Pension groups enlist former PM's wife in case against RBS

Two council pension funds suing RBS for compensation can now include Cherie Booth QC, wife of former prime minister Tony Blair, amongst their legal team.

The Merseyside and North Yorkshire funds have hired legal firm Coughlin Stoia to pursue a class action claim in the US courts. Coughlin Stoia has previously acted on behalf of shareholders in a number of high profile cases, including those arising from the 2001 Enron fraud.

Ms Booth confirmed she has been brought in as a special advisor to the team, stating: “This is a significant case not only for the massive losses inflicted on local authority pension schemes and other UK institutions who were the largest investors in RBS, but also for the potential to protect investors in the future by significantly raising the standards for good governance in major UK companies.”

The class action states that directors “falsely reassured investors that RBS was well capitalized when, in fact, the company was effectively insolvent as a result of impaired assets, bad loans, and its disastrous partial acquisition of ABN AMRO.”

The claim relates specifically to the information which the banks directors, including Sir Fred Goodwin, may have kept from investors throughout 2008. Included in this period is RBS's recent rights issue, when they offered additional shares for sale to existing stockholders. Buoyed by confident messages from the board, at that time the banks shares were trading strongly at 243 pence.

However, five months after the bank had assured the investors of its capital strength, it required a £20billion rescue package from the government, which saw United Kingdom Financial Institution take a 58 per cent stake in the bank. The share price has since collapse to 22.5 pence.

Peter Wallach, the head of the Merseyside fund, has said he is eager to find out the extent to which investors may have been mislead: “Our concern is that perhaps management didn’t indicate to shareholders the full extent of the deterioration in the bank’s finances when it first came to share holders for additional capital.”

Patrick Daniels, a partner at Coughlin, said: “We will be pursuing this claim relentlessly in order to bring the executives, especially Sir Fred Goodwin, and this bank to book.”

US class actions allow courts to bring all comparable cases together under one action and as such it is believed that other UK pension funds will take this opportunity to pursue compensation for their own funds. Individual investors at the time of the rights issue are also being encouraged to make their interest known.

Peter Murphy, a partner at a specialist pensions law firm has said that the US is more suited to this type of claim: “US lawyers act on a ‘no win, no fee’ basis and plaintiffs do not have to pay for the other side’s legal costs if they lose.”

However, he also expressed surprise at Ms Booth's involvement: “Her profile is mainly in UK and European human rights law, not US securities litigation. Her involvement in the case will certainly add greater public interest to an all ready high profile media event.”