Pension funds target missing RBS millions

ROYAL Bank of Scotland faces legal action from three big local authority pension funds to reclaim some of the millions they have lost in the near- collapse of the bank.

The trio include Strathclyde Pension Fund, Scotland's biggest, which estimates RBS's woes have cost it about 50 million. It has more than 180,000 members, including staff at 12 councils. The Falkirk and Highland pension funds have also told The Scotsman they are watching an attempt to launch a "class action" against RBS in courts in the United States. The action is being led by Cherie Booth, QC, the wife of the former prime minister Tony Blair.

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If it goes ahead, a New York court will hear a claim the bank and Sir Fred Goodwin, its former chief executive, are liable for "massive losses" incurred by pension funds as a result of false information allegedly provided by RBS.

The case revolves around an allegation that RBS failed to inform prospective investors of the dire state of its balance sheet, in the aftermath of the takeover of parts of Dutch bank ABN Amro, when it mounted a 12 billion shares issue last year.

In Scotland, there are 11 public-sector pension funds, loosely based on the old system of regional councils. Most are thought to hold shares, or to have sold shares, in RBS. Members of these funds are typically the employees of the 32 current councils, plus civilian staff of the police and fire services.

Richard McIndoe, the head of pensions at Strathclyde Pension Fund, estimated losses to be "something in the region of 50 million" as a result of its investment in RBS. Strathclyde's assets are invested by some 20 pension fund managers, but it appears that few – if any – shares continue to be held in RBS.

The fund's total value has been tumbling in line with collapses in the FTSE 100 index. In December, the pension fund was valued at 8.1 billion; this fell to 7.7 billion in January.

Mr McIndoe said Strathclyde was considering whether to become more active in class actions after details of the US challenge to RBS emerged. This could involve action targeting RBS.

He said: "We don't like to be a leading plaintiff, but we are keen on reviewing our participation in class actions. Our normal participation is that we let somebody else fight the case, but we would still collect at the end of the day. We are reviewing whether we should be more active."

He said the use of class actions had begun as a US phenomenon but had become more widespread in Europe. "We would automatically be eligible for any part of any settlement," he said. "You don't have to fight the case, as long as you are part of the class that held the shares."

Alastair Redpath, the treasury manager at Falkirk Council, said the pension fund – which incorporates Stirling and Clackmannanshire councils – included 5.8 million RBS shares.

He was unable to calculate the loss on those shares, but said fund managers had begun to purchase RBS shares again as a long-term investment.

He said of the US action: "We are currently watching the situation. If there is a class action that is formally approved to go forward, we would certainly be pitching in as well.

"Until such time as the judge in the case announces whether he is going to allow it as a valid class action, we, like any other pension fund, would anticipate lodging a claim."

The Falkirk fund is worth about 800 million, compared with 950 million a year ago.

Highland Council holds a direct RBS shareholding of more than 1.2 million shares, valued yesterday at 262,557.

A spokeswoman said further RBS shares were held in a general fund linked to FTSE 100 companies, although it was impossible to quantify easily the value and size of this shareholding.

She said of the possibility of a class action: "We are interested in the news about that, but we would need to consider it."

A fourth council pension fund, Lothian, also admitted holding shares in RBS. But the fund said it believed it would be unable to join the US claim, as the shares had been bought in London rather than New York.

Legal experts warned that UK councils and other investors should not be complacent about fighting to recover some of their losses. Stephen Everard, the managing director of Goal group, a class-action specialist, said: "Local authorities not participating in US class actions, such as the RBS case, risk losing out on a massive opportunity to seek compensation and plug their escalating pension gap."

He said there were many precedents for authorities claiming compensation for financial losses incurred in the credit crunch.

Two council pension funds were leading a US class action against Lehman Brothers over subprime losses, while the West Midlands fund had recovered more than 355,000 in lawsuits against corporations and banks.

Mr Everard said a quarter of all claims that could have been filed by local authorities between 2000 and 2007 were not submitted to US courts, resulting in a loss of 200 million.

He added: "The RBS case is a real wake-up call for all UK local authorities, and they can no longer afford to ignore their legal right – and indeed responsibility – to participate in US class actions."

Patrick Daniels, a founding partner of the firm Coughlin Stoia, which is taking the action through the New York courts, said last night: "The filing of the applications for the appointment for lead plaintiffs is the first step towards achieving justice for those hundreds of thousands of investors who have suffered huge financial losses."

A spokesman for RBS declined to comment when contacted by The Scotsman last night.

JOBS CRISIS

THERE are ten applicants for every vacancy, underlining the jobs crisis in the UK, according to new figures. One of the worst-affected areas is the Western Isles, where 44 people are claiming jobseekers' allowance for every new post available. Argyll and Bute has a ratio of 31 to one.

However, the Trades Union Council statistics show the worst place in Britain to find work is the Isle of Wight, where there are 60 claimants for every post. Brendan Barber, the TUC general-secretary, said: "The government can no longer claim there is plenty of work available."

Jim Mather, the Scottish enterprise minister, claimed this showed that the UK government should set up a similar stimulus package to the one put together by the Obama administration in America.

He was already alarmed that the last figures showed UK unemployment numbers had topped more than two million for the first time in a decade, although proportionally Scotland has a lower rate of joblessness than the rest of Britain.

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