Humiliation for Lloyds over £1bn small firm fraud

Bank is forced to compensate whistleblower over damning dossier on scandal at HBOS Reading

LLOYDS Banking Group has been forced into a humiliating settlement with a whistleblower who claimed executives covered up a notorious fraud.

It yesterday apologised to Sally Masterton, who compiled a bombshell dossier about criminal bankers and advisers linked to its HBOS Reading unit.

In a highly significant admission, the bank did a U-turn on its stance that she produced the 2014 report on her own initiative. It has now conceded that she wrote it after bosses had asked her to document her concerns.

Masterton has been paid an undisclosed sum in compensation for her ordeal.

Campaigners and MPs last night called for a full investigation into why Lloyds initially disowned her findings.

Kevin Hollinrake MP, co-chairman of the all-party parliamentary group on fair business banking, said: ‘Lloyds previously accused Sally Masterton of making unsubstantiated allegations and made her out to be a rogue employee. This proves that was not the case. There is a feeling that there was a conspiracy of silence and that people were hoping this would just go away.’

Georgina Halford-Hall, of Whistleblowers UK, said: ‘I hope the admission by Lloyds that they had misled the public and Parliament will be the catalyst for a full review into the conduct of the board and senior leadership at this bank.’

Lloyds faces a Financial Conduct Authority probe into what HBOS and its executives knew of the fraud. Separately, retired judge Dame Linda Dobbs is carrying out a review for Lloyds of whether it properly probed the incident after acquiring HBOS in the financial crisis. The Serious Fraud Office is also understood to be taking an interest.

Masterton’s report claimed former directors, including then chief executive Andy Hornby (pictured), knew individuals linked to HBOS’s Reading branch were wrecking small business customers’ firms as long ago as 2008.

They are also said to have sought to keep details private as the bank teetered on the brink of collapse and a rescue takeover by Lloyds was pushed through.

The fraudsters, jailed last year for a total of almost 50 years, spent their takings on prostitutes, holidays and luxury goods. The scandal is thought to have cost Lloyds as much as £1bn.

When details of Masterton’s report emerged last year, Lloyds said her work was not requested or sanctioned and contained unsubstantiated allegations. Masterton took leave from her duties at the bank, and left in 2014.