Lloyds Bank will be forced to make 'substantial awards' to certain victims of the historical HBOS Reading fraud in a damning sign that its original redress scheme failed customers.
It is still trying to move on from a massive scandal at the Reading branch of Halifax Bank of Scotland (HBOS), which was acquired by Lloyds in 2009.
Now an independent review, led by former judge Sir David Foskett, has determined that several victims will be due far more compensation than they were initially offered by Lloyds. In a letter to HBOS Reading victims yesterday, Foskett took a swipe at Lloyds' former boss Antonio Horta-Osorio.
Jailed: From left, Michael Bancroft, David Mills, and Lynden Scourfield
He said the ex-chief executive, who left this year to join Credit Suisse and has since been knighted, had 'not helped' the Foskett panel by 'promising 'swift' outcomes on our behalf before we had even been appointed'. The update from Foskett will send jitters through Lloyds and its shareholders, who will be worrying just how much the scandal could cost the bank.
One source with knowledge of the Foskett review said a handful of customers, who were initially refused compensation by Lloyds, were being told they could claim redress in the tens of millions.
The HBOS Reading scandal occurred between 2003 and 2007, when six bankers and advisers milked millions of pounds from struggling business customers and spent it on luxury holidays, sex parties with escorts including Suzie Best, and expensive watches.
Almost 200 business owners saw their livelihoods destroyed, and total losses have been estimated at more than £1billion. The perpetrators – including Michael Bancroft, David Mills, and Lynden Scourfield – were jailed in 2017.
Lloyds launched a scheme to compensate victims, but a review by retired High Court judge Sir Ross Cranston found it had 'serious shortcomings' as it paid out just over £100m.
Since then, Foskett has led an independent panel which is reviewing all cases, and deciding what they are actually due.
Sex parties: Escort Suzie Best
Foskett said: 'In certain cases, we have decided that a substantial award should be paid.' He said this might not be the case for all affected customers.
Tory MP Kevin Hollinrake, chairman of the all-party parliamentary group on fair business banking, said some victims whose cases had been reviewed were seeing compensation 'in a different order' to what they had initially been offered.
He added: 'When you consider that Lloyds initially never accepted that there had been a fraud, then they made all the promises in the world which they failed to keep, then they put in place a compensation scheme that wasn't fit for purpose and tried to minimise their own losses, their behaviour is disgraceful. There has been a denial at every turn.'
Many victims whose livelihoods were destroyed more than 15 years ago are still waiting for justice. Foskett said that 'almost all' of the 'high priority' cases had received a decision.
He added: 'Do we wish we were further forward? Yes, we do and we and our teams have been working very long hours to progress our work as quickly as we possibly can.'
But Nikki Turner, one of the victims, said it was 'disappointing' that many businesses were still waiting for redress.
She said: 'We do appreciate the scale of the task faced by the Foskett panel, and we knew it would take time. But I don't think Lloyds are looking at this from a humanitarian point. They don't recognise that there are a lot of elderly and ill people who may not be around forever, and who need that money.'
She said the bank had been 'good' at giving interim and hardship payments during its original compensation scheme.
But since Cranston ordered a new inquiry which could take years to complete, Lloyds has only offered £35,000 to tide victims over – back in 2019.
Lloyds had spent £435m on dealing with the scandal, as of the end of last year.
But only a fraction has gone to victims for their compensation, interim payments and legal costs. The remainder has been used to fund a fine levied by the City regulator, the costs of a separate review into whether Lloyds covered up the fraud, and its own legal costs.
Lloyds said: 'We remain extremely sorry to all customers who were impacted by the crimes committed at HBOS Reading and we are committed to putting things right. We are pleased that the first determinations from [the panel] have been communicated to customers. We will continue to provide all assistance needed to Sir David Foskett and the panel.'