Goodwin Won Order to Halt Reports of Affair

Former Royal Bank of Scotland Group Plc (RBS) Chief Executive Officer Fred Goodwin obtained an injunction to keep the media from reporting allegations that he had a “relationship” with a senior colleague, a U.K. lawmaker said during a public hearing in Parliament today.

Ben Stoneham, a Liberal Democrat member of the upper House of Lords, said that the injunction makes it impossible for bank regulators to investigate what may have been a breach of corporate governance at the Edinburgh-based bank, which required the largest bank bailout in the world.

“Every tax payer has a direct public interest in the events leading up to the collapse of the Royal Bank of Scotland, so how can it be right for a super-injunction to hide the alleged relationship between Sir Fred Goodwin and a senior colleague?” Stoneham asked. “If true, it would be a serious breach of corporate governance and not even the Financial Services Authority would be allowed to know about it.”

Two of the U.K.’s most senior judges may attempt to rein in so-called super-injunctions in a report tomorrow in response to political and media outcry over the orders emanating from London courts in cases involving more than 30 soccer players, athletes and politicians who are attempting to hide their peccadilloes.

Goodwin’s lawyer, Geraldine Proudler, declined to comment when contacted by telephone. RBS spokesman Michael Strachan also declined to comment.

RBS Bailout

RBS posted the biggest loss in corporate history in 2008 and required a bailout following the bank’s 73.3 billion-euro ($104.6 million) acquisition of ABN Amro of the Netherlands. Goodwin was cleared of responsibility in December in a report by the FSA on RBS’s 45.5 billion-pound ($73.7 billion) rescue.

Another member of Parliament, John Hemming, disclosed the existence of Goodwin’s super-injunction in March, saying the court order prevented Goodwin from being identified as a banker.

Chief Justice Igor Judge and Master of the Rolls Lord David Neuberger are scheduled to issue a report on super-injunctions tomorrow that may be unable to make many changes to the controversial orders until Prime Minister David Cameron and other politicians reform U.K. privacy laws, said Robin Shaw, a media lawyer at Davenport Lyons.

“I’d be surprised if they make any changes to the law of privacy, or even recommend any changes,” said Shaw, who represents satirical magazine Private Eye. They will more likely concern themselves with procedure because changing the law is the job of legislators, he said.

Mosley Ruling

The court orders have been on the rise since Formula One President Max Mosley won a ruling in 2008 that his privacy rights had been violated by a story by News Corp.’s News of the World that claimed he took part in a Nazi-themed sex party.

Hemming, a Liberal Democrat who sits in the lower House of Commons, says judges are to blame for the rise in super- injunctions. Parliament never intended to create “the most rigid privacy regime in the world where people can be jailed for gossiping,” he said in an interview.

Judges “are not interpreting statute in the way parliament intended,” Hemming said. They should have more regard the right for freedom of expression, and less for the right to a private life, he said.

While the injunctions generally limit descriptions of the celebrities to a “sportsman” or a “businessman,” their identities are increasingly being released. A Twitter Inc. user posted messages on May 8 claiming a number of U.K. celebrities had won super-injunctions and made allegations detailing the activities that the notable people sought to keep out of the public eye, causing lawyers to question the effectiveness of the orders.

To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net James Lumley in London at jlumley1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net; Anthony Aarons at aaarons@bloomberg.net

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