Ex-RBS Small-Business Lender Heads Dragged Back Into Spotlight

(Bloomberg) -- Two ex-Royal Bank of Scotland Group Plc executives who ran its controversial small business-lending unit are set to be dragged into court by a former client.

Property developer Oliver Morley is suing RBS for a deal he made with the bank for repayment of a 75 million-pound ($97 million) loan it made in 2006. Morley alleges that the lender, under the influence of an arm of the treasury, put pressure on him to transfer his assets to an RBS subsidiary by making “unlawful and/or illegitimate threats.” The bank denies any threats against Morley.

As part of his claim, Morley has pulled the two former officials back into the case. Derek Sach, former head of the embattled Global Restructuring Group at RBS, and John Donald Workman, who helped run the Asia-Pacific region, will get summons to testify in court.

Spokesmen for Morley and RBS declined to comment on the case.

The GRG scandal brought negative media coverage and political criticism to RBS. The unit was investigated by financial regulators after a government consultant claimed that many of its small-business customers were pushed into difficulty to bolster the lender’s earnings.

The regulator’s July 2018 report found that “systematic” mistreatment of clients took place, as the unit sought to establish itself as a “profit center” for the bank, often prioritizing revenue generation over its clients’ long-term interests. According to a court filing by Morley’s attorneys, Sach and Workman were closely involved in the GRG unit.

This past July, the regulator declined to take action against RBS or its senior officials following a highly-critical investigation, as it found no evidence that executives acted dishonestly. The decision to not take action was condemned by members of Parliament, including Nicky Morgan, then chair of the Treasury select committee, who branded it “disgraceful.” RBS eventually set aside 400 million pounds to compensate former customers.

Document Disclosure

As part of a London High court ruling Tuesday, the bank will also have to disclose a wide range of documents relevant to Morley’s case including committee minutes, which it previously resisted handing over.

Morley got a 75 million-pound loan to underpin his property portfolio, which he says was “massacred” as a result of his relationship with the bank. As a result of the foreclosure agreement entered into in 2010, properties valued at 45 million pounds were acquired by West Register, RBS’s property arm.

The case hinges on the influence of the Asset Protection Agency, an arm of the U.K. treasury, which as a part of its post-financial crisis bailout of the lender ran the Asset Protection Scheme, safeguarding its investment in the bank.

Morley says that the government agency directed the GRG not to accept his own refinancing proposals and forced “unacceptably harsh” terms of repayment on him. In a court filing, attorneys for RBS described the allegations as “incoherent.”

To contact the reporter on this story: Eddie Spence in London at espence11@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser

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