HBOS Reading: Independent Review

David Drew Excerpts

Tuesday 18th December 2018 Westminster Hall

[Kevin Hollinrake]

Yes. The hon. Gentleman is absolutely right, and he touches on the human cost of these issues as well as the financial cost, which is critical. What we want to see, which I will come on to, is an opening up of all the cases that have been through the Griggs review by means of examination through a completely impartial arbitration process that will fairly adjudicate and arbitrate the claims.

As if the fraud were not bad enough, there was a cover-up. HBOS and Lloyds became aware of the issue from 2006 onwards. The current chief executive, António Horta-Osório, was made aware of the fraud as soon as he took up his post in 2011 by the Turners and many others. Famously, in September 2013, Sally Masterton, a senior risk officer at Lloyds Banking Group, on the instructions of her line manager, produced a report called the Project Lord Turnbull report. Its findings were shocking. There was a corporate strategy within Lloyds and HBOS to conceal the fraud, which caused substantial loss to shareholders and investors.

At that point, there was another opportunity for the bank to hold its hands up and say, “Right, enough is enough. Let’s get all of this out in the open and get to the bottom of these issues.” Did that happen? No, that is not what happened. Sally Masterton was suspended from her job and discredited to the Financial Conduct Authority. Scandalously, she was prevented from working with the police, despite being told that she was vital to the investigation, and then she was fired. The senior management did not make the report available to non-executive directors or the chair of the board for three years. Finally, last month, the bank reversed its position and confirmed that Sally had

“acted with integrity and in good faith at all times”.

There were other elements of cover-up. Thames Valley police said that Lloyds had led them a “merry dance” in their £7-million investigation of these issues. There is evidence of a wider fraud, certainly from victims going through the Griggs review to whom I have spoken. They talk about other senior managers, including Paul Burnett, high risk managing director at HBOS Edinburgh, personally having involvement with HBOS Reading. HBOS compliance officers were embedded in the fraudsters’ operations, and of course gagging orders are used across the board to prevent more disclosures from coming to light.

Let me move on to the review. It was supposed to be an independent review and was headed by Professor Griggs—that is why we call it the Griggs review. It was supposed to provide swift and fair compensation to the victims. However, the SME Alliance, which has done so much work for so many of the victims, instructed Jonathan Laidlaw, QC, who names among his clients the Bank of England, to review the review itself. He determined, in a short report, that the review is “procedurally defective”, and its principles are “flawed and appear partial” to the bank’s interests. That description is consistent with the experiences and stories of the victims. They have described the review to us as corrupt, disgraceful, one-sided and evincing an absence of due diligence, with manipulated documents and lies about evidence. Agreed payments are not met, and the process makes life as difficult and unpleasant as possible. These are victims of fraud.

[Dr David Drew (Stroud) (Lab/Co-op)]

Will the hon. Gentleman add one more element, namely deliberate over-complication? It seems that this whole saga has been made so opaque that it is difficult to get to the bottom of what really happened. Does he agree?

[Kevin Hollinrake]

I totally agree with that. I will come on to the disclosure of evidence shortly, but the hon. Gentleman is absolutely right: the bank could have dealt with this summarily many years ago, as soon as it came to light, but it chose not to. Why it chose not to is an open question.

The basic assumption of this review was laid out by Professor Griggs himself, who was quoted as saying that when he deals with these businesses, he is

“invariably dealing with the financial equivalent of a car crash.”

How can that be the basis for any judgment that these businesses were viable? The judge in the case stated that some “were capable of rescue” and that there was

“deliberate mismanagement of these companies”

by the advisers—by the fraudsters. He added that there were “plunderings made from them”, and that

“fees and any useful assets”

were taken from them. Why would the review ignore a High Court judge? Only four of the 76 cases have been dealt with by means of a consequential loss. All the rest have been dealt with through distress and inconvenience—in other words, all those businesses were dud businesses. That is simply not statistically possible.