Fund the fight on fraud

One of the worst frauds ever perpetrated in Britain was the HBOS Reading scandal.

Six so-called bankers went to jail for a total of 47 years after being found guilty of a scam involving £245m worth of dodgy loans. The full extent of the fraud is more like £1bn.

It took three police forces and over a decade for the Reading six to be put behind bars for their part in a fraud, which forced hundreds of corporate customers – who were already in financial difficulty – into penury.

Many innocent businessmen and women were chased into bankruptcy. Many had to sell their homes and there have been family tragedies because of the vile actions of the HBOS six. Some families still live in bedsits, their lives ruined by the two ex-HBOS bankers and four turnaround consultants who acted like mobsters in their wilful destruction of 200 small businesses with their asset-stripping.

On every level, the HBOS scandal was a shocker. This was a much more banal fraud than the sophisticated crimes involving rich bankers trading in complex derivatives which hit the headlines during the financial crash. But all the more venal for its banality and seediness. Two police forces turned down investigating the HBOS scam because of the cost. Luckily, the case was picked up by Thames Valley Police, and pursued doggedly by then chief constable, Sara Thornton, now head of the national Police Chiefs’ Council, and Police and Crime Commissioner, Anthony Stansfeld.

Most police commissioners would have said job done once the six were jailed.

not Stansfeld. He has pursued the circumstances surrounding the scandal with a vigour that is nothing short of heroic.

He was so saddened by the plight of the victims, and so incensed by what emerged during the inquiry, that he has turned fire on Lloyds Banking Group – which rescued HBOS at the height of the crash in 2009 – and continues to demand that the bank at least acknowledge it knew about the fraud allegations during the takeover. It’s fair to say that it is his tenacity that prompted Lloyds to appoint the former judge, Dame Linda Dobbs, to review whether the HBOS affair was properly reported to the authorities after the rescue operation.

now Stansfeld has a new prong to his campaign. Operation Hornet – as the inquiry was called – cost TVP £7m to investigate. He wants the Treasury to reimburse his police force, and for the policing and financing of fraud in the UK to be reformed.

Fraud costs the country a whopping £200bn a year while the social cost is unquantifiable. Yet the Serious Fraud Office receives only £35m a year while City of London police gets £15m. That can’t be right.

WHICH

is why he argues the TVP should be reimbursed from the £45m fine which Lloyds paid to the Financial Conduct Authority for failing to disclose suspicions of fraud at HBOS Reading.

Unsurprisingly, the Treasury – under previous chancellor Philip Hammond – has rejected his request, saying that all fines from the FCA go as revenues into the Government’s current account for general distribution. Stanfeld disagrees, and in his correspondence with the Treasury, argues that if TVP had not taken on the case, none of the money would have been recovered.

He has a good point, claiming the HBOS fraud should have been handled by the SFO rather than Thames Valley because of its size and complexity.

More worryingly, he suggests the SFO turned down the case because of pressure from the Treasury to protect the bank.

Who knows, but what is sure is that none of the authorities – the Treasury, the SFO, the FCA or the PRA – have yet to provide a satisfactory version of events surrounding the Lloyds takeover of HBOS, and who knew what or when. Stansfeld calls it a cover-up, and he may well be right.

Indeed, Lloyds’ internal Turnbull Report – which the board received in 2014 and which came to light only because of Operation Hornet – suggests directors knew about fraud allegations yet went ahead with the £14bn emergency rights issue. Hopefully, Dobbs will shed more light on the affair when her review is published next year.

In the meantime, Stansfeld has written to all Thames Valley’s 21 MPs and will pursue the funding issue with the Treasury Select Committee when it returns in the autumn.

Ministers be warned: this former Royal Green Jackets officer, who has fought in jungles and flown helicopters in some of the dodgiest places in the world, is not giving up this crusade any time soon.