May 16, 2014 / 3:06 PM / 5 years ago

Legal claims over RBS cash call near 4 billion pounds

LONDON (Reuters) - 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).

A Royal Bank of Scotland branch is seen, in central London February 21, 2009. REUTERS/Luke MacGregor

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 pounds.

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 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.

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 defense 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

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