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June 7, 2010    

Lloyds shareholders could sue over HBOS takeover

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by Kay Murchie

The Treasury and Lloyds senior executives could be sued over the controversial takeover of HBOS, which took place at the height of the financial crisis.

An investor group called Lloyds Action Now, which was established a year ago, claimed investors were lured into voting for the takeover, while not being provided with all the relevant information - particularly in respect to HBOS’ finances.

Lloyds Action Now, which comprises around 500 shareholders, has issued demands for compensation on behalf of test claimants to the Treasury, Sir Victor Blank (former chairman of Lloyds), and Eric Daniels, the bank’s chief executive.

The Lloyds group of shareholders claim they were misled into voting for the takeover without being informed that loans to HBOS from the Bank of England totalled approximately £25.4 billion.

The loans from the Bank of England to HBOS were made in October 2008 - soon after the demise of US investment bank Lehman Brothers.

While the loans have now been repaid, they were not disclosed in the takeover documents.

The Treasury and Lloyds directors have 90 days to respond to a ‘letter of claim’ sent last week before the group takes formal legal action.

Meanwhile, a Lloyds spokesperson said: “We provided thorough and appropriate information to shareholders about our liquidity position and that of HBOS, including the general use of government-backed liquidity schemes. We disclosed the fact of the support.”

Jim Rai of Winckworth Sherwood, the law firm which is acting for Lloyds Action Now, said: “Lloyds shareholders are bearing the brunt for having saved the banking system.

“They are picking up the bill on behalf of the country. They should have had a choice about whether they wanted to do that,” added Mr Rai.

The action group said the total claim could reach £14 billion.

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