RBS and the bizarre case of £200million action group deal
‘Fraudster’ who led fight against the bank could walk off with millions
WHEN Royal Bank of Scotland agreed a £200million settlement with a shareholder action group last year, it seemed a triumph for thousands of small investors over a ruthless and oppressive bank.
Thousands of ordinary shareholders had joined the RBoS Shareholders Action Group to sue the bank for inveigling them into buying shares during the Fred Goodwin era.
Those innocent shareholders were promised a share of the £200million as compensation. But, as The Mail on Sunday has discovered in an investigation over several months into the action group, they are still waiting for their money. And there are troubling questions surrounding the action group itself.
We can reveal that a man at the centre of the group – Irish businessman Gerard Walsh, named as a fraudster by Jersey’s Royal Court – is trying to claim for himself millions of pounds through a secretive company;
Lawyers say they have uncovered 90million ‘phantom’ shares that formed part of the action group’s claim, but never actually existed. This would have inflated the claim.
As a result of our investigation, MP Norman Lamb has written to Nicky Morgan, chairwoman of the Treasury Select Committee, asking her to look at the case.
The Ministry of Justice and Financial Conduct Authority have been made aware of the situation.
Q Why does this matter?
A IT directly affects thousands of innocent small shareholders who signed up to the action group and are still awaiting payouts.
It also affects all taxpayers, who bailed out RBS in the financial crisis. The costs, to be taken out of the coffers of taxpayerbacked RBS, include the £200million settlement.
In addition RBS ran up more than £100million of expenses defending itself before opting to resolve the case out of court. The millions of pounds Walsh is trying to claim would come out of the settlement money, leaving less for others, including small shareholders.
Q So who is Gerard Walsh?
A HE is a 60-year-old businessman who has lived in Eaton Square, Belgravia, and other expensive parts of London. He co-founded the RBoS Shareholders Action Group in 2009. Two years later, he was made bankrupt and stepped down as a director of the group. Several sources familiar with the running of the action group said he continued to play a key role. In 1997, the High Court of Ireland said Walsh was ‘guilty of fraudulent misrepresentation’ by posing as a Lamborghini dealer. A London antiques dealer, who sued Walsh and others over payments for cars that were never delivered, was awarded damages of £677,000. Walsh also featured in a separate case in 2014 when the Jersey Royal Court called him a ‘fraudster’. The court found Walsh had induced the Nolan family, a wealthy Irish transport dynasty, into various investments but took large sums for himself, including tens of thousands he spent on paintings and a car. The Nolans were awarded about £12million in damages. Sources close to Walsh say he denies wrongdoing in the Jersey case, and that he was neither a defendant nor witness, so was not able to challenge the findings. But his name was mentioned about 650 times in the judgment, and lawyers for the Nolans described those who gave evidence to the court as ‘puppets’ of Walsh.
Q What’s the problem at the Action Group?
A TWO main things. First, a company called Evalusafety was set up to make payments of more than £20 million. Shareholders have not been told who the money will go to, or what the payments are for. Walsh is believed to be claiming several million for himself and fellow managers of the Action Group. Some or all of the sums may be legitimate for work on the case but the secrecy surrounding Evalusafety is troubling for shareholders. Second, lawyers say they have discovered 90 million ‘phantom’ RBS shares that form part of the claim but never existed.
Q Isn’t anyone trying to sort it out?
A YES. Property tycoon Trevor Hemmings, who was a big RBS shareholder, is trying to untangle the mess. One of his firms, Manx Capital, put up funding to continue fighting the case. As a condition of doing so, it insisted the action group stopped managing the claims. They are now being managed by a law firm, Signature Litigation.
Q What does the action group say?
A THE action group has filed a complaint against Signature with the Solicitors Regulation Authority.
Signature said: ‘Walsh has a record of threatening and bringing SRA complaints against lawyers who do not agree to his improper demands, and we were threatened with this spurious and tactical complaint long ago.’
Q Does the action group have any supporters?
A YES. A Twitter user with the handle @FrankRyan1936 and one of Walsh’s allies, Neil Mitchell, have taken to social media to accuse our journalists of being RBS stooges.
Q Why aren’t action groups regulated to run properly?
A THE Ministry of Justice regulates some groups but believed the RBoS Shareholders Action Group did not fall into its remit as it was a ‘not-for profit’ company.
City regulator the Financial Conduct Authority will soon take over regulation from the MoJ.
A spokesman for Manx said: ‘The action group failed in its primary task to collect and verify claims and pass them on to the lawyers accurately.
‘Its mismanagement has resulted in massive additional costs for true claimants to bear.
‘The lawyers are regulated and the tragedy for the claimants is that the action group and Walsh were not.’
The law firm acting for the action group declined to comment.