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Noel Edmonds seeks £50m compensation over HBOS fraud

Noel Edmonds seeks £50m compensation over HBOS fraud

By: and

TV celebrity’s letter to Lloyds claims reputation as entrepreneur was ‘destroyed’

Noel Edmonds, the television celebrity, has written to the boss of Lloyds Banking Group to demand compensation that his lawyers claim could run to more than £50m in connection with the fraud scandal at HBOS.

In correspondence seen by the Financial Times, Mr Edmonds says HBOS and its disgraced former employee, Mark Dobson, destroyed Unique Group, his former business, a decade ago.

The claim is the latest twist in the HBOS fraud saga, which centres on a 2002-07 scam run out of the bank’s Reading branch. Struggling small businesses were referred to a turnround consultancy, Quayside Corporate Services, and then loaded with unmanageable amounts of debt before being taken over and asset-stripped.

In February six people, including Dobson, were jailed for a total of 47 years over the fraud, which the presiding judge described as having “ripped apart” its victims.

Lloyds, which rescued HBOS in 2009, has set aside £100m to pay “fair and appropriate compensation” for clients’ losses. If sustained, the claim by Mr Edmonds, star of popular TV series such as Noel’s House Party and Deal or No Deal, would absorb half of this pot on its own.

In his letter to António Horta-Osório, Lloyds chief executive, Mr Edmonds argues that his reputation as an entrepreneur “was destroyed by humiliating media coverage that surrounded the collapse of the business”. His claim against Lloyds includes an element for the loss of promotional speaking income, which was running at £1m a year before Unique’s collapse. That, added to the decline in Unique’s value, plus the direct losses attributable to the fraud, led his legal team to estimate the total cost as potentially amounting to more than £50m.

Mr Edmonds says Dobson was the cause of Unique’s downfall in 2007, according to the letter sent by lawyers on the celebrity’s behalf.

Unique, a holding company for a number of Mr Edmonds’ business interests, had taken out a loan with HBOS to expand its activities. This was secured against its assets, including some 14m shares that Unique held in UBC, a broadcasting company that was also formed by Mr Edmonds.

Under the terms of the contract, Unique was unable to sell its UBC shares without the approval of HBOS. Mr Edmonds also backed the loan with a personal guarantee to the tune of £1.5m.

Mr Edmonds alleges that he and Paul Pascoe, his business partner, made several attempts between 2003 and 2006 to sell shares in UBC at a price that would have fully repaid the loan. However, he alleges these attempts were blocked without any explanation by Dobson.

The letter says: “The primary cause of Unique’s insolvency was the repeated blocking of share sales by Mr Dobson/HBOS.

If Unique’s debt to HBOS had been paid off — as it well could have been had HBOS not blocked the share sale — there would have been no call upon the personal guarantee required of [Mr Edmonds] by HBOS.”The letter also asserts that forcing Unique under was part of Dobson’s dealings with Quayside, the turnround company involved in the scam. David Mills, who ran Quayside, was one of those jailed.

Dobson and Lynden Scourfield, his former colleague in HBOS’s “high risk” department, referred businesses to Mills’ operation in return for money, holidays and sex with prostitutes. Mills then demanded huge fees from the small businesses and took some of them over, stripping them of their assets.

Mr Edmonds’ letter says: “The purpose behind the strategy of HBOS in actively preventing the realisation of the significant value of the UBC Media shares is now clear. It was to force Unique firstly into the hands of the corrupt David Mills and his wife’s turnaround company so that they could milk Unique for fees while conspiring to destroy it.

”The letter asserts that Dobson forced Mr Edmonds to sell one of Unique’s most valuable assets, a stake in a video conferencing company, at a “knockdown price” by threatening to withdraw the loan facility if he refused to co-operate. The business was sold in late 2006 to individuals connected with Interregnum, which was Quayside’s parent company at the time.

HBOS put Unique into liquidation in April 2007, at which stage it owed £2.5m on its loan facility, down from £4.4m in the autumn of 2005.

The business was, at the time, in dispute with another creditor, the finance company Lombard, owned by Royal Bank of Scotland, over the lease of a helicopter that Unique had returned as defective. Mr Edmonds claims that Dobson’s actions made it impossible to defend this dispute.

The celebrity’s demand comes just days before the government sells off its stake in Lloyds almost a decade after the financial crisis.

Lloyds would not confirm the claim from Mr Edmonds, or that it had been included in its compensation review. The bank said the scheme would not be capped at £100m. “If the review determines that the level of compensation due requires us to increase the provision, then we will absolutely do so,” it said.

Lloyds bosses are likely to face questions from clients and investors at the bank’s annual meeting on Thursday, both about the scandal and its compensation scheme.

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