Business Banking Fraud

Jo Stevens Excerpts

Tuesday 9th October 2018 Westminster Hall

[Jo Stevens (Cardiff Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I thank the hon. Member for Hazel Grove (Mr Wragg) for securing the debate. It is a pleasure to speak after him. I have raised the plight of my constituent, Mr Kashif Shabir, for many years. His case is about corporate collusion between Lloyds bank and a firm of receivers in Bristol, Alder King, which was embedded in the bank’s recovery department and effectively destroyed businesses to pick up work for itself.

I led a debate here in September 2016 concerning the role of the SFO, and there was a second debate here in April 2017 about the role of the Royal Institution of Chartered Surveyors as an adequate regulator. Both debates followed a March 2014 Select Committee inquiry into the regulation and policies of the insolvency sector. There have also been many other debates, as has been referenced. The HBOS six have been jailed, the Turnbull report has been released and many victims of quite appalling practices have come forward. My question to the Minister, therefore, is why are the owners of SMEs that were destroyed by the actions of Lloyds bank and RBS still suffering 10 years on?

My constituent’s experience is a case study in the cynicism and arrogance with which Lloyds refuses to right the effects of its wrongdoing, and of the ineffectiveness of organisations such as the FCA, the police and the regulators that are supposed to oversee and enforce the integrity and honesty of businesses in this country. Mr Shabir has been fighting Lloyds bank for 10 years. As far back as 2011, Lloyds acknowledged fault by making an offer of settlement—the bank would not pursue him for the balance of losses, which it had itself created, in return for a gagging order. Mr Shabir quite rightly refused to sign up to that.

Subsequent approaches by Mr Shabir, myself and many people working on his behalf to both Lloyds and Alder King have either been ignored or met with deliberate stonewalling tactics, because those organisations know that they hold the power in this relationship. Their actions have impoverished hundreds of businesspeople, who cannot sue, because they cannot afford to litigate. The banks and others know that and are taking advantage of it.

At the same time, Lloyds has openly stated that it will co-operate and work with the APPG on fair business banking, but we know that, in reality, the opposite is true. If the bank cannot settle with a victim to whom it has already made an offer, even if that offer is derisory, it is clear that that stance is completely disingenuous. In such instances one would expect the regulators to redress those shortcomings, and investigators and prosecutors to look at them. As we have heard, however, they have not done so far.

In the September 2016 debate, I asked the Solicitor General to look at this and explain the threshold for prosecution. He outlined the criteria and the threshold for prosecuting, and said that these cases would not reach that threshold. We know, however, that while individually none of these cases will reach the FCA’s prosecution threshold, collectively they will.

My hon. Friend the Member for Norwich South (Clive Lewis) summed up the matter well in the debate in the main Chamber in January:

“We do know that 90% of GRG-administered businesses never made it back to mainstream banking…The cost is immeasurable, but we believe it to be in the tens of billions…If it is indeed that big, it may be the largest theft anywhere, ever.”—[Official Report, 18 January 2018; Vol. 634, c. 1086.]

If that does not meet the criteria for an SFO investigation, I do not know what does. Why is it not investigating? We have heard many times that hundreds of victims of this fraud have lost large sums individually and collectively.

Mr Shabir tells me that there has never been a rejection of his complaint on the evidential merits; it has been purely on the basis of the threshold. The Avon and Somerset police economic crime team refused to investigate the case, because it said it had already been investigated by other bodies. The Royal Institution of Chartered Surveyors turned it down. The Financial Conduct Authority and the banking ombudsman said they had no locus to investigate it. The police have refused to properly investigate this fraud. Mr Stansfeld has had to write to that constabulary to ask it to look into the case based on the evidence that he has seen.

Mr Shabir will not go away, and nor will the other victims. Whatever the shortcomings of the regulators, investigators and prosecutors, they must not detract from the main issue, which is the fraudulent actions of the banks and the question of where the responsibility for such actions ultimately lies. It lies with Lloyds bank and RBS. It is time for the people in charge of those organisations to take responsibility for their actions.

--- Later in debate ---

[Stephen Kerr (Stirling) (Con)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I thank my hon. Friend the Member for Hazel Grove (Mr Wragg), who secured this debate, for an excellent and powerful speech.

I will refer straight away to the speech made by Andrew Bailey of the Financial Conduct Authority at its annual public meeting just a month ago, in which he said the following, which I find quite shocking:

“Given the serious concerns that were identified in the independent review it was only right that we launched a…investigation to see if there was any action that could be taken against senior management or RBS.”

He was talking about the Global Restructuring Group, or GRG. He went on to say:

“It is important to recognise that the business of GRG was largely unregulated”—

what a telling statement—

“and the FCA’s powers to take action in such circumstances…are very limited.”

Surely that is where we have gone wrong—commercial lending to businesses was “unregulated” to the extent that those businesses were vulnerable to the indiscriminate action of the banks. I will leave the rest of that statement unread.

I also thank my hon. Friend for his fitting use of the metaphor of Lady Justice to represent the dire situation that so many business owners face. Indeed, I suggest that Lady Justice is not only blind and has her arms tied firmly behind her back but is gagged and silenced. Onerous gagging clauses were incorporated into confidentiality agreements, with the effect of silencing witnesses and ensuring that justice is never done. The use of those gagging clauses ensures that organisations responsible for wrongdoing can not only conduct an operation of denial and obstruction of justice but use the clauses as a tool of abuse, to suppress any evidence of criminal behaviour. We are aware of several instances of gagging clauses that specifically state that an individual is unable to voluntarily approach the police or regulators with concerns about potential criminal activity. Let us be clear: that is unacceptable.

At this point we need to turn to the solicitors who are, quite frankly, aiding and abetting concealment of potential criminal activity by writing contracts that contain such onerous gagging clauses. In essence, they are bullying victims into silence and preventing them from discussing their case with those who are there to protect them: the police, Members of Parliament and regulators. That is a deeply troubling fact.

One pertinent example of such practice, cited on numerous occasions by the hon. Member for Cardiff Central (Jo Stevens), is a constituent of hers who accused Lloyds Banking Group plc and the Law of Property Act receivers, Alder King LLP, of a fraud that robbed them of their business and their livelihood. Once the allegations were made by the individual to the bank, Lloyds Banking Group plc proposed to forgive the constituent’s indebtedness, which had ultimately been caused by the actions of the bank and Alder King LLP, in exchange for the signing of a confidentiality agreement that would have prevented any further discussion of the case. Thankfully, the constituent declined the offer, making it possible to discuss their case here today. It will be clear to everyone in attendance today that that tactic was used by the banks and their solicitors to hide abuse and allegedly criminal activity.

The Solicitors Regulation Authority, which is the regulatory body for solicitors in England and Wales, has a duty to society, and I encourage it to issue very firm guidance to prevent solicitors from contractually silencing allegations of criminal conduct.

[Jo Stevens]

I am grateful to the hon. Gentleman for giving way and for his reference to my constituent, Mr Shabir. In Mr Shabir’s case, not only was a gagging order presented to him, but he also has a legal opinion from Queen’s counsel saying that a criminal fraud has been committed against him. That is exactly the sort of circumstance that the hon. Gentleman is talking about.

[Stephen Kerr]

I thank the hon. Lady for her intervention. She made the point that I was just about to make, namely that it is not possible to contract out of criminal behaviour, and it may be that these gagging clauses are in fact unenforceable. However, that is not the point. Such clauses serve the purpose of instilling fear and effectively silence concerns, and potentially suppress valuable evidence. The all-party parliamentary group on fair business banking and finance has found dozens of cases like that one, and people are scared.

Time and time again in this House, we call for transparency and we hear a lot of lip service about the industry’s commitment to it, but there can be neither transparency nor fairness if people are being subjected to onerous confidentiality agreements that prevent the investigation of allegations of criminal activity and obstruct justice, stopping it being served.

This issue should be deeply troubling for all Members of the House. Greater scrutiny must be applied to the use gagging agreements and the role they play in the concealment of criminal activity.