By Allan Urry
BBC File on 4
Joanne Freer claims HBOS ruined her business
Businesswoman Joanne Freer looked to be on a winner with her brand of re-useable nappies.
But the dream soured and she had to sell the business, blaming HBOS and the consultancy she was forced to hire as the price for a bank loan.
"It left me completely penniless because we'd sold property, we'd cashed endowments, we sold everything that we had and everything we had was in the building and was in the business and you know we lost everything because of that," she said.
An investigation by BBC File on 4 has found other businesses complaining about their treatment by an executive from HBOS's 'high risk' team and consultancy Quayside Corporate Services (QCS), who these businesses were required to pay.
Allegations of reckless borrowing and irregular practices at HBOS are due to be debated in the House of Commons next week.
It is scant consolation to Mrs Freer whose eco-friendly venture Cotton Bottoms had won several awards and attracted attention from well-known chains such as Waitrose, Boots, the Co-op and John Lewis.
She needed an injection of finance to expand the business.
She secured £400,000 from HBOS, but as a high risk loan it came with strings attached.
An executive in HBOS's 'high risk' team, based in Reading, insisted she engaged QCS with one of its employees Michael Bancroft sitting as a non-executive director on the board for a fee of £18,000 a year.
"He [the bank employee] also put in a condition that over and above the 1% fee they were already charging for the overdraft, he wanted to levy a further one-off £60,000 arrangement fee," said Ms Freer.
She added: "I thought it was very unfair and very unusual."
Mrs Freer got the fee cut to £20,000 but the relationship with Mr Bancroft soured further resulting in frequent boardroom rows including a fight over Mr Bancroft's plans to make key people redundant in the business.
"I just couldn't understand why he would do that, because effectively it would kill the business because we'd be getting rid of the people, generating the turnover in the business," she said.
Within eight months getting the extra credit, fees owed to the bank and its agents were a huge burden, boardroom battles had robbed the firm of its vitality, sales had collapsed, her marriage had fallen apart, and the bank called in the loan.
Mrs Freer claims she had to sell the company off cheaply.
Mr Bancroft refused to be interviewed by File on 4. A letter from his solicitors characterised Mrs Freer as irrational, rude, un-cooperative and obstructive, and that her company lacked stable and mature management.
According to forensic accountant David Winch there are concerns about reckless lending by HBOS. The BBC asked him to investigate financial documents of 18 different companies involved with HBOS and the consultants.
He found 13 companies that had entered insolvency owing £275m to the bank but only a fraction of that had been recovered. Where David Winch looked in detail at the history of companies, he said there was a "clear and obvious risk to the bank that this money couldn't be repaid."
Mr Winch added: "I have never seen anything like this with these sort of figures, we are talking losses suffered by the bank of £250m, even for a large organisation to lose £250m is quite shocking."
The biggest hit for HBOS came with the failure of airline group Corporate Jet Services (CJS) based at Southampton. It was founded with £13m of borrowed money in 2002. David Mills, who runs QCS, was a non executive director on the board, reporting back to the bank.
Mr Winch said with such large interest payments, the company was heading for a fall. "In the first year of operation the company's takings that it got for hiring out its planes were about £1.5m to £2m, but its expenditure including the interest that it was paying was about £8m. So it was losing money hand-over-fist at the beginning."
But according to an auditor's report an agreed overdraft of less than £1m had soared to £28m by 2006.
By now David Mills had acquired a controlling interest.
The business continued to decline but money from CJS was used to help the purchase of a luxury yacht for another firm owned by Mr Mills.
A sum of £239,000 towards the deposit was charged to CJS, as was the £15,000 monthly fee to enable CJS to use it. Mr Mills told the BBC it was used for marketing purposes.
However, ex-company insiders told the BBC it was never chartered out to customers.
The company crashed in 2007 owing the bank £113m including a £60m overdraft.
According to Mr Winch, "It is astonishing that a company could have been allowed an overdraft of £800,000 initially in 2002 and that it had been allowed to rise and rise until it reached £60m, five years later."
Conservative MP James Paice, and others representing some of the businesses affected are concerned that complaints about HBOS's past has not been properly investigated by its current owners Lloyds Banking Group.
"The bigger public issue here is that a bank that has now been bailed out to a massive extent by the taxpayer, and got into very serious trouble as everybody knows, and it appears that part of that is due to the fact that their lending policies as practised in this particular office were dubious to say the least," he told File on 4.
No-one from Lloyds Banking Group, which owns HBOS, would be interviewed but in a statement told the BBC: "We simply cannot comment on individual circumstances. However, we strongly believe that we have acted throughout in a fair and responsible way.
"We stand by our customers and support them closely in managing their financial difficulties."
David Mills denied any wrongdoing and said: "I and Quayside Corporate Services acted as advisors to a number of banks and accounting firms to help implement commercial decisions made by our clients to try to turn around failing businesses.
"I always kept the banks fully informed of progress with the businesses. Unfortunately, in a number of cases companies were unable to pay off large debts incurred before Quayside Corporate Services' involvement."