Go public and name names, Lloyds shareholders tell Peter Cummings
A SHAREHOLDER action group in advanced talks to launch a £2 billion lawsuit against Lloyds TSB directors for allegedly misleading investors over the takeover of HBOS has challenged a banned top executive to come clean on “who knew what” to support their case.
Lloyds Action Now, fighting on behalf of 7,500 small investors, claim Peter Cummings, former head of HBOS’s corporate lending division at the heart of the bank’s collapse, could provide powerful evidence to back their compensation claims.
It follows the decision by the Financial Services Authority (FSA) on Wednesday to fine Mr Cummings £500,000 for being “personally culpable” for management failings at HBOS that triggered the “rescue” takeover by Lloyds, and ban him from any senior financial post for life.
Lloyds Action Now said it had noted the disgraced director’s sharp rejoinder after the regulatory decision that “the fact that I am the only individual from HBOS to face investigation defies comprehension”.
Mr Cummings branded the FSA’s fine, the biggest ever for an individual’s management failings, as “grotesque” given that the regulator had acknowledged “that other senior people were involved in the critical decisions for which I am taken to task”.
A spokesman for the Lloyds Action Now said yesterday that 800,000 private investors in Lloyds had lost a total of £2bn in the share-price collapse that followed the takeover of HBOS in 2008. It hopes to attract many more private investors to any legal action if it can get the funding for counsel.
The spokesman said: “The FSA judgment is helpful for us. It brings to light the culture in HBOS at the time.
“It was one of complete recklessness with regard to shareholder value in its own bank and had disastrous consequences for Lloyds shareholders when they took them over.
“Mr Cummings claims the regulator’s decision is tokenism, that he is being made a scapegoat when other senior people were also involved. We would therefore challenge him to go public and name names and dates [for who was involved in poor decisions at senior levels]. Don’t keep it a secret any longer.
“If he has any contrition let us hear the full story from a man who was at the heart of a shambles that nearly brought down the British banking system.”
The spokesman said extra details provided by the banned director of who was involved in rash lending and misleading information for shareholders could be very helpful to the shareholder action group in its legal pursuit of redress. He added that such action might go some way to Mr Cummings making up to investors, “many of them pensioners and small investors”, for his division’s key role in bringing HBOS to the brink of collapse and driving Lloyds into part-taxpayer ownership following massive debt writedowns.
Former HBOS chief executive Andy Hornby, although grilled by the Treasury committee on irresponsible lending at HBOS prior to its takeover by Lloyds, has not been subject to any regulatory action. Neither has former HBOS chairman, Lord Stevenson.
The action group argues that directors knew that HBOS was being propped up by £25bn of “emergency liquidity assistance” from the Bank of England, but did not reveal this to shareholders when they voted in favour of the merger with Lloyds at the end of 2008.
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