“All they seemed to do for us was to take enormous fees” … the companies who say consultants jeopardised their businesses

In Article Library by Ian Fraser1 Comment

By Ian Fraser

Published: Sunday Herald

Date: 30 November 2008

BUSINESS customers of HBOS’s Bank of Scotland Corporate division in Southeast England claim that a former bank manager working alongside Quayside Corporate Services jeopardised their businesses – which in many cases went to the wall.

Business customers from across Southeast England were referred to the bank’s “mid market, high risk” division in Reading – run by bank manager Lynden Scourfield – if they sought extra funding, or were deemed to have run into financial difficulties or at risk of breaching banking agreements.

Scourfield, who was sacked by the bank in March 2007, is known to have obliged more than 40 business clients of the bank to use Quayside’s services. If a business refused to appoint Quayside as advisers – or refused to appoint a Quayside representative to their board – they were told their funding would be withdrawn.

Tony Edwards, a director of one of the affected companies, Remnant Media, was told in November 2005 that unless he and his co-director Aroon Maharajh appointed Quayside’s Michael Bancroft a director, their loans would be called in. Edwards said: “There was effectively a gun to our head. We were given no choice.”

Once under Quayside control, some companies were given generous new loans by Scourfield, while monthly payments of between £2,000 and £10,000 were deducted from their accounts. Edwards argues that the £140,000 in annual fees Remnant was obliged to pay Quayside was “extortionate”. He said: “The bank put in Quayside and Bancroft to manage the company. However, they were not doing this very well. All that seemed to happen was that enormous fees were taken for Quayside.”

When Joanne Freer, managing director of Sussex-based eco-nappy company Cotton Bottoms, sought a £400,000 loan for her £1.2m turnover business from Bank of Scotland in 2003, her business account was transferred to the Reading branch, and Scourfield became her manager.

After assessing her business on the bank’s behalf, Bancroft recommended that a loan should be advanced in December 2003. However, Freer was shocked to discover, at an eleventh hour meeting held on Christmas Eve 2003, that Quayside and the bank were attaching expensive strings to this loan. These included a £60,000 “arrangement fee”, appointing Bancroft as a director and £18,000 in annual fees for Quayside’s provision of Bancroft’s appointment within the company.

Freer says she was “completely traumatized” by her experiences with Quayside which culminated in Cotton Bottoms being forced into temporary administration before being sold to Newcastle-based Mayborn. As a consequence of what happened, she and her four children have been left homeless. Yet Cotton Bottoms was awarded a ‘sustainable business’ award and Freer herself received a ‘leadership’ award from the South-East England Development Agency in November 2004.

Paul and Nikki Turner, claim their Cambridge-based music publishing company, Zenith, has been left in a state of suspended animation as a result of Quayside’s involvement. They formally complained about the way they had been treated to several HBOS directors in August and September of last year. The bank’s response was to seek to have the Turners evicted from their home and place of business. “They must have thought they were above the law,” said Paul Turner.

At a court hearing October 2007 a judge suspended the eviction notice, ruling that the situation was “grossly inequitable” and directing the bank to repay £17,000 (to cover payments removed from Zenith’s bank account to cover Quayside’s fees after the Turners had told the bank they wished nothing further to do with Quayside).

Gloucestershire-based David Mills who owns and manages Quayside, is a director several companies including the Aim-listed surveillance specialists Petards Group PLC, whose shares have been suspended from the London Stock Exchange’s Aim market as a result of a failure to publish accounts.

Mills told the Sunday Herald it is quite normal for banks to oblige their “distressed” customers to use external advisors such as Quayside to carry out independent business reviews and become involved for interim periods. He added: “Sometimes the bank would request that a representative of Quayside join their board for a certain period of time.”

Mills said: “Any transaction that was done was always with the approval either of the company but predominantly of the bank that was involved. We’d pre-agree a schedule of charges.”

Mills blamed the bankruptcies of many mutual clients of BoS and Quayside on a change of policy at the bank. He said: “After March 2007 the bank stopped an awful lot of the programmes that were being run – and I think that was because of Basel II [new bank regulations on capital adequacy] coming in – that would penalize any bank with so many customers in the high risk sector.”

He insisted: “You could speak to many other chairmen and managing directors of businesses who would tell you they are absolutely delighted with the services that Quayside provided, because it saw them through a difficult time. It kept the staff from losing their jobs and kept the businesses going. I only wish we could do the same thing in today’s marketplace.”