Action group secures US funding to sue RBS for £600m

us funding A group of businesses that claim to have been pushed to the brink of collapse by Royal Bank of Scotlans's controversial Global Restructuring Group (GRG) has moved a step closer to seeing directors of the unit in court.

The group secured financial backing this week from US litigation funder to pursue a £600m claim against the bank. The RBS-GRG business action group plans to launch an "unlawful means conspiracy action" case agaimnst the bank and four of its executives who held senior posts at the time of the alleged wrongdoing.

About 270 small and medium sized firms, a third of which are based in Scotland, claim that GRG, which was supposed to help struggling businesses, deliberately forced companies to the wall it order to grab their assets on the cheap. It has been claimed GRG forced distressed small firms into bankruptcy in order to improve RBS's capital position.

A spokesman for the action group said the senior executives who were set to face allegations in the case would include the bank's outgoing chairman Sir Philip Hampton and its formar deputy chief executive Chris Sullivan. Derek Sach, who was head of GRG, and Aubrey Adams, who was head the head of the unit's property division, will also face allegations. GRG is currently under investigation by the Financial Conduct Authority. The serious Fraud Office has also said that it is "monitoring developments" around GRG.

The businesses are being advised by London legal firm Enyo Law and have engaged a team of leading QCs.

RBS, which is 79% owned by the taxpayers and is the UK's largest lender to small businesses, declined to comment on impending legal action but has previously denied the allegations. It has said that its objectives was to achieve credit improvements for its customers and it regularly contributed to businesses being saved.

Speaking earlier this year Ross McEwan, chief executive of RBS, insisted that "many customers" said their dealings with GRG were "the best experience of banking they ever had in their life".

He added: "Did we get them all right? I suspect we didn't." Last year an RBS commissioned review of GRG by law firm Clifford Chance found no evidence of the bank systemically defrauding cuistomers. RBS says a second investigation by anoither independent law firm also found no evidence to support the allegations.

Sach and Sulliva also insisted that GRG was not "a profit centre" when quizzed by MPs on the Treasury select committee late last year.

However, their evidence contradicted the description of the unit put forward in a report last year by Sir Andrew Large, a former deputy governor at the Bank of England, who was called in by RBS to investigate its treatment of small businesses.

Andrew Tyrie, chairman of the Treasury select committee, subsequently accused the bank of being "wilfully obtuse" after it was forced to admit GRG unit was indeed run as a profit centre. The bak says "profit centre" is an accounting term and denies that GRG was run for profit.

Michael Glackin

The Sunday Times, 31st May 2015