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HBOS Reading – slow progress

We spent 4 years being defrauded by HBOS employees and associates and a further 10 years trying to expose what the Bank did to our and others’ businesses. For the first three of the ten years it was pretty much the case no one wanted to know and many people, including HBOS executives, were keen to portray my husband Paul and I either as nut cases (what do you mean bankers have committed fraud?) or as whinging business owners who didn’t want to repay their loans. Of course they also repeatedly put us through eviction hearings in their attempts to silence us but that didn’t work out either.

Which is why we have spent years gathering indisputable evidence of the fraud. As a consequence of a collective refusal by bankers and the authorities to believe what we were saying, even when we produced the evidence to support our allegations including in the many Court hearings, we are very aware who knew what and who was complicit in a massive cover up to hide the fraud, a cover up that goes all the way to the top of the Bank.

Nevertheless we did eventually, with the help of many other victims and with the hard work of Thames Valley Police, see bankers and their chums arrested, prosecuted and jailed. That process took over six years from the start of the police investigation. It wouldn’t have taken that long had the Bank been as co-operative as they like to say they were.

Despite the best efforts of many for it not to happen, Lynden Scourfield and Mark Dobson, both senior HBOS bankers, and David Mills, owner of Quayside Corporate Services and his team (including his wife), have gone to jail for a total of 47 years between them. So it is fair to say we and others have been vindicated and finally, albeit kicking and screaming, Lloyds Banking Group did agree to compensate all those defrauded.

It’s now five months since the criminal trial finished and eleven months since Lynden Scourfield (and therefore the Bank) pleaded guilty to various fraudulent scenarios. Despite statements, press releases and comments from the CEO of Lloyds Banking Group and despite a letter to Paul and I from Lord Blackwell saying he hoped that how the Bank would deal with this would restore trust in the Bank, only one person (according to the Bank) has been compensated and a further six (according to the Bank) have received offers.

I have no idea who these people are? No one I have spoken to – I’ve been speaking to victims of HBOS Reading since mid-2007 and the list of names is quite comprehensive – none of them have been compensated.

A representative of the Bank has been quoted in various newspapers saying the Bank are disappointed the compensation process is taking so long because they had a deadline of 30th June 2017. The Bank say the cause of the delay is because victims want more time to present their information. Or to put it another way, the problem is the victims!!!

Victims I have spoken to are also disappointed. They are disappointed the Bank’s chosen method of resolution is via a ‘review’ scheme that seems to be remarkably similar to the failed IRHP scheme or RBS GRG failed compensation scheme. The person running the Lloyds Banking Group ‘independent’ review is Professor Griggs, who I don’t doubt is an intelligent and honourable man. However, he is also someone who has done consultancy work for Lloyds Banking Group and he has been a director of a company where one of the main shareholders was connected to David Mills of Quayside Corporate Services, who was sent to jail for 15 years for his role in the fraud and corruption.

Then there is the way the review is being run. A member of SME Alliance who has met with Professor Griggs, has told us (and we are grateful for the information):

  • Neither the Bank nor Professor Griggs will volunteer any information about the methodology behind the review. Representatives of the Bank have said they cannot comment because Professor Griggs devised the methodology. Professor Griggs has said he cannot give any comment or information because the Bank devised the methodology.
  • A victim who chooses to enter the review process can either fill in the questionnaire Professor Griggs has prepared or they can send their information in an alternative format. Once the information has been received, it will be assessed by a panel and they will make a non-negotiable offer in approximately four weeks. Victims will not know who is on the panel and if they don’t find the offer satisfactory, they can of course choose to litigate (as if the majority of the victims can afford to litigate!).
  • The Bank will pay reasonable legal costs as part of the review but that is limited to a payment for fees totalling 20 hours. I can’t speak for other victims but having met many of them and researched the circumstances behind their cases, I’m not sure it’s fair or reasonable to suggest any victim can condense 10, 12, 14 years of their lives into a 20 hour explanation that will allow their advisers or their legal representatives to present a fully comprehensive presentation of their case.

I’m not sure if the Bank consider they should make additional payments for forensic accountants. I do think they should cover this cost because, let’s face it, some people may find it difficult to calculate losses going back more than 10 years. Additionally, I wonder how many hours the Bank’s lawyers have spent on each victim’s case? I’m guessing it’s far more than 20 hours per case, which hardly seems equitable. For example, Paul and I are not in the review but Professor Griggs does seem to know a lot about our case and it would take far more than 20 hours to go through the copious correspondence between us and HBOS/LBG/ Dentons/Walker Morris and others over the last 10 years. And I wonder what the hourly rate is for the Bank’s lawyers? I know how much one day of fees for Denton Wilde Sapte (now Dentons) costs because I apparently paid a fortune for a senior solicitor representing the Bank’s Board, to attend 6 of our 22 eviction hearings. Will the Bank pay such exorbitant fees to the victim’s advisers? I think not and I am now aware the Bank are challenging the adviser’s fees.

I wonder what will happen if the Bank, having dragged this whole sorry affair out for so long, decide they won’t pay the costs for the victim’s advisers? In theory either the victims themselves will have to pay (so goodbye to the recent ex-gratia payments) or the advisers will just have to stop working.

Conclusion (of the review). Professor Griggs, who may be a very nice man, is not the obvious choice as an ‘independent reviewer” as he has worked for the Bank and had a connection with David Mills through a Company of which he was an Officer. And let’s not forget any money Mills invested in shares or any shares he received as remuneration, came from tainted money or proceeds of crime.

There is absolutely no transparency regarding the review’s methodology – you cannot know how the Professor or anyone else plans to assess your life. If you do enter the review you will not know who the faceless panel are who assess your compensation but you do know their word is final – there is no appeal, debate or discussion. Take it – or leave it and find mega bucks to take the Bank to Court.

Paul and I are not part of the review but I don’t think we are the two people mentioned in the press last week because those people are going down the litigation route. As I know victims who are going down that route and as we are also not in the review, I think someone in the Bank’s press office was slightly confused when they said only two people weren’t participating in the review. Not least because I know of others who, like us, have agreed with the Bank we do not have to take part in it.

Then there’s the number of victims. I’ve been looking at the details of our investigation, which was by no means comprehensive but I don’t understand where the figure of 67 comes from? I can only assume the list doesn’t include shareholders or creditors. I would have thought HMRC would have complained bitterly about that as they are a multiple creditor – not to mention many local Councils.

The biggest disappointment for me (other than the long drawn out time scales, the lack of transparency and the bizarre pretence victims would find the review process acceptable) is the fact this whole situation has been premised on a lie.

I’m not going to go into detail on why I know this is a fact and a huge problem. However, I would just point out to Lloyds Banking Group that, had they done what Lord Blackwell told Paul and I the Bank would do and if they had swiftly, appropriately and generously compensated the victims (Lord B didn’t use the word generously but I’m throwing it into the mix because I believe that’s what he meant), there would have been no delay in compensation and there would not have been endless media articles about Lloyds Banking Group’s extremely disappointing conduct and lack of integrity.

Sorting out this shameful episode was/is not rocket science. All the victims have advisers or legal representation or can get it (there’s no shortage of lawyers offering to help victims). If the Bank had put forward 11 of their best advisers and given them 6 cases each and if the Bank’s advisers had liaised directly with the victim’s representatives, I’m guessing the whole process would have been over and done within a matter of 6 to 10 weeks. I fail to understand why that option wasn’t considered? Why does it have to be so tortuous?

To be clear Lord Blackwell, Mr Horta-Osorio and Mr Colombas, what the victims want is their lives back or as much as we can get back. That won’t happen until they have compensation and closure. I’m guessing the way things are going, the Bank’s major shareholders would also like to see some closure on HBOS Reading before more damaging information about Lloyds is exposed in the press.

It is possible much of what is happening now is designed to wear victims down so that if and when offers of compensation come, the victims will accept anything because they are just tired of fighting. That and the fact many victims are no longer spring chickens and don’t have the time for another prolonged battle. Worse still – some have cancer or other serious conditions.

Of course I can’t prove that theory (it’s not as easy as proving the fraud) but 10 years of dealing with the senior management of Lloyds Banking Group including Sir Win Bischoff, Eric Daniels, Harry Baines, Philip Grant, Antonio Horta-Osorio, Juan Colombas and, more recently, Lord Blackwell, has not instilled any confidence and even if I would like to believe what Lord Blackwell wrote in his letter, I am now struggling.

Where are we now? I have no idea. I’m not actually sure the Bank’s senior management knows but they probably do and this is all by design. Hopefully we will all know a bit more soon but and in the meantime, 30th June 2017 has come and gone and I can confirm the victims are far more disappointed than the Bank or its representatives.

Personally I am disappointed Lord Blackwell has either been insincere in his letter to Paul and I or, less likely, those in the Bank dealing with this matter are not inclined to listen to the Chairman.

 

Nikki Turner                                                                                                                10th July 2017

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Paragraphs redacted from P&N Turner submission to PCoBS 24/08/12

These are the paragraphs which were redacted by the Commission’s support staff.

  1. The example of bank misconduct we have lived through from 2003 (and continue to do so) is a microcosm of what happened to the whole sector. While we are not professionals in the financial sector, we have been forced to spend the last five years investigating aspects of the banking industry.
  2. Between 2002 – 2007 many SMEs whose accounts were ‘managed’ at HBOS Reading, were forced to use the services of a consultancy firm, Quayside Corporate Services (QS), or have their facilities withdrawn. QS had no affiliation to any trade body for consultants and employed the services of known embezzlers. The cost to the SMEs for these services were between £2000 and £30,000 per month + VAT and expenses. In many cases HBOS insisted QS personnel or its Director became directors of the SMEs and were given full fiduciary control.
  3. Once QS representatives had control of the SMEs, the Bank then ploughed millions of pounds into them. A lot of this money was used to facilitate luxury lifestyles for Bank employees, QS staff and the QS Director. Many of the companies subsequently failed and their assets were sold in pre-pack administration to new companies ultimately owned by The Sandstone Organisation (we are reliably informed as being controlled by the Bank) but run by the Director of QS and/or his staff.
  4. In late 2006 the Bank sent a team from Edinburgh to investigate the loan book at HBOS Reading. In early 2007 the manager responsible for most of the loan book was suspended and subsequently resigned. Between 2002 and 2008, the Bank caused at least 80 SMEs who had the involvement of QS personnel, to go into administration and/or liquidation. We are told the overall losses to the Bank because of events originating at HBOS Reading, runs to billions of pounds.
  5. In April 2007 HBOS closed the business accounts of P&NT who had also been made to use QS and had complained of serious irregularities between 2004-2006. They became suspicious of the Bank’s sudden and aggressive stance towards them and, because any investigation promised by the Bank had not actually been done, they commenced their own investigation into HBOS Reading. By August 2007 they had uncovered evidence of systemic fraud and identified other victims.
  6. In September 2007 P&NT wrote to the entire Board of HBOS setting out their findings to date. The Board rejected the allegations. Also in September 2007, P&NT tried to inform the FSA of the fraud. The FSA did not start any investigation until mid 2009. In November 2007 they reported the fraud to the Cambridge Police who were persuaded by HBOS not to investigate. In May 2010, Thames Valley Police (TVP) and SOCU initiated ‘Operation Hornet’ to investigate what happened at Reading having, by chance, come across the case at a routine meeting at the FSA. They were not asked to look into it.
  7. 9 people have been arrested thus far as a result of Operation Hornet and charges are expected in September 2012 for ‘Corruption’, ‘Money Laundering’ and ‘Conspiracy to Defraud.’ TVP have said HBOS Reading is potentially the biggest banking fraud in British History. The Bank (now Lloyds Banking Group (LBG)) still denies the Turner’s allegations and have refused to compensate any of the SMEs destroyed as victims of the fraud.
  8. HBOS/LBG have tried to evict the Turners from their family home 22 times between 2007 – after they started their investigation – and 2010. Legal costs for a senior Solicitor to attend 5 of the eviction hearings and to deal with matters relating to HBOS Reading, have been paid via a false account opened by the Bank in the name of the Turner’s business, Zenith Cafe Ltd (ZC). Neither the Solicitor nor his Firm were instructed in the eviction proceedings. Approximately £363,000 has been paid from the account to Denton Wilde Sapte (now SNR Denton). By August 2011, circa £250,000 in penalty interest and charges had been added to the account which then showed ZC owed over £600,000. LBG have said this is not a case of false accounting and the Turner’s should never have been sent details of the account. The FSA is still investigating the circumstances of this account over a year on.
  9. The Turner’s have spent the last 5 years investigating the fraud at Reading and other bank frauds. Despite the thousands of factual documents establishing irrefutable evidence of fraud originating at HBOS Reading they have supplied to the police and the FSA, it is a sad fact no authority has had the power or, it seems, the appetite, to make the Bank deal appropriately with the matter. LBG remains in denial and the victims have remained in limbo for years hoping the authorities would act.
  10. A Parliamentary Commission on Banking Standards can only be of service to the Nation if the submissions and evidence it receives, is acted upon and not discarded because it comes from those who have individual and profound experiences of what has occurred over the last decade plus.
  11. From 2007, we have contacted (and in most cases submitted a lot of copy documentation to) nearly every agency and authority including the Treasury Select Committee, Constituent victims’ MPs, Government Departments, the Insolvency Service, the FRC, the CIB, HMRC, the senior Executives of the three Banks involved, the Financial Ombudsman Service, the FSA, the SFO, 3 police forces, two Prime Ministers and two Chancellors. Apart from Thames Valley Police (TVP) and specifically the ‘Operation Hornet’ Team, all have failed us with vigour.
  12. For example, we were recently told by a senior enforcement officer at the FSA, the Final Notice Public Censure of BoS, published on 9 March 2012, could have been published two years earlier but for the difficulty the FSA had getting the Bank to agree to it because of FSMA 2000 provisions.
  13. In an e-mail of 9th March 2012, Hector Sants personally advised us the 6 redacted paragraphs in the BoS Public Censure Notice, relate to HBOS Reading. Obviously we have not read the paragraphs and TVP have confirmed they have not read them either, though they were redacted to protect their investigation. The Bank has read them yet it continues to deny any malpractice at HBOS Reading over 5 years after it reported it as a ‘control issue’ to the FSA in ‘early 2007’ (see FSA ‘brief’ to TSC, March 2010).
  14. As a very serious example of how professional standards have reached rock bottom, we would ask the Commission how senior bankers: who are fully aware of the details of the fraud at Reading; who have read the redacted paragraphs in the FSA Public Censure; who have no doubt read Hansard on the debate about HBOS Reading of June 2009; and, most importantly, have clear evidence of how the billions of pounds the Bank lost because of the practices utilised in the HBOS Reading debacle, are able to repeatedly deny the fraud and therefore not compensate but persecute its customers?
  15. We give as an example of this, UKFI which, although it is not a bank per se, it was charged with protecting the interests of the public’s share in two of our biggest banks.
  16. We can confirm that, when we attempted to approach UKFI in 2009 to make them aware of the serious criminal activity in HBOS, which has since resulted in a 2 year major criminal investigation which could potentially damage the reputation of Lloyds Banking Group, we met with a number of hurdles – not least that UKFI has no contact phone number in the public domain.
  17. After a series of e-mails to the PR Company (who were very polite but who would not give us contact details for John Kingman or Glen Moreno) we eventually worked out the e-mail addresses and sent the information, which was in the form of a copy of a letter to Eric Daniels detailing the Reading fraud.
  18. Our letter, which gave explicit detail of fraud and corruption in a then bailed out bank, was ignored.
  19. In 2010 we attempted again to give information to UKFI.
  20. Again it was impossible to make direct contact and we were told (politely) by their PR company, it is because “UKFI do not have time to deal with the general public.”
  21. We are not surprised they have little time for the public as the senior executives of UKFI appear to feature very heavily in any number of bank hospitality situations. We use one of many links as an example: http://www.ukfi.co.uk/images/dynamicImages/Hospitality%20table%20April%2010-%20Mar%2011.pdf
  22. We understand ‘hospitality’ is now accepted as entirely normal in business. However, the millions of people who were severely affected by the events at RBS, HBOS and its parent Lloyds Banking Group, may quite rightly consider the remit of UKFI is to dine well – courtesy of the banking industry – while ensuring they have little or no contact with the shareholders they represent.
  23. We eventually wrote to Sir David Cooksey and Robin Budenberg copying them in on a letter to Sir Win Bischoff. We made the point a Parliamentary Authority Member had advised us to do this.
  24. The reply we got from a UKFI representative informed us: ”We would direct you to note our Framework document which governs the relationship between UKFI and HM Treasury as sole shareholder of investee companies. This document clearly sets out the requirement of the independence of the Boards of the banks; in particular, that UKFI ‘will manage the investments on a commercial basis and will not intervene in day to day management decisions of the investee companies’… UKFI operates as an active and engaged shareholder. We have no regulatory powers, and no power to demand any information from the banks which would not be usually be provided in discharging our duties…As you may have read in our Annual report and accounts, our remit is to manage the investments to create and protect value for the taxpayer and to devise and execute a strategy for the disposing of investments……
  25. UKFI, as part of their remit to protect value for the tax payer, did not feel a massive fraud in a bank the public bailed out, was of any interest to the organisation working on behalf of the public.
  26. Similarly, the BBA told us in 2009 that, if what we were saying was true, it was very worrying but they could do nothing about it.
  27. The FSA, when we first contacted them in 2007, would not give us anything other than a generic e-mail address to send sensitive and personal information of many of the victims of HBOS Reading – which, understandably, we would not and could not do.
  28. The FSA did not get involved in any investigation regarding HBOS until April 2009 and just before the Debate in Westminster on the Reading
  29. We have spoken to many people in the banking profession since we started investigating HBOS Reading and many of them have confirmed to us they work under a regime of fear where missing targets would severely affect the bonus structure which, many of the public do not realise, goes right through the banking system and is not limited to senior executives and traders.
  30. For example and notwithstanding the Reading fraud, HBOS informed us in 2004 they were sending an accountant to review our figures. They did not inform us this would cost us over £1000 for a one hour visit. Neither did they advise us before deducting this amount from our account.
  31. Another example is how the banks’ lawyers charged us £3000 for a standard debenture document while our own lawyers charged £270.
  32. In the case of the Reading victims, all of whom were/are Company directors, the losses to their businesses and to themselves, far exceeds £150,000.
  33. In our case, corporate governance has allowed an internal fraud to progress to a major police operation and FSA investigation because no one at Board level would deal with the matter appropriately, in either HBOS or LBG.. Or so it would seem given the repeated denials for 5 years that anything was wrong.
  34. We have pointed out to the various Boards under various stewardships (Andy Hornby, Eric Daniels, Antonio Horta-Osorio) and on various occasions, the potential damage to the reputation of the Bank because of the scandalous proportions of the HBOS Reading fraud, should have been curtailed and minimised by proper adherence to the Law and sensible damage limitation.
  35. We have no doubt the Bank executives considered it impossible we, as customers, would ever have progressed the investigation of the fraud this far. But that is no excuse for their lack of corporate governance which: a) allowed such a huge fraud to be perpetrated against the Banks’ clients and its shareholders in the first instance and; b) exposed an extreme lack of corporate governance which would put the good name of the Bank at risk and further penalise the victims of an internal bank fraud, by attempting to cover it up rather than exercise proper management, governance and damage limitation.
  36. We advise the Commission, a former HBOS Executive has confirmed to Paul Moore that, in the over £1 billion Reading fraud, only a minority of the Board were “in the know” in 2007 while the others were told HBOS Reading was a minimal problem concerning amounts up to £49M and it had been dealt with.
  37. Clearly this was a case of executive and non executive directors being kept “in the dark” as to the true events concerning the Bank’s risks. Again we would suggest non executives, because of their other commitments, are unlikely to seriously challenge reports from executive directors or committees.
  38. It would be wrong for us to go into any great detail of how we feel the internal audits and controls at HBOS between 2002 and 2007 were a total misrepresentation of the true facts, as we would go into territory that could be harmful to Operation Hornet. However, there is absolutely no doubt that, overall, HBOS and particularly Bank of Scotland had, by 2004/5, become the ‘basket case’ of banking. This is not a term we invented but a term we have heard used by many people in the banking sector.
  39. It could (reasonably) be said we are not the biggest fans of the FSA. However, we can only conclude that, in the case of HBOS, the information given to the FSA with regard to internal audit and control between 2002 and 2007, was, in many instances, a work of fiction – the Arrow Reports.
  40. This was clearly evidenced in 2010 when the FSA sent the TSC a document detailing their version of events originating at Reading and based on a ‘control issue’ reported to the FSA in ‘early 2007’. It was fortunate the TSC copied the ‘brief’ to us so we were able to amend the document with the true facts.
  41. On a specific note and given it does not fall within the remit of Operation Hornet, we would draw to the Commission’s attention the false account HBOS set up in the name of our Company, Zenith Cafe Ltd., to pay the Bank’s legal expenses relating to HBOS Reading. These fees were nothing to do with Zenith.
  42. The account was opened in March 2008 and we were not aware of it until we started to receive interest statements from January 2010 and letters advising a ‘£30 Excess Overdraft fee’ had been added and would we bring the account into line with its facility. In June 2011 and after two requests from the Company’s Accountant, we received all the historical statements which itemised debits and the interest and charges applied. We believe they were sent by a whistleblower and the Bank have since confirmed we were not supposed to have sight of this documentation.
  43. The bank have said this is an ‘internal account’ to keep track of the costs relating to Reading and they never intended to ask us, as Directors, for the money back. We already had letters asking for the money.
  44. Additional to the £372,000 for debits made from the account, predominantly for fees to Denton Wilde Sapte (now SR Denton), the Bank have added approximately £250,000 in penalty fees and interest thus eliminating the possibility this was an internal ‘managers obligation account.’
  45. The account clearly shows a £372,000 debt of the bank as also being a £600,000 debt of our company, so a credit of the Bank. Clearly it is false accounting which we have reported to the FSA and the police.
  46. The FSA, after one year of investigation, say they have not got to the bottom of the matter. We bring it to the Commission’s attention because we do not consider it is at all likely this account is in isolation.
  47. As external whistleblowers, we would warn anyone pondering this route to consider carefully what they are doing before they start. In 2007 when we first uncovered the Reading fraud, we believed it would be quickly remedied for the victims by reporting the matter to the Board of the Bank. Nothing could have been further from the truth.
  48. As noted in para. 13 above, we have, since 2007, contacted every agency and authority possible alerting them first to the fraud and secondly, to the untenable consequences for the victims.
  49. Five years on, the situation remains the same for the victims. The Bank remains in denial despite a two year criminal investigation; we have undergone 22 eviction hearings in 3 years in an attempt by the Bank to silence us and which the Bank paid its additional legal costs via a false account in the name of our company (the actual legal costs were added to our mortgage) and; we continue to live like paupers.
  50. Finally on this aspect, we have personally seen some extraordinary fantasy accounting and conclusions from the Big 4 auditors in the HBOS Reading scenario, including serious breaches of accountancy standards and breaches of the Law. We are not at liberty to evidence these breaches to the Commission at the present time but we certainly will be able to when Operation Hornet is concluded.
  51. In June 2011 we prepared a dossier establishing a ‘time line’ of the conduct of the FSA in relation to the HBOS Reading fraud. This document was copied to the Treasury Select Committee and we would be happy to submit the same to the Commission, if requested. It is a detailed example of the conduct of the FSA in relation to established criminal activity in a bank. Over a year later, nothing has changed for the victims of HBOS Reading and the FSA has taken no enforcement action against the individuals at any level and who enabled the Reading fraud to happen.
  52. At all costs banks will not admit any fault or accept any responsibility even where the evidence clearly promotes a different approach. We cannot calculate how much money HBOS and subsequently LBG have spent defending their position regarding HBOS Reading but almost certainly, the end tariff will cost much more than it would have cost had the Bank dealt appropriately with the matter back in 2007.
  53. We use this question to highlight all we have said in our document and, in order to give the Commission perhaps the most blatant example of just how low professional standards have gone in banking, we use the Farepak debacle as an example.
  54. Our interest in this case dates back some time as the HBOS employees tasked with the Farepak problem, are the same team charged with dealing with the SMEs whose accounts were held at Reading and whose businesses had Quayside Corporate Services imposed upon them.
  55. We have read some of the transcripts of the Farepak trial (May to June 2012). The case against the Directors of EHR was brought by the Secretary of State. It claimed those directors were responsible for 133,000 people on low incomes unwarrantedly losing money they had saved for Christmas vouchers.
  56. What the case actually exposed was how the HBOS team used ‘hard nose tactics’ to block any solution the Directors of EHR proposed in their attempts to save the depositor money and keep Farepak trading.
  57. We don’t intend to go into great detail and we do not believe the Farepak injustice is a closed book.
  58. EHR requested additional funding of £5M in April 2006 to trade the company out of a problem caused by the demise of its main voucher supplier. In its attempts to source this shortfall, which the Bank would not facilitate, EHR was made to spend well over a million in fees to accountancy firms.
  59. HBOS, who refused to ring fence any of the savers’ money already deposited, received a further, circa £18M between April and October 2006 from the Farepak savers. This cashflow was used by the Bank to reduce EHR’s borrowings and allowed the business to carry on trading.
  60. The EHR Directors pursued at least 7 different avenues to secure the funding during this period, none of which were acceptable to the Bank and the Company was put into a pre-pack administration at the beginning of October 2006 causing the savers to lose all their money.
  61. As a PR exercise, HBOS initially put £2M into the ‘Unfairpak’ campaign and more recently they have added an additional £8M. We believe the winding up of the Business will finally cost circa £9M.
  62. Therefore a total of at least £10M has been paid in fees by a business that was looking for £5M additional funding; the whole exercise has cost HBOS itself £10M plus a serious loss of reputation; 133,000 people lost a net total of approximately £25M of the £37M they thought they had saved to ensure their families had a good Christmas plus they suffered all the anxiety caused by this conduct.
  63. A team of 3 or 4 people under the ultimate leadership of Peter Cummings, who was CEO of Bank of Scotland in 2006, brought about this shameful situation. We would make the point; in the transcript, one of the 4 describes his job as being part of the ‘High Risk’ team in 2006.
  64. When we dealt with the same team of people in 2007, their title was ‘Impaired Assets – Structured.’ The difference between High Risk and Impaired Assets is very clear. High Risk may look at resolving a situation by the addition of extra funding. Impaired Assets has a remit which does not include the possibility of any additional funding whatsoever and almost always, unless the clients themselves have a financial resolution, has an insolvency outcome.
  65. The Bank’s position and conduct is laid out very clearly in the transcripts of the case, days 11, 12 and 13. We believe it begs a question of whether HBOS ever intended to find a solvent solution for Farepak or whether the team from HBOS was, in fact, the ‘Impaired Assets’ team who always intended to put Farepak in Administration and simply allowed the directors of EHR to go through the process of finding a resolution in order for the Bank to get in all the savers’ money?
  66. Having met this ‘team’ and having seen how the SMEs associated to HBOS Reading were dealt with by this team, we suggest there was never any intention of saving Farepak. And while we fully appreciate a bank has every right not to extend further credit to a customer (business or individual), we would point out to the Commission that, simultaneous to the Bank’s refusal to assist Farepak with further, minimal funding, it was ploughing tens of millions of pounds into a business with almost no turnover and which had been put under the control of the Bank via its consultants.
  67. In July this year we sent information to a representative of Unfairpak who attended a meeting with Dr. Vince Cable MP after the Farepak trial had concluded and which placed no blame on the Directors of EHR. Our purpose was to evidence the blatant ‘double standards’ the Bank was applying to businesses at the time of the Farepak demise. Following is an extract from our e-mail and the figures are factual:          “..The other thing we think you should know is that contemporaneously to EHR going into liquidation for the lack of £3M to £5M, BoS was ploughing millions of pounds into a company called Corporate Jet Services (CJS). Looking at their accounts and giving a rough calculation, we can see the Bank allowed CJS to increase its borrowings by £19.671 million between April and September 2006 and the turn over for the same period in the cash book was £497,770 of which just over £125,000 was a repayment of VAT from HMRC.
  68. The Bank would say of course, it is down to their discretion how much money they give companies. However, it should be noted the Bank owned all the shares in Corporate Jet Services and despite the tens of millions of pounds they put in to the Company, it went into Administrative Receivership on 26th September 2007 owing the Bank £113M, according to PwC’s Administrator’s Report. Post the appointment of PwC, the Bank allowed the Company to pay £26, 244,708.73 to one subsidiary which was then sold to the now ex directors of the company for £1.00; £2,407,314.31 to another subsidiary that was also sold to the ex Directors for £1.00 and also £333,912.40 to PwC, who had already received £160, 054.84 a month before the Company went down.
  69. In total, the Directors of the Company (one of whom is a main suspect in the Reading case) paid £7.00 and a promise to acquire all the assets of CJS leaving the Bank with a massive debt which, had they taken action in May 2007 when they first brought in PwC to produce a report on the viability of CJS, the amount would have been reduced by at least £6 million.
  70. Additionally, this company had a £800,000 agreed overdraft facility that should have been renewed on 27th November 2003 but wasn’t and by the end of April 2006 the Company had an unauthorised OD of £28.6M according to the accounts for the year ending 31st December 2004 filed at Companies House and which were signed off in June 2006.
  71. Some additional points to be noted from the above comparative scenario between CJS and Farepak. The person dealing with both situations for the Bank, was the same. The PwC person involved in both matters was also the same. The PwC person not only advised the Bank regarding the failed rescue packages in the Farepak debacle, he was also the Bank appointed Administrative Receiver of EHR.
  72. An editorial note concerning the above e-mail extract. It should be noted the sale of the CJS subsidiary Companies to the ex Officers of CJS for £7 and a promise, was completed immediately prior to the Company being placed in Administrative Receivership on 26th September 2007. The first payment stated above as being made by the Bank to one subsidiary Company for £26+M, was made on 27th September 2007 and the payment to a second and different subsidiary also sold on 26th September, was made on 9th October 2007. Both payments post date the appointment of PwC.
  73. We are now into our 9th year since we unwittingly became the victims of the HBOS Reading scandal. Even if we one day get to the end of it and receive the compensation we are undoubtedly due, no one can give us or our families back the 9 years we have lost.
  74. Similarly, no one can give back the Farepak victims’ Christmas of 2006. These are just two scandalous situations out of many caused by bad banking practice. The most worrying thing is – no one has done anything to curtail this sort of behaviour and it continues.

Maxwellisation? Enough already.

So first we had the so called ‘credit crunch’. Bankers all over the world, all paid telephone number fees, ran banks into the ground and brought various economies to their knees. Then we had the bailouts – Governments all over the world and not least the UK, decided the best way out of the ‘credit crunch’ was to give the banks billions of pounds, dollars, Euro’s, you name it, they gave it, to the banks to replace what they lost in their bizarre spending frenzy. And that resulted in mass austerity across the UK, Europe and the US – probably elsewhere as well but I’m not an expert.

Then came the clean up – or the apparent clean up. What happened to cause the credit crunch and how regulators and Governments could ensure we wouldn’t get a repeat performance anywhere in the near future? And how was this clean up done? Well that’s the latest page in the most bizarre story of the 21st century history book – we clean up by burying as much truth as possible and where we can’t – because the public are demanding explanations – we introduce Maxwellisation.

I’ve read various explanations of Maxwellisation and they make as much or even less sense to me as the fateful and long drawn out love affair on the Maxwell House advert. I don’t know what happened in the agonising and tragic story of a love affair that was almost but never quite fulfilled. I certainly don’t know what it had to do with coffee! And similarly I don’t understand how the exploits of Robert Maxwell – who apparently ripped off not just his own company but also pension funds – could be introduced as a legitimate way to stop the rightful exposure of wrong doing?

I may be mad but surely we’ve got it the wrong way around? If our regulators and their third party experts do in depth investigations into situations and come up with explanations, in the form of reports, which finally expose the truth, how can it be right that the people named and blamed in those explanations, can challenge the reports before they are released? Are we saying our ‘experts’ and our regulators may have got things completely wrong? Is it in the nature of ‘experts’ who spend years doing these reports at vast expense to the public, to get it completely wrong? Is that an equation our regulators start with? I don’t think so.

This is like an appeal in the justice system happening before the trial. So the crooks, let’s say for the sake of argument bank robbers, receive the prosecution case and, before a Judge or a jury gets to hear it, half of it is removed because the accused don’t like it or they don’t agree with it. Better still, the accused’s lawyers may be able to come up with legal technicalities as to why the allegations can’t even be made in the first place. So what the Judge or the jury finally get to hear is an edited version of events as permitted by the defendants. Wow, I can see that going down very well with the criminal fraternity. Not a luxury extended to Tom Hayes but surely one the magic circle lawyers will be insisting on for more senior bank management in the future.

As someone who has spent years of my life investigating bank fraud albeit from the perspective of someone who is actually in the rock & roll business, the one thing I know is ‘the written word doesn’t lie.’ Even if people have been deliberately writing lies, the culmination of a proper investigation will just highlight those lies and you will be grateful someone bothered to put the lies in writing as an example of fraud or corruption or, at the very least misconduct or negligence. For example – how could any bank relying on untold amounts of emergency funding from the Bank of England and then needing several billion pounds from the public purse, possibly pretend to investors that it’s a safe bet to plough money into a Rights Issue? But read this absolute twaddle from Andy Hornby back in 2008 http://www.thisismoney.co.uk/money/news/article-1631967/HBOS-chief-Hornby-defends-rights-issue.html and you’ll see that’s exactly what some of them did! Now what part of Maxwellisation can alter those facts?

Better still, let’s remind ourselves of exactly how the great and the good from HBOS and RBS were still trying to pull the wool over everyone’s eyes even after they’d been so instrumental in bringing the Country to the edge of the abyss: http://www.publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/uc144_vii/uc14402.htm

That’s a cracking read by the way.

I don’t know how anyone would do a comprehensive investigation into why we went into the Iraq war although logic would say the absence of the weapons of mass destruction, which were the reason for so many tragic deaths, raises some terrifying questions. But in the case or RBS or HBOS, it’s just not that complicated. If two music publishers can expose a massive fraud in HBOS and if certain members of SME Alliance are supplying the Times with evidence of massive issues in RBS, how can the FCA and their ‘experts’ be so endlessly challenged on their findings? The whole thing smacks of the dreaded ‘D’ word – deals. Deals to hide what really happened in our banking sector. Deals to protect the so called great and the good. Deals which, rather than give the public some sort of closure on what happened and show who was responsible, will just ensure the same or worse happens in the future.

There is no point in Maxwellisation – it’s apparently not a legal requirement and all it is doing is staving off the inevitable. If either of these banking reports ends up as another whitewash, there’s a whole army of people out there who will challenge them. Journalists, whistle blowers, small organisations like SME Alliance, Move Your Money and Bully Banks – not to mention various forthcoming trials (criminal & civil) which will shed more light on the reality. Clearly, if the FCA keep delaying their reports or if they allow the truth to be watered down, others will happily set the record straight.

I would say, from a public perception, Maxwellisation should really be called Orwellisation. We are continually walking backwards to Orwell’s views of 1984. The important difference is, there was no social media in Orwell’s world. No twitter or Facebook or Linked In. And unless the powers that be can wipe out the world wide web, Maxwellisation is actually and ultimately just like the coffee advert – long, drawn out and a fantasy. We’ve had enough fantasy when it comes to real people’s lives. Just like the cream always goes to the top of the coffee,  the truth, as Hillsborough has shown us, also has an amazing way of coming out on top and Maxwellisation won’t change it.

Surely the public have been on the receiving end of too much abuse from bankers without this latest trickery? Let’s just get on with it please, let’s publish these reports and stop all this nonsense. As a very good friend of mine would say – enough already!

SME Alliance meetings at EMM Law and Metro Bank. A really brilliant day!

IMG_8976Yesterday was a double whammy for SME Alliance – we had a morning meeting sponsored by EMM law http://www.emmlegal.com/meet-the-lawyers/kate-mcmahon/ on the subject of Private Criminal prosecutions and an afternoon meeting sponsored by the Metro Bank. I didn’t attend the morning meeting (no room at the inn) so I can’t say a lot except we’ve had some really good feedback and we’d like to thank Kate McMahon and her team at Edmonds Marshall McMahon for their hospitality and for explaining how the process of Private Criminal Prosecutions works. Hopefully Andy Keats, who set the meeting up for us, will blog about it in the very near future.

The afternoon meeting at the Metro bank also went brilliantly. Derek Granville, our host, was our first speaker and he explained both the ethos of the Metro bank and the way they work. Two things in particular were music to the ears of our members. First – they don’t want to sell you financial products. So no PPI, no swaps and no other dodgy, so called, insurance. Secondly the Metro Bank is completely deposit funded and there is no wholesale funding. So they are not reliant on the ‘money market.’ Sophie took loads of notes of the whole meeting and we will post all the main points Derek made as soon as she has typed her notes up. But I can say a lot of us were very impressed with what Metro bank has to offer and it does seem like they are bringing back old fashioned banking where you know who you’re dealing with and what you’re dealing with.

IMG_9015Our second speaker was Andrew Hilderbrand http://gunnercooke.com/team/andrew-hildebrand/ who is a mediator. And whereas the word ‘mediation’ means an alternative form of bank bullying to some of our members, Andrew very eloquently put the case for positive mediation. As many members pointed out, it’s not always the case you can get a bank to consider positive mediation as they’re used to having everything on their terms. However, tying this in with our report to Andrea Leadsom where we suggested ‘FOS Plus’ would require banks and clients to ‘mediate’ early on in the process of dispute resolution, Andrew’s brand of very successful mediation would work very well. Will blog in more detail soon – or better still I’ll ask Andrew to blog.

Our last speaker was Lindsay Whitelaw from Urica. This company offers a very different type of factoring. I have never thought much about factoring except when people call to talk about Bibby (which they often do) but what Urica is offering sounds very different and very positive. The difference with ordinary factoring is Urica requires no personal guarantees and only checks the credit worthiness of the creditor. Anyone who uses factoring services should check Urica out: https://urica.com/ As their website says – “It’s not invoice discounting because that’s just debt by another name.” So it’s an interesting concept and a very new business model.

IMG_8990

Overall it was a great meeting with many new faces including people I’ve been talking to for years about HBOS, Lloyds, bank fraud, SME issues, but I’ve never met. And both Jon and Nick invited some interesting guests. But as always it was really great to see all of our founder members there. I know some people came from Scotland, Wales, the West Country and the North of England. Thank you all for making the effort to travel so far to join us. And thanks also to the two new members who felt it was so positive they have offered to sponsor us.

I will blog again over Easter in more detail but, if I don’t get another blog out before Easter Friday, Happy Easter to all and many thanks for your support. Who would have thought we could achieve so much in such a short time???

p.s I don’t know what time everyone left the Shakespeare’s Head where networking was still going strong when the Turner crew left about 7.00pm but I’m guessing Weatherspoons like SME Alliance!

Apathy International. Does anyone really expect HSBC or wealthy tax evaders to be prosecuted?

I had an interesting conversation on twitter last night with someone I don’t know from Canada – although I think he is British. The very topical subject was “why are wealthy people guilty of tax evasion not prosecuted?” And right from the start of the conversation my twitter friend, let’s call him Bill, made the point that in his view it would cost so much money and take so much time to prosecute them all, it would be counter productive. The cost would be more than the gain.

Bill is probably right. Tracking down the thousands of people identified by the Swiss Whistle blower (and let’s face it, as he says, his list is the tip of the iceberg) would cost a fortune and would probably result in very lengthy criminal trials where the only beneficiaries would be the lawyers. And Bill compared the situation to the gun amnesty used in the US. Hand in your unlicensed gun and we’ll say no more about it. Here the equivalent would be throw the tax man a few thousand pounds voluntarily and we’ll call it a day. I say a few thousand because, in the same way it wouldn’t be cost effective to prosecute these people, I can’t imagine HMRC have the manpower or even the will to do full on investigations into how much is actually owed?

My point was (and is) even considering the logistics of this situation, how can a democratic country ditch the law in the case of one section of society because it’s not cost effective to enforce law? Tax evasion is against the law and nowhere does it say “unless you are part of a rich minority who has been advised by your bank to shunt your money offshore.”

I also made the point HMRC will go through hell and high water to prosecute so called benefit cheats or even people on low incomes who may have been overpaid and then can’t pay it back. Similarly SMEs will be hounded for perceived VAT or tax issues and, if the man in the street doesn’t get all his tax returns in precisely on time and to their satisfaction, HMRC will be very efficient in sending out demands for what they calculate is owed or hefty fines. They also have no compunction about prosecuting for a few hundred pounds if they feel it is due. And that happens to thousands of people.

Bill made the point it doesn’t make any difference whether you cheat the tax man of £50.00 or £5M – it’s still against the law. I agree. So why do I have this horrible feeling you are less likely to be penalised for the £5M than the £50? And the same seems to be true of money laundering or other economic crimes. Big banks money laundering for drug cartels just get hefty fines paid by their shareholders but no one goes to jail. Here’s an extract from my book about HBOS (to be published in the dim and distant future) on these criminal but curiously acceptable transactions:

And by the way, how does that happen? It’s common knowledge now that certain banks have done these totally illegal deals and, yet again, no one in any bank is to blame and instead, the shareholders have paid massive fines as a penalty for bankers conduct. But if no one’s to blame, how do the deals get done? Do the bosses of the drug cartels phone a special ‘money laundering’ call centre and listen to an anonymous voice giving various options: “Please dial 1 for drug deals, 2 for arms deals or 3 for off shore tax evasion. To hear these options again, please dial 4.” Or do the Banks have departments which deal specifically with these ‘dodgy transactions’ and where the staff work in the secure knowledge no one will ever go to jail for criminal deals because bankers are above the law?”

Then there’s other proven fraudulent products like IRHP – another fine. Out and out asset theft from SMEs – another fine. PPI, EFG, SFLG, it’s becoming like a game show – think of an acronym and the contestants get to guess the appropriate meaning and the applicable fine. Winner gets two weeks in the Caymen Islands all expenses (and of course taxes) paid by the FCA. But if you or I were to commit any deliberately fraudulent act to turn a quick profit, you could expect and get the full force of the law to come into force.

However, taxes and financial crime aside, what really disturbed me about my twitter conversation which, by the way, I thoroughly enjoyed because I love a good debate, was the apathy involved. While Bill agreed with me we shouldn’t have a two tier justice system, his very logical approach was, as Tony Soprano would say, wattayagonnado? We are where we are and there’s little we can do about it – apparently.

I am pretty sure the members of SME Alliance would not agree. Most of them (me included) have been victims of the many and varied banking scams which have devastated SMEs. Most of us have been fighting for justice for what seems like a lifetime and sometimes pretty much is and we are, putting it politely, extremely angry at the way banks, who have caused us so much damage, are never penalised except with shareholders fines. Neither are they obliged by the regulators to repair the damage done. So when we hear about people with very healthy off shore bank accounts, organised by their bank, becoming immune from prosecution, we are anything but apathetic, we’re furious. It’s another slap in the face of the British justice system and another reason we are losing faith in it.

But, being honest, I think back to my life before the consequences of fraudulent bankers and their associates kicked in – was I even aware of our two tier justice system? Admittedly inequality has got worse since the so called credit crunch but, if my business hadn’t been sabotaged and had instead fulfilled its full potential and made millions of pounds, would I be seriously concerned about the conduct of the likes of HSBC and its tax dodging clients? Would I be calling for prosecutions? Or would I be taking the rather detached and very logical approach Bill takes?

We have a saying in our house, “you can’t not know what you do know.” And that’s a shame because the things I now know after 7 years of investigating bank fraud and social injustice, very often stop me sleeping at night. I didn’t sleep much last night thinking it’s possible a massive segment of society may be so oblivious to what is happening to democracy or, more likely, just trying to get on with their own reduced circumstances in austerity Britain, they don’t even care about off shore accounts in Switzerland or Monaco. But I think (or should I say I hope) I would have been aware, albeit to a lesser degree, of the increasing dangers our democracy faces even if I hadn’t experienced the consequences personally. I’m a lyricist and a poet and I grew up listening to Bob Dylan and Joan Baez – so the spirit of protest has always been there. But who knows? As long as the comfortable remain comfortable, will they rock the boat? Hmmn. While apathy is, on the one hand a powerful tool for the State, it’s also a powerful tool for the individual conscience.

“If there is nothing I can do about injustice, no one can blame me for doing nothing.” It’s a scary concept but one that has helped permit every shameful human catastrophe.

Anyway, I don’t know what the resolution is to the HSBC tax evaders or the many other tax evaders who were no doubt advised by other banks. Quite frankly, I think those banks must be bricking it in case their own whistle blowers come forward. I agree with Bill, it is impractical to think HMRC can or will prosecute all of these people. But, and remembering this year sees the 800th birthday of the Magna Carta, if we are truly a democratic society, I cannot see how Government, or the appropriate authority, cannot prosecuted them? After all, one person has been prosecuted and surely that has set the precedent? And what was so special about that case? Seems a bit harsh – thousands do it but only one pays the price.

I wouldn’t like to be running this Country. Whatever good intentions any of our politicians have, there seems to be an endless barrage of obstacles in the way of good governance and most of those involve the necessity to compromise and close their eyes to the kind of corruption that is swamping the Country. Hard, I imagine, not to just go with the flow for the 5 years they are in power. And hardest for those in power as opposed to those in opposition where it’s easy to shout foul (especially if you have a short memory)!

If anyone thinks they have the answer to the current problem – is it possible to prosecute every criminal act in the financial system and the associated activities like tax evasion, I’d be happy to hear it and I’m sure many politicians would as well. If we did take this route, we’d have to build a lot more prisons because financial crime, without doubt, is more epidemic or contagious than the flu and we have no jab for it. We seem to have no cure for corruption.

I leave you with a poem I wrote in 2003. I rarely inflict poetry on my blog readers but this one seems entirely appropriate.

Apathy International

I am a member of

Apathy International.

I am working my way up in the company

and should shortly become

a bored member.

Membership was free

and just slipped onto my shoulders

during a raging storm,

like a comfortable old raincoat.

The effects are almost unnoticeable

as is everything else now.

And, as in all such large organisations,

only non members receive active attention,

so I fully expect to disappear completely and painlessly any day now.

(Which I really can’t worry about).

But late at night I wake up

terrified

as a distant but unfiltered image of raw gaping wounds stabs me

and I can hear the hideous cackle of the devil’s favourite shareholders

and I recognise the voice of our beloved CEO crooning

and I think I will implode with panic.

But in the grey reasoned morning light

I think –

what could I do? Nothing.

So I don’t –

except to gently fondle my membership badge.

© Nikki Turner 2003