RBS, KPMG and Cerberus Capital accused of fraud by former Torex Retail boss

Neil Mitchell, the former CEO of Torex Retail, has accused Royal Bank of Scotland (RBS), KPMG and Cerberus Capital of fraud and launched a lawsuit against them. He alleged the three companies had conspired to rig the sale of Torex.

Torex Retail, a software company which enjoyed a valuation of £600m (€760.13m, $855.3m) in 2006, was acquired by American private equity firm Cerberus in 2007 for as low as £204m. Mitchell claims this sale at such a low price was conspired by RBS, which was not only one of its lenders at the time but also the bank leading the sale.

The former boss also alleged that his company had received higher bids from other distressed-debt funds such as Golden Gate Capital but they were not provided key information on Torex as RBS had made a secret deal with Cerberus. KPMG, the professional consultancy firm, has also been accused of fraud, as it was responsible for overseeing the Torex sale.

These details were revealed in the documents filed in the High Court in London, which also said Golden Gate Capital had offered £390m before the Torex fraud was uncovered. The documents further show that Mitchell is now seeking at least £30m, including loss of earnings and damages, as well as interests and costs.

RBS, which is still 73% owned by the UK government, denied the charges. It's spokesperson said: "We have thoroughly investigated Mr Mitchell's allegations and believe them to be entirely without merit. Mr Mitchell has chosen to issue legal proceedings which will be met by a full defence."

While Cerberus declined to comment, KPMG said: "We strongly refute the allegation that KPMG or its members have acted improperly; there is no substance to the claims that have been made. The Courts have previously dismissed similar allegations and we have applied to have the current proceedings struck out."

This is not the first such lawsuit against RBS. It in fact comes at a time when 100 other business firms have come together to accuse a similar kind of fraud against the Edinburgh-headquartered bank. These firms are alleging that they were pushed prematurely into administration by RBS so that it could profit from their distress.