More details have emerged about a complaint brought against Herbert Smith Freehills by a group of MPs accusing the City firm of lacking professional independence and placing commercial goals ahead of ethical values.
In a 21-page submission to the Solicitors Regulation Authority, the All-Party Parliamentary Group on Fair Business Banking (APPG) alleges that the firm exhibited a lack of professional independence; subordinated higher duties it owed as officers of the court to the short-term commercial objectives of its client; and appeared to have behaved unethically or incompetently.
The complaint relates to advice HSF gave to Lloyds Banking Group during the lender’s review to compensate victims of a fraud at HBOS, which Lloyds acquired in 2008.
The compensation scheme is due to be reopened after a report by Sir Ross Cranston, a retired High Court judge, found that Lloyds' original customer review had ‘serious shortcomings’. While Cranston said the bank ‘was to be commended’ for some aspects of its response, he criticised its assessment of direct and consequential loss caused by the fraud.
The all-party group says: ‘There is a serious question in APPG’s view about the role of HSF and the scope of its role in devising the scheme. This is a particular concern, but as will appear, it is part of the APPG’s more general concern about HSF’s role in a wider culture of denial of responsibility.’
It adds that while the ‘boundary between what is legitimate action in the commercial interests of a client on the one hand, and unethical conduct and a failure in professional independence on the other, may be one that is unclear or may be blurred… HSF’s conduct exhibits a discernible pattern in consistently falling on the other side of that boundary’.
Professional incompetence was suggested as an alternative to unethical conduct. ‘It is possible that advice given by HSF to Lloyds Banking Group as its client may not have been given by HSF consciously or intentionally subordinating duties owed by it as officers of the court and abandoning proper exercise by it of independent judgment, but may, rather, be explained as the consequence of mere incompetence and poor judgment,’ the APPG says.
A spokesperson for HSF said: 'We are aware of the complaint and we are confident of the firm's position. We look forward to assisting the SRA with their enquiry, which remains at an early stage.'
An SRA spokesperson said: ‘We continue to investigate before deciding on any next steps.’