first raised more than a decade ago.

MPs on the all-party parliamentary group on fair business banking have also renewed criticism that the bank's redress scheme is not being conducted openly and that victims do not know who is deciding their offer or on what grounds.

Lord Cromwell, chairman of the group, said: "There appears to be a lack of transparency, and therefore a lack of public confidence, in the processes set up unilaterally by Lloyds for assessment and settlement of claims.

"Inevitably this creates suspicion and we are hoping that Lloyds will now accept our repeated invitations to make the processes - including the nuts and bolts of valuing claims - far more open to assessment by victims and their advisers."

Lloyds to compensate victims of £245m HBOS bribery scandal

8 February

Lloyds has indicated it will compensate companies that were victims of a £245m bribery scam, says the Daily Telegraph.

The banking group is consulting the Financial Conduct Authority about hiring an "independent third party", such as a law firm or accountancy firm, to review the cases of customers caught in the scandal and "provide redress if appropriate".

Pressure has grown on Lloyds from MPs to offer compensation after a former HBOS banker was jailed last week for his part in the scam.

Lynden Scourfield, 54, who ran the impaired assets division between 2003 and 2007, was bribed by David Mills, 60, with sex parties involving prostitutes, envelopes of cash, jewellery and luxury holidays.

In return, he encouraged struggling companies to borrow more and, as a condition, to use the services of Mills's debt consultancy Quayside Corporate Services.

Hundreds of millions of pounds were lent, of which £245m was ultimately written off by Lloyds. At least £28m was known to have passed on to Mills.

Companies that suffered were often operationally taken over by Mills, who in many cases simply stripped the assets and ran them into the ground.

"Lloyds, which did not own HBOS at the time of the fraud… [Maintained] it was a victim in the case," says The Independent.

But George Kerevan MP, chairman of the parliamentary committee on fair banking, said in an open letter to Lloyds that complaints had been made to HBOS bosses "as early as 2007 and were repeated to senior Lloyds management after the takeover".

Anthony Stansfeld, police and crime commissioner for Thames Valley police, which mounted the six-and-a-half year investigation, told the Sunday Times the bank "made every effort to make it difficult for the police to investigate".

The Times adds that public records suggest some of the failed businesses' assets are held in a holding company called Sandstone, which Mills said in court was held on trust "on behalf of HBOS".

"Lloyds, however, disputes this," it adds.

Ex-HBOS banker 'sold his soul for sex and swag'

3 February

A former banker at HBOS has been jailed for his part in a scam worth £245m.

Lynden Scourfield, 54, was given 11 years and three months at Southwark Crown Court in London.

Judge Martin Beddoe said the banker had sold his soul "in exchange for sex, for luxury trips with or without your wife, for bling and for swag", reports Sky News.

Scourfield's associate David Mills, 60, the supposed turnaround business consultant at the centre of the scam, was jailed for 15 years.

The judge described him as a "thoroughly corrupt and devious man".

Four other defendants, including Mills's wife Alison, were sentenced to a total of 22 years and six months.

The group hatched a scheme in the years before the financial crisis that involved Mills and his associates bribing Scourfield with "designer watches, exotic holidays and sex parties" with prostitutes, among other things.

In return, Scourfield, who looked after corporate customers at HBOS, advised clients to use the services of Mills's Quayside Corporate Services (QCS) consultancy.

This earned the company huge fees - at least £28m was found to have passed through QCS's accounts - funded by substantial additional lending that ultimately cost Hbos £245m in writedowns.

In addition to "milking [the businesses] for huge fees", Mills and his associates used "their relationship with the bank to bully the underlying business owners and strip them of their assets", says the BBC.

One of Scourfield's customers, Justin Riggs, was one of the leading producers of free range eggs in the country ten years ago, but his farm now lies derelict, says Sky.

Two other victims, Paul and Nikki Turner, who have campaigned for justice for ten years, "needed money to expand their record publishing business but instead fell foul of the fraud operation", it adds.

HBOS, now owned by Lloyds Banking Group, said: "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."

Ex-Hbos banker bribed with sex parties in £245m scam

31 January

A former Halifax Bank of Scotland (Hbos) manager accepted bribes of sex parties and foreign holidays as part of a scam that cost the bank £245m.

Lynden Scourfield, 54, whose division helped distressed companies, pleaded guilty to six counts of corruption last year, says The Guardian.

The case is being revealed for the first time after reporting restrictions were lifted on Monday following the conviction of David Mills, 60, who ran small business turnaround consultancy Quayside Corporate Services (QCS).

Southwick Crown Court heard that between 2003 and 2007, Mills bribed Scourfield with sex parties with prostitutes, "envelopes of cash" and foreign holidays, mostly paid for on an Amex card taken out by Mills in the banker's name.

In return, Scourfield, who was paid £88,000 a year, forced clients of his "impaired assets" division to use QCS to access more loans from Hbos, many of which were never repaid.

Ultimately, the bank wrote off £266m in loans, of which £245m related directly to Scourfield.

The Guardian says £28m "passed from Hbos through the bank accounts of either Mills, his wife or companies under his control".

Mills's wife Alison, 51, was also convicted, along with their associates Michael Bancroft, 73, and Tony Cartwright, 72, and ex-HBOS banker Mark Dobson, 56, who worked directly for Scourfield.

Accountant Jonathan Cohen, 60, was cleared of two charges, including fraudulent trading and conspiracy to conceal criminal property, says the Financial Times.

The paper adds that "many of the struggling businesses passed to Mills's consulting unit went into liquidation resulting in job losses, financial hardship, loss of homes and ill health".

While Hbos looks like just another victim of this scam, the court was told that lax controls typical of the pre-financial crisis era were largely to blame.

The bank's computer system permitted staff to approve credit positions of clients without approval – and Scourfield himself advanced £375m without any authorisation from his bosses.

Sentencing will take place on Thursday.