Strathclyde Pension Fund, one of Europe's largest superannuation funds, has ruled out joining the Royal Bank of Scotland Action Group, a £4 billion UK-based class action against the bank, and is considering joining a rival action led by international litigation specialists, the Sunday Herald can reveal.
The £11bn fund invested £9 million in response to RBS's April 2008 rights issue, five months before the bank's near-collapse necessitated a £45bn taxpayer bail-out.
The SPF – the pooled retirement fund of 180,000 past and present employees of 12 west of Scotland local authorities, as well as Scottish Water, various colleges and Strathclyde Passenger Transport – is understood to have lost up to £50m when RBS shares plummeted to 15p in January 2009.
A spokesman for the SPF said: "We have held discussions with both actions and continue to monitor developments closely."
However, sources within the fund have confirmed that SPF "had a look at [RBSAG] and we decided not to sign up during the first quarter of this year".
Thought to be worth £200m, the second group – launched in March and led by Dutch investment bank ING – is represented by international litigation-only legal firm Stewarts Law. RBSAG is asking members to pay an upfront fee equivalent to around 1% of losses, whereas the free-to-join Stewarts Law group proposes to retain around one-third of any award by the court.
SPF's decision to shun RBSAG, which began its legal proceedings in April, comes as a major blow to the UK-dominated group. There are fears that Strathclyde's decision will influence other big public sector schemes.
One highly placed source in the UK group said: "We can't understand why they wouldn't want to join us. Having been keen, they suddenly said, 'No we are not going to participate in this.'"
Led by City lawyer Bird & Bird, RBSAG claims to represent large and small shareholders collectively holding £4bn's worth of the total £12bn of shareholder value destroyed by RBS's collapse. Claimants include around 12,000 individuals and 120 large institutions, including Deutsche Bank.
The group alleges that RBS "tricked" investors by misrepresenting the underlying strength of the bank prior to the £12bn rights issue in April 2008. It claims that the "true purpose" of the rights issue was, in fact, a response to pressure from the Financial Services Authority to shore up a balance sheet critically damaged by the acquisition of Dutch bank ABN Amro.
The group also claims that RBS did not disclose its capital ratios as it was obliged to do, failed to make write-downs in relation to ABN Amro, did not disclose flawed risk management systems and failed to disclose reliance on $12bn (£7.7bn) in loans from the US Federal Reserve.
The Stewarts Law group's 21 claimants also include a string of international funds from Germany, Italy, Switzerland and Luxembourg who are collectively suing RBS under Section 90 of the Financial Services and Markets Act 2000.
A spokesman for Stewarts Law said: "The claimants allege that the prospectus on which the rights issue was based was defective, in that it contained material mis-statements and omissions."
RBS declined to comment on litigation by shareholder groups.
However, in its first quarter interim management statement last week, RBS acknowledged notification of prospective claims in the UK High Court and in the Netherlands against the bank and "certain former individual officers and directors", including Fred Goodwin (chief executive), Sir Tom McKillop (chairman), Johnny Cameron (investment banking chief) and Guy Whittaker (finance director).
In the same document, the bank updated the market on other outstanding "litigation, investigations and reviews" involving potential liabilities.
The three-page summary includes references to fines related to Libor-fixing; FSA enforcement action resulting from the June 2012 IT failure; a European anti-trust investigation into credit default swaps, and two US investigations.
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