The morning of September 23, 2013, is one that none of the Morgan brothers will ever forget. On that autumn day, 40 security guards marched into the 4,000-acre family farm in rural Oxfordshire, where they proceeded to barricade Nigel, 56, Colin, 65, and Richard, 53, and their families into their homes.
Their late brother David, who was 56 when he passed away broken-hearted just a few months later, was subjected to the same high-handed treatment.
Having confined the Morgans indoors, the security men mounted quad bikes to round up the family’s prized 650-strong Charolais cattle herd – their life’s proud work. The valuable animals were then carted away to be sold at what the Morgans say were rock-bottom prices.
Joanne Dove, 51, a mother of five, had an enviable lifestyle before the corrupt ring at HBOS Reading got their claws into her firm, an eco-nappy business called Cotton Bottoms
What had the brothers done, to deserve such draconian treatment? They had committed no crime. Far from it: they were the innocent victims of corrupt bankers and consultants at the Reading branch of HBOS. Disgracefully, what happened to them is not unique.
As City Editor of this newspaper I have encountered countless harrowing stories from business people, detailing appalling experiences with their banks.
Many were with HBOS Reading, now owned by Lloyds, where six bankers and consultants were jailed in January for defrauding businesses and spending the proceeds on sex, holidays and yachts.
Others banked with NatWest and RBS, which has been accused of driving firms into destruction, but I have heard cases involving all the big four and smaller banks.
Those business people prepared to speak out are the tip of the iceberg. The majority – through a mix of fear of the bank, worry about jeopardising a settlement, or embarrassment at being cheated – want to remain anonymous.
But I have heard of a number of people who have been driven to the brink of mental collapse. One man said he almost had a nervous breakdown after losing a business he had built up over 25 years. Others told me they lost their firms after their bank ‘sold on’ their debts to third parties without their knowledge.
Paul Kanolik, a senior associate at Ellis Jones Solicitors who has dealt with more than 100 cases, said he has heard ‘heart-wrenching’ stories from people who ‘have had their personal and business lives absolutely devastated’.
Those who have turned to him include hoteliers, property developers, manufacturers and entrepreneurs.
Nigel, Richard, and Colin Morgan, who were made bankrupt by illegal actions of HBOS
‘Most have lost businesses which they spent a significant proportion of their lives building, with many being made bankrupt,’ he says. ‘The distress this has caused has resulted in severe medical conditions such as heart attacks, depression and anxiety. A number of clients have also been suicidal.’
While the HBOS Reading affair is the only example so far of outright criminality, I am in no doubt that lawless and unscrupulous behaviour took place as part of a wider culture of contempt and abuse by banks towards their small-business customers.
Following the financial crisis, the banking industry has been hit by scandals, from the rigging of Libor interest rates, to money laundering, PPI mis-selling, sluicing cash for drug barons and busting sanctions to trade with rogue regimes. But the callous treatment of business owners has to be the cruellest of all.
Nigel Morgan is still brought to tears by the memory of that day when his cattle were driven away. When he and his brothers were finally able to leave their homes, a grim sight awaited them.
Their herd had gone, but the bodies of more than 100 foetuses lay on the floors of the barns. Pregnant cows – so traumatised by being herded away – had lost their calves. The Morgans believe the stress caused one brother, David, to miss hospital appointments that could have meant his cancer was better treated.
‘He fought till the day he died, and he died in abject misery,’ Nigel says, in the house where David’s widow Jane still lives. A picture of his late brother stands next to the kitchen table. ‘All the money in the world won’t put it right.’
Others banked with NatWest and RBS, which has been accused of driving firms into destruction, but I have heard cases involving all the big four and smaller banks
Behind their grief lies fury at former HBOS banker Lynden Scourfield, one of the men jailed this year, who had been blackmailing David, demanding a 10 per cent share of a £100,000-a-month deal to supply beef to restaurant chain Smollensky’s, threatening the loss of the farm if he refused.
Furthermore, the family says their dealings with Scourfield pushed them into ever-more expensive banking arrangements that eventually bankrupted them.
They are about to submit a claim to Lloyds, which bought HBOS at the height of the financial crisis in 2008, for more than £90 million in losses. Lloyds says it is waiting for ‘the input we need’ to move ahead with a compensation offer.
But the Morgans are not the only ones. Scores of entrepreneurs who had dealings with the business support unit in Reading have been stripped of their companies, their marriages and their health.
They have literally been broken by their bank. The most famous example is television star Noel Edmonds, who is claiming £300 million from Lloyds over the collapse of his Unique Group of businesses after the involvement of one of the HBOS Reading cabal.
After detailing his story in this newspaper, he has been deluged with letters and emails from fellow victims.
‘The bank’s so-called support unit was actually an abattoir,’ he told me. ‘I’ve been contacted by hundreds of people. As I spend every waking hour attempting to resolve my own situation, I am tormented by the heart-breaking stories I receive on an almost hourly basis from other sufferers.’
No doubt among the welter of claims from small firms that are now pouring forth, a few may be bogus. Equally, no doubt there are cases of incompetent people blaming the bank for their ineptitude.
That’s certainly what the lenders would like us to believe. Lloyds insiders still argue many of the victims of HBOS Reading – a unit meant to help distressed firms across the South of England – were going bust anyway.
It has offered settlements to a number of entrepreneurs, but so far these have not been for losses, but for what bankers call ‘D&I’. This stands for distress and inconvenience – a finance industry euphemism for taking a demolition ball to their own customers’ lives.
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The UK economy and our public services depend on successful small businesses.
When owners borrow money to realise growth, they are putting their trust in their lender. So the bank’s actions and decisions go to the heart of their firm’s ability to succeed, and sometimes, its very survival.
If things go wrong the relationship can change fast, as many firms have found to their cost.
Too many entrepreneurs discover they have signed debt contracts skewed in the bank’s favour and, too often, business owners find themselves less protected than they expected.
They thought lending by commercial banks to their company was regulated and that if their bank gave them advice, it had a legal duty of care. Not so. And it gets worse.
The smallest firms can turn to the Financial Ombudsman when things go wrong, but slightly bigger companies find themselves in the same place as a huge global corporate – having to go to law.
That may entail terrifying complexity and years of expensive struggle, and most small and medium firms are simply in no position to do so.
The good news is that the All-Party Parliamentary Group on Fair Business Banking has been calling for specific changes, and The Mail on Sunday is clearly highlighting the issues.
So what can be done? First, a proper review of the lending contracts the banks’ lawyers ask borrowers – often under severe pressure – to sign.
Equally vital is to create an independent, transparent tribunal, or risk crushing the life out of the firms that are our future employers, taxpayers and creators of prosperity.
That’s what happened to Joanne Dove, 51, a mother of five who had an enviable lifestyle before the corrupt ring at HBOS Reading got their claws into her firm, an eco-nappy business called Cotton Bottoms.
Joanne, from Rudgwick in West Sussex, is still so traumatised by her treatment she describes it as ‘financial rape’.
She says she lost her marriage, her home and most of her possessions; though she made sure to keep her boxes of HBOS documents, which she stored in friends’ garages so she could continue to fight her case.
Joanne is currently going through a Lloyds review and expects to be made an offer in three weeks. Even so, she says it is impossible to put her shattered life back together.
‘You’ve lost all that money, been raped and pillaged,’ she says. ‘My marriage broke down. Not only that, but I was having a baby too. I gave birth on the Saturday and they pounced to take control of my business on the Monday.’
She says her problems stem from an attempt to restructure her business’s finances after receiving a £330,000 order from Boots which needed cash for her to fulfil.
In return for the money, she says she was forced to put Michael Bancroft, one of the jailed men in the HBOS Reading scandal, on to the board in 2003. She says he set about trying to take control and milk it for fees and charges.
At one tense meeting in July 2004, two weeks before she was due to give birth to her youngest son, she says Bancroft and an aide ushered her into an office and locked the door, saying he did not want the meeting to be disturbed.
‘They locked me in a room while I was pregnant,’ she claims. ‘I gave birth two weeks early as I was under so much pressure. My son is 13 now. His age is my measurement for how long this has been going on.’
Lloyds declined to comment on Joanne’s case but said it has made offers to more than half the customers in a compensation review.
It is putting 65 businesses through a review process, of which 26 have accepted a settlement and a further nine have been offered one.
Payouts are believed to be in the region of £600,000 to £800,000, though they are simpler cases, relatively easy to solve.
Settlements of more complex cases are expected to be higher.
At rival bank RBS, which like Lloyds was bailed out by taxpayers in the credit crisis, there are also hundreds of firms who believe they were driven to the wall by their bank.
Among them is Tracey Hogg, who suffered ‘unimaginable stress’ when NatWest bankers mis-sold her a complicated product called an ‘interest rate swap’ as a condition of their £625,000 loan for her fish and chip shop.
A bank manager told Tracey and her husband Paul, 41, that, the swap would protect them from ‘inevitable’ interest rate rises. What they were not told was that, if interest rates dropped, their monthly payments would rocket.
This happened, sending the quarterly payments on their policy soaring from £829 to £7,800.
By 2011, the business was in serious trouble. Tracey, 48, said: ‘I wasn’t sleeping or eating. I had to sell jewellery I’d inherited from my mother to make ends meet.’
The bank didn’t threaten to seize the business because the Hoggs never missed a payment. But Tracey says that when the couple approached their bank manager about their plight ‘he just suggested we sell our house’.
NatWest contacted the couple in 2014 after the regulators ordered banks to put right cases where they had mis-sold swaps. Soon after, the Hoggs were refunded £159,000 in interest payments, but then became locked in a long-running battle for compensation.
They are still pursuing the bank for the loss of business opportunities they say they suffered.
NatWest, which is part of RBS, said it is ‘very sorry for any distress caused to Mr and Mrs Hogg’ and that it has offered a total of £232,000 in redress and consequential loss.
RBS is also under fire over the activities of its ‘Global Restructuring Group’ or GRG which was supposed to nurture troubled firms back to health but is accused of pushing them under for profit.
Regulators are under pressure to publish a secret report they commissioned into its conduct.
Devastating though the damage to individuals has been, the harm does not stop there. Compared with countries like Germany which has a thriving ‘Mittelstand’ or small and medium business sector, Britain’s small firms lag behind.
There is no doubt that the disgusting behaviour of the banks is a cause. After all, who would risk losing everything they have worked so hard for, only to risk their bank pulling the rug from under their feet if times get tough?
Instead of supporting entrepreneurs, it is clear the banks often preyed upon them at times when they were vulnerable, behaving more rapaciously than the most ruthless back-street loan sharks.
It is hard to think of a more pernicious betrayal.
Additional reporting: Alex Hawkes