Shareholders and pension funds mull legal action against Lloyd's Banking Group and other banks to recoup investment losses
Local authorities with investments in RBS have been urged to join a class action suit against the disgraced bank.
Councils in Merseyside and North Yorkshire have reportedly joined forces to file a class action law suit against RBS alleging that the bank misled investors about its financial position.
The entire RBS board at the time of its near collapse following the disastrous acquisition of ABN AMRO is reportedly named in the law suit.
The complaint, brought by law firm Coughlin Stoia Geller Rudman & Robbins, seeks damages on behalf of all the banks shareholders.
Stephen Everard, managing director, GOAL Group, said local authorities not participating in class actions such as the RBS case risk losing out on a massive opportunity to seek compensation and plug their escalating pension gap.
“With pension deficits on the rise, we expect to see more and more investment managers taking an active role in this type of collection lawsuit.
Stephen Everard, managing director, GOAL Group
‘With pension deficits on the rise, we expect to see more and more investment managers taking an active role in this type of collection lawsuit,’ added Everard.
In related cases two local government pension funds are leading a US class action against Lehman Brothers over sub-prime losses; and a West Midlands pension fund has recovered over $500,000 in similar suits against corporations and banks.
Elsewhere, former Lloyds TSB and HBOS shareholders have formed an action group with the UK Shareholders Association.
Shareholders are frustrated that their views were ignored when, with government backing, Lloyd’s TSB decided to merge with HBOS in September last year. Since then HBOS has posted a loss of £10.8bn for 2008, while the group’s Lloyds TSB business reported an 80% fall in profit.
‘We will be considering what actions we might take to oppose this further erosion of shareholder value, and creeping Government control of the bank, including legal action and discussions with institutional shareholders,’ said the action group.
The RBS class action
The complaint charges RBS, and certain directors and officers of the bank, with violations of the Securities Exchange Act of 1934 and the Securities Act of 1933.
On May 11, 2008, Times Online reported that the SEC was investigating RBS over its exposure to American sub-prime mortgages.
On October 7, 2008, news began to emerge that the British government was holding talks with major banks, including RBS, concerning the possibility of government funding.
On November 28, 2008, RBS announced that the government would take majority control of the bank.
In December 2008, it was revealed that RBS had lost half a billion dollars in the Madoff scandal.
On January 19, 2009, RBS announced that it expected to lose approximately £28bn in 2008--the biggest loss in British corporate history--in large part due to the write-off of goodwill associated with the ABN deal.
Thereafter, as the truth regarding the Company's deteriorating financial results began to emerge, the prices of RBS's publicly traded securities declined significantly.
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