Sinead Moore 31 Jan 2017 01:42pm

Former HBoS bankers found guilty of fraud

Two former HBoS bankers and four other individuals have been convicted of corruption, fraudulent trading and money laundering following a five-month trial

They now face lengthy jail terms when they are sentenced later this week for their part in a financial scam that drove businesses into the ground, all for their own financial gain. The scam eventually saw the bank incur losses in the region of £250m, the Crown Prosecution Service (CPS) said.

Lynden Scourfield, a former HBoS employee responsible for helping businesses in financial difficulty, and David Mills, a former banker, spearheaded the scheme.

Mills bribed Scourfield with cash payments and money transfers amounting to several hundreds of thousands of pounds. Mills also provided lavish hospitality, expensive foreign holidays and prostitutes.

In return, Scourfield insisted that customers who were in financial difficulty, employ Mills’ turnaround company Quayside Corporate Services Ltd in order to obtain further lending from HBOS.

Scourfield then advanced large sums of money to the struggling businesses, knowing that the debt could never be repaid.

Mills and his associates, including his wife Alison, Michael Bancroft, and Tony Cartwright, were then able to demand very high fees for their “consultancy services” and in some cases, took over the running of the ailing firms for their own benefit.

Many of the businesses affected by the group’s actions went into liquidation, resulting in job losses, financial hardship, marital breakdowns, the loss of their homes and serious ill-health.

Stephen Rowland, specialist prosecutor from the CPS specialist fraud division, said, “Many people have had their lives ruined by the corrupt behaviour of Lynden Scourfield, David Mills and their associates.

“Scourfield worked in a section of his bank which was supposed to help struggling businesses but instead, motivated by greed, he went about stripping them of their assets.

“This was a complicated prosecution due to the volume and complexity of the financial transactions and the large sums of money involved. But in the end thanks to the work of prosecutors and investigators the jury were left in no doubt that the actions of these six defendants were criminal.”

Scourfield pleaded guilty to conspiracy to corrupt, conspiracy to launder the proceeds of crime and four counts of fraudulent trading in August 2016.

Mark Dobson, who worked for Scourfield at HBoS, was also convicted of conspiracy to corrupt and conspiracy to conceal criminal property in the trial this week.

Mills was convicted of conspiracy to corrupt, four counts of fraudulent trading and conspiracy to conceal criminal property and his wife was also convicted of conspiracy to conceal criminal property.

Mills’ associate Bancroft was convicted of conspiracy to corrupt, three counts of fraudulent trading and one of conspiracy to conceal criminal property. Cartwright was convicted of fraudulent trading and conspiracy to conceal criminal property.

One defendant, Jonathan Cohen, was acquitted.

Those convicted are due to be sentenced on 2 February.

In 2012, former HBoS director Peter Cummings was fined £500,000 and banned from holding any senior position in a UK bank, building society, investment or insurance firm, following the bank’s collapse.

The Financial Services Authority (FSA) said it was the largest fine it has ever imposed on a senior executive for management failings.

In January last year, the Financial Conduct Authority launched an investigation into former senior managers over the bank’s collapse.

The FCA said, "These investigations will determine whether or not any prohibition proceedings should be commenced against them. The FCA and PRA continue to review materials with a view to making further decisions regarding other former HBOS senior managers."

The announcement came a week after the Financial Reporting Council (FRC) launched an inquiry into KPMG and its audit of HBoS’s accounts.

The probe will focus on the Big Four firm’s auditing of the bank and why it granted it “going concern” status in 2007 a year before it had to be bailed out following the financial crash.

Despite KPMG being vindicated in a joint report from the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) in November 2015, the FRC came under renewed pressure to investigate the firm.