Lord claims ex-RBS chief covering up relationship

AP News
Posted: May 19, 2011 1:47 PM
Lord claims ex-RBS chief covering up relationship

A British legislator challenged a sweeping court order blocking publication about a top banker's alleged affair by discussing it Thursday in the House of Lords _ a dramatic step that started a chain of events ending with the lifting of the super injunction.

Ben Stoneham, a member of the upper chamber, argued that the public had the right to know about the private life of Fred Goodwin, who ran the Royal Bank of Scotland before its collapse during the financial crisis and bailout by the British government.

Goodwin had blocked reporting about the affair accusation with a super injunction _ gag orders that have been granted to scores of celebrities and sports figures to prevent media from publishing the details of their extramarital affairs.

Using his rights as a legislator to say whatever he wished in Parliament without risk of prosecution, Stoneham said: "Every taxpayer has a direct public interest in the events leading up to the collapse of the Royal Bank of Scotland."

"How can it be right for a super injunction to hide the alleged relationship between Sir Fred Goodwin and a senior colleague?" Stoneham said. "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."

Soon after the remarks, News Group Newspapers went to court, seeking to quash the order by the High Court in March.

Goodwin did not oppose the High Court's move to alter the injunction following Stoneham's comments. The High Court judge changed the order to allow for publication of Goodwin's name, but not details of the alleged relationship and the name of the woman said to be involved.

A debate about privacy is raging in Britain, particularly because the orders have been seen as a shield for the wealthy. In recent weeks, a Twitter user made anonymous posts claiming to name many of the men who were granted the gag orders, including a married soccer star who allegedly had a fling with a topless model and a well-known married British actor who had sex with a prostitute.

U.S. websites are largely exempt from the British gag orders, in part because they fall outside the court's jurisdiction.

Freedom of speech in the United States is protected under the First Amendment and often trumps privacy arguments. European law protects both privacy and freedom of expression, but it is often left to interpretation by judges.

The news came a day before a senior British judge, Lord David Neuberger, is due to publish a report by a committee of experts on the use of such injunctions.

Goodwin headed RBS when it racked up record losses, and resigned in 2008 when the government rescued the bank in the nation's biggest financial bailout. Taxpayers now hold an 83 percent stake in RBS.

Before the collapse, Goodwin was knighted for services to banking.

In March, legislator John Hemming used parliamentary privilege in the House of Commons to reveal that Goodwin had obtained a so-called super injunction _ which even bars reporting the existence of the injunction _ but disclosed no details.

"In a secret hearing, Fred Goodwin has obtained a super-injunction preventing him from being identified as a banker," Hemming said. "Will the government hold a debate, or make a statement, on freedom of speech, and whether there is one law for the rich, such as Fred Goodwin, and another for the poor?"

The use of similar injunctions has been exposed in several high-profile cases, including one in which the oil-trading company Trafigura obtained a court order prohibiting The Guardian newspaper from reporting allegations about the company's role in dumping toxic waste in West Africa. That injunction came to light after another member of Parliament asked a question about the case.

Several other cases are believed to involve the sexual escapades of celebrities.

Goodwin left RBS with a pension of 703,000 pounds ($1.1 million) per year after leading the bank on an expansion spree culminating in the disastrous takeover of the Dutch bank ABN Amro. Write-offs on that deal helped swell RBS' losses for 2008 to 24.3 billion pounds, a U.K. record.

He later negotiated an agreement to take a lump sum payment of 2.8 million pounds and scale back his pension payments to 342,500 pounds per year.