Has Nemesis finished her work?

The small shareholders on both sides of the Atlantic trying to sue Lloyds over the disastrous takeover of the bankrupt HBOS in 2009 will be encouraged by the settlement reached by Bank of America, which was facing similar action over its rescue of Merrill Lynch.


Like Lloyds, B of A had always maintained that the shaholders had no case in their argument that vital information was kept from them when they voted in favour of the acquisition. Now the US bank is proposing to pay $2.4 billion to stop the action going to court. The deal still has to be ratified by a judge, but the size of the payout suggests that there may have been more chance of the action succeeding than the bank had so far acknowledged. Only $800 million had been set aside for the claim.

Two sets of shareholders are threatening Lloyds. In the US Albert Ross, a retired Scottish sea captain now living in Louisiana, is leading a class action on behalf of other American shareholders.

The basis of their claim is a comment made by former Lloyds chief executive Eric Daniels at the time of the deal about the merged bank’s “robust capital position.” A few months later the bank needed £25 billion in emergency liquidity assistance from the Bank of England. Lloyds have applied to the New York district court to have the action dismissed.

In the UK the group Lloyds Action Now has been struggling to raise the cash to fund an action, but has been talking to litigation funders and risk insurers. The group claims: “As soon as funding and the insurance is in place we will sue the directors of Lloyds TSB. We have a strong team of solicitors, barristers, expert witnesses on both merits and quantum lined up and, unless they settle, we shall have our day in court and extract justice from the directors who let us down so badly.

“It is taking longer than we had hoped but progress is being made and time is running out for the directors that we employed and paid far too much for doing such a bad job!”