RBS and Goodwin sued for £2.4bn by angry investors
Shareholders claim the bailed-out bank's former bosses misled them over a rights issue in 2008
Royal Bank of Scotland and former directors including ex-chief executive Fred Goodwin and ex-chairman Sir Tom McKillop have been hit with a £2.4bn legal claim from angry investors in the taxpayer bailed-out bank.
RBOS Shareholders Action Group was due to deliver claims letters to the bank and 17 former directors today, including the former head of investment banking Johnny Cameron and the former finance director Guy Whittaker. These claim that RBS misled investors in the propectus for its £12bn rights issue to fund the takeover of the Dutch bank ABN Amro just five months before it had to be bailed out.
The Action Group is backed by 7,400 private shareholders and some 80 institutional investors, including Collins Stewart, Deutsche Bank, SG Hambro, State Street Securities and HSBC Global Custody. Ironically it also includes NatWest Stockbrokers.
The statement of claim, issued by the London legal firm Bird & Bird, is set to allege that RBS and its board withheld or misrepresented information about the true state of the bank's finance when it launched the rights issue in April 2008.
Investors suffered huge losses as a result of the bailouts. In December of that year RBS received its first £20bn state bailout, followed by a second round of taxpayer money worth £25bn in December 2009.
RBS shares hit an all-time peak of 607p in March 2007. Following the takeover of ABN Amro the rights issue was launched at 200p a share. The Government paid an average price of 50p a share for its 82 per cent stake. Today the share price is just 26.2p.
The action group claims that Mr Goodwin publicly denied the need for a rights issue, stating only two months beforehand: "There are no plans for any inorganic capital raisings or anything of the sort."
The Financial Services Authority did not take any action against Mr Goodwin or any other RBS directors, despite stating that the bank's near collapse was due to poor management. Mr Goodwin was stripped of his knighthood.
Mike Neill, chairman of the action group, said there had been "extreme disappointment" with the FSA's report.
He said: "We had been led to believe the FSA would adjudicate on whether RBS misled investors in early 2008, whether the 2008 RBS annual report and accounts were accurate, and whether shareholders deserved to be compensated."
The action group's claim states that RBS failed to disclose to shareholders and the market that it was reliant on $11.9bn in cheap loans provided by the US Federal Reserve at the time of the rights issue. The action group is trying to encourage more shareholders to back the action. Preliminary hearings could begin this summer.
A spokesman for RBS said the group has "substantial and credible legal and factual defences" to the claims and will "defend itself vigorously".
Notes from a small island: Is Sealand an independent 'micronation' or an illegal fortress?
Justin Bieber's unfinished monkey business
World news in pictures
Cameron goes to war with press over 'swivel-eyed loons' slur
Revealed: Eerie new images show forgotten French apartment that was abandoned at the outbreak of World War II and left untouched for 70 years
- 1 Tears and cheers as David Beckham ends glittering career after helping PSG to final win
- 2 Heading for America? Prepare for the longest US immigration queues ever
- 3 You thought Ryanair's attendants had it bad? Wait 'til you hear about their pilots
- 4 Cameron goes to war with press over 'swivel-eyed loons' slur
- 5 It’s official: thanks to Stephen Hawking's Israel boycott, anti-Semitism is no more
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£550 - £600 per day: Orgtel: Fidessa Analyst / PM - Banking - London - Up to £...
£450 - £500 per day: Orgtel: Sourcing Manager - Banking - London - Up to £500p...
To be discussed at interview.: Queen Elizabeth's School: An experienced and ef...
£294.05 - £330.92 per day + 150 per day travel and accommodation: Orgtel: A le...