RBS faces class action on $10bn share offering

US court filing alleges bank misled investors

Royal Bank of Scotland faces a class-action lawsuit in the United States accusing the bank and its directors of misleading investors in its shares just before the credit crisis began.

The suit, filed on Tuesday, alleges that when the bank announced a sale of up to $10bn ($£7bn) of American depository shares (ADS) in June 2007 it failed to disclose the damage suffered by debt securities on its balance sheet.

The bank is also accused of allegedly failing to disclose poor internal controls, the damage that would be done by its acqusition of ABN Amro and the weakness of its capital buffer against the deteriorating sub-prime market.

The legal filing in the US court for the Southern District of New York names Sir Tom McKillop, RBS's chairman, and Sir Fred Goodwin, its ex-chief executive, along with other directors and former executives and its underwriting banks. Sir Fred left the bank at the end of last year and Sir Tom will stand down at April's annual meeting.

The case has been brought by Natalie Gordon, an individual investor. The suit asks for the court to grant class-action status and for the case to be heard by a jury.

When RBS issued the preference shares in question, it was pursuing its disastrous hostile takeover of ABN Amro while defaults on US sub-prime mortgages, which RBS packaged up for sale as investments, soared.

"RBS ultimately annouced multi-billion pound impairment charges associated with its exposure to debt securities, including mortgage-related securities tied to the US real estate markets, causing the price of RBS's ADSs issued in the offering to substantially decline," the lawsuit states.

Stephen Hester, RBS's new chief executive, said last week that RBS had taken on too much debt and that its risks were too concentrated. Flagging up a loss of up to £28bn for 2007, he said that RBS was one of many banks to get carried away in the credit boom.

The lawsuit states that after insisting that its capital position was strong, the bank announced a record £12bn rights issue last April and in October accepted £20bn of capital from the Government. RBS said: "We are aware of this action and similar complaints that have been filed against a number of banks over the past 18 months arising from the turmoil in global financial markets.

"The action will be defended vigorously. It would be inappropriate to comment further at this early stage."

US class actions allow the court to bring all comparable cases under one action. They are controversial because, though they avoid inefficient multiple actions, they can lead to massive payouts such as those made by US cigarette companies in recent years to ill smokers. Antonio Vozzolo, the lawyer acting for Ms Gordon, said: "We would encourage all investors with significant financial losses to come forward and move for lead plaintiff."

RBS ordinary shares in London have fallen from 530p at the end of June 2007 to just 21.3p at yesterday's close.

PROMOTED VIDEO
News
Down time: an employee of Google uses the slide to get to the canteen
businessHow bosses are inventing unusual ways of making us work harder
News
Actor, model and now record breaker: Jiff the Pomeranian
news
News
REX/Eye Candy
science
News
i100
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

£50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?