(Adds details of RBoS Action Group claims)
By Kirstin Ridley and Steve Slater
LONDON May 16 Hundreds more investors have
joined an unprecedented group legal action against Royal Bank of
Scotland, alleging they were misled during an emergency
cash call in 2008, and are claiming damages of around 4 billion
pounds ($6.7 billion).
RBoS Action Group, which represents the largest group of
shareholders, said it had filed claims by Friday and would lodge
more next week. The claims could be for at least 1.2 billion
That adds to claims from three other groups that total more
than 2.5 billion pounds on behalf of big financial institutions
and thousands of small investors in the first American-style
class action set to hit English courts.
Thursday marked the six-year anniversary of when the shares
RBS sold in its emergency rights issue began trading and could
be the cut-off point under English law after which damages
claims are no longer be accepted.
Fred Goodwin, the former boss of the 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
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.
Goodwin, alongside former chairman Tom McKillop and two
other former executives, is likely to be called as a key witness
if the case goes to trial - although sources said that may not
happen until early 2016.
RBS rejects 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.
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.
Investors represented by Stewarts Law 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 is
from the RBoS Action Group. 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 six-year
deadline has approached.
It had filed claims by Friday on behalf of investors who
bought 695 million shares in the rights issue, a spokesman for
the group said. How claims are calculated is complex, but that
would indicate claims of about 1.2 billion pounds.
The group will submit more claims next week so the number
will rise, the spokesman said, but he declined to estimate by
how much. Almost all of the claims so far were on behalf of
institutions, he said.
A fourth group represented by law firm Leon Kaye represents
4,200 retail investors with claims worth 22 million pounds.
A London court hearing around early July will set out the
roadmap for the rest of the case, including timing of a trial.
($1 = 0.5954 British Pounds)
(Editing by Erica Billingham)