Bombshell memo ‘shows Lloyds plan to exploit firms’
Customers plundered in RBS-style plot to seize assets, court hears
LLOYDS executives plotted to profit from troubled clients at the height of the financial crisis, court documents claim.
The papers allege the exploitation of firms recently revealed to be prevalent at Royal Bank of Scotland was also happening at Lloyds.
Liquidators for a car auction site who are suing Lloyds have revealed the existence of an explosive 2008 memo.
It outlined a plan to double the income the bank would take from struggling businesses it was supposedly helping nurture back to health.
In a pre-trial hearing held last week the liquidators said: ‘This document is, in effect, Lloyds’ equivalent of the now notorious RBS “Dash for Cash” manual for making money out of its “business support” activities.’
An RBS executive in 2008 wrote a memo to staff outlining plans to extract fees from troubled firms, which he had called ‘Project Dash for Cash’.
An official report into RBS’s global restructuring group – revealed by The Mail on Sunday earlier this month – found subsequently that the bank was focused on plundering clients for fees rather than getting them back on their feet.
The secret Lloyds memo threatens to drag the bank into the furore about the poor treatment of firms facing difficulties. Lloyds has already faced criticism over its behaviour towards clients in its HBOS Reading branch. It inherited this operation when it took over the former Halifax Bank of Scotland in the financial crisis.
The court papers allege documents have been disclosed showing that Lloyds’ Business Support Unit was trying to profit by taking stakes in distressed companies at rock bottom prices. Staff were incentivised to carry out the plan to profit from struggling business owners, the papers allege.
The 2008 memo outlined three key objectives. One of these was the‘ doubling of income’ and another was‘ moving from defenders to strikers ’, denoting a more aggressive approach to customers.
Lloyds planned to build a network of insolvency practitioners to help it carry out its plan, including people working for accountancy giants PwC and KPMG. The memo talks of making money from firms by ‘buying the business at low value’. The Lloyds executive who wrote it, Matthew Packham, aimed to ‘maximise income and gains’.
The full memo has not yet been made public. Its existence was revealed in a case brought by the liquidators of Premier Motor Auctions, a company set up and run by entrepreneur Keith Elliott which went into administration in late 2008.
The liquidators, Menzies, are suing PwC and Lloyds for £50 million over the collapse, claiming they conspired to remove Mr Elliott as part of a broader plan that allowed the bank to take a stake.
The car auction site was introduced to a PwC partner by Lloyds in 2008 after it had cashflow problems.
Premier Motor Auctions claims it was told the partner wanted to become a non- executive director. The company alleges the partner passed on confidential financial information to the bank, which led to PwC carrying out a review of the business. The firm was later put into administration and Lloyds took a stake.
Lloyds, which is disputing the claim, said its Business Support Unit (BSU) is not a profit centre and its objective is to restore customers’ troubled companies to financial health. It rejected any comparison to poor behaviour at banks such as RBS.
The bank added that the document set out theoretical ideas that were never fully put into practice.
Mr Elliott told The Mail on Sunday: ‘We now have the smoking gun which proves that Lloyds had a concerted strategy to exploit distressed companies for its own financial gain. The BSU arrived at the doors of companies offering help, but it was a Trojan horse to get inside and take advantage.’
The case will be heard at the High Court in April.
TOP management at Santander have been rocked by fresh revelations about the role of its UK chief executive Nathan Bostock in a previous job at RBS.
The disclosures are a headache for Baroness Shriti Vadera who chairs Santander’s British operation and is understood to be very supportive of Bostock.
He is expected to argue he was fighting to stabilise RBS’s huge and volatile £2.2 trillion balance sheet at the time in question.
It has emerged that Bostock presided over the major committee overseeing GRG, the now notorious unit of RBS that plundered some of its business customers.
Leaked documents show that Bostock was the chair of the Executive Committee of GRG.
He also sat on two other major committees overseeing key aspects of the division’s activities.
The regulator, the Financial Conduct Authority, is weighing action in relation to failings identified at GRG. Bostock and one of his lieutenants, Chris Sullivan – who was also at RBS and is currently commercial banking boss at Santander – could be in the firing line.
Sources have suggested that the FCA could decide they are not fit and proper people to run a bank. Bostock was the head of risk and restructuring at RBS from 2009 to 2013. An official report commissioned by the City regulator found that at that time GRG was pillaging small firms for cash when it should have been trying to help them.
Bostock managed Derek Sach, the man who was in day- to- day charge of GRG. But Bostock’s direct involvement in major committees is less well known.
Documents leaked to website BuzzFeed show he was on the Strategic Investment Group (SIG) Committee. SIG managed the property and share stakes the bank had seized from struggling businesses that fell into its hands, in the hope of making a profit from them.
Bankers frequently strongarmed entrepreneurs into handing over shares or property under threat of pulling the plug.
The official report was critical of this practice, saying that RBS should not have been taking stakes in small businesses in particular.
Bostock also sat on the Strategic Property Group committee. This oversaw West Register, a division of GRG that bought up properties from clients in financial difficulty.
Chris Sullivan, the former head of commercial banking at RBS, has been arguing in recent weeks that he had little to do with GRG.
But Sach told the Treasury Select Committee in 2014 that Sullivan was also on the executive committee which oversaw GRG.
The saga is an embarrassment for Santander which is trying to build up its small business banking arm. It wants to apply for cash from RBS to encourage customers to switch. RBS is being forced by the European Commission to fund rivals to take its business banking clients as a condition of its 2008 bailout.
Smaller banks are complaining about rules that will allow Santander to apply, saying that as the bank is almost as large in business banking as the Big Four, boosting it will only replicate what the Big Four already offer and not increase competition.
There are several large pots of cash available, and the rules mean that only those who offer business current accounts and already operate at a major scale can apply, ruling out all but a handful of banks.
Santander declined to comment.