Inside Out Bank of Scotland investigation transcript

In the Caves of Financial Justice

Broadcast at 7.30pm on BBC1 South on 3 March 2014. Watch it here.

Copyright - BBC

LIZ WATSON: “It doesn’t make any sense. It just says notice of possession proceedings, well they were issued 5 years ago – why are….”

VO: Elizabeth Watson is about to lose her Bournemouth home. 13 years ago she went to the Bank of Scotland for a loan to invest in a scheme which promised high returns. She says she was told the scheme had the backing of senior people at the Bank of Scotland and the bank was keen to offer her 345,000 pounds secured against her house. But the investment turned out to be a huge fraud and we think the bank should have known that at the time.

LIZ WATSON: “I’ve become obsessed, the fight for justice is so enormous, I’ve been wrestling with the courts. I don’t know how to put it in words other than to say – it’s ruined my life. The biggest cost has been our health, our happiness, our family life. It’s wrecked my business, it’s wrecked my health, it’s wrecked my marriage. It’s been really, really tough. Really, really horrible.”

Liz applied for her loan before the global financial crisis, when banks seemed to want to lend money to practically anybody - and there were big bonuses for those who brought in the most customers. Having made a trial investment, Liz says the conmen directed her to a bank of Scotland manager Fraser Mackay so she could get a loan to invest more.  Mr Mackay was so taken by the scheme he even invested funds of his own. Liz says his enthusiasm meant she got other family members involved.

NW off camera: “Do you feel bad about introducing your family members to the opportunities that were dangled in front of you?

LIZ WATSON: “Terrible. I feel absolutely terrible about that, I was in such anguish over that I had a breakdown I suppose. At the time, I couldn’t function I became a recluse. I wouldn’t go out. I was crying all the time. I felt this terrible guilt, I felt this terrible burden – regret, remorse… I didn’t know how to put it right.”

Now, 13 years on, the bank is going after her home and that of her sister Rosemary. An aunt lost everything and Liz's parents lost their life savings. The whole family was cynically reeled in through a vulnerable daughter because of their apparent wealth.

DENISE WINTON, LIZ’S MUM “It’s almost destroyed my husband because he can’t believe that he was… could ever have done so foolish a thing but then we just didn’t know… it upsets me to see him upset. I’m trying to help my daughters, both of them. I’ve written to all sorts of people – Theresa May, Mr Cameron, even The Queen saying the way I feel about my two daughters in danger of losing their homes. It’s something that I think any mother would empathise with.”

It all began with an accountancy firm formerly based in Nottingham and Leicester called Dobb White – whose partners Alan White and Shin Gangar targeted wealthy families with the promise of returns of up to 160% . The pair got close to one of the managers of the Bank of Scotland, Fraser Mackay – offering him hospitality at champagne receptions and football matches and introducing him to potential investors as the man who could sort out loans. There’s NO suggestion Fraser Mackay knew it would turn out to be a fraudulent scheme but there were plenty of signs that should have made him wary, not least the lies told and extraordinary returns promised by one of the fraudsters Shin Gangar.

LIZ WATSON “I mean total temptation - he made it sound amazing. He said we can generate returns on a best efforts basis, the main thing is your capital is safe – he said it’s risk free – and he made it sound watertight, he said that he had a fantastic new opportunity that was opening up a new area of the financial markets… And that he had the backing of Bank of Scotland and he had a fantastic relationship with them at board level, and that he could arrange loans to invest in this special bond underwriting scheme that they were running. He showed me lots of references from high profile people. He showed me a contract with Andrew Lloyd Webber at the Really Useful Theatre group saying that through the dividends and yields from this scheme that they’d enabled the funding of the Sunset Boulevard tour. I mean it really impressed me, you know...he said if you weren't happy all you had to do was give 30 days’ notice – and it’s a no brainer – he said you can take your money out.”

By promising fantastic pay outs and using names like Andrew Lloyd Webber and David Frost who had never been connected with the investment scheme, Shin Gangar set out to dazzle clients like Liz. 

NW PTC The reason SG was offering returns too good to be true was because he was a crook operating a fraudulent scheme which collapsed. He was sent to jail and the scheme’s investors were left hundreds of thousands of pounds out of pocket..

NW PTC That isn’t the half of it…Shin Gangar already had a criminal record and his dodgy accountancy firm had long been banned by the Financial Services Authority from handling client money. Fraser Mackay and the Bank of Scotland should have known this but they didn’t check.

Financial journalist Ian Fraser is highly critical of the Bank of Scotland’s actions both in making loans to invest in what turned out to be a fraudulent scheme and in now pursuing numerous victims of the fraud for their homes.

NICK off camera “So how would characterise the way banks were lending back in 2001?”

IAN FRASER: “It was insane, they were just lending to anyone with a pulse, virtually. They didn’t care if there was fraud, they didn't care if people made up the information on the loan application in fact they positively encouraged that – some banks including the Bank of Scotland. They basically wanted to put the money out the door and they did not care aboutall  the proper work that should have gone around that including authentication of documents etc.

IAN FRASER: “The whole attitude was a bit like the Wild West - we had almost like a Wild West situation in UK banking at that time where controls, where risk management, where credit checking where a lot of these things were wholly inadequate and we're now reaping the consequences of that.”

NW off camera: “Let me put this to you… this is what bank of Scotland is saying, they never endorsed the Dobb white scheme – all loans were issued  according to relevant processes.”

IAN FRASER: The BoS had an obsession with growth at that period, because it had just merged with Halifax and it wanted to really grow its loan book and was determined to be as big as other banks, like Barclays or HSBC or RBS. So it was going hell for leather as a lender – and it was lending in quite a reckless or cavalier manner, both on the corporate side, which is to businesses and on the retail side to individuals. It was so obsessed with growth it lost sight of fundamentals of banking which is can the borrower pay the money back…?”

NW PTC One of the risks of taking out a mortgage or a loan secured against your home is that if you don’t pay it back or the interest on it then the bank can repossess your property. To protect homeowners from making decisions which could leave them homeless, any lender has to be satisfied you have the means or capacity to pay back the money you are borrowing, aside from the equity in your house.

Under Fraser McKay, at the Bank of Scotland in 2001, the victims we have spoken to claim this was not being properly done. For many of them, their only real source of income was the returns from the Dobb White scheme. 

From what we have been able to find out at least 7 people lent money by the Bank of Scotland have had their homes repossessed or been forced to sell them to avoid repossession. Others have had to give the bank their life savings. To save their homes some victims signed a legally binding gagging order to stop them speaking out about how the bank has treated them.  

By talking to us even anonymously these people could be breaking the gagging order but they now realise staying silent means the story can’t ever get out.

NW: Why did the Bank of Scotland lend you money?

Mrs Y: “The only grounds it was given to me was on the grounds of the income from the Dobb White scheme because I had no other income whatsoever.”

NW: “And the bank knew that?”

Mrs Y: “Correct.”

NW: “Because if someone is going to offer you money secured against your home as a loan, there has to be a pretty certain source of income coming in”

Mrs Y: “That’s right. But that’s what I was offered and that’s what happened.”

NW: “Do you think you were being foolish? 

Mrs Y: “If you have a bank that is happy... to fund you and give you... an unlimited credit card, happy to give you an overdraft, an extra loan, all on the basis of income from this particular scheme. Why should I ask questions about the bank’s knowledge? If they are happy, then why shouldn’t I be?”

NW PTC When Shin Gangar’s investment scheme collapsed more than a hundred million pounds disappeared. Many people lost their life savings. Only a fraction of the cash has ever been recovered.

Mrs Y “The whole world collapsed around us. We just saw a big black hole. Just absolutely no way out. It was just… we felt… that’s it - everything we ever had all gone and lost… it was a matter of selling our house, selling our car, selling everything we could lay hands on and try to keep going…”

NW: “Having lent you the money for this fraudulent investment, what did the bank say when you lost everything?

Mrs Y: “Oh they wanted their money back, full stop. Absolutely. And the solicitors they put on to us to repossess the house were very aggressive.”

NW: How are things like now?

Mrs Y: “My credit status is zero. I’m in a rented house. I’m on state pension with pension credit. Nothing left…”

NW off camera: “The bank say first of all that they did not recommend this Dobb White scheme, secondly that the loans were issued correctly and thirdly if their customers can’t repay their loans, that’s not their problem and they’ve got to call in the money…”

IAN FRASER: “So the bank is saying they’re entirely justified in seeking to evict these people from their homes…[laughs] that’s… that’s… well in my view it’s wrong. They are in denial. They are trying to pretend that they’ve done absolutely nothing wrong and they’re trying to do it to preserve value for their current shareholders.”

We have been in phone and written communication with the Bank of Scotland for months now, but they haven’t answered any of our questions – such as whether it was right for their manager Mr Mackay to accept hospitality from Shin Gangar and whether they were aware that the Dobb White firm was under investigation by the financial authorities at the time of these so called investments.

NW PTC The Bank of Scotland have refused to give Inside Out an interview, but a spokesman, who wouldn’t go on camera, denied the Bank ever made any recommendations to customers about the Dobb White scheme and said that all loans were issued  in accordance with the relevant processes, before refusing to explain what those processes were.

NW PTC You might think a fool and their money are often parted. If something appears too good to be true, it usually is. But this isn’t some pub scam we’re talking about. Fraser Mackay was a senior manager at the Bank of Scotland. For the victims we spoke to he was the face of the bank and he was a figure of authority. His department’s willingnesss to loan them money to invest in Dobb White was, for them, was an endorsement of the scheme.

Since retiring from the Bank of Scotland Mr Mackay has led an active life - jetting off to places like Marrakesh, Moscow and Nepal - and detailing his adventures online.

We eventually tracked Fraser Mackay down. He was happy to chat to us at length off the record and said neither he or the bank had done anything wrong, but he suddenly went very quiet when we asked him to put his point of view on camera.

NW PTC Well we’ve had no joy from the phone calls, the texts, the letters or the emails that we’ve sent, so we’re going to try the direct approach. I’m heading up to Chester which is where Fraser Mackay retired to after he left the Bank of Scotland and we’re going to see if we can get some answers.

Mr Mackay told us he was back from his latest trip, so we waited for him to turn up at his home address…

NW PTC No response - again - we’ve been buzzing Mr Mackay’s apartment for the last two days and there’s been no sign of life at all, so it looks like he’s gone away, or perhaps he’s decide to lie low for a while.

Our expert believes the refusal of anyone from the Bank of Scotland to properly answer our questions fits a familiar pattern of behaviour.

IAN FRASER “In this case and in almost every other case that I’m aware of, the banks never admit that they’ve done anything wrong because they prefer to stonewall, they prefer to be in denial, the prefer to try to divide the victims - there’s various strategies which they and other banks have used over the years. And the hope is that they just stonewall for long enough the customers who have lost money will just go away… die… commit suicide or whatever so then the bank won’t have to pay anything back. It is just an astonishing… I’m not saying in this particular instance - but the banks’ behaviour since the crisis has been abhorrent - most banks have behaved in an abhorrent manner. They haven’t acknowledged they’ve done anything wrong, they haven’t admitted that they have made… well some have admitted they’ve made mistakes, but generally they’ve been in a state of denial believing they could just carry on behaving in more or less the same manner.”

DENISE WINTON: “These banks should be brought to task. A lot of them have spent… well they’ve just ruined peoples’ lives. And I don’t want them to… well they’ve ruined our lives in the sense that for 12 years we’ve had it around our heads. But, I don’t want to see both my daughters, who are still relatively young compared with me lose their homes, because they don’t deserve to.”

But there has been some movement. Since Inside Out has been in contact with the Bank about this investigation they have written to Liz Watson offering to stop repossession proceedings by suggesting both parties sit down with an independent mediator to sort things out.

We have also been in contact with the Financial Conduct Authority, which has the power to issue multimillion pound fines to banks who break the rules. The FCA has taken a keen interest in what we’ve uncovered and promised to look closely at the evidence.

Meanwhile the Bank of Scotland continues to claim they did nothing wrong in depositing customers’ money with an accountancy firm banned from taking it nor would they comment on whether Fraser Mackay’s friendly relationship with Shin Gangar made the Dobb White scheme look legitimate. They also make no excuse or apology for going after their customers when that scheme collapsed.

NW PTC After all, if you end up losing your home because you took out a loan you didn’t have the means to repay… that’s not the bank’s problem - that’s just business.

ENDS