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