By Lawrence White and Iain Withers
LONDON (Reuters) – A long-awaited probe into what Lloyds Banking Group executives knew about one of Britain’s worst ever banking frauds is now not likely to be completed until next year, a source with knowledge of the review said.
The investigation by retired high court judge Linda Dobbs was launched in 2017 to assess whether Lloyds properly investigated and reported the fraud at HBOS, which it bought in January 2009. Lloyds is paying for the review but has said its conclusions will be independent.
“The independent Dame Linda Dobbs Review will continue to have all the time and resources it needs to complete its important work,” a spokeswoman for Lloyds said.
HBOS was once Britain’s biggest mortgage lender, and was rescued in a state-engineered takeover by Lloyds, which has apologised to victims of the fraud and set up a 100 million pounds compensation scheme.
A team of more than 30 lawyers is sifting hundreds of thousands of Lloyds documents, the source said, as well as interviewing victims of the fraud for which six people were jailed for a combined 47 years in 2017.
The inquiry will begin interviewing Lloyds executives from the Autumn, the source said, starting with more junior bankers and likely to include Chief Executive Antonio Horta-Osorio.
The work involves sifting through the documents to build a picture of what Lloyds’ senior executives knew about the fraud, what they did about it and when.
Lloyds has said that while it was aware of misconduct, it could not have known about the criminal nature of the fraud until the trial in 2017.
Britain’s influential cross-party Treasury Committee of lawmakers in June 2018 wrote to Dobbs asking when the review would be complete, and Dobbs said at that time it would slip into the second half of 2019, confirming a Reuters story from May that year.
“The delay is totally unacceptable. People want answers, this has been going on for 10 years and we still have not got to the bottom of this issue.” Kevin Hollinrake, chair of the cross-party parliamentary group for fair banking, told Reuters on Thursday about the fresh delay.
“I’m not questioning Dame Linda Dobbs’ integrity at all but it’s simply wrong that regulators are not taking the lead on this,” he said.
Lloyds in November 2018 settled with an ex-employee who accused her former bosses of concealing the fraud. The bank apologised to Sally Masterton, a former senior risk officer at Lloyds, and said that it had agreed to pay her financial compensation.
Masterton alleged HBOS executives knew of the fraud years before the Lloyds takeover and failed to properly disclose it.
The fraud, which took place in the early 2000s, saw the conspirators use their positions to enrich themselves at the expense of struggling business clients, some of which succumbed to insolvency and were stripped of their assets after being advised to borrow unsustainable amounts.
(Reporting By Lawrence White and Iain Withers; Editing by Alexandra Hudson and Elaine Hardcastle)