I have always thought Fred Goodwin should see the inside of the courtroom. A lot of public cynicism about government, regulators and – especially – bankers stems from the fact that those who did the most to cause the financial crash seemingly got away scot-free.
But Goodwin will at last take the witness stand on 8 June.
For most of the nation, that date stands out as General Election polling day. Goodwin will remember it as the day he was cross-examined over his disastrous leadership of Royal Bank of Scotland.
Read more: Former RBS boss Goodwin to appear in court
Goodwin, alongside RBS itself and several other former executives at the bank, are defendants in a case brought against them by 9,000 retail investors, including many current RBS employees. The trial starts in less than two weeks (22 May) and Goodwin will be called to the stand after the opening remarks. The claimants allege they were wilfully misled over the true financial woes of RBS during the £12bn rights issue of 2008, which was supposed to stabilise the bank. Within months, RBS had to be rescued by the government, which spent £45.5bn of taxpayer money to stop it from collapsing.
RBS’ current chief executive, Ross McEwan, will no doubt face his own questions about this embarrassing case at the bank’s AGM today. He must wonder how it has come to this. Although RBS settled with most of the original claimants without accepting liability, the preamble to this trial been drawn out for years. There has been plenty of time to make sure RBS’ inglorious past is not trailed over so publicly and in such excruciating detail.
Read more: Goodwin‘s HQ to become RBS’ enterprise hub
Shareholders small and large lost a fortune. The retail investors fighting this action are joined by several large US institutions, such as Wells Fargo and the Boeing pension fund, and local authority pension schemes including the London Borough of Merton and Essex County Council.
Goodwin has spent the past seven years hiding from a public still furious that his dreadful calls – notably the 2007 purchase of Dutch bank ABN Amro – helped bring Britain’s economy to its knees. He left RBS in 2009 and was later stripped of his knighthood. But he has never been properly taken to task for his failures.
This is ironic given he would surely never have been so lenient on his own enemies, reportedly keeping “Fred’s black book” filled with names of executives who had angered him. He couldn’t tolerate alleged failures by his own staff, berating them for using Sellotape or offering him the wrong type of biscuit.
In exile, he has had a £342,500 RBS pension to keep him company. The bank is still 72 per cent-owned by the government, so the taxpayer is funding his lifestyle.
What’s more, we’re funding most of Goodwin’s defence. The legal bill for Goodwin and his fellow accused executives was estimated at £6.5m last year, with RBS picking up the tab. The bank will have spent more than £125m on this case when the trial ends later this year – one of the biggest fees in British legal history.
As I have noted before, this expenditure is obscene. The Treasury, as majority shareholder, should have intervened. Chancellor Philip Hammond and McEwan must both now wonder whether that money would have been better invested in a settlement. The claimants are seeking £700m, including interest, and have understandably turned their noses up at offers amounting to barely 20 per cent of this claim.
Hammond has already signalled the public will make multi-billion-pound losses when the state finally sells its shares in RBS at a far lower price than it paid in 2008’s bailout. “We have to live in the real world,” he has argued.
Yet RBS’s share price could well slide even further once Goodwin takes the stand. Legal papers already filed suggest he will be grilled over any number of internal warnings about the bank’s dire financial position and corrosive culture pre-crash. Goodness knows what dirty laundry will be aired.
Whatever the merits of the case, we should be grateful to the claimants – thousands of ordinary men and women – who have finally forced Goodwin out of hiding. But for RBS’s own sake, this trial could and should have been avoided.
Sir Vince Cable was secretary of state for business, innovation and skills between 2010-15 and is the Liberal Democrat parliamentary candidate for Twickenham