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Categorized | Banks

Six on trial over £245m HBOS write-offs

Posted on September 26, 2016

An employee manually counts 20 pound sterling banknotes in this arranged photograph inside a Travelex store, operated by Travelex Holdings Ltd., in London, U.K., on Friday, Sept. 12, 2014. The pound, already suffering its worst month in more than a year, has the potential to tumble 10 percent should the Scots vote for independence from the U.K., according to economists surveyed by Bloomberg. Photographer: Matthew Lloyd/Bloomberg©Bloomberg

A “corrupt relationship” between a senior HBOS banker and a business consultant and their associates led to the bank writing off losses of £245m because of their “wholly dishonest and fraudulent actions”, a London court has heard.

A jury at London’s Southwark Crown Court heard that between 2003 and 2007, Lynden Scourfield was a senior manager in the impaired assets division for HBOS, now part of Lloyds Banking Group.

    Mr Scourfield required struggling business customers within his banking portfolio to use the services of David Mills, a business consultant and his company QCS to act as a turnround adviser so the companies could obtain further bank lending.

    Huge sums were then advanced to the businesses by Mr Scourfield even when it was “obvious” that the bank debt could never be repaid, prosecutor Brian O’Neill QC alleged.

    Mr Scourfield acted in this way to enable Mr Mills and his associates to be paid “very high fees” for their consultancy services and then to allow Mr Mills and his associate Michael Bancroft the chance to take over the struggling businesses and run them for their own benefit, the trial heard.

    Mr Mills provided “huge” rewards to Mr Scourfield including money transfers, expensive gifts, cash, use of an American Express card for personal spending and “inappropriately lavish hospitality” as well as foreign travel and high-class escorts, the court heard.

    HBOS incurred losses of £245m in respect of customer lending managed by Mr Scourfield, the trial heard, which later had to be written off.

    Mr Mills and his wife Alison and four other associates including Mark Dobson, a HBOS banker and accountant Jonathan Cohen, are all on trial at Southwark Crown Court. They all deny wrongdoing.

    “The motivation was greed,” Mr O’Neill told the jury. “The police investigation which took place uncovered evidence of huge rewards provided by David Mills to Lynden Scourfield to effect his corruption,” he added.

    Large amounts of money were paid in fees by HBOS customers classed as “high risk” to QCS and QCS then transferred money into the bank accounts of David Mills and his wife Alison, the prosecutor alleged.

    Some £28m passed through the couple’s personal accounts or the accounts of Mr Mills’ corporate entities, the court was told. It is not suggested the couple retained all that money for personal benefit but the couple did “benefit enormously”, Mr O’Neill told the jury.

    “Scourfield was the goose who was laying the golden eggs; David Mills just had to keep feeding him. And feed him he did,” Mr O’Neill told the court.

    Alison Mills, who once worked for Close Brothers, knew all about her husband’s business activities, the trial was told. Her 40th birthday trip to Barbados was attended by Mr Scourfield and Michael Bancroft, another QCS consultant, the jury heard.

    Mr O’Neill added that employees at HBOS “do not emerge well from the investigation, most particularly Paul Burnett who was Lynden Scourfield’s immediate line manager . . .”

    He told the jury that “some of the bank’s systems and processes undoubtedly contributed to Scourfield’s ability to behave dishonestly.”

    Mr Burnett was replaced in 2006 and a new HBOS manager Tom Angus took over responsibility for the bank’s impaired assets division and became concerned about Mr Scourfield’s activities.

    HBOS then commissioned an internal review into Mr Scourfield’s actions in mid-2006 and concluded there were gaps in formal sanctioning of loans. The matter was later escalated to the Financial Services Authority which then informed the police.

    Mr Scourfield is not on trial. Mr O’Neill told the jury that they should not speculate as to his absence from the trial or possible reasons for it.

    David Mills, 60, denies six counts including four of fraudulent trading. His wife Alison, 51, denies two counts of fraudulent trading and money laundering.

    Mark Dobson, 55, an ex-senior banker at HBOS, denies two counts including conspiracy to corrupt and money laundering.

    QCS consultant Michael Bancroft, 73, denies five counts including three of fraudulent trading.

    Jonathan Cohen, 57, a former accountant at Brett Adams who lives in Hyde, Cheshire, denies two counts including one of fraudulent trading.

    John Anthony Cartwright, 71, who lives in Pinner, Middlesex, denies three counts including two of fraudulent trading.

    The trial continues.