Shareholders File Lawsuit At RBS Over Losses

Tom Burroughes

15 July 2013

A group of shareholders in Royal Bank of Scotland – the parent firm of Coutts - is suing RBS and four former directors for losses they say they suffered when the bank’s plight led to it being bailed out by the UK taxpayer in 2008, media reports said.

The RBoS Shareholders Action Group has issued proceedings against the Edinburgh-headquartered bank, Fred Goodwin (its former CEO), Tom McKillop, Johnny Cameron and Guy Whittaker, in the chancery division of Britain's High Court. They are seeking to recover billions of pounds lost on the value of their shares ahead of RBS’s bailout.

The final claim for compensation could be as much as £4 billion ($6.02 billion), the shareholder group said, according to Reuters.

The group, which comprises some 12,000 ordinary shareholders and 100 institutions, alleges that RBS misled investors about its financial health during a £12 billion share sale conducted six months before its October 2008 bailout. It also says that the bank and its former employees omitted to include critical information in the prospectus.

RBS declined to comment on the matter when contacted by this publication.

In the past couple of years, two lawsuits in the US against the bank concerning a rights issue involving preference shares and ADRs (American Depository Receipts) were struck down. The Financial Services Authority (the former UK financial regulator), in a review of the circumstances leading up to the bailout of RBS, criticised the bank’s senior managers and decisions but saw no case for legal action against it.

A spokesperson for the RBoS Shareholders Action Group was quoted by media as saying: "Today represents a giant step forward for the many thousands of ordinary people who lost money as the result of inexcusable actions taken by banks and their directors... Now, for the first time, some of these directors will have to answer for their actions in a British Court."

In its full-year results for 2012, RBS logged a loss attributable to ordinary and B shareholders of £5.971 billion, widening from a loss of £1.997 billion in 2011.

Earlier suit

Another group of current and former shareholders in RBS has launched a multi-million pound lawsuit against the bank for allegedly misleading investors over a rights issue of new shares in the lead-up to the credit crisis in 2008. A group of 21 claimants - including pension funds - allege the bank published a defective prospectus littered with misstatements and omissions.

Among those bringing the suit are the Coal Staff Superannuation Scheme, the Mineworkers' Pension Scheme, pension schemes for electricity workers in the UK, a number of ING funds and the teachers' retirement system of the state of Illinois.

Litigation funder Argentum says it has broken the mould by providing funding for the suit.

Matthew Reach, solicitor and head of legal review at Argentum said: “This is truly a case of David and Goliath. Without litigation funding from Argentum these shareholders might never have had access to justice. It is important that these shareholders, who lost substantial sums, have their day in court and the bank is held accountable for its actions. This is a pioneering piece of litigation, but we feel it is compelling and are proud to be supporting such a cause.”