LONDON, Dec 13 (Reuters) - Royal Bank of Scotland said it and its former bosses may have made bad business decisions in the past but that does not mean they misled investors or acted illegally, as it prepared to lodge its defence against a lawsuit from shareholders.
RBS said it planned to file its defence against a 4 billion pound ($6.5 billion) lawsuit in London’s High Court later on Friday.
The Royal Bank of Scotland Shareholder Action Group is suing the bank and four former directors on behalf of about 100 institutions and 10,000 private shareholders, alleging they were misled over the bank’s financial strength in a rights issue prospectus published months before RBS almost collapsed.
Fred Goodwin, the disgraced former chief executive of RBS who was ousted at the time of the government bailout, is among the directors accused.
“Had shareholders been given the true picture of the bank’s position, they would have had a better opportunity to assess the risks which caused the shares to collapse and led to billions of pounds of losses for private and institutional shareholders alike,” the action group said in a statement on Friday.
RBS is 82 percent owned by the UK government after the 45 billion pound taxpayer bailout in October 2008, months after the rights issue which was announced in April.
“While RBS and its former directors made some business decisions that have been criticised, this does not mean that they misled investors or acted illegally,” RBS said in a statement.
“We believe we have strong defences to the claims that are being brought against the group and that is why we intend to defend these vigorously and to protect the interests of our shareholders including UK taxpayers.”
The Shareholder Action Group could be joined by some of Britain’s biggest institutional investors, who are part of a separate group considering lodging a claim.
Prudential, Standard Life, Legal & General and the Universities Superannuation Scheme (USS) are part of the group, who took up about 10 percent of the 12 billion pound rights issue under scrutiny.
The case poses a dilemma for large institutions, however, as some remain leading RBS shareholders and could see the value of their investments sink if the Edinburgh-based lender loses the case.
Goodwin, dubbed “Fred the Shred” for his cost-cutting policies, received a knighthood for services to banking in 2004 but was widely blamed for many of RBS’s later troubles, and was stripped of his title in 2012.