Lloyds considers compensating victims of £245m HBOS scam
Lloyds Banking Group has issued an apology for the £245m HBOS loan scam and is considering whether to compensate any of the small businesses affected. The bank released a statement in response to pressure from MPs and business people after senior HBOS manager Lynden Scourfield and five colleagues were jailed last week. Scourfield admitted providing inappropriate loans to struggling businesses and enabling consultants to profit from high fees. An independent organisation will review the case for compensation in consultation with the regulator the Financial Conduct Authority.

Lloyds Banking Group has apologised for the impact of the £245m loan scam at HBOS and pledged to examine whether any of the small businesses affected should receive compensation.

The bailed-out bank issued a statement following pressure from MPs and small businesses after the jail sentences totalling more than 47 years handed down last week to former senior HBOS manager Lynden Scourfield and five associates.



Scourfield, who received a sentence of 11 years and three months, pleaded guilty to the scheme, which involved introducing his small business clients to consultant David Mills. Scourfield gave inappropriate loans to struggling businesses, which allowed Mills and his associates to profit from high consultancy fees while the banker was rewarded with foreign cruises and sex parties.

Lloyds rescued HBOS during the 2008 crisis and the events took place before its period of ownership. It said after the convictions that it would consider reviews for compensation on the basis of any new information from the trial.

It will now appoint an independent organisation to review whether it should pay compensation, in consultation with City regulator the Financial Conduct Authority.

“The group deeply regrets that the criminal actions have caused such distress for a number of HBOS business customers,” Lloyds said.

“Customer cases will be considered afresh in light of all relevant evidence including new evidence that emerged during the trial. Since the investigation began in 2010, it was important that the group did not do or say anything that could subsequently prejudice the trial,” the bank added.

António Horta-Osório, chief executive of Lloyds since 2011, also wrote to George Kerevan, the MP who chairs the all-party group for fair business banking, to pledge action for businesses that were affected.

“Now the trial is concluded we would like to express our deep regret and apologies to any customers who were directly affected by the criminal behaviour of these individuals,” Horta-Osório said. “We are now able to take action to review the cases of all those who may have been affected and, where appropriate, to ensure they are fairly recompensed.”

Kerevan, an SNP MP, said he now wanted to ensure that the compensation system was robust.

Taxpayers own just under 5% of the shares in Lloyds, which received a £20bn bailout during its takeover of HBOS. At one point, taxpayers owned 43% of the shares in Lloyds, which is the UK’s biggest mortgage lender and savings institution.

A jury last week convicted Mills along with his wife Alison, and their associates Michael Bancroft and Tony Cartwright, for running the fraud between 2003 and 2007. Mark Dobson, another HBOS banker who used to work under Scourfield, was also found guilty. A seventh man, accountant Jonathan Cohen, was acquitted.

The Mills owned a £2m superyacht called Powder Monkey which the prosecution said was funded by the elaborate fraud scheme.

The bank said it would “contact all those customers they have identified as potentially affected by the criminal activities and provide redress if appropriate”. “Whilst this should result in all these customers being contacted proactively, any customer who believes they may have been affected can also raise concerns direct with [the bank],” it added.

It said cases to be reviewed would involve customers who were referred by Scourfield and Dobson to Quayside Corporate Services, the business run by Mills, and those that were managed by it. This is likely to amount to about 50 businesses.

But the bank said it would also review previous complaints and any new customer complaints related to the convicted former HBOS employees and QCS.

Case study

Paul and Nikki Turner, who raised concerns over how their business was treated by HBOS Reading. Photograph: Sean Smith/The Guardian

Paul and Nikki Turner, who spent 10 years investigating HBOS Reading, are “cautiously optimistic” after Lloyds’ announcement that customers of the crooked banker might now receive compensation.

The Cambridge-based couple felt ignored when tried to raise the alarm about the way their business – publisher Zenith – was treated by Lynden Scourfield, the former HBOS banker jailed last week, and David Mills’ Quayside Corporate Services.

Their involvement with HBOS Reading began in 2003 when they took a £160,000 business loan from the operation and were introduced to QCS the following year when Scourfield started managing their account. They were required to pay fees – which they said eventually amounted to thousands of pounds – to QCS on a monthly basis.

The pair – who set a group campaigning for fair treatment from banks for small business customers – asked for the relationship with QCS to end, the Turners said, but they said the fees kept being taken from their accounts.

The bank made 22 attempts to repossess their bungalow in Cambridgeshire – where at the time they lived with their two daughters who are now 24 and 25 – which has been without hot water since 2006.

“I’m cautiously optimistic about what happened today and glad the bank has said its going to do the right thing and compensate the victims,” said Paul Turner. After the convictions last week, they felt they had a won a a battle. “Now we might have won what we consider a war. We’ve got to negotiate the surrender for the victims.”

“This is just about why it should have gone on so long,” he said.

The bank has not not yet aside funds to compensate customers. “We’ve had to dedicate our lives to uncover this,” said Nikki Turner. “I don’t think you can quantify 13 years of someone’s life.”