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Investor seeks to force accountability at Lloyds Banking Group

14th April 2015

G650-M-JCBB-600x375Lloyds Banking Group shareholder Michael Page may be about to force some accountability, and perhaps even a degree of honesty, at the state-rescued bank in which he owns a stake.

In doing so Page — whose Guernsey-based aircraft leasing business was left massively out of pocket following the collapse of the scandal-plagued, and HBOS-backed, aviation business, Corporate Jet Services, in 2007 — hopes to call time on the culture of cover up and denial that still plagues Lloyds (which acquired HBOS and all its toxic assets in a fog of hubris in January 2009).

Page wants Lloyds to incorporate a resolution to be voted on at its forthcoming annual general meeting, which is due to be held in Edinburgh on 14th May. He is urging other investors in the bank to join him in calling for his proposed resolution — which would require the bank to come clean about its involvement in the CJS scandal — to be included as a voting item in the AGM agenda.

The Corporate Jet Services / Corporate Jet Realisations debacle largely predates Lloyds’s acqusition of HBOS. It involves a cast of characters including David Cameron’s business ambassador Robin Southwell and PWC’s “Mr Prepack” David Chubb. The company, which focused on transporting celebrities including the footballer David Beckham, had a chequered trading history and failed to file accounts at Companies House for the years ending 2005 and 2006. Its debt to HBOS soared from less than £28m in December 2004 to £113m when it went bust three years later with listed assets of just £2m (for further background on the CJS affair, see these articles I wrote in the Sunday Times and on my blog).

Here’s the full text of Michael Page’s letter to Lloyds shareholders (as it appears on Spandavia‘s site):-

Dear Fellow Shareholder

Corporate Jet Services Limited/Corporate Jet Realisations Limited (in Liquidation) (“CJR”)

Sycamore Limited is a small shareholder, previously in Halifax Bank of Scotland plc (“HBOS”), and now in Lloyds Banking Group plc (“Lloyds”). We urge you to join us in demanding an agenda item at the next available General Meeting to give an account of the CJR affair and to explain what the current board will now do to make good the damage to shareholders’ interests past and present which it has caused.

That damage was firstly the loss of some £150 million of shareholders’ money by what it is extremely difficult to see as other than a fraud which has never been explained; followed by a toxic culture of denial and cover up which has persisted ever since. Lloyds knows the facts but it is not telling. You may have read something about Corporate Jet Services in the press or on the internet but Lloyds has maintained a lofty silence. We have written to our Chairman, Lord Blackwell several times but he does not reply and he brushed aside a shareholder’s question at the last AGM.

If we want our bank to be soundly profitable, to deal fairly with its customers, to promote honest business practice and to pay maintainable dividends – in short to make a clean break with the past – some truth and reconciliation is required. The bank must also pursue those responsible for CJR and who have benefitted from it within and beyond the Bank, for restitution of the millions they have misappropriated.

The history of CJR was short but disastrous for shareholders. In 2003 HBOS set up what was effectively a secret subsidiary company, lent it £12.8 million secured on executive jets worth about £8 million and equity capital of £2,500; and proceeded to pump money through it until it was shut down in September 2007 by PricewaterhouseCoopers as Administrative Receivers at a cost to the Bank’s shareholders of about £150 million.

That company was CJR and it banked with the High Risk Unit in Reading. Tellingly, the Bank paid off all third party creditors and sold the good bits of CJR to the management team for a song, presumably as a thank you for their skillful services rendered. After 2004 by which time it owed the bank £28 million CJR produced no statutory financial statements, in blatant breach of Company Law, so there is no public record at all of where most of the money went. Lloyds will not even tell the Liquidator of CJR and has threatened us with legal action if we support him in his requirement for that information. Certainly it appears that much of the money went to the Isle of Man and some was used to fund the purchase of two luxury motor yachts. The Bank’s official line, in so far as it has one, maintained by Lloyds to this day, was that CJR was the result of some overenthusiastic lending by a manager in the High Risk Unit in Reading and that none of the lost money is recoverable.

Admittedly, HBOS probably did regard £150 million of shareholders’ money as peanuts. It raised £4 billion in a rights issue shortly afterwards in 2008 and secretly borrowed £25 billion from the taxpayer to keep itself afloat. Nobody felt that needed mentioning to the shareholders of Lloyds when they voted on the merger in 2009, so why would they mention a mere £150 million?

We believe that the CJR affair goes to the heart of the HBOS and now Lloyds banking culture. You may think that you deserve an explanation. Lloyds does not. Nor does the public shareholder, UK Financial Investments, which still holds nearly 25% of Lloyds and could singlehandedly get CJR on the agenda, but has told us that the matter has nothing to do with them. Neither it seems do the authorities think that you deserve an explanation. In fact it appears that everybody involved with Lloyds has long known about CJR except the ordinary shareholders. We believe that shareholders are entitled to a full explanation, a heartfelt apology, action to recover the money, and real cultural change.

The key questions are:-

1) Where has the money gone?;
2) Who approved the CJR “lending”?;
3) Who else knew about it?;
4) Who has benefitted from that money?;
5) Will Lloyds now take disciplinary action against those directors and employees responsible for CJR and the cover up?;
6) Will Lloyds now pursue for compensation the individuals responsible, whether inside or outside the Bank, without fear or favour?

Please send an email and/or write as follows in your registered name and address as a shareholder to:

Malcolm.Wood@lloydsbanking.com or Malcolm Wood, Group Company Secretary, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN

I/we as a shareholder in Lloyds Banking Group plc (“LBG”) request that the following be included as an agenda item at the next available General Meeting of the Company, being a matter which ought to be explained in the interests of the shareholders:

“An explanation of the Company’s involvement in the affairs of Corporate Jet Realisations Limited (in Liquidation) Company number 04521080”

I/we hold (number of shares registered in your name) shares [this is optional but preferable – see note (i) below]
Registered Name of shareholder:………………………………………..

PLEASE NOTE that according to the Company Secretary:

(i) To be accepted, the request must be submitted by members holding at least 5% of the issued share capital of Lloyds Banking Group plc or by at least 100 members holding at least 1,000 shares each (£100 worth of 10p nominal value shares).

(ii) the request must be received at least six weeks before the AGM or, if later, by the time the notice of the AGM is given.

As of 22nd March the notice of the 2015 AGM has not yet been issued. Given that the 2015 AGM is to be held on 14th May to ensure that your request is accepted for the AGM it should be submitted before 2nd April 2015.

Make your voice count. You may also like to ask your MP to raise this matter with the government and with UKFI.

So that we may check that the threshold for acceptance has been reached please email a copy of your request to:
mpage@sycamore.aero
Yours sincerely
Sycamore Limited
Michael Page
mpage@sycamore.aero

Note: I ought to have written this two or three weeks ago and appreciate that the official cut off point for contacting Lloyds Banking Group’s company secretary Malcolm Wood is officially 2 April. However I am hoping that, in the event that Wood receives enough letters and emails on this topic over the next few days, the bank might feel obliged to exempt this call for a resolution from its usual six week rule.

Note (14 April 2015): I have had an update from Syamore’s Michael Page, who says that “Lloyds rather gleefully, I thought, wrote very promptly to say that insufficient shareholders had written to them by the deadline and added, rather pointlessly, that we had not paid the required fee for distributing the resolution, a fee they failed to quantify. We replied that … we anticipated it would take some time to build support and as the request was for a resolution at the next available general meeting [which could me that of May 2016]. Also the request for a resolution did not technically come from Michael Page but from Sycamore. 

Short URL: https://www.ianfraser.org/?p=11140

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