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Cash, cruises and sex parties: inside ex-HBOS manager's £245m scam Cash, cruises and sex parties: inside ex-HBOS manager's £245m scam
(35 minutes later)
At the height of the credit boom in 2005, a financier was sent by his boss to a corporate flat in Portman Square in London’s West End.In his hand was an envelope containing about £4,000 in cash for which he had been given specific instructions. At the height of the credit boom in 2005, a financier was sent by his boss to a corporate flat in Portman Square in London’s West End.
He was to hand the package to a business contact called Lynden Scourfield, then a lead director of the HBOS bank’s impaired assets division, who was expected to be entertaining guests in the apartment. Or, if the banker wasn’t in residence, the cash was to be left for him in “the blue drawer”, which referred to the spot that was also used to store Viagra for sex parties. In his hand was an envelope containing about £4,000 in cash for which he had been given specific instructions.
He was to hand the package to a business contact called Lynden Scourfield, then a lead director of the HBOS’s impaired assets division, who was expected to be entertaining guests in the apartment. Or, if the banker wasn’t in residence, the cash was to be left for him in “the blue drawer”, which referred to the spot that was also used to store Viagra for sex parties.
That might all seem like the preamble for a new Netflix series, on which the scriptwriters still have to do a bit of work.That might all seem like the preamble for a new Netflix series, on which the scriptwriters still have to do a bit of work.
But it was the scene-setter that greeted jurors at Southwark crown court in September, as they prepared to hear a fraud case relating to one of the crustiest of finance sectors, corporate banking. This is the seemingly tired old trade of lending money to businesses.Still, the narrative took the courtroom back to a financial period when almost any indulgence was encouraged – and was justified by unremarkable operators who assumed their own genius was making them rich. But it was the scene-setter that greeted jurors at Southwark crown court in September, as they prepared to hear a fraud case relating to one of the crustiest of finance sectors, corporate banking. This is the seemingly tired old trade of lending money to businesses.
Still, the narrative took the courtroom back to a financial period when almost any indulgence was encouraged – and was justified by unremarkable operators who assumed their own genius was making them rich.
However, now it can be reported for the first time that Scourfield, 54, is corrupt, and pleaded guilty last year to six counts relating to his role in a scheme that cost the bank £245m.However, now it can be reported for the first time that Scourfield, 54, is corrupt, and pleaded guilty last year to six counts relating to his role in a scheme that cost the bank £245m.
On Monday his business associate David Mills, 60, who ran a small business turnaround consultancy Quayside Corporate Services (QCS), his wife Alison Mills, 51, plus their associates Michael Bancroft, 73, and Tony Cartwright, 72, were all convicted for their roles in helping to run Scourfield’s scam. On Monday his business associate David Mills, 60, who ran a small business turnaround consultancy Quayside Corporate Services (QCS), Mills’s wife. Alison, 51, plus their associates Michael Bancroft, 73, and Tony Cartwright, 72, were all convicted for their roles in helping to run Scourfield’s scam.
A sixth man, Mark Dobson, 56, who worked for Scourfield at HBOS, was also convicted, while one other defendant, Jonathan Cohen, 57, was acquitted.A sixth man, Mark Dobson, 56, who worked for Scourfield at HBOS, was also convicted, while one other defendant, Jonathan Cohen, 57, was acquitted.
Despite his absence from the courtroom having changed his plea last year, Scourfield’s presence loomed over proceedings each day of the four-month trial.The jury heard more lurid stories of those parties held in the London flat, which prompted one sex worker to comment on Scourfield’s movie star looks (sadly for him, Danny de Vito). They also heard how, apart from funding the evening entertainments, Mills also applied to have a second card on his American Express account, which was issued under Scourfield’s name. Despite his absence from the courtroom having changed his plea last year, Scourfield’s presence loomed over proceedings each day of the four-month trial.
That Amex card was used to pay for, among other things, a £5,880, three-day cruise between Nice and St Tropez in October 2004, which was booked by Scourfield for himself and his wife, as well as Mr and Mrs Mills. The jury heard more lurid stories of those parties held in the London flat, which prompted one sex worker to comment on Scourfield’s movie star looks (sadly for him, Danny de Vito). They also heard how, apart from funding the evening entertainments, Mills also applied to have a second card on his American Express account, which was issued under Scourfield’s name.
That Amex card was used to pay for, among other things, a £5,880, three-day cruise between Nice and St Tropez in October 2004, which was booked by Scourfield for himself and his wife, as well as the Millses.
It also shows a booking for a seven-day jaunt for the Scourfields after boarding the Grand Princess cruise ship in Miami earlier that year, plus on-board expenses totalling $2,769 (£2,215), of which $1,580 was spent in the ship’s gift and jewellery shop.It also shows a booking for a seven-day jaunt for the Scourfields after boarding the Grand Princess cruise ship in Miami earlier that year, plus on-board expenses totalling $2,769 (£2,215), of which $1,580 was spent in the ship’s gift and jewellery shop.
In return for Mills’s generosity, the prosecution alleged, Scourfield would use his position within HBOS to make some demands of his clients and their struggling businesses, such as hiring Mills as an expensive adviser to firms before they could receive loans. In some cases, the jury was told, Mills and his associates also took control of the struggling companies, running them for their own benefit.In return for Mills’s generosity, the prosecution alleged, Scourfield would use his position within HBOS to make some demands of his clients and their struggling businesses, such as hiring Mills as an expensive adviser to firms before they could receive loans. In some cases, the jury was told, Mills and his associates also took control of the struggling companies, running them for their own benefit.
“Scourfield advanced huge sums to the businesses, and continued to do so well past the point when it would have been obvious to any honest banker that the bank debt could and would never be repaid,” prosecution counsel Brian O’Neill QC told the court. “Scourfield advanced huge sums to the businesses, and continued to do so well past the point when it would have been obvious to any honest banker that the bank debt could and would never be repaid,” Brian O’Neill QC, prosecuting, told the court.
He added that more than £28m passed from HBOS through the bank accounts of either Mills, his wife or companies under his control – and while not all of that money stayed with the defendants, Mills and his wife “did benefit enormously”.He added that more than £28m passed from HBOS through the bank accounts of either Mills, his wife or companies under his control – and while not all of that money stayed with the defendants, Mills and his wife “did benefit enormously”.
But who was hurt by all this? Lloyds Banking Group is one victim. It had taken over HBOS, was rescued by the taxpayer and was subsequently forced to write off £250m from its impaired assets division. Of that sum, £245m related to bank customers under Scourfield’s management.But who was hurt by all this? Lloyds Banking Group is one victim. It had taken over HBOS, was rescued by the taxpayer and was subsequently forced to write off £250m from its impaired assets division. Of that sum, £245m related to bank customers under Scourfield’s management.
Meanwhile, campaigners say that lives of some of the people running the businesses have been ruined as they watched firms they had built up being milked.Meanwhile, campaigners say that lives of some of the people running the businesses have been ruined as they watched firms they had built up being milked.
All of which was allowed by the lax controls within the bank, the jury was told. The court heard how the HBOS computer system permitted bankers to approve credit positions of clients without approval. The manager who discovered the scam described the failings as “astounding”.All of which was allowed by the lax controls within the bank, the jury was told. The court heard how the HBOS computer system permitted bankers to approve credit positions of clients without approval. The manager who discovered the scam described the failings as “astounding”.
Giving evidence in court, Tom Angus, who took control of the bank’s impaired assets in July 2006, recalled how he had produced an internal review in 2007 focussing on 38 struggling businesses, each of which had received “irregular” loans and which together owed the bank £375m. All 38 were supervised by Scourfield.After his review, Angus had been left with “the clear impression that Lynden [Scourfield] had been agreeing substantial amounts of credit to distressed companies … completely without his authority and without any authorisation from [his bosses]”.These observations were backed up by the so-called David Miller report, published in May 2007, plus a separate investigation by the HBOS corporate financial crime prevention team, which produced the first of its its three reports on 27 March 2007. Scourfield left the bank on 8 March that year before formally resigning a month later. Giving evidence in court, Tom Angus, who took control of the bank’s impaired assets in July 2006, recalled how he had produced an internal review in 2007 focussing on 38 struggling businesses, each of which had received “irregular” loans and which together owed the bank £375m. All 38 were supervised by Scourfield.
After his review, Angus had been left with “the clear impression that Lynden [Scourfield] had been agreeing substantial amounts of credit to distressed companies … completely without his authority and without any authorisation from [his bosses]”.
These observations were backed up by the so-called David Miller report, published in May 2007, plus a separate investigation by the HBOS corporate financial crime prevention team, which produced the first of its its three reports on 27 March 2007. Scourfield left the bank on 8 March that year before formally resigning a month later.
Yet even after all that, HBOS insisted to victims that there had been nothing wrong with Mills’s QCS.Yet even after all that, HBOS insisted to victims that there had been nothing wrong with Mills’s QCS.
Some of the bank’s former clients told the Guardian they were stunned to hear from the trial that HBOS had investigated loans presided over by Scourfield before the bank told them there had been no fraud.Some of the bank’s former clients told the Guardian they were stunned to hear from the trial that HBOS had investigated loans presided over by Scourfield before the bank told them there had been no fraud.
Lloyds insisted on Monday it was only the police that had the ability to investigate if there had been a fraud and added: “The trial highlighted criminal actions that bear no reflection on the behaviours of the vast majority of the employees of HBOS at the time or in the group today.”Lloyds insisted on Monday it was only the police that had the ability to investigate if there had been a fraud and added: “The trial highlighted criminal actions that bear no reflection on the behaviours of the vast majority of the employees of HBOS at the time or in the group today.”
All of which does little to alleviate the sense that the period of financial history focused on during the trial was one of a long orgy, kept going artificially with other people’s money. With the benefit of hindsight, Scourfield’s evening entertainments look an apt metaphor.All of which does little to alleviate the sense that the period of financial history focused on during the trial was one of a long orgy, kept going artificially with other people’s money. With the benefit of hindsight, Scourfield’s evening entertainments look an apt metaphor.