UK's RBS cash call claims seen near 4 bln pounds

LONDON Thu May 15, 2014 2:07pm EDT

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LONDON May 15 (Reuters) - Hundreds more investors have jumped aboard an unprecedented group action against Royal Bank of Scotland, alleging they were misled during a record rescue cash call in 2008, and are claiming damages of roughly 4 billion pounds ($6.7 billion).

As Thursday's deadline loomed for lawyers to coral claimants, four groups issued proceedings on behalf of both top institutions and thousands of small investors in the first American-style class action set to hit English courts.

Fred Goodwin, the former boss of now state-backed RBS, asked shareholders to stump up 12 billion pounds at the height of the credit crisis to shore up the bank's capital position, which fell dangerously low after it paid top dollar for parts of Dutch peer ABN Amro and lost billions on U.S. credit market assets.

Under Goodwin, dubbed "Fred the Shred", RBS staged a meteoric rise to global prominence, expanding so aggressively into wholesale banking that its near-failure at the height of the credit crisis threatened to fell the UK financial system. Shareholders lost around 80 percent of their investments.

"This is a novel and unique case - there has never been anything quite like it in the English courts before," said Clive Zietman, a partner at law firm Stewarts Law, which is representing 313 UK and international institutional clients, including local authorities, pension funds and asset managers.

"The fact that thousands of claimants and hundreds of substantial institutions are making a huge claim makes it the closest thing we've ever had in this country to an American-style class action," he said.

Goodwin, alongside former chairman Tom McKillop and two other former executives, is likely to be called as key witnesses if the case goes to trial - although sources said that may not happen until early 2016.

But any appearance will be eagerly anticipated. Stripped of his knighthood in 2012, Goodwin has kept a low profile since his fall from grace.

NEW HELM

RBS is now being run by a new team and is 80 percent owned by the government, which was forced to step in with a 45 billion pound taxpayer funded bailout.

Investors claim RBS failed to disclose how bad its capital position was, that its risk management and controls were "fundamentally flawed" and that the integration of ABN Amro business was not going well.

The claims are likely to total between 3.5 billion and 5 billion, according to estimates from several people involved.

Stewarts Law investors are claiming more than 1.3 billion pounds, while law firm Quinn Emanuel has filed claims on behalf of five of the biggest institutions - including top 10 investors at the time Legal & General, Standard Life and Prudential - which are likely to total about 1.2 billion pounds.

The main uncertainty about the size of claims RBS faces dogs the RBoS Action Group, which is the biggest group of small shareholders. The group said it has signed up about 13,500 retail investors and about 100 institutions, and has had a surge in claims in recent weeks as the deadline has approached.

It has put its potential claims at as much as 4 billion pounds, although that number has been questioned after claims were put at just 392 million pounds by the group's lawyers in January. One month later, a judge in the case criticised the group's lawyers over their "substantially fluctuating figures".

A fourth group represented by law firm Leon Kaye represents 4,200 retail investors with claims worth 22 million pounds.

It remains unclear whether there will be an out of court settlement. But in the meantime, RBS dismisses allegations its former directors misled investors or acted illegally.

"These things will be set out in court rather than in an early settlement, we have a good defence on this," RBS Chief Executive Ross McEwan said this month.

A London court hearing around early July will set out the roadmap for the rest of the case, including timing of the trial.

Thursday marked the sixth anniversary of the start of trading in the shares sold in the rights issue, and RBS's lawyers have said they will not opposed claims up to this date.

($1 = 0.5960 British Pounds) (Editing by David Evans)

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