RBS has spent £1billion of your money to stop lawyers grilling Fred the Shred
THE taxpayer-backed bank ruined by disgraced former boss Fred ‘the Shred’ Goodwin has shelled out £1billion to keep him out of court.
Royal Bank of Scotland has been fighting a lengthy legal action with shareholders that was set for a public showdown this month.
It would have seen Mr Goodwin take the stand in a civil trial – finally forcing him to account for his actions in the run-up to the 2008 financial crisis.
But the investors taking on RBS have now agreed to a last-minute £200million settlement, bringing the case to an abrupt end. It takes the lender’s total bill to £1billion, including £100million of legal fees and an earlier £700million settlement with other investors.
Last night campaigners slammed RBS’s behaviour, accusing it of using customers’ money to buy Mr Goodwin’s silence.
‘This is a real tragedy for the public interest, because some of the stuff which would have come out was going to keep everyone enthralled for weeks,’ said Neil Mitchell, a businessman and outspoken critic of RBS who has previously fought – and lost – a separate legal action against it.
‘It’s incredible, and absolutely disgusting, that they’ve managed to keep it private.’
Mr Goodwin ran RBS from 2001 until 2008, and earned his nickname through making ruthless efficiency cuts.
A string of reckless decisions during his time at the helm took the bank to the brink of disaster – and helped bring the world economy to its knees.
Only a £46billion state bailout prevented the lender from going bust, and RBS has lost £58billion since this cash was pumped in.
In April, Chancellor Philip Hammond admitted that taxpayers were unlikely to ever get their money back. Mr Goodwin lost his job and knighthood over the scandal but still draws a pension worth £342,500 a year.
The court case itself centred on £12billion that RBS raised from the markets to help it stay afloat in 2008 at the height of the financial crisis. This rescue plan failed to save it from near-collapse, and the Government stepped in later that year.
Investors who handed over their savings for the doomed fundraising drive claim that they were misled over the financial health of RBS. They launched a legal action to try to recover their losses, triggering growing fears at RBS that it would lead to embarrassing revelations about the lender’s past. Five separate groups representing at least 27,000 ordinary shareholders and scores of City institutions pledged to take on the bank.
RBS managed to convince four of the five to settle weeks ago for around £700million. But the RBS Shareholders Action Group – which represents 9,000 small investors and 18 large corporate ones – held out for a better offer.
It pushed the case all the way to a trial that was due to start last week. Mr Goodwin was due to give evidence tomorrow, with his legal fees paid by RBS. But the case was unexpectedly postponed on the day it had been scheduled to begin for further settlement talks, with RBS doubling the offer on the table. Last night, sources close to the Shareholders Action Group said it had accepted a £200million settlement.
Although the deal is expected to bring the saga to an end, a hardcore group of up to 4,500 investors are still holding out for more and were attempting to force the trial to go ahead.
They claimed to have raised the necessary £7million needed in legal fees, with £5million coming from less than half a dozen wealthy shareholders in the group.
The judge in the court case is due to be updated this morning, with RBS and the action group then likely to issue statements confirming they have settled.
It is possible that dissenters will try to persuade the judge that the case should continue. But they would need proof the £7million is available, as well as the authority to instruct the solicitors acting on the action group’s behalf – and it is not clear that either of these will be forthcoming.
Mr Mitchell said: ‘Thousands of investors still want this to go ahead, predominantly ex-employees of RBS and pensioners.’
RBS denies wrongdoing over the 2008 rights issue and says its exbosses did not act illegally.
Both the bank and the Shareholders Action Group declined to comment yesterday.
‘Thousands want this to go ahead’