Law firm was ‘un­eth­i­cal’ in its bank fraud ad­vice, say MPs

The Daily Telegraph - Business - - Business - By

Lucy Bur­ton

CITY law firm Her­bert Smith Free­hills has been at­tacked by MPs for “un­eth­i­cal” or “in­com­pe­tent” con­duct while ad­vis­ing Lloyds on a ma­jor bank fraud in an ex­plo­sive com­plaint to the le­gal watch­dog.

In a 21-page sub­mis­sion sent to the Solic­i­tors Reg­u­la­tion Author­ity, seen by The Tele­graph, a group of MPs have ac­cused the le­gal gi­ant of lack­ing “pro­fes­sional in­de­pen­dence” and pri­ori­tis­ing “short-term com­mer­cial ob­jec­tives” while ad­vis­ing Lloyds on Bri­tain’s big­gest ever bank fraud, which took place at Lloyds’ HBOS Read­ing branch.

The All Party Par­lia­men­tary Group on Fair Busi­ness Bank­ing crit­i­cises the law firm for the ad­vice it gave the bank on its com­pen­sa­tion scheme for HBOS Read­ing vic­tims, whose busi­nesses were de­stroyed be­fore the last fi­nan­cial cri­sis by bankers who spent their gains on hol­i­days and pros­ti­tutes. It also crit­i­cises the ad­vice it gave the bank over staff whistle­blower Sally Master­ton.

In its com­plaint to the SRA, sent on July 9 and ti­tled “un­der­min­ing con­fi­dence in the le­gal pro­fes­sion”, it said the law firm’s con­duct “ap­pears to be un­eth­i­cal”, adding “in­com­pe­tence may pro­vide an al­ter­na­tive ex­pla­na­tion”.

It added: “The APPG is con­cerned that, in the per­ceived im­per­a­tive to suc­cess­fully rep­re­sent their client’s in­ter­ests, HSF ap­pears fre­quently to have sub­or­di­nated, to the point of ex­clu­sion, the ques­tion ‘is this right?’”

The HBOS Read­ing fraud in­volved re­fer­ring trou­bled firms to a con­sul­tancy firm in the early 2000s, send­ing some small busi­nesses into in­sol­vency. Man­agers were al­legedly bribed with sex par­ties, lux­ury hol­i­days and ex­pen­sive watches.

Lloyds said in 2018 that it “very much re­grets” its treat­ment of Ms Master­ton, whose ex­plo­sive dossier claimed that ex-Lloyds and HBOS bosses knew about a ma­jor fraud at HBOS’s Read­ing branch be­fore it was taken over by Lloyds in 2009.

A spokesman for HSF de­clined to com­ment.

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