The former bosses of Lloyds Banking Group face a new year being dragged through the American courts by shareholders angry at the bank's takeover of HBOS at the peak of the credit crisis.
Sir Victor Blank and Eric Daniels, the former chairman and chief executive of Lloyds, have been named in a class action lodged with the Southern District of New York, along with the bank itself. The board is accused of making misleading statements about the quality of the transaction. Lloyds had to be bailed out by the British taxpayer soon after the deal was announced in 2008.
The lawsuit has emerged as pressure intensifies for a report into the collapse of HBOS to be published by the Financial Services Authority. Lord Myners, the former City minister, believes taxpayers deserve to see an account into its demise, given the enlarged group's continued reliance on the Government, which is Lloyds' 41 per cent shareholder.
Sir Victor and Mr Daniels are accused of violating parts of the US Exchange Act. The class action alleges that "wrongful conduct" led to "false and/or misleading statements" being issued.
The claim is being brought by solicitors on behalf of Albert Ross of Louisiana, an investor in the bank's New York-listed American depositary receipts.
Separately, a British shareholder group, Lloyds Action Now, is in talks with backers to bring its own claim.
HBOS was receiving emergency funds from the Bank of England within weeks of it being taken over by Lloyds. HBOS's bad debts are still being unwound, and the final bill could exceed £60bn. The FSA has been exploring its collapse for the last three years, in particular its corporate lending arm, which bankrolled the acquisition of numerous hotel groups and housebuilders. The watchdog's report into bailed-out Royal Bank of Scotland, released last month, said it was unable to find evidence to take action against the former chief executive Sir Fred Goodwin and fellow directors.
The recovery of the two banks has been slowed by the eurozone debt crisis. George Osborne, the Chancellor, has conceded that he is unlikely to offload stakes in either before the next election in 2015.
Sir Victor, who stepped down as Lloyds' chairman in 2009, has tried to move beyond the debacle in recent months. He guest-edited Radio 4's Today programme last week, andhas used his role as a UK business ambassador to champion growing enterprises.
He has defended the HBOS deal, saying that Lloyds carried out sufficient due diligence, but that there were no other options to prevent a banking collapse because of the speed with which the economy went downhill.
Mr Daniels retired as chief executive in March, but was paid £500,000 to stay on as a consultant for six months. His successor, Antonio Horta-Osorio, has had to take a period of sick leave. He returns to the job next week.
Meanwhile, Sir Richard Branson's Virgin Money yesterday completed its acquisition of bailed-out lender Northern Rock, despite calls for the sale to be delayed while the National Audit Office explores whether the deal represents good value for the taxpayer.
Virgin Money is paying £747m for the bank. Sir Richard has already waited four years to do the deal – an attempt to buy the former building society was rejected days before the Labour government nationalised it in 2008.