[Photo: Fred Goodwin, Former CEO of RBS - Video Grab from 2009]

Royal Bank of Scotland reached an out-of-court settlement with organizers of the RBS Shareholder Action Group, ending a lawsuit that was spiced with the prospect of having disgraced former CEO Fred Goodwin testify about the bank’s financial issues leading up to a $15 billion cash call in 2008 – which management and directors of the bank failed to disclose.

The deal will cost RBS about $257 million, meaning that shareholders will get 82 pence per share, up from the 43 pence per share that the bank offered one week earlier. Investors who paid 200 to 230 pence for each RBS share in 2008 ended up losing about 80% of their investment.

Sir Fred Goodwin, who left RBS a wealthy man, became a symbol of banker recklessness and greed during the credit crisis. Goodwin, nicknamed "Fred the Shred" for his cost-cutting abilities and abrasive management style, was first feted and knighted before RBS's near collapse at the height of the credit crisis prompted the world's biggest bank bailout.

Some shareholders within the group wanted to pursue the case against the bank. However, they were short on funding and lawyers had advised that the case could have dragged on for years. In addition, investors representing 87% of the claim had already settled their case after RBS.