This is a letter from Anthony Stansfeld [who appears in The Great British Mortgage Swindle] on the failure of the UK’s governing and regulatory institutions to hold the banks to account for decades of endemic fraud.
It was originally published here by Noel Edmonds, who is also engaged in an epic legal battle against HBOS.
Everything the Police Commissioner wrote in the letter echoes what he told me when I was fortunate enough to meet with him, last summer.
What he describes is exactly what Bank of Scotland did in my family’s case, which caused a legal war of attrition it took almost a decade to win.
HIGH LEVEL FRAUD
Before becoming the Police and Crime Commissioner for the Thames Valley, one of the UK’s largest police forces, I had served worldwide as an Army Officer, worked in intelligence and been a Managing Director of an aircraft manufacturing company with aircraft in 120 countries. I did not expect that as a PCC much would shock me, I was wrong. The scale of corruption within at least four major UK banks, aided and abetted by their legal advisors, auditors and accountants has been on a massive scale.
Fraud is usually complicated, but the basics of this were simple. Profitable companies and farms with assets or loss making companies with assets that far exceeded their loans from a bank would be targeted. The company loans would be transferred to a branch that purported to specialise in company restructuring. Its sole purpose was to make as much money as possible for the bank and its corrupt managers by liquidating the company.
They would grossly underestimate the value of the assets, sell them at far less than actual value, recoup the loan, share the profits of the resale at proper value amongst their cohorts and then go for the personal guarantees of the company owners. Often this would be done through documentation that had been altered and signatures forged. The bank would regain far more than the original loan and those that assisted made fortunes. The victims lost everything. The amount of money involved runs to over £100Bn.
There has been little effort or enthusiasm by the many regulatory authorities, notably the Bank of England, the Serious Fraud Office (SFO) and the Financial Conduct Authority (FCA) to either stop these frauds or bring the perpetrators to justice. Corruption seems to have become institutionalised and considered normal practice.
There is ample evidence for both the scale of wrong doing and the companies and individuals responsible. Unlike Libor and PPI, these frauds were not skimming off the top. They ruined many tens of thousands, families and jobs have been destroyed. Homes, farms and possessions have been repossessed on forged documentation across the country. The damage to the UK economy has been massive.
The underlying problem is that senior white collar crime is not seen by the establishment to be a real crime. The National Crime Agency claims that Serious Organised Crime (SOC) is running at £38Bn a year. It also states that fraud is running at £190Bn a year. I pointed out that £152Bn seemed to have gone missing and that the majority of that was SOC.
A senior Metropolitan police fraud officer wrote to the Treasury Select Committee in 2017 stating that the executive boards of some of our most prominent banks were SOC syndicates. His report was hastily buried. From everything I have seen and which has become apparent over the last three years, he may well have a point.
In 2013 the Thames Valley Police started to investigate claims of a large fraud in HBOS bank. The fraud was based in just one branch, Reading. Two other police forces and the SFO had already turned the case down.
The only reason TVP took on the case was that a family who had been ruined by the bank carried out an investigation and correlated the other victims of the bank. The bank had tried 21 times to evict them from their house. That was enough to convince the Chief Constable that an investigation should be initiated.
The fraud was large, it had destroyed numerous companies and individuals and nearly £1Bn had been stolen, both from the banks customers and from the bank itself. Throughout an expensive and extensive three year investigation the bank did little to help, in fact the opposite.
Throughout the investigation Lloyds Bank, which had taken over HBOS, denied it had itself been a victim of the crime. The bank had known about the fraud since 2008. The bank was defrauded at least £100m. HBOS was different from the other banks perpetrating similar frauds in that its management seemed to allow the bank itself to be a victim.
In February 2017, the long trial in Southwark Court came to an end with guilty verdicts on 6 fraudsters, and the heaviest prison sentences for a fraud ever in the UK. It was only then that Lloyds Bank which now owned HBOS, would admit a fraud had taken place.
An internal review into what had gone on in Lloyds, called the Turnbull Report, had been written by an employee in 2013. It laid out in detail the consequences of the wildly inaccurate and possibly fraudulent KPMG audits carried out on the HBOS accounts.
These had overlooked massive holes in the bank balance sheet approaching £40Bn, and the concealment of the £1Bn fraud carried out in Reading. On the back of these audits, both HBOS and Lloyds had raised billions in Rights Issues on knowingly false accounts.
KPMG were also the auditors of the Co-Op Bank and Carillion. The senior partner of KPMG became Chairman of the FCA. It is interesting to note that the Chairman of the Financial Reporting Council (FRC), which is meant to monitor auditors, gave the KPMG audits of HBOS a clean bill of health. The Chairman of the FRC was in his previous job Chairman of Lloyds.
The Turnbull Report was written by a senior Lloyd’s accountant, Sally Masterton. It named both the companies and individuals involved in both the frauds and the cover up. She was promptly made redundant with minimal compensation.
The bank denied the report was authorised and did its best to denigrate its author. Both the Bank of England and the Financial Conduct Authority received the report in early 2014. In spite of the evidence neither took action.
Three years after Sally Masterton was sacked the bank had to admit her report was authorised and she was paid compensation. The failure of the FCA to protect Sally Masterton is disgraceful, it took others to ensure the bank apologised to her and paid her compensation. Needless to say, it was accompanied by a draconian Non-Disclosure Agreement (NDA).
In 2017 it became apparent that the Turnbull Report had been concealed by the 3 man Executive Board of Lloyds from their own Chairman and non-executive directors. I personally ensured the Chairman, Lord Blackwell, was sent a copy of the report in March 2017. He took no action in spite of it being clear that a number of fundamental company rules had been flagrantly broken by his executive board.
As far as it can be ascertained he concealed the report from the other non-executive directors for a further year. Anita Frew, the senior non-executive Director of Lloyds, was asked when the Chairman shared the report with the other non-executive Directors. It is a simple question she would not answer, and neither would the Company Secretary.
I believe it was not until the report was published through parliament that she and the other non-executive directors were aware of the report. It is clear that a devastating report of Lloyd’s financial misconduct was concealed from the main board of Lloyds for at least three years.
Similar frauds to HBOS were also going on in Lloyds itself, RBS, Allied Dunbar and Clydesdale part of National Australian Bank, (NAB). As Nikki & Paul Turner collated evidence to present to the TVP regarding the Lloyds/HBOS Reading fraud, Mike McGrath has collated evidence for Lloyds Bank victims, Dereck D’Eye has collated evidence for Allied Dunbar victims, Miles Pengelly has collated evidence for Acorn victims and Ian Lightbody has collated evidence for NAB victims to present to the police nationally through many police forces to help the police limit their recourses and time.
In Lloyds alone at least 5 branches would appear to be involved. None of these has been investigated properly. Most police forces have neither the capacity nor capability to take on white collar fraud based on banks. Lloyds Bank spends nearly a billion on high priced lawyers annually.
The SFO receives less than £40M a year to combat fraud. Its inability to win high profile cases against banks is symptomatic of this. The cost to TVP of taking on the Reading case was £7m. It clearly deterred other forces from taking on major fraud cases. However I am delighted that at last Avon and Somerset Police, having been pushed by their Police and Crime Panel, have invited Thames Valley Police to investigate what went on in Lloyds Bristol.
It is estimated that RBS alone took down around 16,000 companies. A proportion of these may not have been viable, a great number were, and had never defaulted on loans. The companies were pushed into the RBS Global Restructuring Group. This was meant to assist companies, not destroy them.
Its Chief Executive told the Treasury Select Committee it was not a profit centre. It made billons pillaging companies. He has yet to be held to account for this. He was so successful in bolstering the bank’s profits that he was head hunted by Santander Bank to be their Chief Executive. The FCA and the Bank of England stood back and did nothing.
The SFO is now in possession of both the Turnbull Report and detailed files on the use of forged documents and signatures that have been used to convince courts to bankrupt a vast number of individuals and repossess their homes.
The Turnbull report has sat with the SFO for 9 months, and with the FCA and Bank of England for five years. Action by them is well overdue. The evidence is clear. The files that cover the forged documents have been with the SFO for a month. Again the evidence is clear. I trust it will not be covered up like so much else has been.
Similar frauds were perpetrated in both the US and Australia. In the US, the banks were fined £25Bn for the forging of documents and bankers gaoled. In Australia the government set up a Royal Commission. Its report is devastating and the police are now taking action against the bankers and associates involved.
In the UK nothing has been done. There would appear to have been a systematic cover up. The Bank of England, the FCA, the FRC and a number of other bodies have failed to hold the banks to account. It has been at the expense of thousands of small and medium size companies. The bail out of Lloyds and RBS by the Treasury has compounded the loss to the UK economy of so many viable companies being destroyed.
The Government should set up a full Public Judicial Inquiry into what went on in our banks, how it should be prevented ever happening again, why the regulatory authorities covered it up, how the victims should be compensated and who should be prosecuted.
The UK needs a profitable banking system and it needs an honest one. The two are not incompatible.