For the best part of a decade Fred Goodwin, the former chief executive of Royal Bank of Scotland, has shunned the limelight he once embraced, drifting into public consciousness only during fights about privacy injunctions and neighbourhood spats over shrubs. That’s about to change as he’s scheduled to appear in a London courtroom to defend his record.
The trial will force the bank to relive an ugly period during the 2008 financial crisis, when it held an emergency rights offering only to be nationalised months later in a record £45.5bn bailout.
Mr Goodwin, who will make a rare public appearance to testify, had a steep fall from grace, losing his knighthood and becoming the era’s cartoon villain for many of the UK investors who sued after buying shares in the offering, claiming they were misled.
“I definitely want to see it in court, just to see the events and what comes out as Fred sees it,” said John Greenwood, a retired civil engineer who lost more than half of his pension when his RBS shares plunged in value. “Fred and all the directors, they’re the ones running the bank at that time. They’re the ones that should know the true picture, and they’re the ones that should answer.”
The case, which is scheduled to feature Mr Goodwin on 8 June, pits the bank and a handful of former executives against a group of as many as 9,000 shareholders, including 18 corporate investors, customers and former RBS employees. Tom McKillop, the former chairman, ex-financial director Guy Whittaker and former investment banking chief Johnny Cameron are all destined for the witness stand to pore over a painful period in the bank’s history.
Although it’s been almost a decade since the 58-year-old stepped down and apologised for the near collapse of RBS, his spectre still haunts the Edinburgh-based lender. Mr Goodwin, who earned his nickname for ruthless cost-cutting at National Australia Bank’s UK unit, transformed RBS from a regional lender into the biggest bank in the world with acquisitions including the disastrous 2007 purchase of ABN Amro in a three-bank deal valued at €71bn (£61bn).
It collapsed, however, under the weight of ever-increasing debt accumulated during Mr Goodwin’s acquisition spree. RBS has not posted an annual profit in the nine years since the financial crisis and the Government expects to lose money on the bailout.
“The trial is a chance too good to pass for people wanting to hit back and get him in the courts; especially as he’s laid low in recent years,” said Thorsten Beck, a professor of banking and finance at Cass Business School in London. “It could be more about getting him in court than recovering money from a past investment.”
RBS said it has strong defences to the investors’ claims.
“We have a duty to act in the best interests of all of our shareholders, including the UK taxpayer,” the lender said in a statement.
Lawyers for Mr Goodwin and the investors declined to immediately comment on the trial.
Biggest business scandals in pictures
Biggest business scandals in pictures
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Authorities have launched an investigation into Barclays chief executive officer Jes Staley for trying to identify a whistleblower, the bank said on Monday. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are both investigating Mr Staley after the bank notified them that Mr Staley had tried to identify the author of two anonymous letters, which were sent to the board and a senior executive in June 2016.
2/21 UK to crack down on bank money laundering after reports of £65bn Russian scam, City minister says - March 2017
The Economic Secretary to the Treasury has vowed that the Government will crack down on money laundering practices, after several of the UK's biggest banks were accused of processing money from a Russian scam, believed to involve up to $80bn (£65bn).
3/21 Former HBOS bankers convicted of bribery and fraud over £245m loan scam - February 2017
Two former HBOS bankers were among six people found guilty of bribery and fraud that cost customers and shareholders hundreds of millions of pounds, the BBC reports. Lynden Scourfield, 54, a manager at HBOS, forced struggling clients to use the services of his friends David Mills, 60, and Michael Bancroft, 73. In return, the two businessmen arranged sex parties, cash and lavish gifts. On Monday, the three were convicted at Southwark Crown Court on accounts including bribery, fraud and money laundering. Mark Dobson, another manager at HBOS, Alison Mills, and John Cartwright were also convicted.
4/21 Former Reckitt Benckiser executive linked to death of 100 people in South Korea jailed for seven years - Friday January 6
A former South Korean executive of UK-based Reckitt Benckiser has been jailed for seven years over the sale of a humidifier disinfectant that killed about 100 people and left hundreds with permanent lung damage. Shin Hyun-woo, head of Reckitt Benkiser’s Oxy subsidiary from 1991 to 2005, was found guilty of accidental homicide and falsely advertising the deadly product as being safe even for children. The consumer product disaster affected many families in South Korea, where children and pregnant women often battle dry winter seasons with humidifiers. Other retailers such as Lotte Mart and Homeplus were also found guilty of selling the deadly product.
5/21 Rogue trader
A French court cut the damages owed by rogue trader Jerome Kerviel from €4.9bn (£4.2bn) to just €1m (£860,000). The court ruled on that Kerviel was “partly responsible” for massive losses suffered in 2008 by his former employer Societe Generale through his reckless trades. Kerviel has consistently maintained that bosses at the French bank knew what he was doing all along.
6/21 Lloyds chief apologises for damage caused by affair allegations - August 2016
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7/21 Christine Lagarde faces court over £340m Bernard Tapie payment - July 2016
The head of the International Monetary Fund (IMF), Christine Lagarde, must stand trial in France over a payment of €403 million (now £340m, then £290m) to tycoon Bernard Tapie, a France's highest appeals court has ruled. The court rejected Ms Lagarde's appeal against a judge's order in December for her to stand trial over allegations of negligence in her handling of the affair. Ms Lagarde could risk a maximum penalty of one year in prison and a fine of €15,000 euros if convicted.
8/21 HSBC senior manager arrested in FX rigging investigation at JFK airport in New York - July 2016
A senior executive at HSBC has been arrested at New York's JFK airport for his alleged involvement in a conspiracy to rig currency benchmarks, according to reports. Mark Johnson, global head of foreign exchange cash trading in London, was reportedly arrested on Tuesday. He will appear before a federal court in Brooklyn on Wednesday charged with conspiracy to commit wire fraud, Bloomberg said.
9/21 Former PwC employees found guilty in 'Luxleaks' tax scandal - June 2016
Two ex- PricewaterhouseCoopers staffers were found guilty in Luxembourg of stealing confidential tax files that helped unleash a global scandal over generous fiscal deals for hundreds of international companies. Antoine Deltour and Raphael Halet face suspended sentences of 12 months and 9 months and were ordered to pay fines of €1,500 (£1,230) and €1,000 (£822) for their role in the so-called LuxLeaks scandal. Despite the minimal sentences, the ruling was described by Deltour’s lawyer as “shocking” and “a terrible anomaly.” The ruling “puts on guard future whistle-blowers,” Deltour told reporters.The LuxLeaks revelations sped beyond Luxembourg, causing European Union regulators to expand a tax-subsidy probe and propose new laws to fight corporate tax dodging, while EU lawmakers created a special committee to probe fiscal deals across the 28-nation bloc.
10/21 Goldman Sachs dealmakers lavished Libyan officials with prostitutes to win contract - June 2016
A former Goldman Sachs dealmaker trying to persuade Gadaffi-era Libya to invest $1 billion with the investment bank procured prostitutes and invited Libyan officials to lavish parties in the hope of winning the business, the High Court heard on Monday June 13.The Libyan Investment Authority sovereign wealth fund is suing Goldman Sachs for inappropriately coercing its naïve staff into giving its sovereign wealth fund cash to the bank to invest in products they did not understand. The products were designed to generate big profits for Goldman, the LIA claims.Goldman denies wrongdoing and says the LIA was treated as an arms-length customer
11/21 Former boss of BHS said his life was threatened - June 2016
Darren Topp, the former boss of BHS, has said former owner Dominic Chappell threatened to kill him when he challenged him over a £1.5 million transfer out of the business. MPs on the Business, Innovation and Skills Committee asked Mr Topp about a £1.5 million transfer Mr Chappell made from BHS to a company called BHS Sweden.
12/21 Sports Direct founder Mike Ashley admits paying workers below the minimum wage - June 2016
Mike Ashley admitted paying Sports Direct employees below the minimum wage at a hearing in front of MPs. The company founder said that workers were paid less than the statutory minimum because of bottlenecks at security in an admission that could result in sanctions from HMRC.
13/21 Mitsubishi admits ‘improper’ fuel tests - April 2016
Mitsubishi has admitted to using false fuel methods dating back to 1991. The scale of the scandal is only just coming to light after it was revealed in April that data was falsified in the testing of four types of cars, including two Nissan cars.
14/21 Panama Papers: Millions of leaked documents expose how world’s rich and powerful hid money - April 2016
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15/21 Google's tax avoidance
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16/21 Turing Pharmaceuticals and Martin Shkreli
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17/21 Volkswagen emissions scandal
VW admitted to rigging its US emission tests so that diesel-powered cars would looks like they were emitting less nitrous oxide, which can damage the ozone layer and contribute to respiratory diseases. Around 11 million cars worldwide were affected.
18/21 Quindell, the scandal-ridden insurance firm
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19/21 Toshiba Accounting Scandal
The boss of Toshiba, the Japanese technology giant, resigned in disgrace in the wake of one of the country’s biggest ever accounting scandals. His exit came two months after the company revealed that it was investigating accounting irregularities. An independent investigatory panel said that Toshiba’s management had inflated its reported profits by up to 152 billion yen (£780m) between 2008 and 2014.
20/21 FIFA Corruption Scandal
Fifa, football's world governing body, has been engulfed by claims of widespread corruption since the summer of 2015, when the US Department of Justice indicted several top executives. It has now claimed the careers of two of the most powerful men in football, Fifa President Sepp Blatter and Uefa President Michel Platini, after they were banned for eight years from all football-related activities by Fifa's ethics committee. A Swiss criminal investigation into the pair is ongoing.
21/21 Libor fraudster
City trader Tom Hayes, 35, has become the first person to be convicted of rigging Libor rates following a trial at London's Southwark Crown Court. Hayes worked as a trader in yen derivatives at UBS before joining the American bank Citigroup in Tokyo. He was fired from Citigroup following an investigation into his trading methods. He returned to the UK in December 2012 and was arrested following a two-and-a-half year criminal investigation by the SFO.
Mr Goodwin, who was stripped of his knighthood in 2012, was cleared of wrongdoing by the UK Financial Conduct Authority in 2011 along with other directors related to the near-collapse of RBS. The FCA said that regulators had been too lenient in challenging Mr Goodwin’s “dominant” management style.
The claimants argue that the bank deliberately concealed its financial weaknesses before the £12bn rights issue in 2008. The bank will counter that no cover-up took place, the rights issue prospectus included all the information investors needed, and that the claimants are overlooking how volatile markets were in 2008.
The suit, filed in March 2013, swelled to over 27,000 claimants seeking as much as £4bn, but the bank set aside £800m to settle with as many investors as possible in a bid to put some distance between current management and decisions that were made a decade ago.
The bank has settled with about three-quarters of the 27,000 claimants, leaving just the one group of shareholders holding out, seeking about £520m at trial. Additional talks earlier this month failed to reach a final deal.
“One of the reasons I was keen to get it resolved and put some money on the table was so that the bank could move forward again,” Ross McEwan, the bank’s current chief executive, said at RBS’s annual meeting on 11 May. “The media will be very interested, and it will take the organisation back to 2008.”
But investors like Mr Greenwood are hoping the case will go to trial. While the losses on RBS shares did not bankrupt him, he had to abandon plans to buy a boat to spend his retirement travelling the nation’s canals.
“Fred and his men must’ve suffered financial losses, I’m sure, but relatively speaking Fred had a massive pension pot,” the 75-year-old said. “He’s knocked it down, but he’s still many times wealthier than what most people have got.”
The trial won’t be the first time that Mr Goodwin’s attempts to keep a low profile have been scuppered by legal proceedings. In 2015, he was in the news when a judge ordered him to chop down a 20-foot hedge at his home in a fight with neighbours.
Even his attempts to stay out of the headlines made headlines. He went to the High Court in London in 2011 to get a super injunction to prevent a tabloid newspaper from printing a story about his affair with a colleague. His identity became public when Liberal peer Lord Stoneham used parliamentary privilege to reveal his name in the House of Lords.
“The banks are run for individuals to make money for themselves, not for the good of the country,” Mr Greenwood said. “And that’s still the case.”