MPs to Lloyds Banking Group: ‘We will publish report on HBOS Reading fraud’
A cross-party group of MPs today said it will publish a report on an alleged cover-up by Lloyds executives of fraud at acquisition target HBOS at the height of the financial crisis.
The All-Party Parliamentary Group on Fair Business Banking will put the report in the public domain within seven days of a letter sent yesterday to Lloyds boss Antonio Horta-Osorio.
The so-called Turnbull Report details the massive fraud perpetrated by former bankers at the HBOS Reading branch, and alleges that senior managers at Lloyds were "aware of the fraud prior to Lloyds's 2008 takeover of HBOS but action was taken to cover up the fraud", according to the letter, which has been seen by City PM
The fraudsters drove multiple small businesses out of business and stripped their assets for their own gain.
KPMG has also been asked for a statement to accompany the report's publication which, the letter alleges, says auditors at the firm "knew that shareholders and investors were being deliberately misled".
However a KPMG spokesperson said: “We strongly refute these allegations, which we believe to have no basis in fact. We have not seen the report in question and had no involvement in its preparation.
“We have cooperated fully with the detailed investigations undertaken, including those by the PRA / FCA and the FRC, none of which concluded that our work did not meet the applicable audit standards of the time.”
Kevin Hollinrake, the MP who leads the group, wrote that "the public interest would be served by the report being made available for public scrutiny".
Hollinrake told the House of Commons in May that "senior managers" within Lloyds knew of the fraud before the takeover but took "clear, deliberate and documented action to conceal it".
The publication of the report would likely be another damaging reputational blow to Lloyds. The UK's largest retail bank is currently awaiting a judgement in a separate shareholder action also related to the HBOS acquisition in which Lloyds is accused of misrepresenting the risks of the purchase.
The report was shared with both police and regulators in 2014, although there are concerns that the publication of the report may have legal implications if it breaches the privacy of customers and employees named.
A Lloyds spokesperson said: "We have already provided this report to Dame Linda Dobbs, whose independent review will consider whether the issues relating to HBOS Impaired Assets office in Reading were investigated and appropriately reported to authorities at the time by Lloyds Banking Group, following its acquisition of HBOS in 2009.
"Dame Linda’s review is the appropriate forum for considering the report in conjunction with a very significant number of other documents and with input from interviews with relevant parties."
The report was written by Lloyds employee Sally Masterton in 2013, at the request of "Sue Harris, Group Audit Director", the letter said. Hollinrake asked Horta-Osorio to explain earlier statements which appeared to say that Lloyds did not commission the investigation.
MPs were sent a copy of the report by Michael Bancroft, one of six serving sentences totalling 47 years in connection with the fraud, the letter said.