A senior manager at Bank of Scotland who discovered an alleged multimillion-pound corruption scam at its Reading branch has admitted that there were “astounding” and widespread failures in the bank’s checks and controls over several years, a court has heard.
Giving evidence in court, Tom Angus recalled how he had produced an internal review in 2007 focused on 38 struggling businesses, each of which had received “irregular” loans and which together owed the bank £375m.
All 38 were supervised by senior banker Lynden Scourfield and had a relationship with Quayside Corporate Services, a small turnaround consultancy run by former banker David Mills.
Twenty-seven of them were expected to leave the bank with a loss estimated at £266m, while the remaining 11 could add further losses of £22m.
After his review, Angus had been left with “the clear impression that Lynden [Scourfield, a senior BoS banker] had been agreeing substantial amounts of credit to distressed companies … completely outwith his authority and without any authorisation from [his bosses] Paul Burnett or Hugh McMillan.”
Mills, his wife, and three associates, including Michael Bancroft – together with a second BoS banker, Mark Dobson – have variously pleaded not guilty to charges relating to the alleged corruption between 2003 and 2007. Scourfield, meanwhile, is not on trial and the jury have been instructed not to speculate on the reasons for this.
A month after Angus’s 2007 review, Scourfield was confronted with the findings and suspended for gross misconduct. He left Bank of Scotland shortly afterwards.
It was not until October 2009, however, that the City regulator, now called the Financial Conduct Authority, ordered detailed explanations from Bank of Scotland, which by then was part of Lloyds Banking Group.
In response, Lloyds commissioned an independent investigation to be carried out by accountancy group Deloitte. This resulted in a formal report to the FCA which was, in turn, referred to Thames Valley police for criminal investigation in May 2010.
Two months later, Lloyds wrote off £250m from its impaired assets division, which included Scourfield’s loan portfolio. Of that sum, £245m related to bank customers under Scourfield’s management.
Setting out the prosecution’s case earlier this week, Brian O’Neill QC told the jury: “Some other employees of the bank do not emerge well from the investigation, most particularly Paul Burnett, who was Scourfield’s immediate line manager. There is little doubt that his lack of oversight was partly responsible for Scourfield’s ability to act in the way that he did and for as long as he did.”
He told the court Burnett could have identified concerns earlier had he paid closer attention to loan spreadsheets sent to him. “[He] lost his position at the bank as a result of his failures as a manager. However, there is no evidence that Burnett … was complicit in the corrupt agreement.”
O’Neill conceded: “Some of the bank’s systems and processes undoubtedly contributed to Scourfield’s ability to behave dishonestly. This was a case of him exploiting systemic and personnel weaknesses which he knew to exist, not a case of the bank turning a knowing blind eye to his lending excesses.”
The trial continues.