Thames Valley Police has already handed evidence to the Crown Prosecution Service. The papers have since been reviewed by the director of public prosecutions, Keir Starmer and Attorney General Dominic Grieve. The Sunday Herald has learned that the charges – that could include corruption – could be pressed within weeks.
The probe, code-named "Operation Hornet", is described by a police officer involved as "the largest fraud investigation of its type in the UK". Under way since June 2010, it has been led by Thames Valley Police and the Serious Organised Crime Agency.
An initial nine suspects, including two HBOS bankers, were arrested and put on police bail between September and December 2010. The former HBOS senior executive Lynden Scourfield and his wife, Jacqueline were among those detained. Others arrested included David Mills, a former NatWest banker, who founded "turnaround" specialist Quayside Corporate Services in 2002. The company was never a member of any professional institute and was not even contracted to the bank. None of the suspects have yet been charged.
The alleged crimes are said to have occurred mainly between 2002 and 2006, when Sir James Crosby was chief executive and Lord Stevenson was chairman of the Edinburgh-based bank, which is owned by Lloyds banking group. At the time, a common business practice involved Bank of Scotland Corporate transferring business accounts to its "high-risk" division overseen by Scourfield.
Scourfield was based in BoS Corporate's Reading office. He is said to have encouraged a significant number of customer firms to appoint Quayside consultants as directors with full fiduciary powers on their boards.
Two Quayside consultants – Tony Cartwright and Michael Bancroft – were previously accused in 1991 of the alleged misappropriation of £1.5 million from Ritz Design Group, a supplier to Marks & Spencer at which they were finance director and chairman respectively. The matter was investigated by accountants Deloitte, but the pair were not prosecuted and it is understood they repaid the funds.
Within months of Quayside becoming involved with the firms, Scourfield and BoS Corporate provided generous additional facilities and loans, even though some of the firms were near technical insolvency. At textiles group Magenta Studios, it is claimed Quayside prepared an optimistic business plan to persuade Scourfield's superiors that additional lending was appropriate.
Overall, BoS loaned significant sums to Quayside-controlled firms. Ownership of some of the Quayside-linked firms' prized assets – including most of the top-shelf titles of pornographic magazine empire Remnant Media, publisher of Asian Babes – were transferred to off-the-shelf companies linked to Mills and his Quayside colleagues.
Mills spent some of the £113m that was loaned by BoS to executive aviation group Corporate Jet Services, where he was chairman, to part-purchase the Powder Monkey, a yacht with a full-time crew of five. The 100ft luxury yacht was kept in the south of France for "marketing" the aviation group. It is currently for sale through Sunseeker London for €2.35m (£1.83m).
In many cases, the companies' total borrowings from HBOS increased tenfold within a couple of years of Mills and Quayside becoming involved.
Other companies allegedly destabilised, maltreated, or asset-stripped by Quayside included the Bristol-based packaging group Bradman Lake, ecological nappy firm Cotton Bottoms, textile business Multi-Sourcing Group, nightclub and restaurant groups Mezzanine Group, sporting goods manufacturer Seoul Nassau and fishing tackle specialist, Speyside Angling Supplies.
In about September 2006, Bank of Scotland "discovered" some serious irregularities and "control failures" in its high-risk division. But instead of informing police at that stage, the bank instructed executives to "hive down" Scourfield's £1 billion-plus loan book.
The bank used leading accountancy firms including KPMG, PwC and Hurst Morrison Thomson to close down the firms.
In March, KPMG revealed Mills was the biggest individual creditor of collapsed investment firm MF Global, where he had parked £3.65m.
Many legitimate owner/managers of affected firms have lost everything as a result of the activities. The bank has sought to evict Paul and Nikki Turner, directors of Cambridgeshire-based music business Zenith Cafe, from their home with 22 separate court cases. The couple argue that their financial difficulties are entirely the result of interventions from BoS and Quayside. Nikki Turner claimed: "Lloyds Banking Group has always been 100% aware of how bad the HBOS Reading situation was ... but the bank continues to be firmly in denial about the severity of this.
"I wonder which part of the Financial Services Authority's (FSA) principles for business the Lloyds chief executive Antonio Horta-Osorio thinks entitles him to refuse to correspond any further or deal responsibly and fairly with Reading and other matters."
Another director of a victimised company alleged: "The FSA's main agenda has been to try and cover this thing up, since it exposes the catastrophic failures in its own approach to regulating the banking sector.
"They fined Barclays £60m over Libor – what have they done about this? Sweet FSA."
Thames Valley Police spokesman Chris Kearney said: "The nine suspects remain on police bail. They are due to answer their bail in late September.
"A decision will be taken at that time whether to rebail them, charge them, or release them without further incident."
A spokesman for Lloyds Banking Group said: "We cannot comment on the detail of this investigation by Thames Valley Police.
"Bank of Scotland itself is not the subject of the investigation. We have been assisting the police with their investigation."
Former fraud squad officer: 'Banks would shame any Mafia family'
A FINANCIAL crime expert and former Scotland Yard fraud squad officer has accused major British banks of ''engaging in activities which are little more than thinly-disguised criminal enterprises''.
Rowan Bosworth-Davies says they are actively encouraging international money-laundering.
In an article written for the Sunday Herald and published today on heraldscotland.com, Bosworth-Davies says: ''What used to be an industry with some claim to integrity and decent values has become a byword for crimes on a scale that would shame any Mafia family.''
He adds: ''Recent shocking revelations about Barclays Bank and the wholesale rigging of the Libor rates by its traders,and the reports from the Senate Committee hearingsinto the degree and level of criminal money-laundering carried on by HSBC over many years, have lifted the veil of deceit and hypocrisy behind which these institutions have conveniently hidden for so may years."
Labour piles on pressure over money-laundering
Labour is continuing to heap pressure on Trade Minister Lord Green over claims of money-laundering at HSBC while he was in charge.
Chris Leslie, shadow financial secretary to the Treasury, has written to the peer calling for him to publicly answer a raft of questions about what he knew about the alleged wrong-doing at the bank.
A US Senate committee found HSBC accepted more than £9 billion from high-risk money-laundering countries such as Mexico and Russia without properly monitoring transactions.
Green was chief executive of the bank for three years before being appointed chairman in 2006. He remained in the role until he was brought into government by David Cameron in 2010.
