Laws And Lawyers

The former head of Royal Bank of Scotland’s (RBS) corporate banking and financial markets group has denied the bank had made a secret arrangement with Enron, the collapsed energy giant, during a £130 million structured finance deal.
Iain Robertson, who sat on the RBS executive board at the time of the Summer 2000 transaction, said that his bankers had received informal assurances from Enron that RBS would make a decent return on the deal — but these were not a clandestine legal agreement.
Mr Robertson, who retired from RBS in 2005, was giving evidence at the High Court on behalf of the bank, which is defending an allegation of fraudulent misrepresentation relating to the Enron deal.
The deal, called ETOL, was linked to Enron's giant Teesside power plant and was designed to allow the energy group to book future profits from the plant in its accounts before they had been earned Raiffeisen Zentralbank (RZB), an Austrian bank, lost the bulk of its £10 million investment in ETOL and is suing RBS for damages.
RZB claims there was a secret deal between RBS and Enron to increase the return on RBS’s stake in ETOL. RZB says that the documents shown to investors stated RBS would receive 3 per cent but Enron had secretly made a binding commitment to pay the bank 13 per cent.
RZB claims the deal should have been disclosed to other investors and it therefore invested in ETOL on the basis of misleading information.
Mr Robertson, who sat on the RBS group credit committee that approved ETOL, said that assurances from Enron that RBS would be paid 13.5 per cent were not disclosed because they were “no more than an indication” carrying “no legal weight whatsoever”.
Jeffrey Gruder, QC, for RZB told Mr Justice Clarke that Paul Chivers, Enron Europe's then chief financial officer, had told an RBS banker that the bank had Enron’s “absolute commitment” that it would receive the expected return.
Mr Robertson said: “We did not take it as a formal agreement …it was for comfort only.”
Asked whether he understood the intricacies of the ETOL deal, Mr Robertson said, after a long pause: “I certainly understood what the effects of it were” adding that he relied on bankers and lawyers working directly on ETOL to handle the complexities “within structures”.
RBS said: “These claims have been thoroughly investigated and we are satisfied that all the relevant employees acted honestly and to the highest professional standards. For these reasons, and because RBS believes the claim has no merit, we are defending this claim."