Lloyds' investors blame Mandelson in £2bn HBOS case

A group of investors seeking to recoup £2bn of share value lost when Lloyds TSB merged with HBOS have accused Lord Mandelson of withholding evidence which could have stopped the flawed deal.

Lloyds Action Now (LAN) claims the former business secretary failed to disclose to a Competition Appeals Tribunal in Autumn 2008 and later the Scottish Court of Session how HBOS had been secretly granted £25.4bn of 'emergency liquidity assistance'.

The group believes that failure to disclose the loan, which its lawyers argue constituted illegal state aid, would have altered the outcome of the case and could have blocked the merger, the Daily Mail reports.

LAN spokesman Adrian Lithgow says: "The evidence submitted by Lord Mandelson was the subject of a secrecy order which means that no-one who was a party to the case can reveal what it contained.

"That does not prevent them from saying what was not in the secret dossier, and our sources are adamant there was no mention of the £25.4bn."

Particulars of Claim alleging illegal state aid by HM Treasury and the Bank of England and misrepresentation by Lloyds' directors were reportedly lodged in the High Court on Friday.

The group says up to 800,000 shareholders at the time of the merger in January 2009 lost a total of £2bn between them.