(Bloomberg) — A British lawmaker is stepping up his pressure on Lloyds Banking Group Plc’s top executive over how he handled a whistleblower’s report into a fraud case that dates back more than a decade.
“Our concerns relate to the allegations of the cover-up of the fraud, rather than the fraud itself,” Kevin Hollinrake, a lawmaker who co-chairs the all-party parliamentary group on fair business banking, wrote in a letter to Antonio Horta-Osorio. “Despite the fact you were aware” of the findings, “you did not oversee a thorough investigation,” he wrote.
While the incidents that led to criminal convictions occurred years ago, scrutiny of how Lloyds handled the affair has grown as the bank settled last week with the whistleblower, former risk officer Sally Masterton. Separately, a commissioner overseeing police that handled the case spoke up, demanding a U.K. criminal probe.
The report in question was written about five years ago, after Horta-Osorio had become CEO. It claimed some executives at HBOS hid the fraud at one of that bank’s branches before Lloyds acquired the lender at the peak of the financial crisis. The CEO is now accused of not taking action after receiving the whistleblowing report into the incident.
British police have investigated and convicted several people linked to HBOS over a scheme that siphoned millions from ailing businesses and eventually cost the lender around 250 million pounds ($321 million).
“On the facts, Horta-Osorio’s position is untenable,” the lawmaker, Hollinrake said by phone Thursday. “He should have his right of replying, but if we don’t get a suitable response and an investigation by the Financial Conduct Authority, we will call for resignations.”
Hollinrake’s letter to Horta-Osorio, dated Wednesday, demanded that the CEO give more detail on how he treated Masterton’s report. He also accused the bank of setting out to “destroy Sally Masterton’s reputation and credibility” and ignoring requests by police officers investigating the case.
In response, Lloyds said it’s “determined to get to the bottom of what happened in HBOS Reading,” referring to the town west of London where the bank branch was based. The bank has previously appointed Linda Dobbs, a former high court judge, to examine whether Lloyds appropriately reported issues to authorities.
HBOS was the subject of one of the most controversial episodes of the financial crisis: the state-brokered takeover by Lloyds and a 20.3 billion-pound taxpayer bailout. The police investigation into the HBOS scandal led to the convictions in February 2017 of six individuals for fraud and money laundering.
“LLoyds has maintained publicly that they had seen no evidence of criminality prior to the criminal convictions in February 2017,” Hollinrake said. “Indeed, it has based its entire compensation scheme on this fact.”
Horta-Osorio is one of the most highly paid bank chiefs in London. About 21 percent of investors voted against the lender’s compensation for its top executives at the bank’s annual meeting in May, which featured hostile exchanges between management and shareholders.
To contact the editors responsible for this story: Ambereen Choudhury at [email protected], Keith Campbell
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