TAXPAYERS are set to foot the legal bill for disgraced former Royal Bank of Scotland chief executive Fred Goodwin to defend his actions in court.
Mr Goodwin – who receives a pension of £342,500 a year – is expected to be called to give evidence on the bank’s spectacular 2008 collapse when shareholders’ claims for damages are heard.
A judge in London’s Chancery Court was today due to rule on whether three lawsuits claiming that shareholders were misled during a £12 billion capital-raising exercise by RBS shortly before the collapse should be bundled together in a single case.
A source close to the legal action said: “It is absolutely certain Goodwin will have to give evidence. He’s a critical witness and RBS cannot defend this action without him appearing and giving evidence.”
It is understood that RBS, now mostly state-owned, will honour any legal fees incurred by its former directors, which means that taxpayers will end up meeting the cost of lawyers for Mr Goodwin and the other former directors who are named in at least one of the actions.
The judge is also expected to insist that RBS provides the court with an estimate of what its defence will cost and set a deadline for it to submit its defence.
The lawsuits allege that RBS misled shareholders over its financial strength when it urged them to buy extra shares just months before the bank had to be bailed out with £45.5 billion of taxpayers’ money.
The largest claim is being made by the RBoS Shareholder Action Group, which represents more than 12,500 private shareholders, many of them pensioners, and more than 100 institutional investors who lost money in the 2008 rights issue.
The group claims that RBS and its directors — Fred Goodwin, the chairman Sir Tom McKillop, the head of investment banking Johnny Cameron, and the finance director Guy Whittaker — misled shareholders by misrepresenting the underlying strength of the bank and omitting critical information from the 2008 Rights Issue prospectus.
Another claim has been made by more than 50 institutional investors, including the US financial group ING Funds, which manages about £130 billion of funds around the world, and Glasgow City Council. It is understood that a number of large institutional investors are also considering legal action, including Guardian Royal Exchange Assurance, Legal & General and Standard Life.
Meanwhile, the UK Government today sold a £3.21 billion chunk of taxpayer-backed Lloyds Banking Group as it begins the process of returning the bank to private hands.
The stock was snapped up by institutional investors at a price of 75p per share, compared with the 73.6p average price paid by the Government at the time of the 2008 bail-out.
It means the taxpayer stake in Lloyds – rescued by the state at the height of the financial crisis after the disastrous acquisition of Halifax Bank of Scotland – has been reduced from 38.7 per cent to 32.7 per cent. No further sale of the taxpayer stake will take place for a further 90 days.