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By Peter Chapman PETER Hain, one of UK premier Tony Blair's key allies, called for a public inquiry into "financial mismanagement" and "corruption" at the Lloyd's of London insurance market before he came into government, European Voice has learned. The revelation has jolted MEPs as they prepare to decide whether or not to take the European Commission to the Court of Justice for its failure to make sure the UK regulated the insurance market in line with EU rules, which require a proper audit. Hundreds of Lloyd's investors were made bankrupt following billions of euro-worth of asbestos claims, which were never revealed by auditors. Despite Hain's plea - in a letter to then prime minister John Major - a public inquiry has never been carried out into the affair. Tony Blair's government, of which Hain is now a part, opposes calls to deepen investigations into Lloyd's at EU level - seen by many as the last chance for ruined investors to press their compensation claims. But Diana Wallis, the MEP in charge of the Lloyd's issue in the legal affairs committee, said Labour MP Hain's position betrays a massive U-turn of his party, now in government and worried about preserving the UK's massive financial services sector. She told this paper that the letter adds weight to suspicions that the British authorities have something to hide. "I think it is really extraordinary. It seems to be a complete turnaround. It makes you wonder: what influences have been brought to bear?" said Wallis, a British Liberal. She said MEPs in the legal affairs committee would meet to discuss whether or not to recommend that Parliament President Pat Cox launch court action. This follows the Commission's refusal last week to tell the assembly whether or not it believes that the UK was in line with EU insurance law from 1978-2001. The Commission recently dropped its probe into Lloyd's because it decided that a new regime, which entered into force at the end of 2001, was fully in line with European insurance law. Frits Bolkestein, the internal market commissioner, has always insisted that he was unable to rule on alleged past failings. In his letter to Major, dated 15 July 1994, Hain wrote: "I believe that a full public inquiry should be instituted by the government. "First of all, evidence of financial mismanagement, insider dealing and indeed corruption in Lloyd's is widespread and has caused considerable suffering to external investors who have been taken for a ride, especially during the catastrophic years of account 1988, 1989, and 1990." Hain, now Welsh secretary, also insinuated that British MPs that were Lloyd's investors were mysteriously shielded from bankruptcy. Some believe this was to stop the Tory government losing its narrow majority in the House of Commons because bankrupts are not allowed to be members of parliament. "It is extraordinary that none of these MPs has faced the destitution and bankruptcy experienced by hundreds of ordinary names [Lloyd's investors], despite being on the very same syndicates producing huge losses," Hain wrote. John Major's government lost office to New Labour in 1997. Since then, Blair's party line has shifted radically on Lloyd's investigations. A Lloyd's spokesperson said: "Since this letter was sent, the circumstances surrounding Lloyd's losses have been extensively examined in the UK courts and the allegations have been disproved. "To date approximately 98% of names have settled with Lloyd's and honoured their obligations from the reconstruction and renewal plan of 1996." European Voice contacted both Hain's constituency office in Wales and his government office in London. But he was unavailable for comment. peterchapman@economist.com © Copyright 2004 The Economist Newspaper Limited. All rights reserved. |
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