Shareholders of the now state-owned Royal Bank of Scotland are to sue the bank over claims that they were misled by former bosses during a rights issue in 2008.
Angry investors yesterday announced that they will issue a £2.4bn claim against the bank and several of its former directors including chairman Sir Tom McKillop and ex-chief executive Fred Goodwin.
Letters from the RBOS Action Group are due to be delivered to the bank and 17 former directors. The letters claim that investors were actively misled in a prospectus which was published as part of a £12bn rights issue by RBS, which raised money to fund the purchase of the Dutch investment bank ABN Amro.
RBS was forced to seek an unprecedented government bailout, just five months after the purchase went through.
RBOS Action Group is backed by over 7,000 private shareholders and 80 institutional investors which include Deutsche Bank and HSBC Global Custody.
The statement of claim alleges that the bank and its board must have either withheld or misrepresented information about the true state of the bank's finances when it sought investment in April 2008.
Investors suffered massive losses that same year, as the bank was forced to seek a £20bn government bailout in December, which was followed by a second bailout of £25bn in December 2009.
RBS shares peaked in March 2007 at a price of £6.07 per share. However just 18 months later the Government paid just 50p a share for an 82% stake in the company and shares now trade at just under 30p a share.
An investigation by the Financial Services Authority found that the bank's near collapse was due to poor management, but failed to recommend taking any action against the bank's management.
Mike Neill is chairman of the RBOS Action Group; he was disappointed that the FSA did not follow up its conclusions with legal action.
"We had been led to believe the FSA would adjudicate on whether RBS misled investors in early 2008, whether the 2008 RBS annual report and accounts were accurate, and whether shareholders deserved to be compensated," he said.
In a statement RBS said it would vigorously defend any action against it.
Read more on the story (The Independent)