LLOYDS BANKING GROUP Widespread wrongdoing and criminal fraud 4 th September 2019

1. LLOYDS BANKING GROUP Widespread wrongdoing and criminal fraud 4th September 2019 Westminster Central Hall

2. The Lloyds Scandal • The systemic criminality witnessed at Lloyds Banking Group is unprecedented in modern times. • Its Business Support Units were converted into profit centres by 2007 and following the banking crisis, customer assets and those of high value targets were mis-appropriated to improve the bank’s capital position. • For well over a decade, the Government has actively assisted the taxpayer-owned banks, Lloyds and Royal Bank of Scotland (RBS) to cover up their extensive misconduct and fraud. • The Chancellor, Treasury ministers and senior civil servants have co-ordinated these moves, while regulators and prosecutors have been complicit and obstructed investigation. • The scandal, especially relating to the taxpayer-owned banks, has undermined public trust in Government and Parliament, respect for the rule of law, and the reputation of the City of London, which remains the principal source of the UK’s invisible earnings.

3. More serious than every other UK banking scandal • With the Interest Rate Hedging Product (IRHP) and Payment Protection Insurance (PPI) scandals, bank staff were incentivised to sell unnecessary or unwanted financial products to customers and targets. • However, Lloyds’ Asset Theft Frauds have been considerably more serious because of the deliberate intent by the bank to use their Business Support Units to profit at the expense of customers. • For Lloyds Bank and its agents to have engaged in such activity against its customers, while simultaneously being bailed out by the UK taxpayer, is unforgiveable.

4. More serious than Australian banking scandal • Owing to the extent of criminality involved, it has also been more serious than the Australian banking scandal, which has witnessed numerous high-level resignations. • The Australian Government has confronted its serious problem, appointed a Royal Commission and compensated victims. Resignations of bank chairmen and chief executives have also taken place. • In the UK, the Government has covered it up for many years and Lloyds has lied, denied and used its virtually unlimited legal muscle to silence victims and targets.

5. Resignations demanded • Lord Blackwell - Chairman • António Horta-Osório - Chief Executive Officer • Juan Columbás - Chief Operating Officer • Lloyds’ non-executive directors • Lloyds’ senior legal representatives

6. Andrew Bailey - should not become the next Bank of England Governor - • Specially chosen by former Chancellor Osborne, Bailey has maintained a comprehensive cover up, at the request of Government, of serious wrongdoing by Lloyds Banking Group and RBS. This has included criminal misconduct. • The FCA refused eight times to publish the Section 166 (expert) report into RBS’ restructuring unit, GRG and in September 2017, Bailey declined the request of the Treasury Select Committee to publish this, claiming that it was “not in the public interest”. • A leaked version of the report then revealed widespread, systemic wrongdoing. Importantly, it exposed the fact that the FCA summary of the Section 166 report, produced in late 2017, had falsified the facts and conclusions, presumably to limit RBS’ liability. • Bailey has wrongly permitted Lloyds Bank to appoint three reviews - Griggs, Dobbs and Cranston - to investigate aspects of a £1bn fraud at HBoS’ Reading branch and its arrangements to compensate victims, after corrupt bankers and their associates had already been jailed. • Under his leadership, the Financial Conduct Authority has declined to investigate major cases involving allegations of serious wrongdoing and criminality by Lloyds Bank. • Andrew Bailey has been a leading contender to become the next Governor of the Bank of England but his integrity has now been too heavily compromised for him to assume such a position.

7. Lloyds Banking Group- very serious wrongdoing - • Targeting of asset-rich businesses and engineering customer defaults to assist in improving the bank’s capital ratios (whilst not accounting for compensation for damages) • Use of secret panels of leading multi-national firms (accountants, auditors, insolvency practitioners, solicitors and barristers) as agents to gain control of asset-rich targeted companies and individual customers’ assets estates including by allowing such agents to open and operate LBG bank accounts without anti-money laundering checks, to transact in what they do not own • Conspiracy to defraud through false representation, failing to disclose information and abuse of position in conjunction with their own agents, branded turnaround “professionals” • The use of secret, internal accounts including management obligation accounts (MOA’s) • Manipulation of property valuations to achieve engineered loan-to-value (LTV) covenant breaches • Manipulation of overdraft facilities and the levying of unfair and excessive bank fees and interest charges • Lying on the issue of whether Lloyds Business Support Unit had become a profit centre • Widespread wrongdoing and criminality involving the bank’s BSU network and agents including solicitors, insolvency practitioners, auditors and receivers, as well as bailiffs • Forcing supposedly “Independent Business Reviews” (IBRs) by secret panel accountancy firms upon customers to gain access and engineer the desired outcome for the bank

8. Lloyds Banking Group- more very serious allegations - • Extensive manipulation and wrongdoing involving the legal system • Reliance on deliberately invalid appointment documents for receivers/bailiffs • Systemic and long-standing mistreatment of whistleblowers • Indiscriminate use of Non Disclosure Agreements (NDA’s) to cover up criminality • Concealment by Lloyds’ Chairman of a whistleblower’s highly significant “Turnbull report” from the bank’s non-executive directors (September 2013) • Lying and the delivery of deliberately inadequate submissions to regulators re the Turnbull report • Lying regarding aspects of the Halifax Bank of Scotland (HBoS) Reading fraud, including when the bank first knew of these events • Routine discrediting of opponents and denials of all wrongdoing from board level downwards • Benefitting from cover up of serious criminal wrongdoing by one regional Police Authority and by the Solicitors Regulation Authority • Close association, including the sharing of “professional” agents, with a secondary lender, whose activities have been described as “a prima facie case of criminal fraud”

9. Deliberate targeting of customers’ assets • In 2007, Lloyds launched a three-year plan with the deliberate intention of deriving profit from customers, who were branded as being in difficulty and had been put into its Business Support Units (BSU). • The bank later denied that BSU was a profit centre. This was completely untrue. • Lloyds’ BSU units operated under an approved business plan, which was decided at group level.

10. Asset Theft Frauds • Originated well before the 2008 banking crisis but went into overdrive after this event. • By engineering notional customers’ defaults, capital could be re-allocated from non-core (lower grade) to core (higher grade borrowers) assets. • Branded panel accounting firms (agents) were used to take control of customers’ businesses.

11. Lloyds’ professional agents - protected from investigation - • Whole agent firms of solicitors, insolvency practitioners accountants, providers of secondees and receivers with bailiffs have engaged in, and profited substantially from, the most widespread white-collar fraud the UK has ever seen. • They have submitted false information into court to bankrupt customers, provided knowingly incorrect information to the Land Registry and engaged in receivership fraud. • Industry regulators including the Solicitors Regulation Authority (SRA) and the Royal Institute of Chartered Surveyors (RICS) have refused to address their extensive criminality. • Police and prosecuting authorities have also declined to investigate.

12. The HBoS Reading fraud - and the Turnbull report - • A major fraud occurred at Halifax Bank of Scotland’s (HBoS) Reading branch in 2003-2007. It would have prevented Lloyds Bank taking over HBoS in 2009, if it had been disclosed. • A Lloyds’ whistleblower wrote a highly revealing report, which described the widespread wrongdoing and criminality involved: the Turnbull report. • In response, Lloyds mistreated and tried to discredit the author, drove her out of the bank subjecting her to two non-disclosure agreements (NDA’s), covered up, lied and misrepresented her findings to regulators.

13. The HBoS Reading fraud- Investigation & compensation - • At its latest AGM, the Lloyds’ Chairman claimed that it had worked persistently to bring the HBoS criminals to justice. • Thames Valley Police instead have described how Lloyds claimed legal privilege over documents which were not entitled to be protected, supplied vast amounts of irrelevant information and briefed witnesses, prior to police interviews, on what they could say without breaching guidelines set by the bank and its lawyers. • Even when those involved in the fraud were found guilty and jailed, Lloyds Bank still refused to compensate victims of the fraud properly and was allowed to do so by the FCA.

14. Engineering the default- distinction between core and non-core assets - • Once capital had been re-allocated from non-core to core, it could be lent at a greater multiple to a higher quality borrower. Thus, if the bank incurred a loss defaulting a lower grade, non-core asset customer, it could potentially claim on the Asset Protection Scheme, which was announced by the Government in March 2009 covering £260 bn of Lloyds’ problem loans, and subsequently make a “consequential profit” by lending more capital to the higher grade borrower. • Meanwhile, for the lower grade, non-core asset customer, who had been placed in Lloyds BSU, their loan became instantly callable and they were subjected to higher interest and other financial penalties. Escape became virtually impossible. • The distinction between core and non-core was emphasised by the global private investment company, Legatum, which made a “significant investment” in Lloyds Banking Group in 2011. The company stated that Lloyds’ “stock price more than doubled in the 24 months that followed”. However, Legatum can no longer be traced among Lloyds’ major shareholders. • Some customers had their defaults engineered. This can happen in several ways: (1) Reassessment of loan to value – revaluation which significantly undervalued the business’ assets and puts them in to breach of their covenants. (2) Technical breach of covenants – such as a temporary dip in EBITDA or a late submission of information. These are often breaches that have no bearing on the performance or viability of the business. (3) Removal of or change to banking facilities and the move to asset-based finance.

15. Asset Theft Fraud- the use of “Trojan horse” accountants - Branded agents operating as accounting firms such as KPMG and PWC (the notional auditor) have worked with Lloyds and the “Trojan Horse” mechanism works like this, viewed from the angle of the accounting firm: • Gain an introduction to the company: always on an amicable basis. Become a non-executive director. • Befriend them: Persuade the company’s owners that you are there to help and are working in their best interests, even if this is not the case. Obtain full access to the accounts. Avoid formal instructions. • Recommend an Independent Business Review, which is never independent but is very expensive. Avoid giving a complete version of the report to the company’s owners. This will be reserved for the bank. Valuations will be downgraded, enabling LTV covenants to be broken in due course. • Introduce an agent as being a “turnaround professional”, who will work with you and the bank and against the company’s owners, despite the turnaround professional being officially the client of the customer, being paid by the customer and therefore, according to contract law and the Turnaround Professionals’ code of conduct, bound to act in the interests of the customer. • Restructure the finances and security to gain control: Demand extra security including personal guarantees. Introduce an adviser / manager to convey falsely the impression of independence. • The company’s owners have lost control, without even noticing the subtle changes in position.

16. Management Obligation Accounts - vehicles for secret wrongdoing - • The use of internal accounts such as MOA’s, also known as nostro or wash accounts, has long been criticised by the FCA and global regulators because of the lack of oversight, and their potential to facilitate wrongdoing or criminality. • MOA’s were accounts maintained by Lloyds Bank, which the customer never saw, despite the account referencing the customer name. Individual managers could operate these accounts, without having to obtain permission from a higher authority or the customer. • The bank could, and would, divert customer funds to these MOA accounts, where they were both hidden from the customer account and balance sheet, and were not used to pay down or offset the customer debt. • These accounts were, in fact, invisible and could not be used by the customer, seriously compromising their interests in terms of LTV and day-to-day operations. They could be used for fraud or the misappropriation of funds, in addition to countless breaches of regulatory codes and fiduciary duties. • We believe that they were extensively misused at HBoS and that this practice carried over to Lloyds, particularly its Business Support Unit.

17. Lloyds’ panel solicitors and receivers- wholesale wrongdoing - • Whole firms of panel solicitors and receivers have acted for Lloyds’ recovery units and engaged in professional misconduct, which they knew to be highly improper but over which they had been assured that they would be protected from investigation. Lloyds Bank has employed an extensive network of such “professionals”, who have subjected their customers to overwhelming harassment and intimidation. • “Insolvency” fraud (see next page): Panel, financially-interested solicitors acting as Lloyds Bank agents have facilitated the stealing of assets and funds from individuals and businesses, without any legal basis, processed through the judicial system. They have supplied false facts in order to achieve wrongful branding as “bankrupt” of customers and targets. • Property ownership fraud: Land Registry has accepted information supplied by panel solicitors and receivers, acting for Lloyds Bank, at face value knowing it is not true. This has led to widespread wrongdoing and serious injustice, when these submissions have been untrue. Land Registry (with SFO) should prosecute under section1, Fraud Act 2006 but has not done so. • Receivership fraud: LBG agents styled as “LPAReceivers”operating for Lloyds Bank have engaged in long-standing misconduct and criminality. These are not regulated. • Extremely lucrative: For decades, criminality has proved overwhelmingly profitable for fraudulent panel firms of solicitors, insolvency practitioners, receivers and barristers.

18. Insolvency Fraud - described - • Insolvency Fraud is a crime, which involves the stealing of assets and funds from individuals and businesses using insolvency law and the judicial system as the means through which to commit the crime. • The modus operandi by which the crime is committed is that what is written on the Statutory Demand is a false representation of facts, which brings the matter within the scope of the Fraud Act 2006, but the fact the Statutory Demand contains a false representation of facts, which is being passed off as genuine, brings the Statutory Demand within the scope of the Forgery and Counterfeiting Act 1981. • What is notable is that alleged debts amount to theft by deception (fraud). • What is of concern is that orders, purported to have been made by a court, have been found not to be in court files. • Court staff have also obstructed victims from seeing court files, calling on private sector security under contract to H M Courts and Tribunals Service or police officers to forcibly remove victims from court buildings, when they challenge court staff as to why they cannot see the file. • What is also of concern is that the judges who sit in the bankruptcy courts have, in the past, been solicitors or barristers within firms of Insolvency Practitioners and it is not beyond the realms of possibility that bias or undue partiality enters the equation.

19. Lloyds & Insolvency Practitioners- unduly close - • BDO is an example of a panel insolvency practitioner of Lloyds Banking Group (LBG). It takes on jobs as public company “auditor” so that LBG can work made up debt imposed on acompany without so much as a “by-your-leave” of directors under the articles or shareholders in AGMs. It makes itself inaccessible to receiving evidence that by law it must elicit, otherwise be debarred from reporting. • BDO, together with LBG, has been caught out in the courts, for wearing an LBG self-interested hat as well as that of some other statutory office holder, and LBG been ordered to deliver up its panel agreement with BDO. On 26th August, James Hurley wrote in the Times under the heading: “Lloyds Banking Group under scrutiny for insolvency ties”: • Lloyds Banking Group has been ordered to lift the lid on its relationship with insolvency practitioners after allegations that conflicts of interest damaged the position of other creditors. A High Court judge said Lloyds must reveal details of its insolvency agreement with BDO, the accountancy firm, in light of claims that the “impartiality and independence” of insolvency practitioners may have been undermined by their relationship with the bank. The judgment relates to a case in which Ventra Investments, a property firm, is suing Bank of Scotland, a Lloyds subsidiary, over allegations that it was damaged by mis-sold loans. When Ventra’s properties were sold off, the company also alleges that administrative receivers from BDO were “effectively under the control” of the bank and therefore unduly favoured the lender. According to court papers, Ventra’s liquidators claim that BDO’s position on the Lloyds “panel”, essentially a preferred status enjoyed by certain firms who win regular work from the bank, meant that it was unlikely to sue the lender should legal issues come to light. As such, BDO receivers “could not reasonably justify their appointments because they lacked (or, alternatively, there was a reasonable perception that they lacked) the requisite impartiality and independence”, Ventra claimed.”

20. Lloyds and receivership fraud- widespread disregard of the law - • Receiver’s invalid appointment: To be legal, a receiver’s appointment document (contract of engagement) should be signed as a deed and correctly witnessed by two directors, or one director and a company secretary. Lloyds has not been doing this and in the opinion of a leading authority on receivership in the UK, the receiver’s appointment documents, which he has seen, have been invalid. We believe that this has been entirely deliberate to distance the bank from the known criminality of their agents and operatives. • Attorney claim - a lie: In some cases, the panel receiver’s solicitors have been claiming that the receiver was now the customer’s attorney but, because he has not been appointed by deed, this is a deliberate falsehood. • Misrepresentation: Lloyds Bank has not provided their customer with the correct appointment documents and Articles of Association, so the customer cannot determine that their documentation has been incorrectly executed. • Unlawful sales: When the panel receiver proceeded to sell a customer’s property, the sale has been unlawful, not least because the receiver had not been correctly appointed - by deed.

21. Land Registry fraud - 1 • Banks typically do not lend. They assign true sale debt to a Special Purpose Vehicle (SPV) and then act much as a letting agent, collecting payments but not actually owning the property. The funds come from the SPV. • Banks pretend to have loan ownership by not updating the originators’ charge at the Land Registry. However, under Section 71 of the Land Registry Act 2002, the interests of unregistered parties must be declared. • The SPV then places a lien over and above the bank originator’s interest. The lien does not show up in the Land Registry’s records but it should do. • When banks’ panel lawyers go to Court, they can deceive even senior judges because the Land Registry’s records have not been updated and therefore an authority granted in order to gain possession is a false instrument, since its face value at the Land Registry has not been updated.

22. Land Registry fraud - 2 • Property transfer irregularities: Land Registry documentation shows the sale transfer for a property has been signed by just one manager of Lloyds Bank and witnessed by an assistant. This is not sufficient under the Companies Act 2006 and the failure may have been deliberate. • DS1 (discharge of charge document): When a bank is repaid, a DS1 form should be completed to show that the original charge on the property has been removed. Lloyds Bank is circumventing this by transferring all or part of the property on a TR / TP (transfer all / transfer part) document. • Sales not at arms’ length: The purchaser of a property, which has been sold by a panel receiver, requires a DS1 form to demonstrate to their bank that the original charge relating to the property’s previous owners, has been removed. In some instances, Lloyds Bank has funded the purchase of the property / properties being sold and the new purchaser’s solicitors have not requested a DS1 form. This violates the requirement that the sale of properties in receivership should be conducted at arms’ length.

23. Lloyds’ legal wrongdoing- unprecedented - • Lloyds Bank has undertaken widespread legal wrongdoing including the redaction, withholding, falsification and destruction of evidence; reliance on false instruments including deliberately invalid appointment documents for receivers, the forgery of signatures, perjury (lying in court) and other serious offences related to perverting the course of justice. • Judges have made decisions in favour of Lloyds Bank, which have ignored fundamental principles of British justice, violated civil procedure rules and provided indications of overwhelming bias. • Meanwhile, Lloyds Bank spent £850mn last year in legal expenses to contest claims made against the bank and intimidate victims and targets from speaking out.

24. Lloyds’ forgery of signatures - NCA appears unwilling to investigate - • The Chairman of the All Party Parliamentary Group (APPG) on fair business banking, Kevin Hollinrake MP is leading the bank signature forgeries campaign. • Lloyds Bank is accused of having forged signatures on legal documents on an industrial scale. • In this connection, Hollinrake has contacted Lloyds’ Chief Executive, Antonio Horta-Osorio and accused him of persistently deflecting “serious questions around both your firm’s and your own personal conduct raised by Members of Parliament.” • Together with the Thames Valley Police & Crime Commissioner, Hollinrake has taken evidence of signature forgeries to the National Crime Agency. However, the NCA has indicated no willingness to investigate.

25. NDA’s and whistleblowersmis-use and mistreatment • Lloyds Bank has used Non-Disclosure Agreements (NDA’s) to silence its victims and targets for many years. This may be the largest scale under which NDA’s have ever been mis-used in the UK. • The bank has also mistreated a significant number of whistleblowers, while paying lip-service to correct procedure. • Lloyds’ senior management has never been held to account for either of these types of serious misconduct.

26. Government role- total control and cover up - • The Chancellor and HM Treasury have deliberately blocked off the only two avenues available to victims of banking misconduct – regulatory and legal. • They have interfered with the law and committed multiple counts of securities fraud. • They have brought improper pressure to bear on prosecuting authorities. • The Executive branch of Government has ignored the Legislature and treated Parliament and due process with contempt.

27. Cost of banking scandal - greatest in terms of public trust - • The cost of remedying, arguably the UK’s most serious banking scandal, will be high. • However, because the extensive wrongdoing and criminality has been covered up by successive Governments, senior civil servants, regulators and prosecutors, the greatest cost will be in terms of the public’s trust in the Government and the Establishment. • Once the scandal becomes fully understood, it will lead to more demands for high-level resignations, prosecutions and comprehensive reform.

28. Financial Conduct Authority – complicit with Government - • Osborne’s appointment of the FCA chairman (2013) and his replacement of its Chief Executive (2016) demonstrated the Government’s contempt for the integrity of financial regulation at the highest level. • At its inception, the FCA was given a deliberately inadequate mandate and the Treasury retained ultimate control over the regulator. In addition, the FCA has: • Failed to investigate individual cases of serious wrongdoing by Lloyds and RBS and quietly dropped investigations in improper practices by banks. • Refused to publish the section 166 review into RBS’ business support unit, GRG - eight times. • Permitted Lloyds Bank to appoint three reviews regarding HBoS Reading, when it should have required the bank to compensate its victims correctly. • Recently, fined Bank of Scotland £45.5mn over the Reading fraud twelve years after the event, with the fine going to…..HM Treasury.

29. Financial Reporting Council– manipulated by Government - • The FRC is supposed to be the independent regulator of corporate governance and reporting in the UK, with the objective of maintaining public confidence in the financial governance of companies. • However, the Government appoints the chairman and deputy chairman of the FRC and its connections with Lloyds Banking Group (LBG) have been improperly close since 2006. The regulator has been chaired by former chairmen of LBG, while its conduct committee has been weighted with former partners of KPMG and its associates. • In 2013, the FRC refused to investigate KPMG’s 2007 audit of HBoS but changed its mind two years later, under pressure from MPs. In September 2017, having ignored important evidence from a third whistleblower, the FRC cleared KPMG of all wrongdoing. The evidence of two previous HBoSwhistleblowers, Paul Moore and Sally Masterton suggests that the FRC decision was a complete whitewash. • The FRC decision came conveniently one month before the opening of the court case involving Lloyds’ 2009 rights issue which, it is alleged, was based on information which was knowingly false. • However within a year of clearing KPMG of all wrongdoing, the FRC completed a complete U-turn and in June 2018, complained of “an unacceptable deterioration” in KPMG’s audit quality.

30. Interference with the law • A highly improper policy with regard to the law and judicial system has been conducted at the highest level of Government. • Securities fraud: The former Chancellor committed multiple counts of securities fraud. His conduct demonstrated a disregard for existing EU and UK securities legislation, including FSMA 2000. • Wrongdoing by banks overlooked: The Chancellor and HM Treasury have permitted certain activities, particularly those of the taxpayer-owned banks and their agents, to be “above the law” by covering up and not investigating. This has included, as mentioned, lying and the delivery of intentionally inadequate submissions to regulators, redaction of and tampering with evidence, forgery of signatures on an industrial scale, reliance on deliberately false documentation in court, perjury, the mis-use of NDA’s to cover up criminal conduct and other serious offences. • Legal costs inflated: The Government has priced victims out of justice, while Lloyds and other banks have monopolised the foremost legal talent on their panels and loaded so-called costs onto their opponents (targets) to force them to abandon their legal standing. • Manipulation of trials and trial dates and of the operation of the Criminal Cases Review Commission (CCRC).

31. Serious Fraud Office (SFO) – tightly controlled - • The Chancellor receives details of every case put up by the SFO for investigation and has tightly controlled the SFO’s budget. There is evidence which suggests that the SFO has deliberately taken no action in respect of certain cases involving the taxpayer-owned banks and their agents. • The SFO states that “If the information provided is not for us, we pass it on to other relevant enforcement agencies and regulators”. However, the majority of reports of serious fraud are ignored and no action is taken because of the excuse of inadequate funding or insufficient resources. • The number of new investigations opened annually as a percentage of the total number of whistleblowing reports received has been minimal. • As a result, the UK’s investigation of serious corporate fraud has become significantly inadequate by international standards.

32. Action Fraud- a long-standing farce - • Action Fraud is operated by Concentrix, a call-centre, to which all victims of fraud are first referred. It is a subsidiary of Synnex Corp, a California outsourcer. • Excellent work by The Times (15th-17thAugust 2019) exposed what one MP has termed the “utter disgrace” of Action Fraud, whereby victims are routinely mishandled, mocked behind their backs and required to clear a series of ever increasing hurdles before their cases are taken forward. Only 2% of cases per year currently result in successful prosecutions. • The Times’ articles revealed that new employees are required to sign gagging orders, so it is hardly surprising that the scandal has remained undiscovered for so long. • There can be little doubt that the Home Office has been aware of the complete inadequacy of Action Fraud for the years since the last outsourcer collapsed and City of London Police assumed responsibility.

33. Police and NCA- widespread reluctance to investigate - • Regional Police forces claim that they lack the resources and skill to investigate serious fraud, as the Thames Valley Police and Crime Commissioner has reiterated to the Chancellor, and almost all are unwilling to do so. • When challenged recently over its conduct, one regional Police & Crime panel chose to avoid the complainant by not answering them but leaving the meeting room. • The National Crime Agency (NCA) has little previous experience of investigating serious white-collar fraud. Unlike police, they are prosecutors. As recently as October 2018, the National Economic Crime Centre (NECC) was established within the NCA to attempt to make up for this shortfall but considerable doubts persist as to its capability and willingness (experience) to investigate serious fraud undertaken by banks. • One regional Police force is even alleged to have been complicit with Lloyds’ and other related frauds.

34. Parliament & due process - ignored - • The Executive (Government) has ignored the legitimate concerns of members of Parliament raised in numerous debates for more than a decade. • The supposed reform of the Financial Services Authority (FSA) into the FCA and the Parliamentary Commission on Banking Standards have, in key respects, been a sham. • Reports critical of the banks, which have been forwarded by civil servants to the Chairman of the Treasury Select Committee (TSC), have not been shared with other members of the committee. After its hearings, the TSC produces reports for Government but the latter is not required to act on them.

35. Chancellor & HM Treasury - multiple counts of securities fraud - • The Chancellor, notably Osborne, and HM Treasury have been responsible for carefully co-ordinated and extensive moves across Government departments to conceal certain damaging information from prospective investors involving professional misconduct and criminal wrongdoing by the taxpayer-owned banks. • The Chancellor and HM Treasury have committed multiple counts of securities fraud by taking such action, while simultaneously selling shares in the two banks to institutional and other investors. • The Government has chosen to conduct the sales by means of smaller tranches, because larger sales would have required greater disclosure in a comprehensive prospectus.

36. EU & UK securities law over-ridden • Securities law in the UK is governed by EC securities directives, the Financial Services Markets Act (FSMA) 2000 and FCA regulations. • Investors purchasing a given security require full and adequate disclosure, so that they can make an informed assessment. No material facts or circumstances should be omitted. • Instead, major wrongdoing at RBS-GRG and Lloyds BSU has been covered up, while from September 2013 to May 2017, the Government completed the sale of its 43% stake in Lloyds Bank and began sales of RBS shares. For everyone else, securities fraud remains a criminal offence.

37. Lloyds share sales- investors with reason to feel aggrieved -

38. Three principal objectives • Proper & just compensation: the proposed Business Bank Resolution Scheme remains deeply unsatisfactory and an insult to victims of banking wrongdoing and fraud, many of whom have suffered serious injustice, hardship and loss for a decade. • Prosecution of leading professionals among banks and their agents, who have been involved in professional misconduct and criminal fraud. • The introduction of comprehensive reforms. These will be essential to restore trust in the City of London and repair the UK’s damaged reputation in global finance.

39. Business Bank Resolution Scheme - deeply unsatisfactory - • Due and proper process disregarded: Lloyds Bank has been permitted to deny and lie about major wrongdoing, dismiss the majority of complaints and cover up. In the case of HBoS Reading, the bank has been allowed to appoint its own supposedly independent experts to assess victims’ cases. • The Business Bank Resolution Scheme (BBRS), which was first announced under a different name in November 2018 and is designed to come into effect in September, remains deeply unsatisfactory in many respects. Supported by UK Finance and seven leading banks, victims suspect that it is a deliberate attempt to continue awarding wholly inadequate compensation and to ensure that widespread wrongdoing and criminality remains covered up and is never investigated. • The proper and just solution would be for independent tribunals to assess victims’ cases and for the assessment of their consequential losses to be paid for by the bank in question. Compensation should reflect both consequential losses and punitive damages. Otherwise, there is no penalty whatever for the bank to have acted in the criminal fashion that it has over many years. The total amount of compensation should be index-linked, given that many cases are long-standing. It should also be paid free of tax, since the ultimate irony would be for victims to be required to pay back substantial amounts of tax to HM Treasury, the very body which has been responsible for covering up Lloyds’ criminality in the first place. Anything less would be a travesty of justice.

40. Suggested reforms - 1 • Commercial lending by banks should become a regulated activity and the banks should have a duty of care for commercial borrowers. • Non-disclosure agreements (NDA’s) should be reviewed and their mis-use to cover up criminal conduct should itself be made a criminal offence. • Banks should not be permitted to appoint their own “independent” experts to investigate allegations of serious professional misconduct and determine compensation claims for victims. • The Fraud Act 2006 should be amended to make fraud easier to prove and less expensive to prosecute. The excessively high cost of prosecuting corporate fraud continues to be actively used by criminals, including fraudulent solicitors, to escape prosecution. • The penalties for criminal fraud of seven to ten years’ imprisonment should be significantly increased. • Bank officials and their agents, who have been responsible for serious criminal conduct, should be prosecuted. This would result in an immediate improvement in standards of conduct.

41. Suggested reforms - 2 • The Financial Services Act of 2012 should be revised to eliminate HM Treasury’s powers of direction over financial reviews. • Laws governing insolvency require comprehensive overhaul because they have been widely abused by fraudulent insolvency practitioners. • The 1925 Law of Property Act requires revision, while the role of accountancy firms in insolvency, independent business reviews (IBR’s) and administrations requires specific attention and rules governing pre-pack administrations should be tightened. • The UK’s prosecution of fraud is blatantly inadequate since fraud is estimated to cost the UK up to £190 bn annually. The agencies responsible for prosecuting fraud require comprehensive reform, starting at the bottom with Action Fraud. • The Serious Fraud Office should be set up to be entirely independent of Government and financed from fines on banks and other financial companies. A less preferable alternative would be to increase the SFO’s core budget and make it less reliant on blockbuster funding. Either way, the annual number of new investigations needs to rise significantly. • The major Police authorities should receive a significant increase in funding to enable them to investigate and prosecute serious corporate fraud. By engaging the appropriate experts, they could investigate cases, which the SFO may still not have the capacity to pursue.

42. Suggested reforms - 3 • Immediate criminal investigations should be launched into the past conduct of the recovery units of Lloyds Banking Group and Royal Bank of Scotland. • The operation of the FCA requires significant reform. Its remit requires obvious adjustment to promote the highest standards of financial conduct. Its terms of reference should also be changed, so that it can consider individual cases. The credibility of the Financial Ombudsman Service (FOS) is too badly damaged for victims to trust it to adjudicate their cases fairly. • There should be a much clearer distinction between regulators, prosecutors and those institutions over which they regulate and exercise authority. The present system, whereby senior FCA / SFO staff can resign and transfer to the private sector after only six months has brought the regulatory and prosecutorial regimes into severe disrepute. A minimum gap of two years should be instituted and remuneration increased to reduce the incentive to move. • The Financial Reporting Council (FRC) should be staffed by independent professionals, who have no connection with the firms they are investigating. • Self-regulation by professional bodies such as the SRA, RICS and ICAEW has not functioned correctly and has actively discriminated against or ignored legitimate complaints. External entities should be established to review and rule on complaints and the failure of their regulatory functions, which looks to have been deliberate, should be investigated. This especially applies to the SRA and its failure to hold certain fraudulent solicitors, who have acted for banks, to account. • Firms of solicitors should be held jointly and severally liable for their partners’ actions and the status of limited liability partnership (LLP) should not stand, in the event of criminal fraud or other criminal conduct being proven.

43. Other reports by this author • “Serious corporate fraud in the UK” (May 2014), based substantially on material sourced from the UK’s foremost investigative journalist, Ian Fraser, the author of “Shredded” on RBS. Report sent to Home Secretary, Theresa May. Reply received three months later from HM Treasury, saying that no-one had any time to discuss it. • “The Inconvenient Truth - Lloyds Bank, secondary lender (not named for legal reasons) and their involvement in criminal fraud” (January 2015). Sent to the Treasury and Business, Innovation & Skills Select Committees. • “The SRA, SDT and corruption at the highest level” (August 2016). Sent to the Attorney General and the Lord Chief Justice. • “A District Judge with questions to answer” (October 2016). Sent to the Minister of Justice and the Judicial Conduct Investigations Office (JCIO). • “Lloyds Recoveries, Bristol – the key to more extensive fraud” (July 2017). • Presentation to the Deputy Director General, FISMA, European Commission Financial Regulator, Brussels (September 2018). • “Larger Than Watergate” (December 2018). Sent to every MP and a wide representation of the national press and media.