A fraudster is trying to help himself to £3.75million of taxpayers’ money from a compensation payout intended for small savers ripped off by Royal Bank of Scotland, a court has heard.
Significant new information has emerged in court following a six-month investigation by The Mail on Sunday that has detailed the deeply concerning background of Gerard Walsh, who co-founded the RBS Shareholders Action Group company.
This company established itself as a public-spirited group dedicated to helping small shareholders win justice after being duped by RBS in the financial crisis.
However, we reveal today allegations Walsh has sought to use the action group company as a vehicle to enrich himself through a secret agreement to the tune of millions of pounds to be paid to him.
Shares battle: Royal Bank of Scotland
We can disclose that Walsh is accused of:
- Trying to extract a sum of £3.75million for himself;
- Presenting himself as a ‘volunteer’ for the group when in fact he was raking in £80 an hour plus expenses for ‘consultancy’ services over several years;
- Being responsible for registering 130million ‘phantom shares’ – which would have inflated the value of the claim against RBS;
- Acting as a ‘shadow director’ of the action group company despite officially standing down when he was made bankrupt in 2011;
- Masquerading under false names.
The allegations surfaced at a High Court hearing last week where Walsh’s camp argued the payments were justified for work done over many years.
The legal showdown came after months of battling between the RBS Shareholders Action Group company and tycoon Trevor Hemmings, who himself lost millions on RBS shares in the financial crisis.
Thousands of investors bought shares in 2008 when the bank asked for £12billion to see it through an economic squeeze. Soon after, their value collapsed and the bank had to be bailed out by the Government, which still owns a 70 per cent stake.
In despair, around 7,000 small investors signed up to the RBS Shareholders Action Group company – which Walsh had co-founded – knowing nothing of his background or subsequently of his alleged scheme to pay himself £3.75million through a secret arrangement.
Controversial: Gerard Walsh denies wrongdoing
The action group won a landmark settlement of £200million from the bank last year, prompting Walsh to take steps to seek payment from the funds. But he may be thwarted by Hemmings. Walsh and the action group company have been stripped of the right to administer the settlement, which has been handed instead to one of Hemmings’ companies, Manx Capital.
Manx has appointed a law firm, Signature Litigation, to handle the claim and make payouts to small investors.
Last week, Manx applied to the High Court for access to all of the action group company’s files for the payout process. One major concern was an agreement – allegedly concealed from claimants – to pay millions of pounds to Walsh and his associates through a company called Evalusafety.
The court heard that Walsh is claiming £3.75million for himself from Evalusafety and £250,000 for his daughter Rachel.
Manx and Signature want to assess whether these payments can legitimately be made. The action group company argues the payments are justified for work over many years.
The court heard that it also paid Walsh £80 an hour from March 2009, despite him having portrayed himself as a ‘volunteer’, according to Manx and Signature.
In response, the action group company has challenged the fees of Signature. The group says Signature has overcharged investors by around £4million.
Signature denies this. A spokesman for Manx said the law firm has ‘discounted its fees very substantially’ and is ‘good value for money for claimants’. He added: ‘This is just a smokescreen tactic by the company.’
Manx told the court the action group may have committed a ‘criminal offence’ in allegedly trying to blackmail Signature into rubber-stamping payments under the Evalusafety payment.
It said the 130million ‘phantom shares’ – which they claim never existed – could constitute a ‘criminal offence of fraud’.
Manx also alleged that Walsh had posed as two characters associated with the action group company: Mike Neill, who wrote to investors asking them for subscription payments to the group, and Ed Montgomery, who was allegedly involved in putting 40 million ‘phantom shares’ into the claim.
Fightback: Trevor Hemmings
Signature questions whether these individuals actually exist.
As previously reported by The Mail on Sunday, Walsh has been involved in two earlier fraud cases. Walsh said: ‘I have never been convicted by any court of being a fraudster.’
However, the Jersey Royal Court described him as a fraudster in 2014 in a case where he induced a wealthy Irish family into various investments and took swathes of cash for himself.
In a separate case, the Irish High Court ruled in 1997 he was ‘guilty of fraudulent misrepresentation’ by posing as a Lamborghini salesman.
The Mail on Sunday has spoken to several people who say they were victims of his dishonesty.
Walsh also denied that he registered the phantom shares.
In court last week a barrister for the action group denied Walsh has ‘been found to be a fraudster by two courts’ and added that, although he would not respond to every allegation made by Manx, it should not be taken they are accepted as fact.
The allegations raise serious questions for a separate company, the RBS GRG Business Action Group, which also names Walsh as a ‘volunteer’ adviser.
That company claims to represent more than 500 small firms seeking to sue RBS over maltreatment by its controversial restructuring unit.
The GRG group said Walsh’s role is ‘genuinely voluntary’, adding: ‘He’s never taken money from the GRG Business Action Group or asked for any – whether as salary, bonus or any other fee.
‘He made it clear, and recently reaffirmed, that he will not be involved in the day to day running of the group.’