The US shareholders have filed a lawsuit against Lloyds Banking Group’s former chairman and chief executive, Sir Victor Blank and Eric Daniels, for issuing false/misleading statements during the acquisition of Halifax Bank of Scotland (HBOS).
The class action has been filed in the Southern District of New York court accusing Lloyds for hiding the fact about HBOS being technically insolvent at the point of takeover.
The £12bn merger was completed after HBOS received an emergency liquidity support of £25.4bn from the Bank of England as well as an estimated $11.5bn from the US Federal Reserve.
The claim is being brought by three sets of solicitors on behalf of investor Albert Ross of Louisiana who owned 1,400 Lloyds American Depositary Receipts (ADRs).
Fishman Haygood Phelps Walmsley Willis & Swanson partner Jim Swanson, which is one of the law firms responsible for the lawsuit, said that the executives failed in letting the investors know about the government’s emergency bail-out.
Sir Victor and Daniels are accused of violating parts of the US Exchange Act during the takeover leading to a collapse in Lloyds’ shares following which shareholders lost an estimated £14bn.
About 1,400 US residents and several institutions that bought Lloyds TSB shares on the New York stock exchange are also expected to claim compensation.
The bank is also facing a possibility of legal action from the British shareholder group, which is being supported by Lloyds Action Now (LAN).