Press Cutting from Legal Business – 20 November 2015
by Sarah Downey
RBS litigation: judge takes defence team to task over ‘less than wholly satisfactory’ disclosure process
Herbert Smith Freehills (HSF) and its client the Royal Bank of Scotland have been criticised for their role in a ‘less than compelling’ and ‘unfocused’ disclosure process in the long running £4bn shareholder dispute against the bank.
In a judgment handed down from the High Court this morning, Mr Justice Hildyard decided ‘with very considerable reluctance’ to an adjournment of the trial until 6 March 2017. RBS and its lawyers HSF had requested the delay, claiming it was impossible to prepare the evidence required.
The shareholder claimants opposed the extension, claiming that the disclosure process had already taken many months and, questioned why there needed to be a re-review of all the disclosed documents without explanation.
In his ruling, Hildyard J described ‘what appears to be an unfocused disclosure process, which has fanned out exponentially and extravagantly without sufficient control and direction… the commitment of increasing resource to the identification of documents, leaving a diminished resource for their assimilation, without properly taking stock as to whether the process had overtaken the purpose.’
One of the most high-profile features of this case has been costs, and Hildyard said while the court does not ‘intend by any means to peer behind the curtain of legal privilege, the lack of clear evidence is all the more worrying given the apparently small percentage of their allotted budget for witness statements the defendants’ legal team have so far spent on this process.’
Hildyard J said some of the evidence provided by the defence has been both ‘unsettling’ and ‘less than compelling’, and cited a description provided of the pleaded issues as ‘incredibly broad and complicated’.
In accepting the need to move the trial date, Hildyard J observed that a submission made by the claimants ‘to the effect that the defendants must re-think their approach and strategy and must be able to achieve better progress in the future carries force’.
Last month several Lloyds Banking Group institutional clients broke away from the shareholder action group and instructed Mishcon de Reya instead of Signature Litigation. The action is brought against the bank’s former chief executive Fred Goodwin and three other directors, and relates to a rights issue in April 2008, in which RBS sold its shares at £2 per share. The claimants allege that the prospectus on which the rights issue was based was ‘defective’ and contained material misstatements and omissions.
The RBS Shareholder Action group is the largest of three currently in dispute with RBS, with the others represented by Quinn Emanuel Urquhart & Sullivan and Stewarts Law.
HSF continues to defend RBS in both cases, with a team lead by partners Adam Johnson, Simon Clarke, Kirsten Massey and James Norris-Jones.
HSF declined to comment.
Press Cutting from The Sunday Times – Scotland – 26 July 2015
by Michael Glackin
RBS advisers accused of stalling court document disclosure
Advisors to Royal Bank of Scotland (RBS) during its ill fated multi million pound cash call in 2008, including US financial giant Goldman Sachs, have been accused of delaying a £5bn court case by lawyers representing shareholders.
Goldman Sachs has so far failed to hand over key correspondence it had with RBS in the run up to the Edinburgh bank’s £12n rights issue that took place just before the bank’s near collapse and its £45bn bailout by taxpayers.
RBS faces a crucial hearingin the High Court in London on Tuesday amid increased delays and wrangling over the disclosure by emails by a number of so called ‘third party groups’ who had a role in the contraversial rights issue.
The delay has forced the judge hearing the case, Robert Hildyard, to extend the deadline for disclosure documents by a further month, to August 10.
RBS and its former directors including the erstwhile chief executive Fred Goodwin, are being sued bt former shareholders including key city institutions, who claim they were mislead into investing in the rights issue.
They claim RBS failed to disclose the rotten state of its finances to investors, who later saw the value of their shareholding collapse.
RBS denies this claim.
Lawyers representing shareholders said Goldman Sachs, which is not party in the court case but was one of the underwriters of the controversial share issue, has still not handed over a tranche of documents that they believe are critical to proving their case.
Leon Kaye, senior partner with Leon Kaye Solicitors, which is acting for about 4,000 small shareholders and some city institutions said: “Most of the disclosure issues are resolved, but some are lingering, which is why the deadline for disclosure was extended”.
Navid Hakimmaani of Leon Kaye said “Some Royal Bank advisers such as Goldman Sachs and some other third parties, have some issues about disclosing some documents they have in their possession. We’re confident this will be resolved but we have had no disclosure from Goldman Sachs yet”.
Goldman Sachs declined to comment.
The revelation comes after Justice Hildyard, criticised David Blayney QC, a lawyer for the defendants for trying to stall the case during a case management hearing at the High Court in March.
It is understood one of the other third parties that has had issues about disclosure was Deloitte, Royal Bank’s auditor at the time of the share issue. Deloitte declined to comment.
An insider said ‘Some groups do not want to hand over documents if they can avoid doing so. We believe these documents are crucial and will tell us what the bank knew and more importantly what third party advisers were telling the bank at the time of the rights issue. The delay is frustrating to say the least”.
The disclosure work will ‘substantially increase’ the £42m of taxpayers’ money earmarked by the courts for RBS’s defence.
Press Cutting from Scottish Herald dated 7 June 2015
Lawsuit threatens to spoil Osborne’d RBS share sale celebrations
George Osborne’s plan to sell the government’s 80 per cent stake in Royal Bank of Scotland, the expected highlight of this week’s Mansion House speech, looks set to fall short of Treasury expectations as leading investors baulk at buying shares in the state-rescued bank.
Sources close to UKFI, the quango tasked with selling government bank stakes, have told the Sunday Herald that some of the UK’s biggest investors – including Legal & General (L&G) and Universities Superannuation Scheme (USS) – have indicated they would steer clear of the RBS sell-off.
Wednesday’s Mansion House speech has been flagged by a Treasury spokesman as “an obvious platform” for Osborne to spell out plans for the state-rescued Scottish bank, following his pre-election hints at an imminent sale. Over and above his disposal of more than half the government’s stake in Lloyds, he said he wanted to commence a disposal programme for RBS this summer.
However L&G is understood to have told UKFI it will only consider buying shares in RBS once the legal dispute with the bank over its disastrous 2008 rights issue, in which L&G is the leading participant, is resolved. One City source said: “L&G has told UKFI they feel they were duped by the bank back in 2008 and, until that wrong has been ‘corrected’, they won’t be buying any further RBS shares.” An L&G spokesman declined to confirm or deny the position.
Pension giant USS is also believed to have told UKFI that the £48bn fund has no interest in buying further RBS shares. USS also declined to comment.
In April 2014, both entities teamed up with other large investors to sue RBS, alleging it misled them over its 2008 rights issue. The result of the litigation, which is costing the bank and its pursuers at least £94m in combined legal fees, is unlikely to be known until 2017 at the earliest.
In recent weeks UKFI’s chairman James Leigh-Pemberton and its head of capital markets, Oliver Holbourn, have been informally sounding out institutional investors about bank share sales The state amassed the shares during the 2008-09 banking bailouts. UKI declined to comment
Hamish Buchan, the influential chairman of Edinburgh’s Personal Assets Trust, said investors that are suing RBS may find the rights issue litigation “a serious obstacle” to buying further shares in the bank, saying “why would anyone take the risk of buying shares in RBS given that the liabilities are unknown?”
Alan McFarlane, founding partner of Dundas Global Advisers, told the Sunday Herald it would be unusual for investors to increase exposure to companies that they are actively suing – especially where the litigation concerns allegedly “misleading” information surrounding in the earlier share offering. A positive outcome to the court case would, he said, mean they end up “compensating themselves”.
Another senior City source said most institutional investors still regard banks including RBS as “pretty uninvestable” due to the opacity of their balance sheets and likelihood that fines and litigation costs for misconduct will persist for years. But Daniel Godfrey, chief executive of the Investment Association, said “everything has its price”, detecting no formal or corporate governance obstacle stopping investors who are suing the bank buying further shares.
Colin McLean, chief executive of SVM Asset Management said the rights issue litigation is “a problem, but not an absolute barrier” to Osborne’s reprivatisation plan. He said whenever the government is hawking a privatisation or a reprivatisation, “institutional investors generally talk the stock down, while investment banks talk it up. Think Royal Mail.”
Standard Life Investments, another litigant against RBS, declined to comment on whether it felt precluded from buying RBS shares because of the legal confrontation, but sources close to the Edinburgh based asset management firm said it did not see it as an impediment.
RBS shares fell as low as 337p last Tuesday but rose to close last week at 359p. This is well below the 502p break-even price at which the UK government bought its stake. It has been reported Osborne is willing to start the sell-off at a loss in the hope of driving up RBS’s share price up and starting a process of rehabilitating the bank in investors’ eyes.
However consumer group Move Your Money UK and thinktank New Economics Foundation have warned Osborne against an RBS firesale. They are urging the chancellor to look at other options including breaking the bank into a string of regional lenders. NEF head of finance Tony Greenham said: “The story of RBS is a touchstone for much that’s wrong with the current set up of the UK financial system. But we believe it’s also the touchstone for how things could be transformed.”
Last October UKFI’s Oliver Holbourn, told the Treasury committee: “Ross [McEwan] has made very good progress in terms of trying to make RBS a simpler, better bank, but there are still a number of issues on which we would like more clarity before we feel that we could deliver a good outcome for the taxpayer.”
Press Cutting from Scottish Herald dated 29 March 2015
Breakthrough in RBS shareholder trial as judge orders bank to produce Fred’s private mails
Royal Bank of Scotland has been given less than three weeks to hand over emails and other correspondence sent by former chief executive Fred Goodwin and former head of investment banking, Johnny Cameron, in the prelude to its October 2008 collapse.
In a hearing in the Royal Courts of Justice earlier this month, the Hon. Mr Justice Robert Hildyard, ordered the state-rescued bank and its lawyers Herbert Smith Freehills to produce evidence, including executive directors’ correspondence, emails and phone call transcripts.
The judge made his ruling in the build-up to a £4 billion investor-led court case, in which RBS stands accused of misleading investors into pumping in £12.3bn in a rights issue, up till then the UK’s largest ever corporate capital-raising.
In a prospectus published on 30 April 2008, RBS is alleged to have given the impression that if investors subscribed to a £12.3bn rights issue, its capital problems would be solved and it would have sufficient working capital to survive for at least 12 months. However the bank collapsed, requiring a £45.5bn taxpayer-funded bailout, four months after the money was raised. Investors, including thousands of employees of RBS, NatWest and Ulster Bank, lost more than 95 per cent of their cash.
The judge has ordered the bank to hand over the correspondence to the claimants and their legal teams, or, in some instances explain why it has been unable to provide the evidence, in a series of stages starting on April 1 and culminating on 17 April 2015, with a final deadline of 15 June 2015.
Hildyard has laid out a new timetable to which the bank and Herbert Smith Freehills are expected to adhere. The formal trial itself is not scheduled to start until 2016.
During the hearing Hildyard also dismissed RBS’s legal team’s repeated demand that the shareholder group draft a “model prospectus”, understood to be a document that would show what they believe ought to have been in the rights issue prospectus. He called the demand a “distraction”.
He said: “It would be a great, great distraction if the issue which is the sufficiency of this prospectus were clouded by a debate about another prospectus… I think we have got quite enough on our hands trying to find out what the position is with respect to this [the actual, published] prospectus.”
The long list of data the bank has been asked to hand over includes emails sent by Johnny Cameron. Claimants believe these may be critical to their case.
These and emails sent and received by the then Sir Fred Goodwin, who was forced out as RBS chief executive on 13 October 2008, and later had his knighthood rescinded, must be handed over by 1 April, said Hildyard.
RBS was also instructed to seek to obtain emails sent and received by advisers on the rights issue, including Merrill Lynch, Goldman Sachs and UBS, as well as correspondence sent by the team it installed to run ABN AMRO after RBS acquired it in October 2007.
The judge also gave RBS until 17 April to detail all the “shared [computer] drives” it was operating in the UK on 30 June 2008, and to outline the ease with which these could be trawled for data.
While Goodwin did not have a personal RBS email account, the claimants are seeking sight of those sent from the RBS account of personal assistant Mary McCallum, as well as those Goodwin is believed to have sent from the accounts of other members of his secretarial team. Private emails sent by former RBS finance director Guy Whittaker are also being sought.
One of the four investor groups that is suing RBS – the RBoS Shareholder Action Group – has named Goodwin, Cameron, Whittaker and former RBS chairman Sir Tom McKillop, as defendants in its lawsuit alongside the bank.
These four ex-directors will now be obliged by Wednesday to complete “Electronic Documents Questionnaires”, providing full details of all personal email accounts, mobile phones and computers they were using between March 2007 and February 2009.
The bank was also ordered to seek to retrieve emails sent and received by its former non-executive directors. These include the former Treasury mandarin Sir Steve Robson, former EU commissioner Peter Sutherland, and the ex-senior partner of KPMG Scotland, Archie Hunter. Hildyard gave the bank until 17 April to summarise its progress in retrieving sent and received messages.
RBS press office declined to comment on the judge’s rulings, the bank has earlier said:
“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.”
“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.”
Press Cutting from This is Money dated 26 March 2015
Hand over the emails sent by disgraced banker Fred Goodwin during financial crisis, judge tells RBS
Written by james Salmon for The Daily Mail
Royal Bank of Scotland and disgraced former boss Fred Goodwin have been blasted by a High Court judge for resisting demands to hand over private emails sent during the financial crisis as part of a £5billion lawsuit.
About 100 institutions and 12,500 private investors are suing the bank and four former executives, after buying into a £12billion share sale as the bank tried to raise cash to survive in 2008.
Spearheaded by the RBoS Shareholders Action Group, they claim the lender concealed the dire state of its finances and misled investors. The defendants are former chief executive Goodwin, former chairman Sir Tom McKillop, former investment banking boss Johnny Cameron and former finance chief Guy Whittaker.
They were ordered in December by Justice Hildyard to disclose the contents of private email accounts, personal mobile phone records and personal computers they held between March 1 2007 and February 28 2009, by April 1.
RBS also has until April 17 to hand over correspondence with its advisers during the rights issue – Goldman Sachs, Merrill Lynch and ABN Amro.
But Justice Hildyard said in a damning ruling that the defendants – represented by law firm Herbert Smith Freehills – have exaggerated how expensive and long it would take to provide the required information. He revealed it would take 18 days and cost £55,000.
He said that there was also a ‘danger’ that the defendants relied on the fact they will not have to take the stand until December 2016, to ‘justify slippage’.
Robert Thompson, a member of the action group, said the private emails will provide a ‘treasure trove of evidence’.
÷ RBS (down 2p to 350.3p) said it hopes to raise £2.5billion from selling another slice of shares in its US subsidiary Citizens. If successful this will reduce its stake from 71 per cent to 41.9 per cent.
Press Cutting from This is Money dated 29 December 2014
Written by Rob Davies for The Daily Mirror
Ex- RBS boss Fred Goodwin ordered to reveal emails and texts he sent during the financial crisis
Former Royal Bank of Scotland boss Fred Goodwin faces spending Christmas trawling through emails and texts he sent during the financial crisis, on the orders of the judge in a £4billion lawsuit.
About 100 institutions and 15,000 private investors are suing the bank and former executives for £4billion, after buying into a £12billion share sale as the bank tried to raise cash to survive in 2008.
Goodwin, former RBS chairman Tom McKillop, investment bank chief Johnny Cameron and finance director Guy Whittaker, have been ordered to disclose the sources of information they will submit during the case.
A date for the trial was also set, with the disgraced ex-bankers due to take the stand in December 2016, some eight years after the bank’s near collapse and £46billion state bailout.
Lawyers from Fladgate, acting on behalf of the claimants, will say that RBS did not disclose the rotten state of its finances to potential investors, who later saw the value of their investment wither.
The December 2016 date will be the first time that British bankers have seen the inside of a courtroom to defend allegations of cavalier behaviour that helped bring the British economy to its knees.
RBS is understood to have asked for the trial battle to be delayed until 2017 but was turned down.
The bank, Goodwin and his former cronies have been given until the end of January to explain what material they intend to present in their defence.
RBS’s lawyer David Blayney QC said: ‘We don’t have difficulty in principle with that being done.’
Evidence is expected to include a raft of previously unseen internal memos from the depths of the banking crisis, as well as phone records, emails and texts sent from the private accounts of directors.
Goodwin, whose aggressive style saw him nicknamed Fred ‘the Shred’, was stripped of his knighthood and saw his pension pot cut.
RBS, represented by law firm Herbert Smith, is facing a parallel suit over the £12billion rights issue from major City institutions, including Prudential and Legal & General.
The bank said last night that it would defend the case ‘vigorously’. Lloyds is also facing a lawsuit by investors who say they were not given the full facts about its takeover of stricken lender HBOS.
RBS is expected this week to reveal its progress on an internal investigation into a more recent scandal – the manipulation of foreign exchange rates – for which it was fined nearly £400million by UK and US regulators last month.
The bank has launched a probe into 50 current and former employees who are suspected of being involved in the scam. Last month it said just six staff had been disciplined, with three of them suspended.
Press Cutting from Sky News dated 18 December 2014
Written by Mark Kleinman, City Editor
RBS Loses Fight Over £4bn Investor Court Date
The taxpayer-backed RBS and its former bosses will face investors in court in 2016, Sky News understands.
Royal Bank of Scotland (RBS) will face angry investors in court by the end of 2016 in a legal case that is likely to see Fred Goodwin, its former boss, testify about the lender’s implosion.
Sky News has learnt that RBS was told this week that litigation brought by a shareholder action group would result in a trial beginning in December 2016, almost a year earlier than the bank had sought.
The RBS Shareholder Action Group, which includes major City institutions such as M&G and Standard Life Investments as well as thousands of private investors, is suing over a £12bn rights issue launched by RBS in April 2008.
That fundraising was aimed at removing any doubts about the bank’s financial strength, but ultimately proved to be only a stay of execution.
Mr Goodwin, RBS’s former chief executive, was stripped of his knighthood in 2012 and has faced calls to be banned as a company director in the wake of the bank’s near-collapse.
Sir Tom McKillop, the former chairman, and Guy Whittaker, the former finance director, are also named as directors in the shareholder lawsuit, which is said to seek damages of as much as £4bn.
At a case management conference this week, RBS is understood to have been ordered to accelerate the disclosure of hundreds of thousands of documents.
The named directors will have to let the court know by end January what information they intend to provide the court.
Some claimants have expressed frustration that the case will not be heard for more than eight years after the rights issue which saw them stump up £12bn.
RBS has estimated that it could spend as much as £42m in total on legal fees during the case, a figure which includes separate representation for the director defendants.
Mr Goodwin and Sir Tom stepped down in the autumn of 2008 as Alastair Darling, the then Chancellor, insisted on their resignations as a condition of the bank’s rescue.
There are four main investor groups bringing claims against RBS, in which they allege that the bank misled them about the state of its finances when it raised £12bn from them in a rights issue in the spring of 2008.
Months later, RBS received an emergency £45.5bn capital injection from the Government as it came close to outright collapse.
The claimants also include a group which includes Aviva, the insurance companies; and another which is acting for dozens of institutional investors.
RBS itself is being represented in the series of shareholder lawsuits by Herbert Smith Freehills, a prominent City firm.
In a statement, RBS said: “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.
“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.”
Both RBS and the RBS Shareholder Action Group declined to comment.
Press Cutting from the Scottish Daily Record dated 10 July 2014
Written by David Taylor
RBS spend £500,000 in legal fees defending disgraced former boss Fred “The Shred” Goodwin
Majority owned by the taxpayer, the firm insists it is bound by law to pay to defend Goodwin in the numerous cases brought against him by shareholders who lost out during the banking crash.The Royal Bank of Scotland have spent £500,000 defending disgraced former boss Fred Goodwin – before the case comes to court. The mostly taxpayer-owned firm estimate defending Goodwin and three other directors could cost up to £42 million. Shareholders who ploughed cash into the bank in 2008 say they were assured by bosses that RBS were in good health.But months later, the share value plummeted, bringing the bank to the brink of collapse. Four cases are being brought against the bank, which are expected to be wrapped into a single hearing.
RBS have no option but to pay to defend Goodwin, known as Fred the Shred, who has a whopping £342,000-a-year pension. Companies listed on the FTSE 100 have to defend former executives from lawsuits, even if they have left before the action is raised. Leading London law firm Herbert Smith are representing RBS and the directors.
Labour MP and member of the Commons Treasury committee John Mann said: “This is a disgrace. It’s a staggering amount of money and will only climb higher.“It shouldn’t be happening, especially when the taxpayer owns this bank”.
It hinges on the bank’s activities in 2008, when investors were asked to spend £12billion buying new shares to help the bank fund new deals. Goodwin, who was RBS chief executive from 2001 until 2009, was stripped of his knighthood in 2012. He is expected to give evidence at the hearing, which is due to begin next year. An RBS spokeswoman refused to discuss the potential costs but added: “While RBS and former directors made some business decisions that have been criticised, this does not mean that they misled investors or acted illegally.
“We believe we have strong defences to the claims that are being brought against the bank and that is why we intend to defend these vigorously and to protect the interests of our shareholders, including UK taxpayers.”
Press Cutting from Citywire dated 9 July 2014
Written by June Merrett
RBS racks up £400k legal bill to defend Goodwin over rights issue
The Royal Bank of Scotland RBS has spent more than £400,000 in legal fees to defend ex-chief Fred Goodwin and other former directors in an ongoing battle with shareholders. The extent of the bank’s bill was revealed during a case management conference which was held as part of pre-trial preparations last week, according to Sky News. RBS has previously estimated it could spend around £42 million in total on legal fee.
The bank faces four main investor groups bringing claims against them, alleging that the bank misled them over its financial health, making it seem stronger than it was, prior to launching a £12 billion rights issue in 2008. The claimants include the RBS Shareholder Action Group, which comprises around 38,000 shareholders and is seeking £4.5 billion in compensation. There is another group which includes Aviva and Standard Life.
In March it was reported the bank was considering whether to pay out £4 billion in shares to settle the legal battle, and although no court date has been set, it is thought the directors will appear in court in early 2015. RBS declined to comment on the cost of legal fees for its former directors but said: ‘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.
‘We believe we have strong defences to the claims that are being brought against the bank and that is why we intend to defend these vigorously and to protect the interests of our shareholders including UK taxpayers.’
Press Cutting from Reuters dated 16 May 2014
Written by Kirstin Ridley and Steve Slater
Legal claims over RBS cash call near 4 billion pounds
(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.
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 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.
Press Cutting from The Scotsman dated 14 May 2014 written by Martin Flannagan
Rush to join multi-billion pound RBS legal actions
Angry shareholders in Royal Bank of Scotland have made a late rush to join legal actions over its controversial £12 billion rights issue in 2008. The deadline for suits related to the cash call on investors expires on Wednesday and one of the main action groups has seen a trebling of institutions seeking damages.As a result, the claim led by British legal firm Stewarts Law is now expected to raise the sum being sought through the High Court from “hundreds of millions” to £1bn. The firm represented nearly 80 international investors and pension funds from Britain, Canada and the US at the beginning of the year. But sources say the number of institutions has jumped to more than 300 as the cut-off date has approached.One source close to the legal action said: “There has been growing momentum. “It has really gathered pace ahead of the deadline, and is a random mix of pension funds and asset managers. The Stewarts Law claim is now probably worth in excess of £1bn. “It is probably because as time has progressed, institutions have decided they have a fiduciary duty to pursue an action. They would face strong criticism if they did not bring an action and there was a huge settlement in favour of the claimants. “You could imagine them being asked why they did not participate. The only institutions now who have not joined one of the actions against RBS are those who sold out quite quickly after the rights issue and lost virtually no money.”
Shareholder action groups allege that the bank misled them as to its financial strength in the rights issue prospectus. RBS vigorously contests the claims. Group chief executive Ross McEwan has said there will be no out-of-court settlements because it has a strong defence against the charges. In 2012 US courts found in the bank’s favour regarding two legal actions related to the rights issue by holders of RBS preference shares and American depositary receipts.
The deadline for private investors to join a separate £4bn action by the RBoS Shareholders Action Group, representing 100 institutional investors and 12,000 small shareholders, expired last Friday after being extended from 30 April because of late demand. A source close to the group said: “We have had a lot of private investors and institutions coming in since Friday’s extended deadline was announced. The applications have not all been processed yet, but by all accounts it is a substantial number.”
The RBS Rights Issue Action Group, represented by Leon Kaye Solicitors, issued court proceedings against taxpayer-backed RBS on 28 April on behalf of more than 3,500 private investors to a value of about £20 million.
A fourth claim is also understood to have been launched by international corporate litigation firm Quinn Emanuel, representing five blue-chip investors: Edinburgh-based Standard Life Investments, Legal & General Investments Management, Prudential, Aviva and the University Superannuation Fund.
Press Cutting from the Financial News dated 1 May 2014 written by Mark Cobley
RBS Facing Multibillion Law Suit as Rights Issues Claims Mount
Royal Bank of Scotland could be facing as much as £5 billion in legal claims from shareholders over its 2008 rights issue, as groups seeking damages from the bank report a late surge of interest from investors ahead of a May 15 deadline.
According to people close to the shareholder action groups, investors have added claims worth hundreds of millions of pounds in the past few weeks. There is considerable uncertainty over the final totals, however, until formal claim documents are filed.
In a statement, an RBSspokeswoman said the bank intends to “vigorously” defend itself and its shareholders, which include UK taxpayers, against the claims being brought. She said: “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.”
Four groups of shareholders have been formed under a December 2013 “Group Litigation Order” – a court order that means the claims will be managed collectively because they involve substantially the same matters of fact or law.
All of the groups allege that Royal Bank of Scotland and its key directors misled them over the bank’s financial health when they issued new shares in the bank in early 2008.
About £12 billion was raised in the rights issue, aimed at shoring up its capital position following its deal to acquire Dutch bank ABN Amro. But despite the extra money, within months the bank had almost collapsed and had to be bailed out by the UK government.
The largest, and lead grouping of shareholders, known as the RBoS Action Group, is being advised by lawyers Bird & Bird. It comprises 100 institutional investors and around 13,000 individual shareholders and said a year ago that its total claims could be worth up to £4 billion by the time they are filed.
However, during a pre-trial review in February, Bird & Bird was criticised by the judge for mis-stating the value of the claims made under the group’s action. A spokeswoman for Bird & Bird said: “While there was previously a factual error in expressing the value of claims issued, which was notified to the Court as soon as it was recognised, there was no miscalculation of the Action Group’s size of membership and the balance of the Action Group’s substantial claims will be issued shortly.”
The RBoS Action Group imposed a deadline of April 30 on new expressions of interest in joining, as it will need a couple of weeks to process them ahead of the May 15 deadline for filing.
However, this morning, the group said it would extend this deadline. The deadline for institutional investors to join is now May 12, while the deadline for retail shareholders is May 9.
According to a person close to the group, during the past month shareholders with a potential £500 million of additional claims have expressed interest in joining. He added that an exact value on the total claims would not be known until they are all formally filed at court, but argued £5 billion would be a conservative estimate given the amounts attributed to all the shareholder groups so far.
News of the second-largest group emerged last week, comprising the institutional shareholders Legal & General, Aviva, Prudential and the Universities Superannuation Scheme. These shareholders formally filed their claim this week, a USS spokeswoman confirmed.
Their claim, which is being handled by US class-action specialists Quinn Emanuel could be worth around £1 billion, according to the news agency Reuters.
Stewarts Law is co-ordinating a third group of institutional investors, 101 of them according to the firm’s latest public statement. But a person close to this grouping said that this total was now likely to be “substantially” higher than that, with claims also exceeding £1 billion.
A fourth group, the RBS Rights Issue Action group, comprises retail shareholders co-ordinated by Leon Kaye Solicitors, and has claims worth about £20 million. This group is accepting new joiners until May 9.
Press Cutting from The Scotsman
Written by MARTIN FLANAGAN and published in The Scotsman on 29 April 2014
Third Legal Action Launched Against RBS
THOUSANDS of small shareholders in Royal Bank of Scotland yesterday launched a £20 million legal action against the bank alleging they were misled as to its financial strength at the £12 billion rights issue in 2008.
The RBS Rights Issue Action Group, represented by Leon Kaye Solicitors, said the proceedings were on behalf of 3,500 private investors.
Leon Kaye said: “Although the RBS Rights Issue Action Group has from the outset primarily represented the interests of small and medium sized investors, proceedings have been issued on behalf of investors ranging from holdings of 100 shares up to 100,000 shares.”
RBS, whose then-chief executive Fred Goodwin and other former directors led the cash call prior to the bank’s collapse, vigorously contests the claim.
Two legal actions had previously been launched on the issue, one by the RBoS Shareholders Action Group, and another representing institutional investors.
Press Cutting from the Scottish Herald
Written by Ian Fraser and published on 27 April 2014
Thousands of staff line up to sue RBS
Workers tell of pressure to buy shares. By Ian Fraser
A third of the 12,000-plus individuals signed up to sue Royal Bank of Scotland over its allegedly “misleading” £12.3 billion rights issue are current or former members of staff at the bank.
RBS Shareholders’ Action Group, the largest of the investor groups suing RBS over the 2008 rights issue, said it processed its 4000th application from a current or former RBS member of staff last Thursday. That application is understood to have come from an Edinburgh-based risk expert.
Most of the bank employees who have joined the action group worked in RBS itself, NatWest, Ulster Bank, Coutts & Co, Adam & Company and Global Banking & Financial Markets (RBS’s investment bank, since reinvented as M&IB). They come from all seniority levels, from call centre staff to ex-members of the group executive management committee.
A spokesman for the investor group claimed “scores” of current senior RBS executives have applied to join the action group in recent days. All believe they were misled by Fred Goodwin and other members of the bank’s board during the critical April-June 2008 rights issue period.
They are effectively suing their employer, together with four of their former bosses – Fred Goodwin, Sir Tom McKillop, Johnny Cameron and Guy Whittaker. Most of the cash ploughed into the new shares evaporated as a result of the bank’s near collapse and government bailout a few months later. Rights issue shares bought for £2 in June 2008 had collapsed in value to 10p-11p by January 2009.
A spokesman for the RBS Shareholders’ Action Group, comprising more than 12,000 individual investors and 100 institutional investors, including charities, said it has had to take on staff and volunteers to handle a late surge in applications from aggrieved investors, including from bank insiders. The final deadline for applications is Thursday, May 1.
In the wake of the March 2008 collapse of US investment bank Bear Stearns, then RBS chief executive Goodwin and chairman McKillop recognised their bank’s urgent need of fresh capital. Persuaded to pursue a rights issue by the Financial Services Authority, they urged employees to participate, providing reassurances about the bank’s financial strength.
Some RBS group employees now allege management effectively “bullied” them into taking part. An action group spokesman said the court would hear evidence that staff were warned by line managers of “career limiting” consequences of failing to buy the shares.
The bank is also alleged to have given staff so-called “soft loans” – unsecured loans on relatively easy terms – to fund their share purchases. One former Gogarburn-based manager of RBS’s corporate lending arm told the Sunday Herald: “They were more or less telling us to remortgage our homes to go out and buy as many shares as possible.”
The case against RBS will also refer to a message posted by McKillop, described by the complainants as “particularly persuasive”. One ex-NatWest call centre worker said: “Like many others I believed our senior management team and invested a further £12,000, borrowed from my parents, into the rights issue. Within weeks I lost virtually all of this.”
The investors will highlight critical omissions in RBS’s 147-page rights issue prospectus. These included that the bank made no reference to the fact that on April 9 the Financial Services Authority ordered RBS to carry out a right issue of this scale, and that RBS’s finances were already in such a parlous state it was making use of $11.9 billion of clandestine emergency loans from the US Federal Reserve.
An RBS spokesman said: “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. We believe we have strong defences to the claims that are being brought against the bank.”
Press Cutting from The Financial Mail on Sunday – 19 April 2014
Written by Laura Shannon, Financial Mail on Sunday
Thousands of investors urged to join legal battle against RBS over rights issue
Tens of thousands of ordinary investors in Royal Bank of Scotland – many of them pensioners – who believe they were misled when they bought new shares sold to plug a gaping hole in its finances and they lost serious money as a result, have only a few days left to decide whether to back legal action.
More than 60,000 small shareholders are thought to have been affected. The Mail on Sunday explains what you can do if you bought shares in the rights issue.
WHAT IS HAPPENING?
Action groups representing disgruntled investors affected by the RBS rights issue launched in April 2008 – when the desperate bank sought to raise £12billion – are issuing final calls to join a legal battle.
They are working together under a Group Litigation Order to sue the bank for compensation. Two groups represent the interests of ordinary investors.
They are the RBoS Shareholders Action Group and the RBS Rights Issue Action Group, and they are broadly similar.
The latter says its focus is more on smaller shareholders, although the former does represent those with as few as one share from the rights issue, as well as large and institutional investors.
A third group, led by law firm Stewarts Law, focuses solely on institutional investors, such as insurance companies and pension funds. Fred Campbell of the RBoS Shareholders Action Group says he is ready to fight ‘tooth and nail’ on behalf of shareholders and that ‘now is the time to join our claim and fight for compensation’.
WHAT’S THE ROW ABOUT?
The rights issue came after what is now widely seen as a disastrous takeover by RBS of Dutch bank ABN Amro – while Fred Goodwin was chief executive – and months before a £46billion bailout of the bank by taxpayers in the credit crunch.
Investors who bought shares in 2008 to help stabilise the bank’s finances saw about 90 per cent wiped from the share price in months. But many shareholders believe they were not given the full picture about the health of the bank, which they say would have put them off buying more shares.
Campbell says: ‘It is our belief that the information in the rights issue prospectus was misleading and as a result RBS is liable to pay compensation to shareholders.’
He estimates that more than 63,000 small shareholders lost money, with many more losing out indirectly through pension funds invested in the bank. In London alone about 8,000 investors suffered losses of more than £40million, while more than 1,700 Edinburgh-based investors had the biggest average per-head loss of nearly £5,500.
A bank spokesman says: ‘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. ‘We believe we have strong defences to the claims that are being brought against the bank.’
WHAT DOES A RIGHTS ISSUE MEAN TO SMALL INVESTORS?
If a company needs to raise extra capital it might offer existing shareholders the opportunity to buy additional shares within a set time and at a discounted price. This is known as a rights issue.
The money will be needed either because a company needs rescuing or to fund a project, such as a takeover, to expand the business.
Investors might find the offer appealing if they want to maintain their percentage share of the business and if they expect the share price will rise in future. The downside is that if they do not accept the rights issue their holding in the company is diluted because new shares are created. And there are no guarantees that the share price will rise in the future.
But you can also sell your right to buy more shares. This will be free of capital gains tax if you receive a small payment – usually less than £3,000 or 5 per cent of the value of your shares in the company – and it is less than the cost of your original shares.
Most recently the insurer RSA, which owns More Than, asked its shareholders for £773million to shore up its finances.
Last year Barclays asked for £5.8billion to ensure it had enough capital in reserve to meet new regulatory requirements.
WHY HAS ACTION TAKEN SO LONG?
In the wake of the near collapse of RBS, regulators and politicians examined what went wrong and there was expectation of compensation among investors who had suffered badly.
Campbell says: ‘Shareholders were patient to begin with because after the near collapse of RBS in the financial crisis there were a number of investigations by the Treasury Select Committee and Financial Services Authority. While critical of RBS, these did not specifically look at the rights issue, where our members lost money.’
It has also taken time to start legal proceedings as a result of holding ‘case management conferences’ to establish certain boundaries before any court case, such as examining how costs will be borne by the different claimants.
WHEN IS THE DEADLINE?
Late joiners need to consider now whether it is worth enlisting in the class action. Both the RBoS Shareholders Action Group and RBS Rights Issue Action Group have announced deadlines for the end of this month.
This allows just enough time for preparations to be made before the ‘statute of limitation’ – the legal deadline for bringing a claim. In this case it must be made within six years of when investors agreed to buy additional shares in the bank.
‘After that point, they will not be eligible for compensation,’ warns Campbell.
WHAT DO I STAND TO GAIN?
Any payout will depend on how the case is settled. But you can check whether a claim is worthwhile by using the compensation calculator at rbosaction.org/membership. Estimates are based on what the shares were originally sold for before they were stripped of value.
Compensation for someone who bought 5,000 shares could be £10,000 before any potential interest is added on top. The fee for an investor with 5,000 shares to join the RBoS Shareholders Action Group is £800 – about 75 per cent of which they would hope to recover from the other side if successful in court, reducing the fee to £200.
SHOULD I JOIN?
If you don’t join before the end of the month you lose any right to compensation. But you also need to decide whether the costs are worth any possible compensation. The action groups have also tried to mitigate losses for members if the court battle is lost.
The RBoS Shareholders Action Group has a £23.5million insurance deal to protect members and pay the bank’s legal costs if the case collapses. The RBS Rights Issue Action Group say that if the case fails, the cost to its members is minimal.
Shareholders would have to pay about £2 for every one hundred shares. For example, an investor with 5,000 shares would need to pay £100.
HOW MUCH WILL IT COST?
The RBoS Shareholders Action Group’s one-off fee starts at £800 for up to 19,999 rights issue shares, rising to £500,000 for investors with more than 50 million shares.
The RBS Rights Issue Action Group charges £100 for up to 499 shares, rising to £1,500 for those with more than 50,000 shares. A full breakdown of costs can be found on the websites.
HOW CAN I JOIN?
Visit rbosaction.org for information about the RBoS Shareholders Action Group. Email firstname.lastname@example.org or call 020 7286 4161.
Information about the RBS Rights Issue group can be found from its solicitor’s website, leonkaye.co.uk, where you can download a registration form. Or call Leon Kaye Solicitors on 020 7228 2020.
Press Cutting – Taken from Financial Mail on Sunday – by Laura Shannon – published on 19 April 2014
Price collapse hits a sour note for organ builder who can’t retire
Justice: Judith Howard has joined an action group
Judith Howard cannot afford to retire as a result of losses she has suffered from holding shares in Royal Bank of Scotland.
Aged 67, and single, she has been forced to return to work as a part-time office assistant – and sees little prospect of being able to retire in the foreseeable future.
Judith, who builds and tunes organs and sings in a local church choir, is a member of the RBoS Shareholders Action Group. She only bought £3,000 worth of shares in the 2008 rights issue but she also held shares inherited from her family.
Before the 2008 financial crisis, they were worth £70,000 and she was also receiving attractive income from dividend payments. In 2009, the bank stopped paying dividends as a condition of the Government bailing it out.
Judith, from Battersea, south-west London, says: ‘Normally I wouldn’t put all my eggs in one basket but they were already in there because of what I had inherited and you don’t expect the bottom to fall out of the basket like it did.
‘If the action group is successful I don’t expect to get much because only a fraction of my RBS shares were acquired through the rights issue. But this is more about justice being done than any personal compensation.’
Press Cutting from The Times 13 January 2014
Written by JAMES DEAN
Ranks of rebel investors swell as RBS faces court struggle over misleading’ share sale
Thousands of private investors will join a multibillion-pound court action against Royal Bank of Scotland over allegations that it misled them ahead of the biggest share sale in British corporate history, The Times has learnt.
About 8,500 small shareholders will become the third group in an action that already comprises 12,500 other private investors and more than 150 financial institutions.
In 2008, shortly after the sub-prime crisis erupted, RBS tapped its shareholders for £12 billion. Months later, it went cap-in-hand to taxpayers, accepting its first instalment of a £45.5 billion bailout that shattered its share price.
The three shareholder groups, which are claiming more than £4 billion in losses. allege that the prospectus issued by RBS ahead of the 2008 sale was misleading. One group’s claim names Fred Goodwin, who was chief executive of RBS at the time of the rights issue and other former top executives at the bank.
The third group of 8,500 small shareholders has been gathered together by Leon Kaye Solicitors. Leon Kaye, senior partner of the firm said “We intend to issue proceedings in the next few months. We have everything we need”.
The Leon Kaye claim has been made possible by a High Court ruling in December when a judge placed limits in the amount that shareholders would be liable to pay if they lost their case.
The judge ruled that if the claimants lost and had to reimburse RBS’s legal costs – estimated at nearly £42 million – they would pay an amount proportional to the shares they bought in the 2008 rights issue. Normally, losing claimants split the defendant’s legal fees equally, meaning that a corporate institution suing a bank for millions would pay as much as a shareholder claiming £1,000.
Mr Kaye said the judge’s ruling made it “far easier” for small investors to join the claim.
Claimants have until May to join the action against RBS, after which they will not be guaranteed compensation in the event that the allegations against the bank are proved. The Leon Kaye group had been waiting in the wings while the judge decided on the legal costs issue.
A fourth group that is considering joining the action includes Prudential, Legal & General and Standard Chartered. It is being run by Quinn Emanuel, Urqhart & Sullivan, an American law firm, which said in September that the three pension managers and the Universities Superannuation Scheme collectively had bought 10 per cent of the shares sold in the 2008 rights.
Two groups have already filed claims against RBS. The RBoS Shareholders Actin Group represents 12,500 small shareholders and 100 institutions. A group led by the legal firm Stewarts Law represents 53 institutional investors.
Glasgow’s Sunday Herald reported yesterday that five former RBS executives had agreed toa ct as witnesses for the claimants.
A spokeswoman for RBS said “The group considers that it has substantial and credible legal and factual defences to the claims and will defend itself vigorously”.
George Osborn the Chancellor has found it harder to return RBS to the private sector than Lloyds Banking Group which could b out of government hands by the end of the year.
UK Financial Investments which handles the taxpayer’s stake in both banks, sold 6 pe cent of Lloyd’s to institutional investors in september. Further share sales for Lloyd’s which is now 32.7 per cent owned by the public are planned for this year.
About 81 per cent of RBS remains with the Government. Vince Cable, the business Secretary said in August that a share sale was at least five years away.
RBS has removed two of three obstacles to privatisation . In December it pulled out of the Government’s contingent capital facility a year earlier than planned, after leaving the £282 billion asset protection scheme in 2012. It has yet to exit the “dividend access share” scheme – under which it cannot pay dividends – although RBS and the Treasury have said that talks to do so are at an advanced stage.
Press Cutting from The Scotsman – 13 January 2014
By Martin Flannagan
FUNDING has been secured for a third legal action against Royal Bank of Scotland over its £12 billion rights issue in 2008, with the fight expected to be launched by April.
Scotland on Sunday has learned that the RBS Rights Issue Action Group – which represents about 8,000 small shareholders – is preparing to issue proceedings well before June’s statutory deadline.
One insider revealed that conditional funding for the action has been put in place thanks to a High Court judgement issued last month, which limits private investors’ costs in any losing action.
The source said: “It is certainly our intention to issue proceedings against RBS. The issue of costs was the major factor that was holding us up.
“Conditional funding has now been organised. The exposure of our members [to any losing action] would be very limited.
“It is impossible to be absolutely precise on timing because there is still time-
consuming administration to be sorted out when you have over 8,000 members. But April at the latest is the date we have in our minds.”
Mr Justice Hildyard, at a case management hearing in London on 19 December, said: “It seems to me that the fairest, or least unfair, basis is to adopt the solution of costs proportionate to the subscription paid [for shares in the rights issue] across the board.”
The controversial RBS rights issue was launched just months after former chief executive Fred Goodwin claimed the bank did not need more money, following its disastrous acquisition of parts of Dutch rival ABN Amro.
The RBS Rights Issue Action Group alleges that the Edinburgh-based lender and its senior directors misled investors in the rights issue prospectus as to the bank’s financial strength.
Later in 2008, the bank collapsed into majority taxpayer ownership with £24bn of losses. RBS says it will vigorously contest that it misled shareholders or acted illegally.
Two claims have already been launched against the bank, including a £4bn action by the RBoS Shareholders Action Group. That action is backed by about 100 institutional investors and 12,000 small investors with holdings in the bank above £5,000 following the cash call.
The other claim, said to run to hundreds of millions of pounds, is headed by law firm Stewarts Law, representing 20 major shareholders in RBS.
Edinburgh-based Standard Life Investments, Legal & General Investment Management, Prudential and the Universities Superannuation Scheme have separately hired corporate litigation firm Quinn Emmanuel to weigh up whether to launch a fourth legal action on the rights issue. It is understood that they have privately decided there is a strong legal case and may also formally launch proceedings shortly.
RBS teamed up with Dutch bank Fortis and Spanish lender Santander to break-up ABN Amro in 2007 after Barclays withdrew from a rival bid.
RBS share price: Third group of shareholders to join legal battle over rights issue.
Press Cutting from Ezz. com – January 13th 2014
Written by Branimir Kondov
High Court judgement paves way for more small investors to sue RBS
Thousands of small shareholders of Royal Bank of Scotlandareholders of Royal Bank of Scotland Group Plc (LON:RBS) have secured funding for a third legal action against Royal Bank of Scotland over its £12 billion rights issue in 2008, Scotland on Sunday has learnt.
The RBS Rights Issue Action Group is preparing to issue legal proceedings on behalf of about 8,000 small investors in April, well before June’s statutory deadline. According to an insider, conditional funding for the action has been put in place thanks to a High Court judgement issued last month, which limits private investors’ costs in any losing action. The judge ruled that if the claimants lost and had to reimburse RBS’s legal costs — estimated at nearly £42 million — they would pay an amount proportional to the shares they bought in the 2008 cash call rather than split the defendant’s legal fees equally among themselves.
With the issue of costs that was holding up legal action now removed, “April at the latest is the date we have in our minds”, the inside source told the newspaper.
The RBS Rights Issue Action Group claims that the bank and its senior directors misled investors in the rights issue prospectus as to the bank’s financial strength. The controversial rights issue was launched just months after former chief executive Fred Goodwin said the bank did not need more money, following its disastrous acquisition of parts of Dutch rival, ABN Amro. The Edinburgh-based lender collapsed into majority taxpayer ownership with £24 billion of losses later in 2008. A spokeswoman for RBS said: “The group considers that it has substantial and credible legal and factual defences to the claims and will defend itself vigorously.”
The 8,000 small shareholders will form the third group in the action against RBS after the RBS Shareholders Action Group, which represents 12,500 small shareholders and 100 institutions, and a group led by law firm Stewarts Law representing 53 institutional investors. The three groups are claiming more than £4 billion in losses.
Standard Life Investments, Legal & General Investment Management, Prudential and the Universities Superannuation Scheme have separately hired the corporate litigation firm Quinn Emanuel to look at whether RBS misled shareholders over its financial strength in the rights issue prospectus.
Press Cutting from The Sunday Herald – 12 January 2014
Written by Ian Fraser
Former top execs to give evidence against RBS in High Court trial
The investor group suing Royal Bank of Scotland in the High Court in London has recruited five former executives to act as witnesses in its £4.3 billion group litigation order against the state-rescued institution, the Sunday Herald can reveal. The former insiders who have agreed to appear for the RBoS Shareholders’ Action Group include one banker who was an RBS director for more than a decade. The case is expected to be heard in May.
Victor Hong, a former managing director of risk management and head of fixed-income independent price verification at US-based RBS Greenwich Capital Markets, is one of those who have agreed to give evidence against the bank. He resigned from RBS in October 2007 alleging that senior colleagues disregarded his advice to mark down valuations of the bank’s collateralised debt obligations, the mortgage-backed securities that were central to the 2008 crash.
The investors group claims that RBS and four of its former directors – Fred Goodwin, Guy Whittaker, Johnny Cameron and Sir Tom McKillop – effectively duped them into pumping £12.3bn into its shares five months ahead of the bank’s October 2008 collapse which resulted in its £45.5bn bailout, the world’s largest. The bank sold investors the shares at £2 each in June 2008, but their value had fallen to just 10p seven months later.
It emerged last week that RBS – which has shed 40,000 staff since the crash – was preparing to cut thousands more jobs across the UK to reduce costs by around £1bn.
Other ex-RBS insiders who have agreed in recent weeks to be witnesses in the shareholder action include a former senior member of the team which oversaw the ill-fated integration of RBS and Dutch bank ABN Amro, and a former senior internal auditor, who reported directly to RBS’s former finance director, Guy Whittaker, one of the defendants in the case.
Another new witness for shareholders is a former senior member of RBS’s investor relations team, who claims to be aware of messages that RBS was privately conveying to large City investors at the time. And a former senior executive in RBS Global Banking and Markets, the institution’s investment banking arm, earlier agreed to provide testimony about the circumstances surrounding the rights issue.
The group of 16,000 investors – which includes institutional and corporate investors as well as 12,000 individual investors – filed its original High Court writ in April 2013.
It alleges the bank’s April 2008 share prospectus was defective and contained “material mis-statements and omissions”. It also claims the document falsely portrayed RBS as financially strong, failed to admit to the inadequacies of its back office systems and controls, and failed to admit it had incomplete knowledge of its own financial position.
Legal sources suggest RBS may settle “by Christmas”. One told the Sunday Herald: “My gut feel is that, if RBS were to offer investors £1.40 a share, they would accept it.”
A spokesman for RBS said: “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. 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.”
Press Cutting from Herald, Scotland
Written by Simon Bain
9 January 2014
RBS shareholders can join legal action
But key institutions including Standard Life have still to decide whether to participate in the action.
The High Court has now approved a Group Litigation Order (GLO) dealing with all claims by shareholders or former shareholders in RBS who took up shares in the rights issue of April-June 2008.
The RBoS Shareholders Action Group said the GLO “provides that any individual or entity that issues a claim under the RBS Rights Issue Litigation must do so in the management court and that all claims will be entered on a Group Register … kept at the offices of Bird & Bird LLP”.
A cut-off point for new claims of April 15 is likely to be enforced by the court.
The action group has lodged a £4 billion claim against four former RBS directors on behalf of 12,000 small investors and 100 large shareholders including local authority pension funds, churches, charities, and several major Scottish institutions.
The Stewarts Law group has lodged a second action on behalf of institutional shareholders.
However, Standard Life, Prudential, Legal & General, and the Universities Superannuation Scheme, which are represented by US law firm Quinn Emanuel Urquhart and Sullivan, have still not committed to join the action, in common with the 8000-strong RBS Rights Issue Action Group represented by Leon Kaye.
The four institutions mopped up 10% of the new shares issued in 2008 at 200p, which (with RBS shares at 361p yesterday, equivalent to 36.1p) means their current paper losses on those shares would be 82% or almost £1bn.
The groups claim RBS’s rights issue prospectus was misleading and omitted material information on the bank’s capital position.
The bank says it has substantial and credible legal and factual defences
Press Cutting from The Scotsman – 20th December 2013
Thousands of small shareholders in Royal Bank of Scotland yesterday hailed a legal judgment to limit their costs if they lose lawsuits against the bank related to its £12 billion 2008 rights issue.
The preliminary judgment of Mr Justice Hildyard is seen as paving the way for the launch of a third legal action against the bank by the RBS Rights Issue Action Group, representing 8,000 small shareholders.
The judge, at a case management hearing in London ahead of any litigation, ruled that if costs were awarded against the plaintiffs they would be based on how many shares institutional investors and private shareholders took up in the stock market cash call.
He said ahead of a final judgment: “It seems to me that the fairest or least unfair basis is to adopt the solution of costs proportionate to the subscription paid [for shares in the rights issue] across the board.” He said he believed the solution to be workable and “pragmatic”.
Leon Kaye, solicitor for the RBS Rights Issue Action Group, said: “It is an excellent result. It will be an enormous boost to members of our action group.”
Plaintiffs claim the RBS prospectus for the rights issue misled investors as to its financial strength, coming after the disastrous acquisition of ABN Amro and before the bank crashed to a record £24bn loss for 2008. RBS vigorously contests this.
Kaye and the group’s legal counsel, Michael Lazarus, had argued that, if costs were split equally between the plaintiffs, thousands of less wealthy small shareholders risked being shut out of the legal action.
RBS has already given a £41.8 million “ballpark estimate” of its own costs when the case eventually comes to court.
The judge drew attention to the complexities caused by the many claimants, some not having launched actions while issues like costs and the respective merits of group litigation orders and split trials were hammered out.
Saying such parties had “enjoyed spectator status without committing themselves”, the judge added: “I consider that the assessment of what is the right course has been bedevilled by the excessive focus on the groups that have come to be represented before me.”
The two actions that have been launched include a £4bn suit by the RBoS Shareholders Action Group against RBS and former bank directors including chief executive Fred Goodwin and chairman Sir Tom McKillop.
The group represents 100 past and present institutional investors in the bank and about 12,000 small shareholders with holdings in RBS above £5,000 following the cash call.
UK law firm Stewarts Law has also launched a suit on behalf of about 20 institutional investors in RBS.
Separately, corporate litigation specialist Quinn Emanuel has been retained by Edinburgh-based Standard Life Investments, Prudential and Legal & General Investments Management to monitor the case management proceedings at the London High Court before deciding whether to launch legal actions.
Press Cutting from The Scotsman – 18th September 2013
FOUR major institutions, including Standard Life, are considering suing Royal Bank of Scotland over its £12 billion cash call in 2008, it was confirmed at a court hearing yesterday.
The Scotsman revealed earlier this month that international corporate litigation firm Quinn Emanuel had been privately hired by Standard Life Investments and Legal & General Investments Management as they weigh up whether to launch legal action against RBS for allegedly misleading investors in the bumper rights issue.
At a preliminary hearing at London’s High Court, Richard Snowden QC, acting for Quinn Emanuel, told Mr Justice Hildyard that he was also representing Prudential and the University Superannuation Fund.
Snowden said the four institutions combined had acquired “well over 10 per cent of the [RBS] rights issue”, and “have responsibility to many thousands of stakeholders”.
He said those institutions had not yet decided whether to commence proceedings but that the move was “under active consideration”.
The hearing was also attended by lawyers representing the two legal claims already launched.
They are a £4bn lawsuit by the RBoS Shareholders Action Group, backed by nearly 100 past and present institutional shareholders in RBS, and more than 12,000 small shareholders; and a claim said to run to possibly hundreds of millions of pounds made by a group of about 20 claimants, including international investors and pension funds from Britain, Canada and the US.
Also present was legal counselfor the RBS Rights Issue Action Group, representing about 8,200 RBS shareholders, which is also considering launching proceedings against the bank for allegedly misleading investors about its
financial strength at the time of the controversial cash call.
The judge said he was still “minded” that all actions would be heard under a Group Litigation Order (GLO), suggesting any new and prospective claims would be heard at the same time.
Legal sources said this was a standard template in such cases of possible multiple actions against the same alleged wrongdoing in order to assist efficient adjudication of disputes.
Mr Justice Hildyard laid down a timetable for the court action, including a hearing to discuss how costs will be allocated among the various parties around 12 November, and RBS to have its defence lodged by 29 November.
Former directors, including ex-chief executive Fred Goodwin, are expected to be called to give evidence about the bank’s collapse.
The judge said there would be a third case management hearing held in January 2014 to mop up any issues, and confirmed his earlier guidance that the cut-off date for more people to join in the legal actions would be 15 April.
Michael Lazarus, legal counsel for the RBS Rights Issue Action Group, pressed the court for as early a meeting on costs as
possible because many small shareholders needed to know whether they could afford to take up the legal action.
The judge said in setting the cut-off date for people to join actions he did not want to exclude people prematurely “but I must not put a brake on the existing claimants”.
David Blaney QC, of Herbert Smith Freehills, representing RBS, said the bank was “content” at any cases being heard under the GLO umbrella.
Press Cutting from The Lawyer, 18th September 2013
Royal Bank of Scotland (RBS) is expected to run up a legal bill of £42m defending shareholder action over its £12bn rights issue, with Quinn Emanuel expected to join the action for Prudential, Standard Life and Legal & General.
In a case management conference at the Rolls Building yesterday (17 September 2013), Mr Justice Hildyard was told of the expected bill. The bank has turned to Herbert Smith Freehills to defend the case, which is worth a potential £4bn, with partner Adam Johnson instructing Serle Court’s David Blayney QC.
Stewarts Law issued the claim against the bank in March on behalf of the 53 institutional investors, which alleges that they were misled over RBS’ rights issue in April 2008 (23 April 2008).
Stewarts Law head of commercial litigation Clive Zietman is heading the team for the shareholder action group with litigation partners Keith Thomas and Fiona Gillet. The firm has instructed 3 Verulam Buildings’ Andrew Onslow QC and Adam Kramer (28 March 2013).
Third-party funder Argentum has agreed to bankroll the case for Stewarts (4 April 2013).
Bird & Bird partner Steven Baker has instructed Serle Court’s Phillip Marshall QC to lead 20 Essex Street’s Tom Raphael for the RBS Rights Action Group, which is made up of 7,000 former RBS shareholders and a number of institutions.
Since March the action has ballooned with new claimants threatening to enter the fray.
London firm Leon Kaye is yet to issue a claim but is representing the RBS Rights Issue Action Group, which is also considering whether to join the case, with the named partner Leon Kaye instructing 3 Verulam Buildings’ Michael Lazarus.
Quinn Emanuel may also join the action having been instructed by Prudential, Standard Life and Legal & General. The three fund management groups were told yesterday that they needed to decide whether to issue proceedings or risk penalties for hestitating.
Quinn Emanuel partner Sue Prevezer QC is leading the team having instructed Erskine Chambers’ Richard Snowden QC.
The group claims that the prospectus on which the rights issue was based was defective and contained “material misstatements and omissions”. They are also claiming that the prospectus portrayed the bank as being in good financial health, but the reality was different and the take-up of shares would have been limited “had the truth been known”. Shares in the bank sold for £2 each.
The dipute is shaping up to be one of the standout battles of 2014. The claimants will return to court in November to determine how RBS’ costs would be split among the group should the claims be dismissed.
Press Cutting from The Scotsman – 10th September 2013
(By Martin Flanagan) A Looming court hearing in London is poised to rule that at least two lawsuits alleging shareholders were misled in Royal Bank of Scotland’s £12 bilion capital-raising in 2008 will be heard together. Lawyers representing more than 100 institutional investors and about 12,000 small shareholders in RBS believe the judge will decide that separate hearings for legal actions would mean unnecesary duplication and waste time and money. The Chancery Court ~ case mangement meeting” before a judge, due to be heard around 15-17 September, is also expected to set a deadline for the bank’s defence against the allegations, thought likely to be around late November. Once source said “This meeting, essential an administrative exercise, follows an earlier case management meeting in August. It is a measure of the coplexityy of the RBS case, with the various plaintiff groups involved, that it has taken two case management meetings rather than one. But this one should be definitive, setting the ground rules of the court hearing even if that still take quire some time to be heard”. The RBoS Shareholders Action Group’s claim, said to be potentially worth up to £4bn, is backed by nearly 100 past and present institutional invesotrs in RBS, and also represents about 12,000 small shareholders. In a smaller action, said to be worth hundreds of milions of pounds, UK legal firm Stewarts Law has brought a case on behalf of about 20 institutiojal investors in RBS that management retirement funds in the UK, United States and Canada. News of the meeting comes after The Scotsman yuesterday revealed two major institutional invesotrs in RBS have hired international business litigation specialists Quinn Emanual to weigh up whether they were misled by the bank in the stock market rights issue that followed the bank’s disastrus acquisiiton of ABN Anro in 2007. Quinn Emanuel understood to be monitoring legal developments for Edinburgh based Standard Life INvestments (SLI) and Legal & General INvestment Management (LGIM) without yet inititing any proceedings, attednded the first case management meeting in early August.
It comes as lawyers for another group of private investors – the RBS Rights Issue Action Group, representing more than 8,000 people – said yesterday they were confident of issuing proceedings against the bank.
Leon Kaye, of Leon Kaye Solicitors, which specialised in class actions, told The Scotsman: “We met our barrisers yesterday, and we remain confident of issuing proceedings”.
Press Cutting from Reuters dated 30th July 2013
(Reuters) – Two lawsuits brought against Royal Bank of Scotland by shareholders who say they were misled into taking part in a 2008 cash call could cost the bank over 4 billion pounds if successful, court documents showed on Tuesday.
Thousands of shareholders are suing for compensation for losses incurred as a result of the 12-billion-pound rights issue in April 2008, months before RBS came close to collapse and had to be taken over by the state.
A first court hearing took place on Tuesday at the High Court in London. The litigation is in its early stages and the hearing was about how it should be structured rather than about the substantive issues.
The largest group, the RBoS Shareholders Action Group, is made up of about 12,000 shareholders including over 100 institutional investors. It is suing both RBS itself and four of its former directors, including disgraced ex-CEO Fred Goodwin.
Dubbed “Fred the Shred” for his cost-cutting policies, Goodwin 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. The lawsuit from the Action Group could eventually force him to defend his actions in court.
The group’s lawyers have already filed claims worth a total of about 900 million pounds on behalf of some of its members. They plan to file two further claims, in September and in April next year, and the final total could be about 4 billion pounds, according to documents presented to the court.
Among other points, the Action Group says that in the disputed 2008 prospectus, RBS gave a positive picture of the acquisition of ABN Amro the previous year. The Dutch bank’s assets turned out to be overvalued and the takeover was one of the main factors in the downfall of RBS later in 2008.
Once a small Scottish retail lender, RBS staged a meteoric rise to global prominence before its near-collapse threatened the entire British financial system. It required a 45-billion-pound taxpayer bailout and billions more in state-backed loans.
The bank declined to comment on the shareholder lawsuits.
A second group of claimants, made up of 53 institutional shareholders, is suing only RBS and not the former directors. It has filed claims worth about 362 million pounds.
A third group of 8,000 mostly retail shareholders was also represented by lawyers at the hearing, as an interested party. It has not yet filed any claims and it is not certain whether it will join the litigation. Claims from that group could amount to about 44 million pounds.
RBS wants the court to issue a so-called “group litigation order” which would bring the different strands into a single consolidated lawsuit.
The RBoS Shareholders Action Group is also in favour of a group litigation order although it disagrees with RBS over the details – particularly whether the claimants should continue to have separate legal teams or appoint a lead lawyer, as the bank wants.
RBS also wants the court to set December 31 this year as the cut-off date for any new claimants to join the litigation. The shareholders say that is not necessary as the limitation period will expire in June next year, six years after the rights issue closed, and that date will provide a natural cut-off point.
The court is expected to give its rulings on these procedural points at a later date.
(Editing by Pravin Char)
Press Cutting from This is Money co UK dated 30th July 2013 – RBS Investors a step closer shredding Fred Goodwin
Press Cutting from the Scottish Times dated 13 March 2012
RBS SHAREHOLDERS PRESS FOR DAY IN COURT
– Compensation sought over £12bn rights issue
Legal action by Royal Bank of Scotland shareholders seeking compensation for the collapse in value of their shares is expected to begin “in the near future”, a lawyer acting for a major group of claimants said.
The action, being brought by Leon Kaye, a London solicitor, on behalf of about 8,500 shareholders, alleges that RBS failed to disclose the bank’s tgrue financial position when it asked shareholders to buy £12 billion worth of shares in a rights issue five months before it collapsed.
Mr Kaye’s action is farther down the legal road than a second group of about 7,400 shareholders who are ths week sending letters to the bank and former directors, including Fred Goodwin, the former chief executive, asking whether they accept or deny that sharehlders are entitled to compensation.
The £12 billion rights share sale was made in April 2008 to give RBS extra capital to deal with write downs on loans caused by the financial crisis and shore up reserves after the doomed purchase of Dutch bank ABN Amro.
Some months ago, Mr Kaye sent out letters alleging that there had not been full disclosure of information in the rights issue prospectus and has received replies rejecting the claim. “They do not accept that RBS or the relevant directors made false statements in the prospectus” said Mr Kaye, adding that the bank had suggested that the action should be dropped to support the present directors’ efforts to restore the bank to health. “I think that is rather naive to put it politely”, he said “I expect to initiate court proceedings in the enar future”.
If the action is successful, it will result in RBS, or more probably its insurers, having to pay out billions in compensation. Such actions are commonplace in the United States but rare in the UK as British law lays more stress on the principle of “buyers beware”, making it difficult to prove claims that companies and their directors falsely induced people to buy shares.
Shareholders seeking compensation through the US courts were rebuffed by a court in Manhattan last year, which ruled that foreign owners of shares in a foreign-owned company could not seek redress in America. The £12 billion rights issue has become the focus for legal action because the bank claimed at the time that the new shares, costing 200p would provide RBS with enough working capital for it to carry on normal operations for at least another year. But five months later the bank had to be bailed out by the taxpayer and the share price collapsed to less than 20p.
Although class action lawsuits by shareholders in Britain are rare, Mr Kaye claims to be one of the few layers with a record of success. In the 1990s he took action against Guiness Mahon, a merchant bank, over three business expansion schemes the bank sponsored in the 1980s. All three businesses failed costing people who bought shares about £20 million. Mr Kaye’s legal action eventually won about £5 million for its clients in an out of court settlement.
One of the matters that the sharehlders allege was not disclosed by RBS was that it had borroed $845 billion in emergency funding from the US Federal Reserve in 2008. An academic expert in corporate law, who declined to be named, warned that this may not be enough to win a case as the court would ask whether this borrowing caused the bank to collapse and it appeared that it was the purchase of ABN Amro rather than the emergency borrowing which led to RBS’ downfall.
Press cutting from YORKSHIRE POST dated 16th April 2009
SMALL INVESTORS TO SUE RBS OVER ‘MISLEADING’ RIGHTS ISSUE
By John Collingridge City Reporter
Angry shareholders who claim they were wilfully misled into participating in The Royal Bank of Scotland’s £12bn rights issue plan to sue the bank. RBS Action Group, comprising private investors, intends to file a class action lawsuit against the bank arguing it failed to make shareholders fully aware of its financial predicament when urging them to subscribe to its fundraising.
Michael Lamoureux, who founded the group, invested £12,000 in the rights issue, but has seen his stake plunge from about £100,000 to £4,000. He said: “We feel that the bank has conned us out of billions. We were deliberately misled by RBS through the statements made by RBS both before the rights issue and by the statements made in the rights issue prospectus.”
Solicitors Leon Kaye are acting for the group and will file a detailed claim letter in coming weeks. RBS received more than 95 per cent shareholder support for its £12bn rights issue – then a record sum raised by a UK company – arguing it was needed to rebuild its tattered balance sheet, stretched by the acquisition of Dutch bank ABN Amro. But the demise of US investment bank Lehman Brothers and the collapse of confidence in the banking sector forced RBS to seek state aid, and the Government now holds more than 70 per cent of its equity.
With RBS’s share price down more than 90 per cent on a year ago, many small investors’ stakes have been reduced to virtually nothing. An RBS spokesman said: “We are aware of a number of class actions against RBS, which we will of course defend.”
“It would be inappropriate to comment further at this stage in the process.”
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