RBS Shareholders Launch £4bn Lawsuit

By Poppy Trowbridge, Business and Economics Correspondent

A group of Royal Bank of Scotland (RBS) shareholders has launched proceedings against the bank and four directors, including former chief executive Fred Goodwin.

The RBOS Shareholder Action Group, which represents more than 12,000 investors, claimed they were misled by directors over its £12bn rights issue in April 2008.

The group said the final claim against the bank could be worth up to £4bn.

A spokesman for the Action Group said: "Today represents a giant step forward for the many thousands of ordinary people who lost money as the result of inexcusable actions taken by banks and their directors in the financial crisis.

"Now, for the first time, some of these directors will have to answer for their actions in a British court."

It named the bank, Mr Goodwin and former directors Tom McKillop, Johnny Cameron, and Guy Whittaker as defendants.

Fred Goodwin oversaw RBS' multi-billion pound deal to buy ABN Amro in 2007

As the financial crisis took hold in 2008, RBS announced new shares would be offered to investors to buy, in an effort to raise the £12bn and boost the bank's financial strength.

RBS also announced at the time that it would suffer write-downs of nearly £6bn because of its exposure to credit markets.

The shareholders claim the true purpose of the rights issue was not disclosed at the time and the directors in charge gave the false impression the bank was generally financially sound.

The bank has around a month to respond to the lawsuit by issuing their defence, or apply for extra time before replying. It has the option of settling the claims or going to court.

Patricia Mohammed, one of the shareholders involved in the claim, said investors trusted RBS to tell them the truth.

"It was a huge institution, it had a huge history behind it and people on enormous salaries running it - people that we trusted to do the right thing," Ms Mohammed told Sky News.

"If we get some compensation, that is very nice.

"But if it is brought to the Government's attention that there are people prepared to do something - that they are not happy - that is important."

In 2007, RBS beat rivals, including Barclays, to buy Dutch lender ABN Amro in 2007 for nearly £50bn.

But the deal left the bank dangerously overstretched, and the following year it was forced to take a multi-billion pound bailout by the British Government.

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