RBS and Goodwin sued for £2.4bn by investors
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 has delivered claims letters to the bank and 17 former directors, including the former head of investment banking Johnny Cameron and the former finance director Guy Whittaker.
These claim that RBS misled investors in the prospectus 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% stake. At the time of writing 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.
A spokesman for RBS said the group has "substantial and credible legal and factual defences" to the claims and will "defend itself vigorously".