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Vol. 9 No. 21 : 5 June 2003
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From James Benningfield
Sir William Jaffray isn't entirely correct when he writes that Lloyd's 'rescue' vehicle 'Equitas' has avoided any scrutiny by the courts (Letters, 28 May-4 June)
In 1996 in Allen vs Lloyd's in Virginia, the judge condemned the scheme as a continuation of the 'fraud of the century'. The UK government intervened to overturn the judgment on purely technical grounds within the space of a few days in order that the rescue of Lloyd's and the further denial of any justice to investors could continue.
It is difficult to understand Michael Cashman's motives for not wanting an inquiry into the matter. We are used to seemingly illogical interventions by public officials in our ten-year fight to obtain at least some inquiry and to lift the veil of secrecy which appears to taint the government on this subject.
We well remember another interventionist action on this issue in the US. Just at the point at which certain states were ready to prosecute Lloyd's, along came California Insurance Commissioner Charles 'Chuck' Quackenbush, who was also appointed as the chair of the National Insurance Commissioners' Association. State attorneys could not understand why he should have intervened in the due process on behalf of the insurance corporate.
Quackenbush has since resigned and has moved 'abroad', but a matter of a payment amounting to some Û340,000 from Lloyd's for 'educational' purposes to his 'office' remains to be fully investigated or properly explained.
Harvey Pitt, who recently resigned as chairman of the Securities and Exchange Commission, was an energetic advocate and counsel of Lloyd's in the US, at a time when an investigation by Federal authorities of Lloyd's was coming to a close. Having the Enrons and Worldcoms on his plate became somewhat of a conflict of interest, having defended so many of those he now was supposed to regulate.
The EU has declared its aim for transparency. It has also aimed to curb the corporate excesses and lawlessness which we all fear. Lloyd's has been above the law and avoided inquiry for more than 20 years. A full inquiry is nothing to be avoided or feared by any corporation if its dealings are in the interests of the community and its citizens.
The European Parliament's petitons committee is to be applauded in not being swayed by smokescreens, as so many others around the world have.
James Benningfield
Melbourne, US
© Copyright 2003 The Economist Newspaper Limited. All rights reserved.