SME class-action numbers expected to soar following RBS data leak

Daily Record, 10.10.16

 

RGL Management expects its class-action group will rise from around 140 at present to “more than 1,000” as it pursues litigation alleging RBS “systematically sought to defraud its customers for its own commercial purposes”

 

A group gathering claims against Royal Bank of Scotland for the conduct of its disbanded Global Restructuring Group expects claimant numbers will swell to more than 1,000 as a result of a data leak proving RBS deliberately set out to profit from business customers.

 

RGL Management Limited, incorporated in February for the purpose of pursuing RBS for the actions of the now disbanded restructuring arm Global Restructuring Group (GRG), plans to launch a legal claim against RBS in early 2017.

 

The group, which is being funded by professional litigation investors, said its headline claim in the litigation will be RBS, through GRG, “systematically sought to defraud its customers for its own commercial purposes”.

 

The class action will also claim GRG targeted “asset-rich” small to medium-sized enterprises (SMEs) on an “often invented” pretext to then “hit them with heavy fees, placed them into a manufactured insolvency process and then in many cases obtained their key assets at undervalued rates”.

 

RGL Management stated earlier in the month it expected to launch a £1 billion legal claim against RBS early next year on behalf of around 140 businesses, having added around 100 new claimants between April and October.

 

Those firms already signed up to the class action are pursing claims on average of £6-7 million.

 

However RGL Management now expects it will be pursuing claims on behalf of more than 1,000 firms with “an aggregate claim size reaching billions of pounds” following the publication today of extracts from a data leak of more than 17,000 internal RBS documents.

 

The leaked documents reveal GRG operated an internal project codenamed “Dash for Cash ” to run down lending and increase profits.

 

The documents show RBS incentivised staff who identified companies which could be moved to GRG and bonuses were also awarded based on the volume of fees collected from companies which ended up in GRG.

 

Staff were also apparently incentivised to find ways to “provoke a default” on customer debt.

 

The documents, reported to have come from a whistleblower within the 73 per cent taxpayer-backed bank, suggest some customers were referred to GRG simply for requesting a move to another lender.

 

Others were apparently referred to GRG for threatening to take legal action against the bank or for questioning the banks’ motives or behaviour.

 

RGL Management said it had worked with the BBC’s Panorama team and BuzzFeed to help provide details of GRG wrong-doing.

 

RGL argues claims made against GRG which fell outwith a six-year timebar limit could now be resurrected, “by virtue of RBS’s concealment of the true nature of GRG’s activities”, first outlined in businessman Lawrence Tomlinson’s November 2013 report outlining GRG’s “unscrupulous” treatment of RBS business customers.

 

Tomlinson’s report claimed RBS had deliberately pushed some firms into insolvency in order to buy back their assets at rock-bottom prices.

 

In response, RBS instructed Magic Circle law firm Clifford Chance – who are also retained by RBS in other matters – to undertake an ‘independent’ review of the GRG business which found no evidence in the 138 cases selected for review the bank has acted improperly.

 

The Clifford Chance report also found no evidence the RBS property arm, West Register, had deliberately targeted customer assets.

 

However the leaked documents show information on properties held by customers in GRG was being passed to West Register.

 

Derek Sach, then global head of GRG, also sat on the committee of West Register, which decided on which customer assets the bank would purchase.

 

RGL Management, who state their focus is on “commercial returns”, said Humphries Kerstetter LLP and a team of counsel from 3 Hare Court have been engaged to launch proceedings against RBS, with proceedings scheduled to commence in early 2017.

 

Commenting on the progress of the claim, James Hayward, chief executive of RGL Management Ltd, said: “Many of the victims of GRG have claims that are time-barred.

 

“But those claims can be resurrected by virtue of RBS’s concealment of the true nature of GRG’s activities.

 

“It will be forcefully argued that insufficient knowledge was publicly available as to the truth of what happened until the 2013 publication of the Tomlinson report.

 

“Consequently, limitation ought not to run against these claims until six years have expired from November 2013.”

 

Hayward added: “The litigation will obtain redress for a substantial body of RBS’s former customers who have been deprived, in most cases, of everything they owned at the hands of a bank they thought was there to help them succeed.”

 

RBS declined to comment on the latest statement from RGL Management, though the bank stated earlier it believes it has a “strong case” and will defend the claims “vigorously”.

 

In 2013 the regulator the Financial Conduct Authority (FCA) was ordered to investigate the allegations outlined in the Tomlinson report by then business secretary, Vince Cable.

 

The FCA appointed Promontory Financial Group and Mazars to carry out the review and the FCA was expected to publish its findings by the end of 2015.

 

However FCA chief executive Andrew Bailey has yet to set a date for publication.

 

Andrew Tyrie, chairman of parliament’s Treasury Select Committee, said he will be writing to the FCA seeking a publication date.

 

“The leaks today illustrate the need for the FCA to get on with publication as soon as possible,” he said.

 

“The basis of what has come out so far, this appears to be a shocking story, with many businesses at the wrong end of it.”

 

The FCA said the review is “complex and lengthy” and stressed it was “important.. not rush the final stages of this process.”

 

Laith Khalaf, a senior analyst at Hargreaves Lansdowne, said the leaked documents present a “material threat” to RBS’s future prospects.

 

Khalaf said: “RBS is already potentially facing a multi-billion dollar fine in the US for mis-selling in the run up to the credit crunch.

 

“These latest revelations suggest the financial crisis may not have brought an end to bad behaviour at the bank however, which looks to have continued while under government ownership.”

 

He added: “The financial watchdog will give its verdict on the allegations facing RBS in due course, which could lead to yet another fine, and the prospect of a fresh wave of litigation.

 

“It’s a sad fact that despite the spectre of the PPI scandal beginning to fade away, conduct costs remain a material threat to the Royal Bank of Scotland.”

 

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