Lloyds is to re-open compensation claims to customers who were victims of a fraud scheme perpetrated by the HBOS Reading branch – which plundered £1bn from small firms to fund sex parties, superyachts and lavish holidays.
Lynden Scourfield, 54, a senior director of HBOS, ‘sold his soul’ to David Mills by forcing firms that needed to borrow cash to use his friend’s crooked consultancy firm.
Behaving like the ‘Mafia’, they would then use threats and extortion to seize control of the businesses, plundering bank accounts and pocketing massive new loans granted in their name.
The bankers referred businesses to a turnaround consultancy and stacked fees on top of them, increasing debt, destroying some of the businesses according to victims. They then splurged the money on prostitutes and luxury holidays.
At Scourfield’s trial, jurors were told the fraud was worth £245million, but victims and police sources said the cost to small firms ruined by the scam was up to £1billion.
Lynden Scourfield, 54, a senior director of HBOS, ‘sold his soul’ to David Mills by forcing firms that needed to borrow cash to use his friend’s crooked consultancy firm (he is pictured alongside Michael Bancroft and David Mills who were also jailed for their part in the fraud)
Scourfield (left) was jailed for 11 years and three months while Mills, 60, was given 15 years at Southwark Crown Court in February 2017. Escort Suzie Best (right) was a porn star who performed for Scourfield at sex parties he organised
Now, following an independent review into a compensation scheme for those affected, the former High Court judge Sir Ross Cranston has condemned Lloyds Bank for not delivering ‘fair and reasonable’ offers.
The London School of Economics (LSE) law professor said that a review commissioned by Lloyds, which took over HBOS in 2008, to compensate customers of the fraud, had ‘serious shortcomings.’
He said the bank failed to act in a ‘sufficiently clear and transparent way’ over ‘distress and inconvenience’ (D&I) payments, and that few, if any customers were well-treated by the Bank’s ‘forceful approach.’
Lloyds Bank’s boss Antonio Horta-Osario apologised to customers who were affected by the fraud and had not received sufficient redress.
He wrote: ‘Our intention…was to deliver fair and reasonable outcomes for customers in a swift way that would be more generous than through the courts.
‘Sir Ross has concluded that customers may not have received fair outcomes due to flaws in the review process. I am very sorry that this has happened.’
The bank has agreed to act on Sir Ross’ recommendations and promised to ‘fully support giving customers the option of a voluntary re-review of direct and consequential losses.’
Mills, 60, was given 15 years at Southwark Crown Court in February 2017
The HBOS Reading fraud saw financiers at the branch defraud several businesses between 2003 and 2007, including one run by TV star Noel Edmonds. Many were forced to close down after the event.
Scourfield was jailed for 11 years and three months while Mills, 60, was given 15 years at Southwark Crown Court in February 2017.
Michael Bancroft, 73, was jailed for 10 years, Mark Dobson, 56, for four-and-a-half years, and John Cartwright, 72, for three-and-a-half years for their various roles in the fraud between 2003 and 2007.
Mills’s wife Alison, 51, also played a major role in the corruption and was sentenced to three and a half years.
Sentencing, Judge Martin Beddoe said the case involved an ‘utterly corrupt senior bank manager letting rapaciously greedy people get their hands on vast amounts of bank money and their tentacles into ordinary and honest businesses’.
The bankers referred businesses to a turnaround consultancy and stacked fees on top of them, increasing debt, destroying some of the businesses according to victims. They then splurged the money on prostitutes and luxury holidays.
The case bears similarities to the 2013 film The Wolf of Wall Street, in which Leonardo DiCaprio plays a crooked broker who made millions as part of a stock market fraud – using his ill-gotten millions on lavish parties, cars, prostitutes and drugs.
Scourfield enjoyed ‘sexual entertainment… on a fairly frequent basis’ in return for his part in the scam. Wads of £4,000 cash to be spent on prostitutes were delivered to a central London flat where he entertained the women.
Nicknamed ‘funny money’, it was kept in a drawer along with a stash of Viagra. Suzie Best, a £250-an-hour escort and former adult TV star described the fat cat banker as a ‘short, balding Danny DeVito lookalike’ after one session at the rented flat in 2005.
Powder Monkey, the £2million superyacht owned by David and Alison Mills
This huge, white-walled villa was Bancroft’s home in Portugal, paid for from the funds they gained from their illegal scheme
She said the man with ‘grey, brushed-back hair’ asked her to go to the bedroom with him, but she ‘didn’t think he could get an erection at any stage’.
Another call girl, a porn star, kept a diary detailing a lurid lesbian show she and three other women performed for Mills and Scourfield in October 2005. A later entry read: ‘Chinese meal. Then drinks at flat and quick shag. Easy £1,500.’
Scourfield, who earned £88,600 a year, was also given free rein to travel across the world and splash out with an Amex card at Mills’ expense. He spent more than £57,000 on jewellery, clothes, and hotels during ‘boys’ jollies’ in Germany and the US.
Mills took him on several holidays, including a £4,000 seven-day cruise in Florida paid for on an Amex card from a struggling business.
Scourfield and Mills took their wives for a six-star cruise from Nice to St Tropez, staying in a royal suite on the three-day trip.
The Quayside consultants also enjoyed a luxury life from the money they stole. Mills and his wife Alison lived in a detached six-bedroom home, with swimming pool, tennis court and gym, in the affluent town of Chorleywood, Hertfordshire.
They also owned a 100ft £2million luxury superyacht called Powder Monkey, which was moored in the Mediterranean. Accomplice Michael Bancroft lives in a six-bedroom farmhouse in Warwickshire and had a villa in the Algarve.
He was employed by Quayside despite previously using £645,000 of shareholders’ cash at another company to pay for his lingerie model mistress, work on his family home and golf holidays.
Scourfield got away with his ‘deliberate, systematic and sustained’ scam for so long because of a ‘fundamental flaw’ in the banking system, the court heard before his sentencing.
Noel Edmonds was one of the customers defrauded by the HBOS Reading branch. He was awarded a multi-million pound compensation package earlier this year
An initial review of how to compensate victims was lead by another academic, Russel Griggs.
Sir Ross said that parts of that customer review were good. He especially praised ‘generous’ awards paid out to customers for distress and inconvenience.
But, he added: ‘Despite the merits of the customer review, I have concluded that it had serious shortcomings.
The most serious shortcoming concerned the bank’s approach to assessing direct and consequential loss caused by the criminal misconduct.’
The report found that Lloyds made inconsistencies over writing off debts. Customers who were still banked with Lloyds had their debts written off.
But it stated that the treatment of ‘customers who had refinanced their debts with other lenders, or who had repaid their debts to the Bank’ was tantamount to discrimination.
Some of the victims lost their companies, livelihoods and even their homes as a result of the scam.
Paul and Nikki Turner, from Cambridge, were ignored for years when they tried to report what was going on after their publishing company, Zenith, was run into the ground in the scam.
‘They defrauded us, denied for 10 years that the fraud had happened, ignored the debt from the fraud and tried to evict us 22 times in order to cover up the fraud,’ Mrs Turner said outside court in 2017.
‘It’s a huge success for us that the trial has gone on.’
She added: ‘The other victims have gone through terrible things, they have gone through the loss of businesses and lost homes.
‘Other people lost everything, including marriages broken up, because of this.’
When the wealthy gang of four men and a woman were convicted for the five-year fraud, Thames Valley Police commissioner Anthony Stansfeld described it as a ‘shocking’ and ‘disturbing’ crime.
The Financial Conduct Authority (FCA) said it was ‘disappointed’ that customers had not been ‘properly remediated’ for their losses.
They added: ‘Sir Ross’s inquiry was instigated by the FCA after listening to feedback and concerns from HBOS Reading customers, as it is vitally important that customers have confidence they have been treated fairly and their claims are assessed thoroughly.
‘While finding that some aspects of LBG’s approach were reasonable, Sir Ross has found serious flaws in important aspects of the approach taken by LBG, including failures to adequately assess claims for direct and consequential losses, the exclusion of some customers from the review and inconsistency in the way some customers were treated in respect of claims for distress and inconvenience.’
In a statement, Lloyds Banking Group’s boss Antonio Horta-Osario apologised to customers who ‘may not have received fair outcomes due to flaws in the review process’
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