Firms ‘forced to the wall by RBS’ to sue bank for £600m

RBS is facing a £600million compensation claim from a group of businesses which claim they were pushed to the brink of collapse by the bank.

More than 100 small and mediumsized Scottish firms have secured funding to pursue a case against a controversial arm of the stateowned bank.

They are part of a UK-wide group of 270 companies which claims the bank’s business turnaround division, the Global Restructuring Group (GRG), deliberately forced businesses to the wall so they could grab their assets on the cheap.

It has been alleged that GRG forced

‘Fraud Office is monitoring case’

distressed small firms into bankruptcy to boost RBS’s capital position.

The RBS-GRG business action group now plans to launch an ‘unlawful means conspiracy action’ against the bank and four of its executives after securing backing from US litigation funders.

The senior executives set to face allegations in the case include the bank’s outgoing chairman Sir Philip Hampton and former deputy chief executive Chris Sullivan. Derek Sach, who was head of GRG, and Aubrey Adams who was the head of the unit’s property division, will also face allegations.

RBS is closing GRG down, citing improving economic conditions which reduce the need for restructuring. The bank claims GRG rescued more than 750 small businesses in a year, saving more than 25,000 jobs.

But the division is under investigation by the Financial Conduct Authority (FCA).

The Serious Fraud Office is also ‘ monitoring developments’ around GRG.

The Government’s role in the scandal has come under scrutiny after it emerged that a public agency urged GRG to be tougher on business customers of the bank which was bailed out by the taxpayer in the recession.

GRG has been subject to intense scrutiny since Lawrence Tomlinson, a former government adviser, published a report in 2013 that criticised its conduct.

He accused GRG of charging struggling small businesses excessive fees and of undervaluing their assets before buying them through the bank’s own property division, West Register.

He suggested that RBS forced vibrant businesses into trouble and profited from their distress by squeezing them for fees and ultimately seizing their assets to swell its own property empire.

A report by lawyers Clifford Chance, for RBS, cleared the bank’s restructuring division of wrongdoing. However, the FCA is still investigating the claims.

In his report, Mr Tomlinson, chairman of Leeds-based conglomerate LNT Group, cited 400 case studies and interviews with ex-RBS insiders, advisers and companies.

An action group spokesman said the senior executives and the bank were being pursued as there was evidence they had profited from GRG.

RBS, which is 79 per centowned by the taxpayer, declined to comment on the impending legal action but has previously denied the allegations. It has said its objective was to achieve credit improvements for its customers and it regularly contributed to businesses being saved.

Speaking earlier this year RBS chief executive Ross McEwan insisted that ‘many customers’ said their dealings with GRG were ‘the best experience of banking they ever had’.