SPECIAL INVESTIGATION: ‘I was duped,’ says Barry Middleton. ‘Why are groups like that not regulated by the authorities?
‘Why has no one investigated diligently, given what we now know? It staggers me that this guy could blatantly get away with this.’
Mr Middleton, 74, is a retired RBS bank manager. He is one of 7,000 small investors who signed up to the Royal Bank of Scotland Shareholders Action Group. The ‘guy’ he refers to is an Irishman called Gerard Walsh with a documented record of fraud and deception, who co-founded the group in 2009.
Claim: Barry Middleton, pictured, invested £12,000 in RBS
The action group portrayed itself as a public-spirited organisation that would lead an army of aggrieved small investors in a battle for compensation from RBS.
In itself, that was a worthy cause: the bank, then run by disgraced chief executive Fred Goodwin, had misled its own shareholders into investing in a doomed £12 billion attempt to bolster its balance sheet in the financial crisis.
So when the action group won a £200million settlement last summer, it seemed like a cause for celebration. In fact, it was the start of a new nightmare for Barry and his fellow investors.
They were about to find out they had been taken in twice: not only by the bank but also, they say, by the man behind the action group supposedly helping them.
The action group presented itself as a white knight, acting for small shareholders against big bad RBS.
I hope the full weight of the law comes down on that guy’s head
But the victims now believe Walsh used the group to concoct a scheme for his own enrichment.
A court heard that he attempted to take £3.75million for himself from the settlement, to be funnelled to him through a separate company set up to pay millions of pounds to beneficiaries whose identities were not disclosed to investors.
But no one in authority seems to care. The glaring question at the heart of the case is this: Why are regulators, politicians and officials unable or unwilling to investigate? This failure is particularly shocking as the affair involves very large sums of taxpayers’ money.
On top of the £200million settlement, RBS spent more than £100million on legal fees defending itself. As it is still majority-owned by the Government, it means the case has consumed £300million of taxpayers’ funds.
Scheming: Gerard Walsh
Over the course of a ten-month investigation, this newspaper has exposed the ugly saga behind the RBoS Shareholders Action Group.
It is a cautionary tale for anyone tempted to sign up to an action group without first checking out the organisers’ bona-fides.
Astonishingly, Walsh was able to co-found the RBoS Shareholders Action Group apparently without any checks from the authorities on whether he was a fit and proper person to do so.
And during the course of our inquiries, our journalists have been subjected to a campaign of intimidation and abuse including malicious and baseless allegations of anti-semitism and attempts by deception to find a reporter’s home address.
Again, this raises worrying questions about the conduct and credibility of those behind the action group. Communicating with the group’s administrators is like entering a hall of mirrors. Emails are signed off in a variety of names – some of which lawyers involved in the case suspect to be false.
But when Barry Middleton signed up to the group, he had no reason to suspect anything was amiss – he just wanted compensation for his losses after investing £12,000 of his modest savings in RBS in 2008.
He sent a cheque for £50 on October 1, 2009, to join the group, and estimates he paid up to £2,000 in subscriptions in the following years.
Alert: The Mail on Sunday warned of Walsh’s ‘get rich’ bid last April
Small investors like Barry, from Inverurie in Aberdeenshire, are still waiting for full payment of their claims. In a High Court case this spring, the judge described the situation as ‘absolutely extraordinary’.
He added that consideration should be given to ‘whether the action group should be delivered into other hands because its direction is unclear and its compliance with [court] orders lamentable’.
Walsh was also accused in the High Court – in a case relating to the running of the action group – of being responsible for registering 130million ‘phantom shares’, which would have inflated the value of the claim against RBS.
The court heard that if true, this could constitute the ‘criminal offence of fraud’. The action group denies this.
In any event, when Walsh cofounded the action group in 2009 he already had a history of dishonesty and fraud. In two civil cases – one of which came to court later, in 2014 – he has been found to have cheated a wealthy family and a businesswoman out of hundreds of thousands of pounds. In 2011, he was made bankrupt.
It begs the simple question of how the authorities ever let a man with this track record set up a group at all, let alone one in which thousands of RBS small shareholders invested their hopes – and thousands of pounds of subscriptions.
Why, given the size and importance of the case, did no one check Walsh’s background? And why is no one in officialdom prepared to look into the case even now? The group appears to have fallen through the cracks. Commercial claims management firms are supervised by the Claims Management Regulator, which is part of the Ministry of Justice. However, not-for-profit action groups are not covered.
The CMR decided last year that the RBoS Shareholders Action Group did not fall under its remit, despite the fact Walsh hoped to make large sums for himself, as did other individuals and firms.
Liberal Democrat MP Norman Lamb and law firm Signature Litigation, which now represents the 7,000 investors who signed up to the group, met with the CMR last month to urge it to reconsider.
It would be a criminal offence if the MoJ finds the group was not regulated when it should have been.
The City of London Police’s Action Fraud unit has been asked to probe the group by at least four small investors. The Financial Conduct Authority, the top City regulator, is taking over claims management regulation from the MoJ next year.
Decades of deception: How Walsh has cheated victims out of millions
1997 In civil proceedings the High Court of Ireland finds Gerard Walsh ‘guilty of fraudulent misrepresentation’ by posing as a Lamborghini salesman. Along with others, he had persuaded antiques dealer Amanda Forshall to part with £677,000 in 1990 for nine Lamborghini Diablo cars that were never delivered. Evidence given by Walsh was rejected by the court as neither ‘accurate’ nor ‘credible’. Ms Forshall was awarded £677,000 in damages.
2008 He is stripped of an honorary fellowship at Cardiff University after failing to pay a £2.5million donation he had promised. The university has reformed its rules on accepting donations and awarding honorary fellowships.
Duped: Walsh induced the Nolans, a wealthy Irish haulage family, into making millions of euros worth of investments that failed
2009 Walsh co-founds the RBoS Shareholders Action Group.
2011 He steps down as a director of the group after being made bankrupt but is subsequently accused in court of having continued to act as a shadow director.
2014 The Jersey Royal Court describes Walsh as a ‘fraudster’ after he induced the Nolans, a wealthy Irish haulage family, into making millions of euros worth of investments that failed. He spent large amounts of their money on himself, including £210,000 towards a 10 per cent deposit on a luxury flat in London’s Belgravia. A source close to the Nolans, who were awarded damages but have never seen a penny of it, said the family see him ‘as a predator’.
Tory MP Nicky Morgan, chair of the Treasury Select Committee, has been alerted by several MPs but has declined to intervene.
Supporters of Walsh deny any wrongdoing and argue he is entitled to the £3.75million for his work. He does not have a criminal conviction for fraud, but has been named as a fraudster by a judge in two civil cases.
Mouthpieces for him have also made a barrage of unsubstantiated claims against other parties in the RBoS affair. These include property tycoon Trevor Hemmings, who made large losses on RBS shares and signed up to the action group. Hemmings has now taken control of the £200million settlement via one of his investment vehicles, Manx, and a law firm, Signature, which is acting on behalf of the investors.
The action group has attacked this newspaper for declining to print allegations against Hemmings, Manx and Signature. We asked for evidence but none was forthcoming.
Founded after credit crisis: The Royal Bank of Scotland Shareholders Action Group portrayed itself as a public-spirited organisation that would lead an army of small investors aggrieved with RBS
In emails under the name of ‘Margaret Hewitt’, the action group’s administrators have circulated malicious and false accusations against Mail on Sunday City Editor Ruth Sunderland, without a shred of evidence, including allegations of anti-semitism, conspiracy and attempts to pervert the course of justice.
On Friday the MoS received an email from the group which threatened ‘to publish a leaflet detailing our allegations against her’ and said it would be distributed at tube and train stations.
So far, Walsh has been thwarted in his efforts to get his hands on the £3.75million. The action group says Walsh has a contract setting out the terms of his consultancy. It added he is unable to comment because he has been in a bike accident.
As for Mr Middleton, he has asked Action Fraud and his local MP to investigate. ‘I still feel there ought to be a reckoning,’ he says. ‘And I hope that in due course the full weight of the law will come down on that guy’s head.’