A £125m trial is set to get underway in London today as RBS investors left out of pocket by the bank’s ill-fated 2008 rights issue seek compensation.
The case will see Fred Goodwin, one of the most notorious figures of the financial crisis, take the stand.
The 9,000 claimants in the civil trial, due to start in the High Court today bar an eleventh hour settlement, allege they were misled about the true state of RBS’s finances when it issued a prospectus for a £12bn rights issue in April 2008, shortly before the credit crunch hit with full force.
Despite the giant rights issue, RBS’ financial position continued to deteriorate and the government was forced to bail out the Edinburgh-based bank with £45.5bn of taxpayers’ money, leaving its shares largely worthless.
The investors affected by those events are seeking compensation of more than £800m for their loss. RBS denies it is liable.
It is understood that settlement talks were ongoing at the time of publication but that some claimants are determined that Goodwin have his day in court.
On 8 and 9 June, Goodwin, who was stripped of his knighthood over his role in the bank’s collapse, will be forced to defend his actions under oath for the first time since the 2008 bailout.
The disgraced former banker, dubbed Fred the Shred for his love of cost-cutting, was named by Time magazine as one of the 25 people most to blame for the financial crisis that followed the credit crunch.
During a seven-year tenure in the top job at RBS, he attempted to build a banking empire through more than 20 acquisitions. Goodwin had hoped the crowning glory of his spending spree would be the ABN Amro deal in 2007, but it precipitated the bank’s bailout and ultimately his own downfall.
According to its own court submission, RBS will have spent at least £125m on legal costs relating to the rights issue case by the time the trial ends on 27 October. At least £6.5m of its legal costs have been spent on the defence of the individual defendants including Goodwin, who continues to draw a £342,500 a year pension from the bank.
Of the approximately 27,000 retail shareholders who have been claimants in the litigation, it is estimated that some 4,000 have died between RBS’s bailout in 2008 and the commencement of the trial.
More than 1,000 other investors in RBS have applied to add themselves as claimants. RBS is arguing that their application is time-barred.