Royal Bank of Scotland could be poised to sue Goldman Sachs for hundreds of millions of dollars after the American investment bank paid out $550m (£358m) to settle fraud charges brought by the US Securities and Exchange Commission.
Goldman neither admitted nor denied the SEC's charges. However, as part of the settlement it did admit that it should have told investors in a controversial mortgage derivative known as Abacus that a hedge fund client which helped with the portfolio was betting on it failing.
RBS will receive $100m as part of the settlement but has the option of pursuing Goldman for more after the SEC said the case opened the door for civil claims. Another $150m will be paid to IKB Industrie Bank of Germany, which was the other big loser on the Abacus bond, with the rest going to the US government.
RBS became involved through its acquisition of ABN Amro, the Dutch bank whose investment bank provided credit insurance on the bond and lost $841m in August 2008 as a result. RBS said in a statement: "[We have] been monitoring the complaint closely. Following the SEC's announcement, RBS will now carefully consider all of its options."
A number of investors in RBS, which is 83 per cent owned by the British taxpayer, have been pressing the company to take action to recover more of the losses. Any legal case against Goldman would have to take place in the US.
However, sources indicated yesterday that a civil suit was only one of a range of options being considered to recoup RBS's losses. A negotiated settlement with Goldman is another possibility as the US bank battles to draw a line under the affair and restore a reputation that has been shattered because of its actions during the credit crisis. In April, the then prime minister, Gordon Brown, said that Goldman would have to pay back "hundreds of millions of dollars" if the charges against it were proven. During the general election campaign, both the Conservatives and Liberal Democrats were also sharply critical of the Wall Street giant, which is America's second-biggest bank.
However, a spokesman for the Treasury would not be drawn on the issue yesterday, saying: "We regard this as an operational matter for the banks."
If RBS is able to recover more than the $100m it would be seen as a significant victory for the new management team led by the chief executive Stephen Hester, who has been charged with returning the bank to health after it received billions of pounds of taxpayers' cash to prevent it from going under during the financial crisis.
Despite the chance of a significant one-off boost if it can squeeze some more cash out of Goldman, RBS's share price fell xxp to yyp last night.
While Goldman has settled with the SEC, it could still face more penalties in Britain. The Financial Services Authority is pursuing action against the bank and said yesterday that its investigations were continuing.
When the SEC filed its charges it emerged that FSA had not been told that Fabrice Tourre, the trader who constructed the Abacus bond, was under investigation by the SEC when he was transferred to London.
Mr Tourre remains on paid leave from Goldman Sachs and a Goldman spokeswoman said he continued to be an employee of the company, although it has pledged to help the SEC with its parallel investigation into his conduct.
Goldman is also paying Mr Tourre's legal fees, although he has been de-registered as a trader with the FSA in Britain. Allen & Overy, the law firm representing him, declined to comment. Mr Tourre has until Monday to respond to the SEC charges against him but could seek a 30-day extension.Reuse content