Lloyds & KPMG accused over SME insolvency

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Julie Davey, a property developer, is seeking the removal of two partners of KPMG as joint administrators of Angel Group after accusing the accountants of working with Lloyds to “artificially distress” her company.

Stephen Davies, QC, Ms Davey’s barrister, told The Times that KPMG and Lloyds had engaged in “dark practices” in order to provoke the failure of the business in 2012. The allegations were made during a court hearing in London yesterday, which aired claims that Ms Davey’s business was part of a group of companies “earmarked for liquidation” by Lloyds in 2009.

Mr Davies suggested that this had occurred because the bank was under pressure to improve its balance sheet after the emergency takeover of HBOS.

Angel, which was profitable and had net assets of about £100 million before its demise, was best known for running a government contract to provide housing for asylum seekers. Ms Davey claims that Angel was placed into Lloyds’ turnaround division without her knowledge in September 2009. She had banked with HBOS, but was moved to Lloyds after the takeover.

KPMG was appointed by the bank in 2011 to review the company. An “independent business review” was commissioned and charged to the Angel group at a cost of £600,000.

Ms Davey alleges that a consultant installed by Lloyds ostensibly to help the business acted as a “Trojan horse” who “secretly collaborated with Lloyds to assist KPMG in an exit strategy”.

In legal papers, she claims that a whistleblower has provided information which revealed this collusion.

There are also claims that Lloyds syphoned off more than £1 million of the company’s money, without the authority of Ms Davey or disclosure to the company’s auditors.

Mr Davies said that Angel was an example of a wider group of companies that had suffered a similar fate. He said that it was the lead case of what he called the “Tomlinson class” of companies. This was a reference to a report from Lawrence Tomlinson, a former government adviser, who accused banks, particularly Royal Bank of Scotland, of forcing companies to the wall. Ms Davey is seeking an independent liquidator “to investigate the true reasons” behind Angel’s administration.

KPMG said: “The joint administrators wholly reject the allegations which have been made, which they consider are unfounded.”

Lloyds said: “We are not a party to this application. As such is it is not appropriate for us to comment on the case. No action has been brought against Lloyds Banking Group.”

The hearing on the application to remove the administrator is expected to be held in October.

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