Lloyds Bank criticised over ‘flawed’ compensation scheme for fraud victims

A group representing small businesses has attacked the City watchdog for allowing Lloyds Banking Group to set up a “flawed” compensation scheme for victims of fraud.

The SME Alliance has filed an official complaint with the Financial Conduct Authority alleging that Lloyds covered up its knowledge of criminality at the bank which hurt hundreds of businesses, pushing many into bankruptcy.

The complaint also claims Lloyds excluded some victims of a £245m fraud perpetrated by corrupt bank managers from receiving compensation.

Lloyds set up a compensation scheme in January 2017 after the conviction of former HBOS bank managers Lynden Scourfield and Mark Dobson along with “consultants” Michael Bancroft, David Mills and Alison Mills.

The group spent some of the millions they squeezed from small firms on luxury holidays, trips on Mr Mills’ yacht and sex parties with prostitutes.

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Noel Edmonds likens Lloyds Bank boss to a cockroach

Lloyds says its compensation scheme complies with the law and that it has written to all 71 companies it believes were affected.

But SME Alliance says the bank is unfairly limiting its liability by claiming that it only knew about the fraud in 2017, when the perpetrators were convicted.

Documentary evidence suggests that Lloyds chief executive Antonio Horta-Osorio and chief operating officer Juan Colombus knew about the fraud in 2012.

A 2014 report by chartered accountant Sally Masterson found that the bank had “deliberately concealed” the fraud which was more extensive than had been made publicly known.

The issue gained renewed publicity in recent weeks after Noel Edmonds, one of the victims, used his appearance on hit ITV show I’m a Celebrity to draw attention to his £60m legal battle with the bank.

The former Deal or No Deal star, who says his Unique Group collapsed as a result of the HBOS fraud, likened Mr Horta-Osorio to a cockroach.

Mr Edmonds has suggested that the Lloyds chief executive knew about misconduct, and claimed that the bank boss “wants to destroy me, he wants to crush me”.

On entering the jungle to film the show, Mr Edmonds said: “Hopefully I will stay in long enough that every time that I eat a cockroach millions of people will be thinking of Antonio Horta-Osorio.

“And do you know what? I may even enjoy eating that cockroach.”