* Six jailed for fraud that targeted small businesses
* Bank's compensation scheme had 'serious shortcomings'
-report
* Bank apologises, says will implement recommendations
By Iain Withers and Lawrence White
LONDON, Dec 10 (Reuters) - Lloyds Banking Group has
been heavily criticised for mishandling a compensation scheme
for victims of one of Britain's biggest banking scandals in a
report published on Tuesday.
The fraud at Halifax Bank of Scotland's Reading branch led
to six people being jailed for a combined 47 years.
The scam involved small business customers being targeted
and referred to a consultancy in return for bribes which the
judge at the trial said included designer watches, sex with
prostitutes and foreign holidays.
The bank's compensation scheme for victims had 'serious
shortcomings', retired judge Ross Cranston said in a review into
how Lloyds compensated victims.
The bank likely failed to properly compensate some victims
for financial losses arising from the fraud's impact on their
business, and showed an 'unacceptable denial of responsibility'
for victims' suffering, the review found.
The bank, which has paid more than 100 million pounds
($128.30 million) in compensation over the fraud, said it would
offer all victims the option to have their cases independently
reviewed.
Politicians and campaigners have criticised Lloyds for its
handling of the fraud at HBOS, a business it bought in a
state-engineered takeover in 2009.
Cranston was appointed by Lloyds to assess its compensation
scheme for victims, after financial services minister John Glen
called for an investigation in December last year.
Lloyds Chief Executive António Horta-Osório apologised to
victims and said he was committed to implementing the
recommendations of the report.
($1 = 0.7794 pounds)
(Reporting By Iain Withers and Lawrence White, editing by Huw
Jones and Alexandra Hudson)