Two chief executives of collapsed mortgage bank HBOS were involved in the cover-up of a notorious fraud that ruined scores of firms, according to a shocking secret report.
A damning internal review seen by The Mail on Sunday alleges that executives at the highest level tried to conceal details of the HBOS Reading fraud.
Those accused include ex-chief executive Andy Hornby, now a multi-millionaire gambling boss, his predecessor James Crosby and Peter Cummings, the disgraced onetime head of corporate banking.
A damning internal review alleges that executives at the highest level tried to conceal details of the HBOS Reading fraud
Former chairman Lord Stevenson, now a mental health activist, is also named as one of those allegedly responsible for suppressing facts about the fraud.
Conservative MP Kevin Hollinrake, co-chairman of the All Party Parliamentary Group on Fair Business Banking, named the men in the House of Commons last week.
He said: ‘Those named as culpable for nondisclosure in the report include chief executive Andy Hornby, chairman Dennis Stevenson, former CEO James Crosby, CEO James Crosby, corporate CEO Peter Cummings and auditors and reporting accountants KPMG.’
The Financial Conduct Authority is investigating the alleged cover up. The HBOS Reading fraud led to the jailing of six individuals in January 2017 for plundering small firms and the bank for personal gain between 2003 and 2007.
A court heard how they indulged in luxury cruises and sex parties document explosive document with the proceeds of their crimes.
The report, which was kept under wraps for five years until The Mail on Sunday saw it this weekend, claims the HBOS board failed to come clean about the shameful episode.
If the directors had revealed the truth, the report says, it would have ‘rewritten history for HBOS, Lloyds and the Government’.
Those accused include ex-chief executive Andy Hornby, now a multi-millionaire gambling boss
It says HBOS was ‘hopelessly insolvent by July 2008’ and would never have been rescued that autumn as Lloyds would have been scared off by the prospect of large fraud losses, which the report puts at up to £1 billion. With legal cases ongoing the final cost to Lloyds remains unclear.
Questions might also have been raised as to whether the fraud was an isolated episode or happening elsewhere in the bank. The report says shareholders in both banks suffered ‘substantial loss’ as a result of the concealment.
However, investors have found it difficult to prove and win redress for such alleged losses. Calls were growing this weekend for the full report to be published.
Lloyds, and before it HBOS, have always argued they did not know fraud had been committed until the parties were convicted in 2017.
The report, however, compiled in 2013 by a Lloyds risk expert, alleges which bankers, auditors and insolvency practitioners knew what had gone on, and when they knew. It says the laptop of jailed banker Lynden Scourfield was wiped immediately after he left, contrary to bank policy.
KPMG was said to have been ‘complicit’ in withholding information from investors, knowing that disclosure would be ‘potentially fatal’ for HBOS – an allegation that KPMG denies.
Lloyds said a review it launched last year led by High Court judge Dame Linda Dobbs would investigate the cover-up allegation. It added: ‘We have reviewed the allegations and taken the information within the report seriously.’ Hornby, Crosby, Cummings and Stevenson could not be reached for comment.
But the bank has said the report contains ‘many unsubstantiated allegations about individuals…the majority of which are made without any supporting evidence’.
Why the document is so explosive
The 160-page seen by The Mail is known inside ‘Turnbull report’.
It is an internal review of what HBOS and Lloyds executives knew about the Reading fraud.
The report was completed in 2013 by a risk expert who has now left the bank after passing it to a senior internal auditor.
Lloyds says it handed the report to police and City regulators. Its full contents have never been made public until now.
Victims want it published to show how their concerns about their treatment were ignored by the bank.
The clamour for transparency over the banks’ treatment of small firms echoes the campaign to reveal a report commissioned by City regulators into RBS, which was also exposed in The Mail on Sunday.