Lloyds picks up the legal bill to defend shamed HBOS bankers
The legal bill to defend disgraced former bosses of Lloyds-owned Halifax Bank of Scotland (HBOS) and of the Royal Bank of Scotland (RBS) is understood to be running into millions, with RBS admitting that it may have to spend as much as £42mn defending itself against the £5bn RBS lawsuit.  
Former HBOS chief executive James Crosby (left) and successor Andy Hornby are both being investigated by regulators over the roles they played in the bank's collapse

Taxpayers have paid millions of pounds in legal fees to defend disgraced former bosses of HBOS and Royal Bank of Scotland.

Ex-directors of state-backed Halifax Bank of Scotland are battling with regulators investigating their role in the bank’s collapse.

They include former chief executive James Crosby, successor Andy Hornby and former chairman Lord Stevenson.

The legal bill has spiralled as a report into what went wrong and who was to blame has been delayed by their lawyers.

But it emerged the bankers have not paid to defend themselves against allegations their reckless pursuit of growth led to the bank’s implosion.

Their fees to City law firm Ashurst have been covered by Lloyds, which took over HBOS in 2008 before being rescued with a £20.5billion bailout. Taxpayers own 18 per cent of the lender.

RBS, which is 79 per cent owned by taxpayers, estimates it will have to spend £42million defending itself and former bosses against a £5billion lawsuit.

Investors claim the bank misled them into buying shares in 2008 by playing down the parlous state of its finances.

Jonathan Isaby, of the Taxpayers’ Alliance, said: ‘Taxpayers will be furious that years after the bank bailouts, the costs continue … These legal bills will only rub salt in the wound.’

Former HBOS chairman Lord Stevenson. He and other bankers have not had to pay to defend themselves

Labour MP John Mann said: ‘These individuals have done extremely well out of a bank which they have driven to collapse. They should be picking up their own legal bills.’

The Financial Conduct Authority report was due to be published in 2013. Last week it emerged lawyers for former HBOS chiefs had made another bid to delay it, questioning its independence.

Maxwellisation, the term given to allowing those criticised the chance to respond, has dragged on for almost two years. But the bankers have not paid any legal fees, despite their huge rewards.

Mr Crosby has an annual taxpayer-backed pension worth more than £400,000 from HBOS. Andy Hornby is thought to enjoy a seven-figure pay package as chief of bookmaker Gala Coral.

It is usual practice for big firms to cover legal costs of executives if these relate to their work. But the revelation that men accused of destroying HBOS are receiving this support is highly controversial.

Paul Moore, a former HBOS executive sacked in 2004 after warning about the bank’s reckless lending, said it was an ‘insult to taxpayers’.

He added: ‘These former directors were accountable for catastrophic failures of management … Lloyds should be suing [them] not protecting them using taxpayers’ money.’

Lloyds said: ‘We do not intend to comment in relation to the position of former directors of HBOS and their legal fees.’ But it added: ‘It is not unusual for public companies to cover the costs of a director’s legal fees where appropriate.’

RBS declined to comment.