In the first court document filed in the UK over the bank’s record £12 billion cash-call in April 2008, a group of 21 claimants – including international investors and pension funds – have claimed RBS published a defective prospectus littered with mis-statements and omissions.
The claim was issued in London’s High Court just days before a much larger £4bn lawsuit is expected from another investor grouping called the RBoS Shareholders Action Group.
Both claims could lead to RBS’s disgraced former CEO Fred Goodwin being forced to appear in court to defend the bank’s actions.
“Unless the matter can be resolved amicably, the claimants intend to pursue this litigation vigorously and through to trial in order to seek appropriate redress from the court,” said Clive Zietman of UK firm Stewarts Law, who is representing the 21 claimants.
Only broad outlines have been filed so far of a claim Mr Zietman said could be worth “hundreds of millions of pounds”.
The RBoS Shareholders Action Group – some 12,000 ordinary shareholders and 100 institutions – has also alleged that RBS misled investors about its financial health at the time of the rights issue and is demanding compensation.
RBS declined comment and its law firm, Herbert Smith, was not available for comment.
The failure of the bank was averted only by a £45bn taxpayer bailout and billions more in state-backed loans.
Mr Goodwin, dubbed “Fred the Shred” for his cost-cutting abilities, was knighted in 2004 for services to banking in an era of “light-touch” regulation that celebrated financial innovation under former prime minister Gordon Brown.
But Mr Goodwin’s tenure at RBS was brought to an ignominious end after the bank succeeded in its pursuit of ABN AMRO, only to find its Dutch peer’s assets overvalued just as the unfolding credit crisis undermined the entire banking sector in late 2007 and 2008.
RBS – already struggling to secure financing for a ballooning leveraged finance and commercial real-estate lending business – launched a rights issue, but with its shares in freefall as the liquidity crisis took hold, it was not enough.
In October 2008, with corporate customers withdrawing deposits and RBS hours away from running out of cash, the government took an 83 per cent stake.
Mr Goodwin was sent home with an annual pension of over £700,000 before a public outcry forced him to cut it to an annual £342,500.
He was also stripped of his knighthood in early 2012.
RBS has previously said it will vigorously fight any lawsuits related to the 2008 cash-call on shareholders.