Lloyds shareholders want perjury charges over HBOS merger case

Published on Tuesday 26 April 2011 22:56

A SHAREHOLDER action group has asked government law officers to see if perjury was committed during court proceedings in which a case brought to prevent the merger of Lloyds TSB and HBOS collapsed.

Lloyds Action Now (LAN) has asked Scotland's most senior government law officer, the Advocate General, Baron Wallace of Tankerness, to bring charges over what it alleges was the failure to tell the court in November 2008 a material fact.

This, according to LAN, was that the Bank of England had secretly supported HBOS with a 25.4 billion loan of last resort to prevent its insolvency.

Nick Shaw, chairman of LAN, which has 4,000 members, said: "This loan was emergency state aid and should itself have had the approval of the European Union Commissioners, but they were never told of it and so therefore it was granted by the UK government unlawfully.

"As the EU Commissioners were not told of the state aid, the UK government's assertion that the merger had been approved was made in the knowledge that the EU had not received all the relevant background."

A small group of Scots businessmen, called the Anti-Merger Group and led by architect Malcolm Fraser, had challenged the government-brokered Lloyds TSB takeover of HBOS on competition grounds.

They brought the case before the Competition Appeals Tribunal, sitting as a Scottish court, two and a half years ago.

But it collapsed when their lawyers read a 300-page secret dossier of evidence in support of the merger submitted by the then business secretary, Lord Mandelson, which said the merger had the approval of Brussels.

Shaw said: "It may well have been that they (the EC Commissioners] may not have approved the 25.4bn loan and it certainly appears that the government was not prepared to risk the possibility they may not have done so."

LAN claims as a result of the merger in early 2009 - after which it was found HBOS had billions of toxic property loans on its books - the share price of the new Lloyds Banking Group crashed 70 per cent and dividends were suspended, leading to big shareholder losses.

LAN has in the past few weeks lodged letters of claim against HM Treasury, the Bank of England, and former Lloyds chairman Sir Victor Blank and chief executive Eric Daniels, alleging the merger was unlawful on the grounds of illegal state aid, misrepresentation of HBOS's true financial position and a breach of Section 90 of the Financial Services and Markets Act.

Section 90 says "full disclosure" of all relevant financial information surrounding a merger should be made available to all interested parties.The Bank of England said yesterday: "We cannot comment on a legal matter." A department of business spokesman said the 15 April deadline for dealing with a Freedom of Information request from LAN to see the crucial dossier supporting the merger had been recently extended to allow further examination of the case.

Widows sale on the cards

THE majority of City analysts now believe new Lloyds Banking Group boss Antonio Horta-Osorio will look to sell the group's Scottish Widows subsidiary, as well as the 60 per cent stake Lloyds owns in wealth management group, St James's Place.

Nine out of ten analysts and fund managers polled by Reuters said the sales would be used to bolster Lloyds' balance sheet. The analysts said Widows would fetch about 6 billion, which could be used to beef up the capital reserves of the bank in time for the start of the Basel III solvency rules in 2013.