£100m bill to defend Fred the Shred and RBS (paid in full by YOU)
‘Duped into buying new shares’
TAXPAYERS have racked up a £100million bill to defend Royal Bank of Scotland and its disgraced former bosses, including Fred Goodwin. The state-backed bank, which received a £46billion bailout from taxpayers in 2008, is battling a £4billion lawsuit.
The legal claim has been lodged on behalf of around 27,000 furious investors who claim they were misled into supporting a £12billion share sale to shore up the bank only five months before it collapsed.
It could see Fred Goodwin – nicknamed ‘Fred the Shred’ for his ruthless approach to business – finally forced to account for his actions in court.
Mr Goodwin was stripped of his knighthood over the implosion of RBS, but still enjoys a £342,500-ayear taxpayer-funded pension from the bank.
The other millionaire former executives who could take the stand include former chairman Sir Tom McKillop, Johnny Cameron, the former investment bank chief, and Guy Whittaker, the former finance director.
While the prospect of these men being put in the dock will be relished by millions who saw their pensions and investments hit by the downfall of RBS, the spiralling legal bill will not. A court filing by RBS’s lawyers, Herbert Smith Freehills, showed the bank has run up costs of £86.2million, including fees of £6.1million for the individual directors.
Once VAT is added the total cost is £103.4million. The bank estimated last August that the case would cost it £98million before VAT.
These costs will be indirectly paid for by taxpayers, who still own 72 per cent of RBS.
RBS is legally obliged to foot legal costs of former executives for actions taken while they worked at the bank.
The spiralling bill has infuriated MPs, with one saying it would ‘stick in the throat’ of ordinary workers.
Wes Streeting, a Labour member of the Commons Treasury Committee, said: ‘Some of the lowest paid workers in my constituency are denied access to justice because they cannot afford employment tribunal fees.
‘So it sticks in the throat to see the likes of “Fred the Shred” being funded to the tune of £100million. I could think of a million better ways to spend the money.’
The bitter legal battle centres around the height of the financial crisis in early 2008, when RBS tapped up shareholders for £12billion.
Investors claim RBS and its executives duped them into buying new shares in the bank by covering up its precarious finances.
Many lost a large part of their life savings when the bank was bailed out months later. The action is being spearheaded by the RBS Shareholder Action Group, which includes 27,000 retail investors, 4,400 of whom work for the bank.
It has joined forces with companies and institutions – including Axa, Aberdeen Asset Management and local authority pension funds – which also lost money and have lodged separate lawsuits.
The court case was due to begin last December but was delayed as the two sides tried to reach a settlement.
Investors are said to have turned down a £700million offer last July and are seeking £4billion.
The case, set to begin in March, is expected to last six months. Legal sources have suggested the bill could double.
An RBS spokesman said: ‘We continue to strongly contest these claims.’