FRED Goodwin and three other former Royal Bank of Scotland directors were yesterday served with a £4 billion lawsuit by a powerful shareholder action group.
Named in the proceedings alongside the disgraced former chief executive are Sir Tom McKillop, Johnny Cameron and Guy Whittaker, respectively ex-chairman, investment banking head and finance director. The bank itself is also included in the action.
The proceedings relate to alleged financial misrepresentation in the bank’s controversial £12bn rights issue in April 2008. It was launched after the previous year’s ultimately disastrous £47bn takeover of Dutch bank ABN Amro by an RBS-led consortium.
It comes just days after a smaller lawsuit, involving more than 20 institutional investors and said to be worth hundreds of millions of pounds, was launched by legal firm Stewarts Law making broadly the same allegations.
RBoS Shareholders Action Group, which represents more than 12,000 private shareholders and about 100 institutional investors, said yesterday: “The action group maintains that the bank’s directors sought to mislead shareholders by misrepresenting the underlying strength of the bank and omitting critical information from the 2008 rights issue prospectus.”
The group said that when the case comes to court its lawyers would contend that Royal Bank of Scotland is liable for the losses incurred on the shares subscribed in the rights issue because of breaches of Section 90 of the Financial Services and Markets Act 2000.
An action group spokesman said: “It is estimated that the final claim may be as much as £4bn. Today represents a giant step forward for the many thousands of ordinary people who lost money as a result of inexcusable actions taken by banks and their directors in the financial crisis.
“Now, for the first time, some of these directors will have to answer for their actions in a British court.”
The papers are understood to have been served on leading City lawyers Herbert Smith, representing both RBS and the former directors, marking the beginning of a civil law suit. One private shareholder from west Yorkshire involved in the RBoS lawsuit, who preferred not to give his name, said: “I’m disgusted with the way this [the investor cash call in 2008] was presented months before the firm went bust.
“We’re not broke or anything, but we are appalled with how we were misled and we know others are less fortunate and have been very badly impacted as a result of the rights issue.
“We would love to have had a better retirement and RBS and its former directors have prevented that. I am delighted this has finally been brought to court and I’m hoping for a speedy and favourable resolution.”
RBS declined to comment. However, in the past the bank has said that it would vigorously contest any suits relating to the 2008 rights issue, which came months after Goodwin, who has since been stripped of his knighthood, had told the City that RBS did not need to raise capital.
Last year, two legal actions by holders of RBS preference shares and American Depositary Receipts were thrown out by US judges.
The just-abolished Financial Services Authority said in its review of the collapse of RBS into majority taxpayer ownership that “a series of bad decisions” had been made by directors in the run-up to the financial crisis.
But the regulator concluded that these bad decisions “were not the result of a lack of integrity by any individual and we did not identify any instances of fraud or dishonest activity by RBS senior individuals or a failure of governance on the part of the board”.