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HBOS scandal: What happens next

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27th Apr 2017
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The result of one of the largest investigations into fraud in the UK has found six people, including two former HBOS bankers, guilty of fraud and money laundering offences.

The investigation, which took Thames Valley six years to undertake, started after allegations of fraud were unearthed. It was discovered that several struggling businesses were blatantly exploited by HBOS bank managers, who directed them to take on services from external consultants in return for bank loans. These services proved to be incredibly costly to these businesses, who were already finding it hard to stay afloat.

By profiting from bribes and high consultancy fees, these bank managers and consultancy staff were able to treat themselves to expensive jewelry and luxury holidays – all while many affected businesses had no option but to go bankrupt.

A recent report discovered that senior executives at HBOS knew about the fraud as far back as 2008, yet only ever attempted to cover it up.

Lloyds Banking Group took over HBOS and was subsequently forced to write off £250m from its impaired assets division. Up to £245m of this sum related directly to bank customers who had been under the management of Lynden Scourfield, a former manager with HBOS who pleaded guilty to six counts including corruption.

The HBOS scandal is a prime example of bankers and accountants taking advantage of vulnerable businesses that were desperate and in dire need of assistance.

What happened next?

It took 14 years for a trial to be completed, but it found the involved bankers and consultants guilty. Each of them was then jailed and fined.

In 2017, Lloyds promised to provide appropriate compensation to those who fell victim to the fraud. It was recently announced that the banking group would put aside £100m for compensation.

What steps can be taken?

Many financial experts believe that the £100m compensation fund doesn’t even start to cover the ongoing effects that the scandal has had on businesses across the UK. It is estimated that the figure required to cover all the losses from businesses could reach as high as £1bn – a far cry from £100m.

For any businesses that were caught up in the HBOS scandal, it is likely that civil proceedings will need to be brought if proper compensation is to be recovered.

Victims of the scandal can take the following steps in order to help their chances of receiving compensation:

  • Preserve and collate any evidence of dealings with the bank, including (but not limited to) written correspondence and documentation of meetings and conversations

  • Seek advice from a solicitor with a solid financial industry background, who will have the understanding and experience in similar schemes

  • Employ an expert accountant who will be able to establish the extent of losses suffered

  • Ensure correct agreements are in place for a legal claim to be made – such as issuing a protective claim form – in order to avoid the limitation period running out

Taking action early will avoid any limitation period running out on your claim, therefore giving you a better chance of being successful.

 

Find out more about these issues in berg’s ‘HBOS – the Background’ guide which takes an in-depth look at the HBOS scandal and resulting fallout. It has been compiled by berg and is free to download.

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