Lloyds Shareholders commence legal action against HM Treasury and directors
Former Chancellor Darling, Sir Victor Blank and Eric Daniels accused of hiding huge HBOS debts to save merger deal
June 05, 2010, Press Dispensary. An unprecedented legal action has been launched as a result of the former Labour Government’s handling of the financial crisis which could expose the taxpayer to a £14 billion bill.
Shareholders in Lloyds Banking Group state in a letter of claim that former Chancellor Alistair Darling and Lloyds TSB directors unlawfully withheld vital information about HBOS’s finances in a prospectus on which they were asked to vote to save the stricken lender.
Secret loans by the Bank of England of £25.4 billion saved HBOS from declaring bankruptcy and, arguably, a run on the pound at a critical time for the financial system but the price was a collapse in the merged bank’s share value and suspension of shareholder dividends once the debts became public.
Demands for compensation on behalf of test claimants belonging to the Lloyds Action Now campaign group have now been sent to the Treasury which assumed responsibility for the circular selling the merits of the deal. They have also been sent to former Lloyds TSB chairman Sir Victor Blank and CEO Eric Daniels.
Once the test cases have been resolved the association will act collectively on behalf of the broad base of share holders who have lost between £1.50 and £3.00 a share depending on their cause of action. In total all shareholders have lost £14 billion between them and their dividends have been suspended until at least 2012.
Lawyers for Lloyds Action Now say that keeping secret a £25.4 billion loan ‘of last resort’ made by the Bank of England to keep HBOS afloat in October 2008 before shareholders approved the merger a month later was a misrepresentation of the facts and contrary to law.
“We would prefer not to pursue a case based on deceit but as presently instructed we cannot see how this can be avoided.
“There can be no doubt that the fact of the £25.4bn loan was not only being kept secret for the possible advantage of the UK banking system, but was deliberately kept secret so that LTSB shareholders were not put off the proposed acquisition of HBOS,” said Jim Rai, head of litigation at Winckworth Sherwood, acting for Lloyds Action Now.
Lloyds Action Now contends shareholders were deceived into shouldering the burden of saving HBOS which should have fallen more fairly on taxpayers in general. As it was, once HBOS debts became public knowledge the Government was still forced to step in and partially nationalise the bank which also raised extra cash to staunch the wounds inflicted by HBOS with two rights issues.
A major factor in the case which has put the Government in the dock has been the extraordinary intervention of Permanent Secretary Sir Nicholas Macpherson under whose name an assumption of liability for ‘facts and omissions’ appeared in the prospectus on the part of the Treasury.
Mr Rai continued: “Information in the document relating to HM Treasury and for which Sir Nicholas was responsible has been revealed to be incorrect in substantial detail. At the time of making the Statement Sir Nicholas was aware that the Bank of England (“BoE”) had made an advance of £25.4bn to HBOS during or about October 2008. This material fact was not disclosed in the Lloyds TSB Circular. Having assumed a duty of care towards shareholders of LTSB by making the Statement, it was the duty of Sir Nicholas to disclose that fact.”
Lloyds Action Now was founded a year ago and has since joined forces with another group, the Lloyds Private Shareholders Action Group, part of the UK Shareholders Association. The combined membership is 500 with new members joining on a daily basis.
Alice Beer, the broadcaster and former BBC TV Watchdog presenter, said: “There are 800,000 shareholders in total who have been hugely affected by what has happened.
“They are by no means City fat cats, but overwhelmingly ordinary men and women who were saving for their retirement or retirees living off their dividends. Many have lost everything and it is a complete injustice that they have been used in this way.”
The Association is holding the first of a series of regional meetings in Reading on Wednesday June 9th as part of an awareness campaign being conducted nationwide.
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Notes for editors
Extensive background information about Lloyds Action Now, its structure and the case against the Government and Lloyds directors can be found on the campaign’s website www.lloydsactionnow.
The association’s full letter of claim against on behalf of test claimants can be obtained by clicking here. The identities of the claimants have been redacted in this version of the document.
Lloyds Action Now is a not-for-profit organisation set up by shareholders for shareholders. It has instructed leading London law firm Winckworth Sherwood as solicitors and other professionals to assist with the case management and promotion of the case. Again, full details are on www.lloydsactionnow.com.
The association and its advisors have spent a year researching the economic, political and legal background to the Lloyds TSB/HBOS merger and the direct involvement of former Prime Minister Gordon Brown in one-on-one meetings with former Lloyds chairman Sir Victor Blank. Sir Victor resigned shortly after the AGM of the combined Lloyds Banking Group in June last year where he was subjected to extensive criticism over the merger that made his continued stewardship untenable.
LBG CEO Eric Daniels was similarly criticised for the way in which the merger was carried out by the Treasury Select Committee to whom he admitted that only a third of the due diligence that might normally expected on such a deal was actually carried out. In a second appearance he insisted a minor reference to support given to HBOS in the merger prospectus, instead of stating the exact amount of £25.4 billion, was ‘thorough disclosure.’
When he was Liberal Democrat economics spokesman, Business Secretary Vince Cable said in Questions to the then Chancellor Alistair Darling that the Government and Lloyds TSB were entirely wrong to insist on the secrecy of the Bank of England loan to HBOS while shareholders were considering the merger and that they should have nationalised the bank and thereafter taken the bank back into private ownership before going ahead with merger if it was feasible.
Lloyds Action Now is inviting shareholders in the former Lloyds TSB to join the association. A registration fee of £225 + VAT is payable as well as £00.03 p per share held at the time of the merger. No further payment will be demanded of participants to take their case forward. Full details of funding arrangements are on the website www.lloydsactionnow.com.
The website features an instant assessment tool which allows shareholders to see if they have a claim, what category of claim it falls under, how much it will cost them to pursue it and how much compensation they may be due.
For further information, please contact:
Adrian Lithgow BA LLB MCIPR, George Berkeley Public Relations Ltd
Tel: 0844 818 5434/0776 419 4719/01273 487529
Full letter of claim here