Investors who signed up to an action group in an attempt to sue RBS due to its 2008 rights issue have been informed that they were collectively charged £8 million through subscription payments. They were told that many of the subscriptions should not have been made.
The Action Group company (AGC) of RBoS Shareholders brought together the shareholders of RBS who claimed that the bank concealed the true state of its finances when it requested them to subscribe to its 2008 rights issue amidst the financial crisis.
Since a £200 million settlement was agreed in June 2017, it has emerged that the AGC has connections to Gerard Walsh, the Irish businessman who was branded of being a fraudster in a Jersey court in 2014. In the late 1990s, an Irish court found him to have “fraudulently misrepresented himself” by posing as a dealer of Lamborghini.
Since last year, the claimants have been waiting to receive their full compensation while Signature Litigation, the law firm that legally represents them, calculates millions of pounds worth of liabilities that it believes has been racked up the AGC.
Last year, the litigation was delegated to the largest investor and vehicle of tycoon Trevor Hemmings called Manx Capital Partners.
In a written update to claimants that was issued last week, Signature said that it believed that many of the 7,000 investors had been wrongly charged by the AGC via subscription payments that totalled to approximately £8 million.
It stated: “We are aware that many claimants paid subscriptions to the AGC in amounts disproportionate to their shareholdings, based on subscriptions which we and Manx consider should not have been made. Prior to our ongoing work, the AGC had informed us of receipt of approximately £8m from corporate and retail claimants.”
It disclosed that during its probe into how the money of the claimants had been spent by the AGC, it had learned that more than £1.9 million was directly paid to Walsh and entities and individuals who are associated with him, with almost 90 percent of that total going on “leaflets, professional fees and administrative fees.”
Also, Walsh has been accused of claiming £3.75 million for himself in success fees from the settlement. This comes on top of a £80 per hour in consultancy fees that he has charged for his work on the said case since March 2009.
Barry Middleton, one of the claimants, said that he had paid approximately £1,450 in subscription payments to the AGC. Every time, he was told by the AGC that the payments would go towards running costs and legal fees.
Signature said that it did not receive any of the £8 million.
Middleton stated: “At the time the payment demands did not make me suspicious.”
He added: “I was aware legal costs are excessive so I was comfortable that this had to be funded and my contributions were needed.”
After learning the Signature update, he stated: “Of course now I’m very angry,” claiming “the action group have used my money to set themselves up with a very comfortable living.”