The first class action complaint was filed on January 12, 2009, in the U.S District Court for the Southern District of New York, titled Edward P. Zemprelli, et al. v. The Royal Bank of Scotland Group plc, et al., docket number 09-CV-00300. has been on behalf of purchasers of The Royal Bank of Scotland Group plc (“RBS” or the “Company”) (NYSE:RBS) American Depositary Shares (“ADSs”) pursuant and/or traceable to a false and misleading registration statement and prospectus (collectively, the “Registration Statement”) issued in connection with the Company’s June 2007 initial public offering of 38 million Non-cumulative Dollar Preference Shares, Series S (the “Offering”).
The complaint charges RBS and certain of its officers and directors with violations of the Securities Act of 1933. RBS is a holding company of The Royal Bank of Scotland plc and National Westminster Bank plc, which are United Kingdom-based clearing banks.
The complaint alleges that defendants consummated RBS’s Offering pursuant to the false and misleading Registration Statement, selling 38 million Non-cumulative Dollar Preference Shares, Series S (“Series S ADSs”) at $25 per share, for proceeds of approximately $950 million. The Registration Statement incorporated RBS’s financial results for 2004, 2005 and 2006. RBS ultimately announced huge multi-billion pound impairment charges associated with its exposure to debt securities, including mortgage-related securities tied to the U.S. real estate markets, causing the price of RBS’s Series S ADSs issued in the Offering to decline. The ADSs now trade at approximately $10 per share.
According to the complaint, the true facts that were omitted from the Registration Statement were: (a) defendants’ portfolio of debt securities was impaired to a much larger extent than the Company had disclosed; (b) defendants failed to properly record losses for impaired assets; (c) the Company’s internal controls were inadequate to prevent the Company from improperly reporting its debt securities; (d) the Company’s participation in the consortium which acquired ABN AMRO would have disastrous results on the Company’s capital position and overall operations; and (e) the Company’s capital base was not adequate enough to withstand the significant deterioration in the subprime market and, as a result, RBS would be forced to raise significant amounts of additional capital.
On January 22, 2009, a class action complaint was filed in the U.S. District Court for the Southern District of New York, titled Harold H. Powell Trust v. Royal Bank of Scotland Group PLC, et al., docket number 09-CV-617. The Complaint alleges that the Company’s Preferred T Prospectus contained both material misstatements and omissions, which Plaintiff and the Class relied upon to their detriment. The representations made in the Prospectus were materially false and misleading because at the time of the Offering, RBS was already suffering from several adverse factors that were not revealed and/or adequately addressed in the document. These factors include, but are not limited to, (i) the failure to disclose the Company’s extensive investments in asset backed securities, including collateralized debt obligations (CDOs), and their exposure to the subprime mortgage market; (ii) the failure to disclose all of the risks associated with the purchase of ABN Amro’s assets; (iii) the insufficient capital levels; (iv) the failure to adequately write-down bad assets; and, (v) the failure to prevent and remedy such improper and harmful actions that resulted in the Company being bailed out by the British government. The Complaint asserts that Defendants could have and should have discovered the material misstatements and omissions in the Company’s Prospectus prior to its filing with the SEC and distribution to the investing public. Instead, they failed to do so as a result of a negligent and grossly inadequate due diligence investigation. As a result of the dissemination of the false and misleading statements set forth in the complaint, the market price of RBS Preferred T was artificially inflated during the Class Period. In ignorance of the false and misleading nature of the statements described in the complaint, plaintiff and the other members of the Class relied, to their detriment, on the integrity of the market price of RBS Preferred T. Had plaintiff and the other members of the Class known the truth, they would not have purchased said securities, or would not have purchased them at the inflated prices that were paid.
On January 31, 2009, a similar class action complaint was filed in the United States District Court for the Southern District of New York, against Royal Bank of Scotland Group plc, certain of its officers and directors, and its underwriters, on behalf of a class of: 1) purchasers or acquirers of RBS Series “Q” 6.75% Preferred stock pursuant to the May 18, 2006 public offering; and/or 2) purchasers or acquirers of RBS Series “T” 7.25% Preferred stock pursuant to the September 20, 2007 public offering.
On February 23, 2009, a class action complaint was filed in the U.S. District Court for the Southern District of New York, titled Barbara Fitter, et al. v. The Royal Bank of Scotland Group PLC, et al., docket number 09-CV-1650. The complaint alleges that during the Class Period, defendants 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 (“ABN”). On May 11, 2008, Times Online reported that the SEC was investigating RBS over its exposure to American sub-prime mortgages. On October 7, 2008, news began to emerge that the British government was holding talks with major banks, including RBS, concerning the possibility of government funding, and on November 28, 2008, RBS announced that the government would take majority control of the bank, buying a 57.9% stake in the Company. In December 2008, it was revealed that RBS had lost half a billion dollars in the Madoff scandal. Then, on January 19, 2009, RBS announced that it expected to lose approximately £28 billion in 2008, in large part due to the write-off of goodwill associated with ABN as well as charges associated with bad loans, the biggest loss in British corporate history. Thereafter, as the truth regarding the Company’s deteriorating financial results began to emerge, the prices of RBS’s publicly traded securities declined significantly. According to the complaint, defendants’ statements during the Class Period were materially false and misleading for failing to disclose the following: (a) the Company’s portfolio of debt securities was impaired to a much larger extent than the Company had disclosed; (b) the Company had failed to properly record losses for impaired assets; (c) the Company’s internal controls were inadequate to prevent the Company from improperly reporting its debt securities; (d) the Company’s capital base was not adequate enough to withstand the significant deterioration in the subprime market and, as a result, RBS would be forced to raise significant amounts of additional capital; (e) the Company failed to properly report the goodwill associated with the ABN acquisition; and (f) the Company’s internal controls were inadequate to prevent the Company from improperly reporting the goodwill associated with the ABN acquisition.
According to the Order dated May 5, 2009, signed by Judge Deborah A. Batts, the court consolidates ten related action, under the caption "In re Royal Bank of Scotland Group plc Securities Litigation" and the files of these consolidated actions shall be maintained under Master Docket Number 09 Civ. 300(DAB). The Freeman Group shall be appointed Co-Lead Plaintiff on behalf of the putative class of Plaintiffs who purchased preferred shares in Defendant RBS ("the Preferred Share Group"). The State Funds shall be appointed Co-Lead Plaintiff on behalf of the putative class of Plaintiffs who owned common shares in Defendant RBS ("the Common Share Group"). The Freeman Group's selection of Girard Gibbs LLP as Lead Counsel is approved for the Preferred Share Group. The State Funds's selection of Cohen Milstein Sellers & Toll PLLC, Labaton Sucharow LLP, and Wolf Popper LLP to serve as Co-Lead Counsel is approved for the Common Share Group. Going forward, counsel shall coordinate their efforts at every step in this litigation and avoid duplicative costs and fees.
On July 15, 2009, a consolidated amended complaint was filed in the court by the co-lead plaintiffs in the action against the defendants.
On January 11, 2011, a Memorandum and Order was issued dismissing counts One, Two, Six, Seven, Eight, Nine and Ten from the Consolidated Complaint with prejudice. A number of Defendants, Co-Lead Plaintiffs and their counsel were also dismissed with prejudice from this case.
On September 4, 2012, the Court issued an Order granting the defendants' motions to dismiss with prejudice. The Clerk of Court was directed to close the docket in this case.