RBS Fails to Block Highland Texas Fraud Suit After Trial `Lies’

A London appeals court refused to block Highland Capital Management LP’s Texas fraud lawsuit against Royal Bank of Scotland Group Plc over a collapsed debt deal.

The three justices today also overturned a 2010 ruling that Highland owed RBS about 19 million pounds ($29 million) in light of dishonest evidence given by the Edinburgh-based lender.

That judgment was “obtained by the fraud of RBS through the misstatement and concealment of facts,” by one of its witnesses, former trader Sam Griffiths, appellate Judge Richard Aikens said in a written decision.

Highland claims it lost as much as $100 million when RBS improperly terminated a collateralized-debt obligation and seized the underlying loans in 2008, at the height of the credit crisis that followed the collapse of Lehman Brothers Holdings Inc.

RBS spokeswoman Rebecca Nelson declined to comment.

“This judgment validates Highland’s position that no financial institution, regardless of size, is above the law,” the Dallas-based firm said in a statement. Highland manages about $18 billion, chiefly in credit markets.

In May of last year, London Judge Michael Burton ruled the bank’s actions had been legal despite the dishonest evidence.

The court of appeal today overturned the decision against Highland and rejected RBS’s request for an injunction stopping the Texas lawsuit.

The judges today said Griffiths “had lied” about his knowledge of the CDO loans and that he had done so on behalf of RBS.

Griffiths was later fired by RBS and is now suing for unfair dismissal. His lawyer Raja Nadarajan didn’t immediately respond to an e-mail seeking comment.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

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

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