The legal action begins tomorrow of 6,000 Lloyds Banking Group shareholders seeking £600 million in damages from five former executives and the bank itself over claims they were misled during the acquisition of HBOS.
Opening submissions will be made at the Royal Courts of Justice in London, marking the start of a 14-week trial brought by the Lloyds/HBOS Shareholder Action Group.
The former Lloyds directors in the case are ex-chairman Sir Victor Blank; ex-chief executive Eric Daniels; former chief financial officer Tim Tookey; Helen Weir, the one-time director of retail banking; and George Truett Tate, former wholesale banking director.
Lloyds bought HBOS at the peak of the financial crash in 2008, but the acquisition saddled the bank with lots of toxic assets stemming from risky bets made by HBOS on commercial property during the boom years.
It led to the enlarged entity having to be bailed out with £20 billion of taxpayer money. Out-of-pocket Lloyds investors claim that the bank’s board breached its duty to them by not disclosing in the shareholders circular relating to the acquisition the major financial lifelines HBOS was getting from the Bank of England and Federal Reserve.
They therefore claim the shareholder EGM to vote through the acquisition was based on “incomplete and misleading information”. A spokesman for the action group, which also includes 300 institutional investors, said: “We will finally have our day in court after nearly ten years and expose the injustice done to Lloyds TSB shareholders who were duped into rescuing a defunct HBOS.
“The trial will show how much the director defendants knew about how bad HBOS was, that they concealed crucial information about HBOS’s financial position, and that they should not have recommended the deal on the basis that they did, nor should they have allowed the deal to go ahead on those terms.”
The spokesman said it was hoped the trial would also “get to the bottom” of the role played by the UK government, Bank of England, and the now-defunct Financial Services Authority in relaxing competition rules and “pushing the deal through”.
A spokesman for Lloyds said: “We do not consider there to be any merit to these claims and we will robustly contest this legal action.”
It comes amid the backlash over Lloyds’ customer redress in the HBOS Reading scandal, which saw senior staff embark on a £245 million loans scam between 2003 and 2007.