MPs have demanded to see the report of an alleged cover-up of a £1 billion fraud at HBOS Reading.
The investigators who looked into the allegations for Lloyds Banking Group (LBG) have been told they must hand over their findings to the prestigious Treasury Select Committee.
Committee chairman, Nicky Morgan, has already seen a leaked copy of the report and says she found details disclosed in it ‘deeply troubling’ and said her committee would demand ‘maximum transparency.’
It is understood the report claims HBOS failed to report the fraud before it was rescued from collapse by Lloyds at the start of the 2008 financial crisis.
The fraud took place at the Halifax/Bank Of Scotland office in Reading where corrupt bankers forced business customers to take on a firm of so-called ‘turnaround’ specialists.
But, instead of being helped, the firms ended up being ruined with many of those involved in losing their livelihoods, marriages and health.
LBG ordered an internal investigation, code-named Project Lord Turnbull. The secret report, originally presented to the bank in 2013, appeared on the internet last week and has since been published by MP Kevin Hollinrake, chairman of the All Party Parliamentary Group on Fair Business Banking.
Mr Hollinrake’s committee has now asked both the Serious Fraud Office and the National Crime Agency to investigate what went on as ‘the only way that we can truly identify and provide remedies for the destruction of individual businesses and the loss that investors have suffered.’
The committee argued: “We need an impartial, independent redress process so that those whose lives and businesses have been wrecked by these scandals have their faith restored in the system and receive proper compensation for their loss.”
In April, LBG ordered a second investigation into the incident under Dame Linda Dobbs. It has not committed to making its findings public which has led to MPs demanding to see it.
Ms Morgan said: “The fraud at HBOS Reading was a shocking crime that destroyed lives and livelihoods. There are numerous investigations into the events, including the Dame Linda Dobbs Review and an investigation by the Financial Conduct Authority (FCA).
“There are deeply troubling allegations raised in the ‘Project Lord Turnbull’ report, which are at the heart of Dame Linda’s and the FCA’s investigations. The committee will consider the findings of this work when it’s completed.
“In the meantime, we will continue to press for maximum transparency. It is overwhelmingly in the public interest to understand how such a huge criminal fraud was allowed to happen, and why it took so long for it to come to light.”
The author of the Project Lord Turnbull report was LBG senior manager Sally Masterton and she was the first to uncover evidence of the fraud.
In the report’s executive summary, written in September 2013, she said: “Proper disclosure of the Reading incident in July 2007 would have re-written history for HBOS, Lloyds TSB and the government.
“HBOS should have been a gone concern in February 2008. It was hopelessly insolvent by July 2008. The strategy since January 2007, and possibly from 2005, has been to conceal the Reading incident,
“Concealment set in motion a course of events that has had and continues to have far-reaching and very serious consequences, extending to the Lloyds TSB takeover. LBG is significantly exposed.”
It is understood that just over two weeks after submitting the report she was placed on enforced leave.
A spokesman for LBG said: “The bank remains determined to get to the bottom of what happened in HBOS Reading and we share the Treasury Committee’s desire for transparency.
“We welcome the statement by Nicky Morgan MP, chair of the Treasury Select Committee. We continue to support the FCA investigation and the separate, independent Dame Linda Dobbs review.
“We will, of course, assist the Treasury Select Committee in its consideration of these matters and will fulfil any requests made to us, including the provision of Dame Linda’s review findings.”
“In April, LBG ordered a second investigation into the incident under Dame Linda Dobbs. It has not committed to making its findings public which has led to MPs demanding to see it”