KPMG Found ‘No Evidence’ to Support HBOS Whistleblower’s Claims

An internal investigation into allegations by the former HBOS Plc group risk director found “no evidence” that he was fired for raising concerns to senior management about risky sales.

The KPMG report published today by the U.K. Treasury Select Committee investigating claims by the whistleblower said he wasn’t fired “in response to him performing his job too well, as suggested” by Paul Moore, the whistleblower. Moore headed the team managing risk at HBOS, once Britain’s biggest mortgage lender, until the end of 2004. HBOS commissioned the report in 2005.

Moore’s original testimony to the select committee that he was fired by the bank’s then-chief executive officer James Crosby, caused Crosby to quit as deputy chairman of the U.K. Financial Services Authority after the panel suggested there was a conflict of interest. HBOS is now part of Lloyds Banking Group Plc (LLOY), which said today HBOS had a 7.5 billion pound ($10.7 billion) loss for 2008.

“A number of senior executives referred negatively to Mr. Moore’s behavior and performance at meetings,” said KPMG, which interviewed Crosby and Andy Hornby, the most recent CEO of the bank. “Consistent reference has been made” to Moore’s “over- stating matters in an overly dramatic and theatrical way.”

Crosby denies Moore’s allegations and said in a Feb. 11 statement that resigning from the FSA was the “right course of action.”

Moore said in testimony that KPMG’s report can’t be relied upon because it failed to interview key witnesses that he had requested. His lawyer, Peter Hamilton, of London-based 4 Pump Court Chambers, said that KPMG being both HBOS’s auditors and reviewer of Moore’s claims meant that the investigation wasn’t independent.

Michael Fallon, a Conservative lawmaker and deputy head of the select committee, also questioned the report’s independence in an interview this week with Bloomberg Television.

Both KPMG and the Financial Services Authority assert that the investigation was independent and proper.

To contact the reporters on this story: Caroline Binham in London at

To contact the editor responsible for this story: Anthony Aarons at

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