3 Oct 2010

http://www.heraldscotland.com/business/corporate-sme/former-hbos-banker-bailed-over-alleged-money-laundering-1.1058954

A former HBOS banker who has been linked to an alleged money-laundering scandal was arrested and bailed last week by the economic crime unit of Thames Valley Police.

In the first arrest of a financier on suspicion of criminal behaviour from the UK’s state-rescued banking sector, Lynden Scourfield, former director of mid-market high-risk at Bank of Scotland Corporate, was later freed on bail. Police said the arrest was part of an investigation into “corruption and large-scale fraud in connection with HBOS”.

Scourfield, 48 – who left his job in the impaired assets division of HBOS after a period of sick leave in April 2007 – was arrested as part of Operation Hornet, a four-month investigation involving 28 officers from the economic crime unit of Thames Valley Police and the Serious Organised Crime Unit (SOCU).

Scourfield and his wife Jacqueline Ann, also 48, were arrested at their home in Berkshire at around 7am on Wednesday. The pair were then released on bail by the following day, pending further inquiry, until January 26, 2011.

A third suspect, John Anthony Cartwright, 65, an accountant and former director of one of the group of England-based companies to which Scourfield lent millions of pounds, was also arrested on Wednesday morning.

Reading from a statement, a spokeswoman for Thames Valley Police told the Sunday Herald the arrests were made “on suspicion of corruption, conspiracy to defraud and money-laundering”.

She continued: “The Thames Valley Police Economic Crime Unit can confirm they are investigating a corruption and large-scale fraud in connection with HBOS.

“The case was referred to Thames Valley Police by the Financial Services Authority. A number of warrants were carried out for addresses in Berkshire, Warwickshire and Cheshire. Three people – two men, aged 48 and 65, and a woman aged 48 – have been arrested on suspicion of corruption and conspiracy to defraud and money-laundering.

“The investigation is still in its early stages and Thames Valley Police will not be releasing or confirming any further information for operational reasons at this time.”

The investigation is being led by Detective Superintendent David Poole with input from SOCU. Cartwright, a former director of the porn magazine publisher Remnant Media – whose titles included Asian Babes, Readers’ Wives and Hot 60 Plus – and Flip Media was arrested at an address in Cheshire but has since also been released on bail, pending further inquiries, until February 2.

Thames Valley Police are understood to have also placed “restraint measures” on several other suspects in the alleged money-laundering ring, some of whom are believed to be abroad.

The investigation relates back to September 2007 when Lord Stevenson, HBOS’s former chairman, Andy Hornby, the bank’s former chief executive, and the other 14 members on the Edinburgh bank’s board were alerted to an alleged fraud by letters and emails sent by directors of companies that had been allegedly forced by the bank to use the services of self-styled “turnaround consultants” Quayside Corporate Services. From about 2002-03 onwards it is understood that Lynden Scourfield had a close business relationship with Quayside Corporate Services which was a recently launched turnaround consultancy. Neither Stevenson nor Hornby responded directly to representations by the directors of affected companies or addressed their concerns, but instead instructed law firm Denton Wilde Sapte to reply on their behalf, requesting evidence to support allegations of a criminal offence or to give evidence to the “relevent authorities”.

In December 2007 two victims of the alleged fraud went to Cambridgeshire Constabulary fraud squad which, having studied their evidence, concluded HBOS was the main victim and some of the corporate customers of the bank were “collateral damage”.

It is believed that the Cambridgeshire fraud squad suggested to HBOS that it might wish to initiate an investigation. The bank sought and received further evidence but on March 3, 2008, the bank responded by saying it was disinclined to report anything to the police “unless any new concrete evidence comes to light”.

In a second letter addressed to Stevenson, dated October 4, 2007, Nikki Turner of Cambridge-based music publishers Zenith Café, whose business suffered after the bank allegedly forced it to use Quayside, wrote asking Stevenson to ask HBOS or Denton Wilde Sapte to “let us know if they are investigating the Bank of Scotland/Quayside debacle and, if they are, how that investigation is going?”

Turner received no response from Stevenson, but Tom Angus, head of impaired assets at Bank of Scotland Corporate, replied, saying: “I believe the bank has responded comprehensively to your complaints.”

The alleged fraud was first reported in the Sunday Herald in November 2008 and on BBC Radio 4’s File on Four in May 2009. It was also the subject of a debate in the House of Commons, requested by the South East Cambridgeshire Conservative MP James Paice, in June 2009.

It is understood that between 15 and 20 directors of companies affected by the alleged fraud are also taking out a civil action against Lloyds Banking Group, HBOS, Bank of Scotland and Lloyds TSB via the Milton Keynes-based law firm Dunham Law.

The causes of the civil action include alleged breach of contract, fraudulent misrepresentation, negligence, negligent misstatement, harassment, fraud and conspiracy to defraud.

A spokesman for Lloyds Banking Group, which acquired HBOS in September 2008 for £12.2bn, said: “We cannot comment on the detail of this investigation by Thames Valley Police.

“The Bank of Scotland itself is not the subject of the investigation. We have been assisting the police with their investigation.”