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Posted: **Mon Oct 03, 2005 7:01 am**

TIME EUROPE FEBRUARY 21, 2000 VOL. 155 NO. 7 SPECIAL REPORT The Decline and Fall of Lloyd's of London A legendary institution has barely escaped bankruptcy and is now accused of perpetrating the greatest swindle ever. What happened? By DAVID MCCLINTICK Caressed by a soft breeze, Ralph Rokeby-Johnson and Roger Bradley surveyed the forbidding fourth hole of the vintage Walton Heath golf course south of London. It was a bright Thursday in early October, 1973. "Orator, you're not orating," Rokeby-Johnson said. "Have I upset you?" Rokeby-Johnson had been needling the normally loquacious Bradley for inside information since they'd teed off in the autumn golf outing of Lloyd's of London, the world's pre-eminent insurance market. Bradley and Rokeby-Johnson were leading executives at competing firms in the market and Lloyd's men maintained a spirited rivalry in golf as well as business. But as they shop-talked their way along the first three holes, "Orator" Bradley had fallen silent, because he sensed that Rokeby-Johnson was himself harboring information that could prove explosive: the threat to Lloyd's posed by asbestos, the ubiquitous, benign-looking insulation material that was slowly but surely infecting workers in the asbestos industry with deadly lung diseases--asbestosis and cancer--prompting lawsuits and insurance claims in America. "What can you tell me?" Bradley finally asked as they idled on the fourth tee, waiting for the players ahead to clear the green. "What I can tell you," Rokeby-Johnson replied in a stage whisper, "is that asbestosis is going to change the wealth of nations. It will bankrupt Lloyd's of London and there is nothing we can do to stop it." Fast forward to February 2000. Over a quarter of a century has passed since Ralph Rokeby-Johnson shared his apocalyptic vision with Orator Bradley. Legendary Lloyd's of London, pioneer of the insurance industry and synonymous with it, has escaped bankruptcy. But the organization that was once part of the very bedrock of Britannia has been devastated by losses including massive compensation claims from American workers afflicted by asbestosis and lung cancer. The wealth of nations may not have changed dramatically, but Lloyd's fundamental character has changed, and thousands of Lloyd's investors--the so-called Names who pledge all their personal wealth to underwrite insurance policies issued by Lloyd's syndicates--have been ruined. The decline and fall of Lloyd's, like all engrossing tragedies, has been building to a spectacular d?nouement. The final act is now upon us and waiting in the wings are a group of Names who could yet prove to be Lloyd's nemesis. These are the dissident investors, including members of the so-called United Names Organization, who have refused to settle their asbestos-related debts with Lloyd's because, they claim, they are the victims of a massive and calculated swindle. Back in the 1980s, they argue, Lloyd's duped them into becoming Names by fraudulently misrepresenting its profitability and concealing the ruinous asbestosis losses that were in the pipeline. Do they have a case? The truth, they say, will soon out. Later this month, in what could prove to be the trial of the new century, the Lloyd's dissidents will claim in England's High Court that they have been the victims, not just of negligent underwriting, but of one of the greatest fraudulent conspiracies of all time. They will argue that they were recruited to Lloyd's at a time when the 300-year-old institution knew it was facing massive asbestosis claims and needed extra capital to absorb its forecast losses. The dissident Names will further charge that this massive fraud was not the work of a few posh-mannered, money-grubbing Lloyd's underwriters, but was condoned and indeed orchestrated by the Lloyd's hierarchy itself. Sir William Jaffray, a former Name, is one of the dissidents scheduled to take the stand when the case, named after him, opens on Feb. 28. He has no hesitation in alleging fraud at the highest level. "By the late 1970s," he told Time, "the Committee of Lloyd's knew they were facing a crisis and by 1982 the hierarchy knew that Lloyd's was bust. The only way they could keep going was to suppress the asbestos information, cook the books to ensure they were still showing profits and go after new investors." Jaffray claims that in 1982, the year he became a Name, Lloyd's closed its accounts fraudulently under the orders of the then chairman Peter Green. "The books should have been left open to acknowledge the exposure still out there," Jaffray argues. "If I and other investors had known then what the hierarchy and insiders already knew about Lloyd's exposure to asbestos and the losses in the pipeline, I would never have signed up. We were the victims of a massive swindle." John Melville Donner, an investor and retired executive who worked at Lloyd's for 40 years, the third generation of his family to make a career there, says bluntly that Lloyd's perpetrated "one of the greatest commercial and political crimes of the 20th century." Thomas Seifert, a New York lawyer representing several angry American Names, goes even further. "The facts are clear," Seifert asserted in a letter to British Prime Minister Tony Blair dated Oct. 7, 1997. "Lloyd's has committed the largest, most extensive and pervasive fraud in history." Harsh words to go with high stakes. If they lose, many of the dissidents will surely be ruined. Not only will Lloyd's come after them for the money they have so far refused to pay to meet the losses of their syndicates--about $44.5 million--but they will be hit by legal costs totaling further millions of dollars. If, on the other hand, they can show that the Lloyd's hierarchy knew about the asbestosis time bomb and failed to stop syndicates from fraudulently recruiting new names to spread their losses, or even encouraged them, then the outlook for Lloyd's will be bleak indeed. Having denied wrongdoing for so long, Lloyd's would find its credibility in tatters and its efforts to build a new Lloyd's seriously compromised. Lloyd's denies the allegations of fraud (see box) and will defend itself vigorously in court. "Lloyd's is confident that [the allegations] will ... be rejected," says a Lloyd's spokesman. How seriously it views the upcoming proceedings can be judged from the 48-strong team of lawyers and para- legals from the leading London law firm Freshfields and Lloyd's own legal department it has deployed for its defense at an estimated cost of upwards of $32 million. But as the dissident Names set out their evidence it may well be that Lloyd's, even if acquitted of fraud, will not emerge from this trial with its motto Fidentia--or confidence--intact. And as the trial exposes the dirty linen of the past thirty years, it is hard to imagine investors taking seriously the ancient principal of insurance underwriting which has supposedly governed Lloyd's down the years: Uberrima Fides, or utmost good faith. TIME's investigation of the events leading up to the Jaffray trial lends some support to the idea that the explosive information of the kind that Rokeby-Johnson shared with Roger Bradley in that conversation on the fourth tee at Walton Heath golf course in 1973 became widespread knowledge among Lloyd's insiders in the years that followed. Those were the years when certain Lloyd's syndicates, with the apparent backing of the Lloyd's hierarchy, made a determined effort to recruit new Names to boost the market's capital base. Did Lloyd's top brass endorse this rapid expansion with the legitimate aim of growing its business? Or was there, as the likes of Jaffray claim, a more sinister motive: the need to recruit suckers to help pay for asbestos claims which threatened to overwhelm the market? Was it mere coincidence that many new recruits ended up on the syndicates most exposed to the asbestosis risk? Was it also a coincidence that back in the early '80s, key insiders began laying off their asbestos exposure onto other syndicates? Such questions will now be answered in an English court. But even if Lloyd's wins the upcoming trial its legal troubles are far from over. The European Commission in Brussels is questioning British compliance with E.U. insurance legislation. But more ominous for Lloyd's is what lies in wait in the U.S. Although most attempts down the years by ruined U.S. Names to sue Lloyd's for fraud haven't succeeded, largely for procedural and jurisdictional reasons, there are clear indications that the legal tide may be turning in America. The U.S. government itself may soon be getting into the act. The Department of Justice, in the person of the U.S. Attorney in New York City, is currently conducting an intensive, criminal investigation of Lloyd's. Senior federal investigators probing fraud, conspiracy and perjury allegations have interrogated witnesses recently in both the U.S. and Britain. The U. S. government is increasing the resources it has committed to the investigation. Meanwhile, in California, a pivotal civil case is scheduled to go to trial early next year. The suit, brought by Lloyd's investor David West and his daughters, Deborah and Susan, charges that Lloyd's defrauded them in much the same way it allegedly defrauded the Jaffray Names. Lloyd's has more to fear from the West suit, however, because it is easier to prove fraud in the U.S. than in England, and the California state court, where the case will be heard, has been more sympathetic to Lloyd's Names than U. S. federal courts. As these things so often do, the Lloyd's debacle began with an obscure person in an obscure place. In 1969, a dying insulation installer, Clarence Borel, began a lawsuit in federal District Court in Beaumont, Texas, against 11 asbestos-insulation manufacturers alleging that they had known of the dangers of working with asbestos but had failed to warn him. Four years later, a federal appeals court ruled that the companies were liable for damages. Other asbestos workers sued--in small numbers at first, then by the hundreds, then by the thousands. Eventually, damage awards would soar into the billions of dollars and threaten the financial viability of asbestos companies such as the Johns-Manville Corporation, which carried liability insurance (but not enough, it turned out) for such contingencies. The insurer of last resort--the most exposed to a tidal wave of claims--would be Lloyd's. It was this revelation, grasped then by only a few people, that Ralph Rokeby-Johnson confided to Roger Bradley on the Walton Heath golf course in 1973. Along with yachting, golf was an important entr?e to the persnickety Lloyd's social culture. Membership of the club was by invitation only and it was on courses like Walton Heath, carved out of a jungle of heather and gorse in Surrey in 1904, that social and commercial bonds were forged. These bonds could--and did--lead to an incestuous insider culture which was lambasted as early as 1969 in a report produced by former Bank of England governor, Lord Cromer. The report had been commissioned by Lloyd's itself in the wake of 1965's Hurricane Betsy, which cost the average name $120,000 and caused Lloyd's membership to fall for the first time in a century. But it was speedily buried because it turned out to be too embarrassing. Cromer warned that Lloyd's was not only outmoded, but riddled with "conflict of interest." It was thus fitting that the huge insider trading scandal now alleged by angry Names should have been foreshadowed by two Lloyd's insiders sharing a round of golf. "Well, Orator, has Green got all his reinsurance for asbestosis in place?" Rokeby-Johnson asked as their game progressed. Bradley paused. "Peter seems relaxed," he replied. Peter Green, a second-generation Lloyd's man, keen yachtsman, social mover, future knighted Lloyd's chairman and Bradley's boss in the Lloyd's trading room in London, was indeed laying plans to avoid the asbestos threat. But his plans were top-secret. Had Rokeby-Johnson got wind of them? "Has he got enough reinsurance?" Rokeby-Johnson pressed. "Has he got it placed offshore?" Bradley, addressing his lie on the narrow fairway, fell silent. The "reinsurance" to which Rokeby-Johnson referred was the universal practice of spreading risk. If Insurer A insured a risk, he then typically "reinsured" all or part of it with Insurer B, who then reinsured it again with Insurer C. The governing principle of reinsurance, established over centuries in law and custom, was the Latin maxim Uberrima fides. If Insurer A disclosed all the elements of the risk in laying it off on Insurer B, the contract was valid. However, if Insurer A intentionally concealed important facts, the contract could be voided. Roger Bradley was chilled by the questions. Rokeby-Johnson sounded as if he knew more about the sensitive matter of asbestos than he was letting on. Bradley said nothing further until Rokeby-Johnson pressed him on the fourth tee as they looked out across a stretch of unforgiving heather that would swallow any ball hit less than 100 meters. It was when Bradley pressed back that he elicited the melodramatic declaration that he would remember vividly a quarter of a century later: "Asbestosis is going to change the wealth of nations. It will bankrupt Lloyd's of London and there is nothing we can do to stop it." It was conceivable to Rokeby-Johnson that the Bank of England might have to intervene to prevent a meltdown at Lloyd's causing serious damage to the City of London's reputation as a business center. Admonished by their partners to stop the shop-talk, Bradley and Rokeby-Johnson dropped the subject until after the game when they settled with drinks in a corner of the tweedy bar of the clubhouse. "Were you serious about asbestosis destroying Lloyd's?" Bradley asked. "Of course," Rokeby-Johnson replied. On the back of his scorecard, he then proceeded to calculate that Lloyd's could be swamped by claims far in excess of the market's ability to pay--perhaps as much as $120 billion by the year 2000. "Do you mean 'million' or 'billion'?" the incredulous Bradley asked. "Billion," Rokeby-Johnson stressed. "It's the time bombs that worry me." "What are the time bombs?" "The time bombs are the young victims [of asbestosis] who will gradually develop lung disease. When they die, the lawyers are going to have a field day. Pick a figure, but it won't be far off what I've told you. See whether I am right. I shall be gone long before you." Rokeby-Johnson, who managed to dodge more of the asbestos losses than many of his clients, now enjoys a comfortable retirement in California and South Africa. He told Time last year that he found "nothing offensive" in Roger Bradley's account of their Walton Heath conversations. That account is also contained in sworn affidavits filed with authorities as disparate as the High Court of Justice in London, a British parliamentary investigative committee and the Attorney General and District Court of the State of Utah. It's understood that in the upcoming Jaffray trial, Lloyd's will attempt to rebut Bradley, who has been an occasional paid consultant to the dissident Names. "What Rokeby-Johnson knew," Bradley said in his affidavit, was that Lloyd's of London had written liability insurance for American asbestos companies since the 1930s (actually, reinsurance on their insurers), that the policies were still in effect, and that they were generally unlimited. There were no maximum amounts where the insurance stopped paying, and no diseases were excluded from coverage. The potential damage awards--and Lloyd's exposure (it had insufficient reinsurance itself)--were limitless. The day after the golf match, Bradley recounted the conversation to a senior Lloyd's colleague who warned him against repeating it to anyone else. It seemed to Bradley then that at least a few Lloyd's insiders were aware of the looming asbestos problem even as they recruited new Names to bolster the market's capital base. And recruit they did. The number of names soared beyond 7,000 in the early '70s to 14,000 in 1978 and reached over 34,000 by the late '80s. After nearly three centuries of genteel, discreet one-by-one recruitment in Britain, Lloyd's salesmen fanned out across the world, especially North America, touting Lloyd's as an exclusive club offering secure investments to only a select few who qualified for membership. According to many of these new recruits, the Lloyd's sales pitch promised not only risk-free profits, but the opportunity to join an elite and prestigious "society" which had existed for 300 years and whose membership included titled British aristocrats. New investors signed up in droves. As one Name recalled later, "You don't need to drop the names of many English earls to attract a bunch of North American dentists." Among the recruiters dispatched to the U.S. was Charles Parnell, an avid golfer who moved about American cities with his golf clubs in tow. Parnell worked for Rokeby-Johnson and for David Coleridge, an even more senior Lloyd's underwriter. Coleridge and Rokeby-Johnson had been contemporaries at Eton, where Coleridge had been the coxswain and Rokeby-Johnson the No. 7 oarsman on the second-string crew. Coleridge, a descendent of the poet Samuel Taylor Coleridge, would go on to become the deputy chairman and eventually the chairman of Lloyd's. Rokeby-Johnson also wielded increasing influence at Lloyd's through leadership of key committees, including the group that monitored the asbestos problem. To help their U.S. recruitment drive the three men enlisted the aid of big brokerage firms such as E. F. Hutton (now owned by Salomon Smith Barney, a part of Citigroup) and paid them substantial commissions to introduce them to potential Names. But the smooth talking was left to the Lloyd's men themselves. "No one in your office will be required to spend any of their valuable time explaining the advantages ... in joining Lloyd's," Parnell wrote to a Hutton officer in April 1977. "You will be required only to introduce us to prospective interested persons--I think it important that this 'thing' must be handled with care." Parnell wooed investors at meetings that E. F. Hutton arranged at places like the plush Pacific Union Club on Nob Hill in San Francisco. The payments to Hutton violated the stated policy of Coleridge's underwriting company, Sturge, whose brochure promised, "We do not pay any introductory commissions nor provide financial reward to companies or individuals through whom new Names are introduced." According to investigators for the State of California, which brought a lawsuit in federal court in Los Angeles, Coleridge, Rokeby-Johnson and Parnell, as well as other Lloyd's insiders, conspired to defraud investors by lying to them about the risks of Lloyd's investments, especially the losses likely to be caused by massive asbestos claims as well as potentially huge claims from environmental damage at sites such as the Love Canal. The California State Government lawsuit was settled by a compromise so these charges were never tested in court. Amongst them were claims that Lloyd's recruiters led potential investors to believe that the "unlimited liability" clause in their contracts with syndicates was a "mere formality," part of an initiation rite into an exclusive club that had been in business for 300 years without loss. These charges have been revived by David West, who is now suing Lloyd's in a California state court. He claims he was told that the risk of loss was "purely theoretical ... the risk to Names was effectively minimized and controlled." Lloyd's recruiters used the same sales pitch in New York, Texas, Ohio, Illinois and elsewhere in the U.S. Another major Lloyd's underwriter, Stephen Merrett, who would become deputy chairman of Lloyd's, was particularly active recruiting big names in New York. And even as Lloyd's salesmen were emphasising the exclusivity of their club and recruiting many big fish, they did not neglect the smaller fry, thanks to a decision by Lloyd's itself to lower the wealth barrier to membership. The net worth requirement was cut below $1 million, a discount that sucked in many recruits whose assets were not up to the risks involved. While penetrating the ranks of dentists, doctors, civil servants and retirees around the world, Lloyd's did not neglect its core constituency, the rich and famous of England. In the late '70s it landed former Prime Minister Edward Heath; Frances Ruth Shand Kydd, the mother of Diana Spencer, who would become the Princess of Wales; Camilla Parker Bowles, who would become the mistress of the Prince of Wales; and hotelier Rocco Forte. Back in the U. S., Lloyd's snared some of the savvier people around as well as the glamour-struck dentists: Stephen Breyer, a Harvard-trained lawyer and jurist who, in 1994, would be named by President Bill Clinton to the Supreme Court of the United States; Wall Street entrepreneur Dan Lufkin, a founder of the renowned investment firm of Donaldson, Lufkin & Jenrette; millionaire businessman Bruce Sundlun, who would become Governor of Rhode Island; discount stockbroker Charles Schwab; and Wall Streeter Oliver Grace Sr., a principal of the New York Stock Exchange firm of Sterling Grace & Company. Grace was a cousin of Rokeby-Johnson, who was instrumental in selling Grace and his wife their Lloyd's investments. What all these investors have in common, says former Lloyd's Name Dona Evans, is that they were the victims of a sophisticated confidence trick in support of the larger fraud. London-based Evans joined the Sturge syndicate in 1987, two years after Coleridge was appointed deputy chairman. She says he was present at one of the recruiting sessions when Evans, who had been alerted by newspaper articles to possible asbestos problems at Lloyd's, asked whether she could find herself on a syndicate with exposure to asbestos claims. Coleridge, so she recalls, told her not to worry about asbestos because "all this was known about and reserved for, it is all in the past, we never take risks with our new Names, this is the best time to join Lloyd's." In a later meeting prior to Evans' signing on as a Name, she says Coleridge was again present when the issue of unlimited liability came up. "He was wearing a pink shirt with these exquisite gold cufflinks," Evans recalls. "He stood up and shot his cuffs and said jokingly, 'You are of course liable in theory for losses right down to your cufflinks.' It was a vaudeville gesture intended to make us take the unlimited liability issue lightly. Then she claims he added, 'In practice it never happens because it's all reinsured.'" Now broke and a party to the Jaffray suit, Evans rejects suggestions that the Names were gullible or greedy investors in search of quick and hefty profits. "I joined in the hope of making enough money to help out with my children's school tuition. I pledged my house and lost everything. I was well aware of the unlimited liability clause but Lloyd's brushed that aside. I believed I could trust Lloyd's to look after my interests in much the same way I would trust my bank. The branch manager might run off with my money but the bank itself would protect my interests." Evans says the clinching argument for joining came again from Coleridge, who boasted to recruits that Lloyd's was backed by its own act of Parliament. "He said, 'Parliament would never have passed the act had Lloyd's accounts and regulation not been impeccable.' I thought to myself, if Parliament has given its seal of approval to Lloyd's, what more do I need?" "Johns Manville is a goner," Don Tayler confided to Ronald Verrall at a Lloyd's of London social gathering in February, 1981. Tayler and Verrall were underwriters for David Rowland, a leading Cambridge-educated Lloyd's insider who would become its chairman in the 1990s and be knighted by the Queen. Tayler, chairman of a small group of insurance professionals that monitored the asbestos threat, was warning Verrall of the looming bankruptcy of the Johns Manville Corporation, the world's leading asbestos products manufacturer. It was still a year and a half before Johns Manville would file for protection and reorganization under Chapter 11 of the U.S. bankruptcy law--one of the largest industrial corporations ever to do so--but Tayler had learned from private sources that bankruptcy was inevitable. He also knew that claims for damages against the company were so massive that they threatened to overwhelm not only Johns Manville but its last-resort insurers, the syndicates of the Lloyd's market. Armed with that information, Ronald Verrall took steps to reinsure massive asbestos liability away from David Rowland's syndicate onto an unrelated Lloyd's syndicate. Verrall concealed the asbestos problem from the managers of the other syndicate and their unsuspecting Names, disguising it on the books as innocuous ship cargo he was insuring, according to records of an arbitration proceeding in London in 1990. In typical British understatement, an arbitration panel found Verrall's syndicate liable for "non-disclosure of a material fact." Manipulations such as Verrall's are even now being combed by investigators, for it appears that the early '80s were the years when the frantic activity to spread or offload the asbestos risk got into high gear. But the Parnells and Verralls were not the only ones seeking to offload looming asbestos liabilities or who knew that insolvency beckoned. There is evidence that as early as 1979, one of the largest banks in the world, Citibank of New York, was aware through a senior bank official of the incipient crisis. Lloyd's North American reserves, then worth about $4 billion, were on deposit at Citibank, and Thomas Hitchcock, who was in charge of the bank's international insurance business and was the bank's point man for the Lloyd's American Trust Fund, had concluded that the fund was not enough to cover Lloyd's asbestos exposure. That is claimed by Roger Bradley who says in a sworn affidavit that Hitchcock confided his findings to him over dinner in New York. The banker's recommendation? Lloyd's should recruit still more Names. On the back of a napkin, says Bradley, the two men figured that the capital of 25,000, 50,000, or perhaps even 100,000 Names would be required to meet the coming asbestos claims. Thus Citibank may have become caught up in the effort to bring unsuspecting Names into the market--a claim made in a State of California lawsuit that was settled on non-evidentiary grounds in 1996. Another suit, now pending in federal court in New York City and certified as a class action, alleges that Citibank breached its fiduciary duty to Names who had trust accounts at the bank. Citibank, according to the suit, looted the trust accounts of Names who owed nothing to Lloyd's to pay the obligations of those who purportedly did. A spokesman for Citibank told Time that neither the bank nor Hitchcock would have any comment because of the pending litigation. By 1982, a flustered Lloyd's was not only worried about its financial exposure but its exposure to future litigation arising from the recruitment drive for Names. The answer was to persuade Parliament to grant Lloyd's immunity from lawsuits by the Names. Because of its exalted status, Lloyd's for centuries had enjoyed a unique freedom from regulation in Britain. Down the years Parliament had explicitly exempted Lloyd's (in so-called private acts) from the laws that applied to the insurance industry at large. But now Lloyd's needed to protect itself from legal action by disaffected Names. Immunity, however, was unlikely to be granted if Parliament got wind of Lloyd's looming financial problems. In the upcoming London trial, the dissident Names will charge that in order to make itself look healthy Lloyd's and Lloyd's syndicates manipulated their finances to show false profits, thereby deceiving not only Parliament but also existing and prospective Names. To understand these allegations one must first fathom the peculiar financial system--fundamental to the operation of Lloyd's--that the Names say was manipulated. Like so much else at Lloyd's, the system, having originated in the 17th century, was complex and unusual--"odd" and "quirky," as a committee of Parliament would later observe, "arachnoid," as a U.S. judge asserted. Instead of figuring profits and losses and closing its books at the end of each year like most businesses, a Lloyd's syndicate waits two additional years to better account for unresolved or disputed claims. At the end of the third year, the underwriter in charge balances the accounts as best he can, estimating the size of any unresolved claims and setting aside reserves to cover them. Unresolved claims can also be reinsured assuming another syndicate willing to take them on can be found. However, if unresolved claims are still too numerous or large at the end of the third year to allow a closing of the books, the underwriter is supposed to leave his syndicate's books open until all claims are covered, even if that takes many years. When asbestos claims began to arrive at Lloyd's, the insiders knew they would take longer than three years to be resolved. Asbestos claims were more than doubling each year from the late '70s onward. Estimates of eventual claims ranged well over $100 billion, exceeding Lloyd's total reserves and Names' combined assets. "Lloyd's was bust and had to disguise its problems by false accounting," concluded Anthony John South, a British insurance expert and member of Lloyd's from 1968 to 1994, in a sworn affidavit prepared for the West case in Los Angeles. (South died in December, but lawyers can still use his evidence in both the West and Jaffray trials.) Under normal procedures, Lloyd's underwriters would have been barred from closing the books on the affected syndicates--even after three years--and would have had to set aside large reserves in anticipation of the claims. But Lloyd's insiders knew such moves would alert Parliament to the looming trouble and scuttle the new bill that would insulate Lloyd's against lawsuits. "Three-quarters of the market was technically bust in 1982," Jaffray claims. "But Peter Green was determined to close the books, otherwise Parliament would not have passed the Lloyd's bill." Adds Christopher Stockwell, a leader of the dissident Names in a witness statement prepared for the Jaffray trial: "[Green] ... would not have hesitated to seek to hide the problem if he believed that the interests of the market were threatened." The insiders are alleged to have devised a two-part cover-up. First, in order to post current "profits," they used funds that instead should have been set aside as reserves against future asbestos claims. That is "fraud anywhere in the world," said South in his affidavit. Second, they formed new Lloyd's syndicates with newly recruited Names, who were oblivious to the asbestos problem, and had them reinsure the old syndicates. In effect, the old Names, typically Lloyd's insiders, passed liability for enormous potential claims to new Names, none of whom had been warned about what they were being asked to reinsure. They were like "lambs being led to slaughter," alleges a legal memorandum filed by lawyers for the family of Oliver Grace in a New York court in December, 1998. "Lloyd's ... permitted the liabilities to be rolled forward onto an expanding pool of investors ... without disclosure," concludes William H. Mohr, an assistant attorney general in New York, who conducted an intensive two-year investigation of Lloyd's. "It has been a classic Ponzi scheme, in my opinion," British investor John Finlay testified to a committee of the House of Commons in February 1995. To succeed at these deceptions, it is alleged that Lloyd's misled its auditors as well as its Names and Parliament. At a time in the early '80s when asbestosis claims were more than doubling every year, the chairman of Lloyd's audit committee, R.J. Kiln, gave instructions that the specifics of asbestos claims were not to be mentioned to outside auditors for Lloyd's. Some auditors, however, sensed trouble. At a meeting at Lloyd's on Jan. 15, 1982, they told senior officials informally that if Lloyd's were to set aside sufficient reserves to properly anticipate asbestos claims, the marketplace would be "effectively bankrupt." A formal written warning--less blunt--followed a few weeks later, on Feb. 24, 1982. In that warning, the chartered accounting firm Neville Russell informed Lloyd's that losses from asbestosis and related diseases such as cancer appeared to be "considerably in excess" of what Lloyd's had acknowledged and raised doubts about the adequacy of reserves. The Neville Russell letter, although judicious and understated, implied that asbestos threatened the viability of Lloyd's itself. Neville Russell spoke for auditors for more than 80% of Lloyd's syndicates. It was an apocalyptic warning. The challenge of responding to these concerns was assigned by Lloyd's chairman Peter Green to his deputy, Walter Nicholas "Murray" Lawrence, who had attended the meeting when R.J. Kiln had ordered that asbestos details be withheld from the auditors. Like David Coleridge, the descendant of the poet, Murray Lawrence was an Englishman of impressive pedigree, educated at Trinity College, Oxford, where he had read history and become a top amateur golfer. He also had American roots as the grandson of Nicholas Murray Butler, who had been president of Columbia University and the Republican candidate for Vice President of the U.S. in 1912, on the ticket with President William Howard Taft that had lost to Woodrow Wilson. In his response to the Neville Russell letter, Murray Lawrence, on March 18, 1982, recommended what would have been a reversal of course--that Lloyd's Names be informed of the asbestos crisis. Had the Names received this information, it would have been harder for them later to claim a cover-up. But neither they nor Parliament saw Murray Lawrence's letter or the auditors' letter that had prompted it. Like the 1969 Cromer Report, the Murray Lawrence letter was seen only by a few insiders--the Names claim that he feared wider dissemination would panic the market and destroy Lloyd's. Lawrence confided his fears to a London lawyer and Lloyd's investor, John Osbrey, who had known Murray Lawrence since boyhood and attended Oxford with him, according to Osbrey's interviews with Time and his sworn affidavit which is filed with courts in Los Angeles and London. (Osbrey died in 1999. His evidence, however, can still be used in both the Jaffray and West cases.) Reflecting the same fear of disclosure, just two days before the Murray Lawrence letter was dated, the Lloyd's membership committee decided "not to refer specifically to asbestosis risks" when initiating new Names, according to the committee's minutes. David Coleridge, the future Lloyd's chairman who had been recruiting names in the U.S. since the '70s, was present at the meeting when the decision was made. While hiding the asbestos warnings from the Names at large, senior Lloyd's insiders--described to Time by a former Lloyd's official as a "clique within a clique"--took steps to safeguard their own syndicates, reinsuring them to protect against asbestos claims, shifting the liability to others who were unaware of the mounting claims. The Murray Lawrence letter was "crafted by Lloyd's to create the appearance of a watchful umpire," says New York Assistant Attorney General Mohr. It was written to be buried and was part of the cover-up, he argues. In a December 1998 New York court memorandum, lawyers for the Grace family in New York agree, claiming the letter's sole purpose was "to make it appear that full disclosure had been made." According to the State of California suit in federal court in Los Angeles, the letter was prepared "for the purpose of creating a false record in Lloyd's files to protect Lloyd's from future liability for failing to disclose the asbestos crisis." These allegations are made not only in the New York Assistant Attorney General's investigation, the Osbrey affidavit and the Grace memorandum, but in the testimony of a former Lloyd's committee member, Ian Posgate, in a Toronto court case and a report prepared for Lloyd's investor John Melville Donner, who had asked his London lawyers, Memery Crystal, to investigate the apparent cover-up of the asbestos problem at Lloyd's. "The Committee of Lloyd's concealed data and made statements that were false and were intended to be false," Memery Crystal asserted. Lloyd's of London, through its attorneys, Freshfields, has called the Memery Crystal statement "misconceived" in a written reply that rebuts each of Memery Crystal's charges. The Memery Crystal charge--that Lloyd's concealed the "nature and size of asbestos claims"--is echoed, however, by a number of other sources consulted by Time, including a well-placed insider who worked at Lloyd's for several years in the 1980s and 1990s. An internal recommendation for an independent inquiry into the Memery Crystal findings was rejected by Lloyd's in favor of having its own lawyers investigate and respond. Murray Lawrence, in a deposition, vigorously denies John Osbrey's claim that Lawrence feared market panic. He does acknowledge protecting his own syndicate from asbestos claims while not warning the Names at large. None the wiser, Parliament on July 23, 1982, gave Lloyd's its exemption from lawsuits. It could be held liable for damages only if a plaintiff could prove "bad faith," which is difficult to establish under English law where the "buyer-beware" principle is more firmly established than in the U.S. (an obstacle the Jaffray suit will have to surmount). Not only was Lloyd's still self-regulating, it was empowered to determine itself what was meant by the notion of self-regulation, unilaterally making rules governing its operations, without answering to any outside authority, even Parliament. Lloyd's secrets were still safe. Though Lloyd's of London was largely successful in concealing its problems in 1982, they were being whispered around the City of London. The Bank of England grew so concerned that it undertook a top-secret inquiry into Lloyd's. Though the bank had no direct power over Lloyd's, it approved six of the 19 members of Lloyd's governing group and was responsible for the overall financial health of the City of London, where Lloyd's was a large direct and indirect employer and historically contributed almost as much to the British balance of payments as the entire banking system. The Bank of England's inquiry determined that the collapse of Lloyd's, or a significant number of its syndicates, would pose what one analyst termed a "significant systemic risk" to the British banking system. The bank's findings were conveyed to Lloyd's chairman Peter Green in a letter referring to serious liability problems at Lloyd's. Insiders dubbed the study Project Armageddon. Chairman Green showed the bank's letter to his Committee at a meeting in the chandeliered Adam Room on the second floor of the Lloyd's building between March and May, 1982, according to a draft affidavit from Ian Posgate who was present. Posgate has confirmed the essential details of the affidavit in an interview with Time. The letter "warned of enormous losses, resulting from asbestos claims which were about to engulf the Lloyd's market and of the disastrous effect they could have, not only on Lloyd's itself, but on those banks who had provided Lloyd's guarantees or lent money to Lloyd's syndicates," Posgate says. Numbered copies of the bank's letter were distributed by the chairman's white-gloved waiter, and then collected, with all copies accounted for. Green admonished the Committee to keep the contents of the letter secret, and it was indeed kept secret from the Names, Parliament and all other outsiders. A few Lloyd's insiders in sensitive positions learned of the letter, however. "I certainly remember being told by a number of people, in some cases slightly obliquely, that there was a letter, there was correspondence, there were notes of a meeting that was predicting very adverse financial consequences," says one insider. "This was a significant factor behind the continued recruitment, or indeed the increased rate of recruitment, of Names ... The terms Armageddon and meltdown were put to me in discussions." Because of its concern, the Bank of England used its influence to get an executive of its choosing, Ian Hay Davison, a chartered accountant who had been in charge of the British office of the global firm of Arthur Andersen & Co., named chief executive officer of Lloyd's in 1983. But if the bank and Davison believed that he could set Lloyd's to rights, they were naive. Davison had limited real power, which remained with the chairman, the richly corrupt Green, Bradley's former boss, who would later be found guilty by a Lloyd's tribunal of "gross negligence" and "discreditable conduct." Green, when once accused of having a conflict of interest, replied, "Gentlemen do not have conflicts of interest." He concealed much of the asbestos problem from Davison, who resigned in November 1985. Green, however, did confide in the man who would succeed him as chairman, Council member Peter Miller. "The 1982 results were 'frankly ghastly' and 1983 and future years may be even worse," Green said in a letter to Miller. "There are plenty of horrors in the pipeline." Back in his December 1969 report to Lloyd's, Lord Cromer had warned of the inherent conflicts of interest in a system which allowed underwriters, brokers and agents to form limited liability companies and charge exorbitant fees and commissions to Names whose liability remained unlimited. Lloyd's had buried the warning and allowed the conflicts to flourish. In some cases, underwriters were fattening their companies in order to sell stock to the public. One of the fattest such companies was Sturge Holdings, which was owned and controlled by Coleridge and Rokeby-Johnson and which Dona Evans was later to join. Having known of the asbestos problem since the '70s, Sturge had been selling Lloyd's investments around the U.S. and placing investors on syndicates it knew would be hit with asbestos claims, according to allegations in lawsuits in the U. S. and Britain and an American law enforcement memorandum. The Sturge Names included American stockbroker Charles Schwab, as well as two investors who had been put on the similarly infected Merrett syndicates, Dan Lufkin and Bruce Sundlun. Charles Parnell, representing Sturge, also lured investors of much lesser means such as Shirley Cook, a third grade teacher from Texas, and Elizabeth Bencsics, the wife of an electrician in New Mexico. "At school, we were taught that there was nothing more honorable than Lloyd's of London," Bencsics says. "I was thrilled to be part of it." In 1984, when it is said they knew that the market was in for a drubbing, Coleridge and Rokeby-Johnson sold Sturge stock to the public. Both men made millions of dollars, while allegedly continuing, along with others, to foster the cover-up of the coming debacle. "Both of them were clearly aware by then of the likely scale of forthcoming losses which were to swamp the market--in particular, the Sturge Names--a few years later," asserts Coleridge's cousin, Priscilla Stewart-Smith, in a confidential report to Sturge Names on her Lloyd's investment (see separate story). In 1985, Coleridge was named deputy chairman of Lloyd's. That same year, a U.S. law firm warned a leading Lloyd's underwriter that the asbestos matter couldn't be kept "low key" much longer. By 1986, according to a later finding by a federal judge in Texas, "if any reasonable outside Name had known what insiders at Lloyd's knew, that Name most certainly would have preferred to terminate or suspend his or her underwriting activity with Lloyd's." In 1986, Lloyd's quietly added a clause to its contract with investors. Any legal dispute over the investment would have to be resolved in England under English law. Investors were not told that Parliament four years earlier had effectively inoculated Lloyd's from lawsuits in England. By the late '80s there were sufficient signs of trouble at Lloyd's to alert investors. On Nov. 26, 1986, the Economist warned that a rising number of Lloyd's Names were quitting and that new investors had "the dice loaded against them." In 1987, Ian Hay Davison, whom Lloyd's had made chief executive four years earlier to appease the Bank of England and then disgorged in 1985 after concealing its worst scandals from him, published a book about his experience. "When I joined Lloyd's," he wrote, "I had announced my determination to pick out the rotten apples. I then thought that to exclude the wrongdoers would solve the problem. But it was not as simple as that. Many of the apples were to some extent tacky, and the barrel itself appeared ... to be infected." Yet the allure of Lloyd's was still strong. It signed up Robert Novak, the cnn political commentator whose nationally syndicated column, written in Washington with Rowland Evans, appeared in newspapers all over the U.S. In England that same year, Lloyd's recruited the Earl of Airlie, a distinguished banker and member of the House of Lords, who served as the Lord Chamberlain, the Queen's chief executive officer at Buckingham Palace. Lloyd's also lured several more Members of Parliament, bringing the contingent of Names in the House of Commons to around 50 and in the House of Lords into the hundreds. As the crisis intensified inside Lloyd's, its underwriters and agents pushed outside Names to increase their financial stakes. The number of syndicates in which Dan Lufkin invested rose from four to 52. Charles Schwab raised his commitment from five syndicates to 41, Robert Novak from seven to 20. Lloyd's sales commissions leveraged the process: the riskier the syndicate an investor was induced to join, the higher the commission the salesman was paid. The first unmistakable sign of serious trouble at Lloyd's came in June 1991, when Lloyd's reported a loss of $980 million for 1988 (remember the three-year lag in reporting underwriting results). There had been major disasters that year like the Piper Alpha oil rig explosion, but it was clear that the claims from asbestos and pollution were finally hitting the market with a vengeance. What Rokeby-Johnson had confided to Bradley on the Walton Heath golf course in 1973 was coming true. The losses sent many Names into a panic. Those who had taken heed of the small print in their contracts knew that their liability was unlimited. But most, like Evans, remembered the joking assurances of those who had recruited them that Lloyd's was as "safe as houses." Others recalled more enticing blandishments. "Lloyd's is a license to steal--it's a legal way to steal," Sturge's Parnell told California Name Verne Ballard, who wound up living in a trailer after losing his $1 million house. And still the red ink flowed. Lloyd's declared a loss of $3.85 billion for '89, partly as a result of disasters ranging from the Exxon Valdez oil spill to Hurricane Hugo and the San Francisco earthquake. Names hit by the '88-89 losses received cash calls averaging $600,000. 1990 was even worse with a loss totaling $4.4 billion. Contributing to all those losses were the unrelenting asbestos claims. Angry Names began lawsuits alleging fraud against Lloyd's and its principal officers, underwriters, brokers and agents. Suits brought in California and New York accused not only Lloyd's but more than 100 individuals and dozens of their companies. There were efforts to compute the magnitude of the alleged swindle. John Rew, a British investment analyst, chartered accountant and former Lloyd's Name with considerable insurance expertise, examined Lloyd's own figures and estimated that external Names were bilked of at least $23.8 billion for just the years 1988 through 1992. That figure included $15 billion in losses from asbestos and other liabilities that allegedly were concealed from them, and $8.8 billion from fraudulent sales commissions generated by so-called churning--the repeated charging of both premiums and sales commissions for insurance written to give the illusion of business growing faster than it was. This allegedly involved the excessive, repeated, widespread and unnecessary reinsuring of certain risks within the Lloyd's market with commissions and premiums collected at each step along the way by agents, brokers and Lloyd's. One particularly outraged Name hired a firm of German private detectives to secretly break into Coleridge's residence in Switzerland to search for evidence against him. It found none. American Names complained to the U.S. Securities and Exchange Commission, which is supposed to police securities fraud in America. The sec's enforcement division and general counsel began separate inquiries into Lloyd's in 1991. The British police--the fraud squads of Scotland Yard and the City of London police--were swamped with reports of fraud at Lloyd's. "We were hearing the same thing from every direction," a senior law enforcement source told Time. "There was worry that the whole insurance business of the U.K. could collapse." Attempting to investigate, the police got little cooperation from Lloyd's top brass. "Usually the ceo of a company with a fraud problem will fall over backward to assist the police," the source says. "Here they weren't committed to cleansing, only to concealing." Eventually the flood of reports about fraud at Lloyd's overwhelmed the police, which turned them over to the Serious Fraud Office, a unit of the British government that had been created in 1987 to prosecute major financial crimes. The SFO, which reports to the Attorney General of Britain, assigned its own investigators to the Lloyd's case. Across the Atlantic, as the losses at Lloyd's mounted in the '90s, a host of judges and law enforcement officials investigated Lloyd's and found serious wrong-doing. In Texas, Federal District Judge John D. Rainey determined that Lloyd's and Sturge, the company belonging to Coleridge, Rokeby-Johnson and Parnell, had defrauded a Lloyd's Name by "misrepresentations, misleading partial disclosures, and nondisclosures of material facts." But the judgment was overturned on appeal on non-evidentiary grounds, and the Name, forced to take the case to England, chose not to pursue. Enforcement officials in 11 states charged Lloyd's and some of its associates with various wrongs such as fraud and selling unregistered securities. The Pennsylvania Securities commissioner determined that Lloyd's had begun defrauding investors as early as 1969. In New York, Assistant Attorney General Mohr asserted in a memorandum to officials in other states that the Names' contracts with Lloyd's should be voided. In a separate enquiry at the New York State insurance department, supervising examiner Paul Cohen determined that $12 billion in Lloyd's reserves on deposit at Citibank (the amount had grown from $4 billion in the late '70s) were "seriously deficient" and "unlikely to cover all losses" at Lloyd's. Reporting in May, 1995, Cohen stated that Lloyd's in effect had borrowed from Peter to pay Paul in administering Names' liabilities. With Citibank's knowledge, Cohen said, Lloyd's had "borrowed" from the assets of Names who owed nothing to pay the obligations of Names who did, all in violation of the Names' contracts with Lloyd's and trust agreements with Citibank. Citibank declined comment because of pending litigation. In Britain, in 1995, a parliamentary committee that was investigating how the government regulated financial services decided to include Lloyd's in its inquiry. The committee allowed a group of Names to assail Lloyd's publicly for creating false profits, lying to Parliament in 1982 and cloaking itself in a "culture of secrecy." The committee even got Lloyd's officials to acknowledge fraud at Lloyd's. "You have quoted me as saying there was fraud in Lloyd's," former chairman Peter Middleton said. "There was. Also, that there were some terrible things that happened. I believe that." Labour M.P. Brian Sedgemore assailed the incumbent Lloyd's chairman David Rowland to his face. "It looks like bluntly from all the documentation I have got here and from listening to you that either you were behaving with culpable negligence or you were being dishonest ... This documentation seems to me in all fairness to point a very strong accusatory finger at you ..." Rowland denied any wrongdoing, saying he had always fully disclosed his personal financial interests and had himself suffered "very substantial losses" from his Lloyd's investments. He didn't say how much. What has been the result of this welter of lawsuits, allegations, investigations and hearings? So far very little and "Orator" Bradley is worried. "I've gone to all this trouble, gone through all these papers, verbiage, repeated these things over and over to various investigators and nothing ever happens," he muses. Seated behind the closed doors of a secure room in the U.S. Embassy on London's Grosvenor Square, Bradley is in the third hour of interrogation by a senior American prosecutor, Assistant U.S. Attorney Michael Tabak, and two fraud investigators, John S. Ellis Jr. and John M. Marsh. The American team decided to move its questioning into the security of the embassy after hearing a rumor that the outside office where it had intended to meet witnesses was bugged. "I can hear the phone call now," Bradley is saying. "'Mr. Bradley, nice meeting you, but we've decided not to proceed.'" Tabak rises to his feet, positions himself behind Bradley's chair, and grasps the older man's shoulders. "Roger, that will not happen in this case. I can assure you we are going right to the end." Will they? It's hard to dismiss the Orator's doubts. Consider all the other investigations: the sec probes; the British police and Serious Fraud Office investigations; the Parliamentary inquiry; the inquiries by officials in New York and other states across America; the numerous lawsuits. So far nothing has come of all this probing. Houdini-like, Lloyd's has escaped all substantive accountability for the actions that have ruined thousands of investors. After reviewing evidence of fraud gathered by the police, and after assembling extensive further evidence from Bradley and others, Britain's Serious Fraud Office (often derided as the "Seriously Flawed Office") decided in 1995 that there was "insufficient" evidence to support prosecution. Yet just prior to the SFO standing down, a British judge, Sir Peter John Creswell (who will be presiding in the upcoming Jaffray case), had found that a former deputy chairman of Lloyd's, Stephen Merrett, had "deliberately concealed" the true condition of his syndicates and "kept the Names in the dark," exposing them to potentially huge liabilities. In the case, a civil action brought by angry Names, Creswell criticized Merrett for false statements and offering "unsatisfactory and unconvincing evidence." Merrett told Time he had done nothing wrong (see box). The Creswell ruling was "as damning an indictment as you can imagine," says a London lawyer and former senior law enforcement official. Yet the SFO declined to bring criminal charges against Merrett or attempt to use him as a witness in prosecuting other Lloyd's officials. The SFO's reluctance to prosecute Lloyd's angered former Lloyd's chief executive Davison, who said later that he was "extremely indignant and disappointed at this." A top police official insists that "it would have been easy to put a case against Lloyd's together. All it needed was will on the part of the government," which was not forthcoming. Ironically the government official in charge of the SFO at the time was Attorney General Sir Nicholas Lyell, who was a Name himself and who stood to lose if Lloyd's moved against him. It is understood that Lyell ultimately settled his final debt to Lloyd's for $32,000. Because of his Lloyd's membership, Lyell didn't participate in decisions on whether to prosecute Lloyd's, leaving them to his second-in-command, the Solicitor General, Sir Derek Spencer who has not responded to Time's questions about the SFO decision. The parliamentary committee that investigated Lloyd's proved nearly as impotent as the SFO. The committee had very limited staff, no power to subpoena either people or documents, and no power to compel voluntary witnesses to tell the truth. A request for a broader, deeper investigation was rejected by the government of John Major in 1995. Like the Thatcher government before it, the Major regime may have feared that an aggressive investigation of Lloyd's would damage the reputation of the City of London, causing it to lose business to other European financial centers. The Major government, already skidding in the polls, may even have feared for its own existence. At least 50 Tory M.P.s were Names and a hefty number were potentially under water. Had Lloyd's forced them into bankruptcy, Major's slim majority would have been threatened, since bankrupts cannot sit in Parliament. "The numbers were such that it would have brought about the collapse of the government--there was no doubt about it," says the former Lloyd's insider. A leading member of the Conservative Party recently told Time he believed an unspoken understanding existed between Lloyd's and the Tory government that their fate was intertwined. In the U.S. the staff of the sec wanted to proceed with both of its inquiries. However, they were stopped abruptly in 1992 by the Commission itself, led by Chairman Richard Breeden, not long after British Prime Minister John Major spent a weekend with President George Bush at Camp David. Had Major persuaded Bush to call off the investigation, as British press reports speculated at the time? Both Bush and Major, through spokesmen, say they don't recall discussing Lloyd's. Former Chairman Breeden, who had been a key White House aide under Bush, told Time that the sec decision against proceeding "was not because Mr. Major and Mr. Bush said anything to each other" but because the SEC decided that disputes between Names and Lloyd's should be resolved in English courts. "We didn't make a judgment that the way (Lloyd's) allocated risks among syndicates wasn't sleazy," Breeden told Time. "We didn't make a judgment that their practices were honest." Even though federal Judge Robert Payne of the U.S. District Court in Richmond, Va., described the Lloyd's debacle as "one of the most far-reaching and serious insurance frauds of record anywhere," U.S. courts have yet to make any headway against Lloyd's. The 11 states in the U.S. that had sued Lloyd's reached a settlement with the institution in 1996 which was widely viewed as a wrist-slap victory for Lloyd's. State regulation of securities and insurance in America historically is weak. Most lawsuits by private investors against Lloyd's in the U.S. were stymied, too. The fraud allegations for the most part never got a hearing because Lloyd's invoked the clause it had slipped into its contracts with investors beginning in 1986 calling for any legal disputes to be litigated in England. Even though the investors argued that they had been tricked into signing that clause--and Americans' rights under U. S. securities laws generally cannot be waived by such contracts--U.S. appellate courts ruled that the contracts were valid and that Names had to sue Lloyd's in England. When they got to England, however, they discovered that suing Lloyd's successfully in its home country is very difficult, though there have been a few successful suits against individual Lloyd's syndicates. In Britain, Lloyd's has not only been protected by its own act of Parliament but by real fear of its clout within the establishment, clout that many insist makes Lloyd's dangerous to cross. "Lloyd's has more power than the government," says a knighted landowner and Lloyd's victim, who, like others, refuses to speak for attribution. "We are scared. People are frightened. This is not the England I knew." The fear has been fueled by a series of bizarre and sinister episodes, including threats and intimidation. An anonymous telephone threat was received by John Melville Donner, the retired Lloyd's executive and investor who was one of the earlier Names to accuse Lloyd's of fraud. Inside Lloyd's itself, an employee with sensitive information got two anonymous calls advising him to keep quiet. He also received an envelope in the mail containing a handgun bullet, possibly a practical joke, possibly not. Another investor was threatened with "concrete boots" if he investigated the reasons behind his losses. Sensitive records have been destroyed, according to a computer programmer who used to work at Lloyd's. Files have been stolen from the offices of no fewer than six dissident Lloyd's investors or their lawyers in the U.S. and Britain. A burglar who broke into Evans' house in London ignored cash and other valuables and took only her laptop computer, its hard drive crammed with material relating to the dissident Names' upcoming court battle with Lloyd's. Investigations haven't tied Lloyd's or its officials to any of these episodes and TIME has no evidence that links Lloyd's to them. But suspicions among some Names persist in part because, as former Lloyd's chief executive Davison found, Lloyd's has a long reputation for secrecy and for covering up negative information. And it occasionally has tried to purchase silence with favorable financial settlements for dissident investors. Only now, with the Jaffray case about to begin, is Lloyd's facing the prospect of a serious legal challenge in which all its dirty linen will be hung out to dry. "Finally Lloyd's is in the dock, and will have to answer the tough questions it has been dodging for years," says former Name Clive Francis, a retired Royal Air Force pilot. Even as Lloyd's deflected suits, it hounded investors for cash, ruining many lives. Roy Bromley, a British Name since 1977, balanced a shotgun on the ledge of open French windows at his home in London and shot himself in the chest. Richard Burgoyne, a Name who had lost heavily in two years, also shot himself at home--his wife and two sons, ages 8 and 11, found his body in their living room. Margaret Jones, a British lawyer and magistrate, sedated herself with pills and whiskey and then gassed herself to death with carbon monoxide. The wife of Harold Weston, a prominent lawyer, found his body hanging from the banister of a staircase in their home. Charles Bailey and Fred Yeo, both Canadians, hanged themselves as well. Sir Richard Fitch, a British admiral and defense official, killed himself with carbon monoxide from his car exhaust after learning that much of his estate had been wiped out by the Lloyd's debacle. "He saw everything he had based his life on destroyed," says the admiral's son, also called Richard. "Until the last years of his life my father had absolute faith in L

Posted: **Mon Oct 03, 2005 7:04 am**

Queens Bench 1994-C-2024 C/Eusebio Navarro 12 JP Cleary v Anglia Television 35003 Las Palmas de Gran Canaria Spain Ms Janet Reno 17 April 2000 Attorney General of the USA Ref: Sovereignty over American Lloyds Names Dear ms Reno, I write further to my copy letters of 1 November 1999 and 3 April 2000. I knew the Department of Justice had an interest in that latter documentation when I read David McClintick’s brave piece on the Lloyds/Names asbestosis litigation in Time Magazine. As I ruminated on what I had done I thought again about the wisdom of returning to England. And the Archer perjury decoy has confirmed my caution as being well founded. Rather than attempt a rehash I ask you to please refer to the two-page document attached headed “Nolan Submission 16.xii.1994”. Prime Minister Major established the Committee on Standards in Public Life and this is my receipted contribution. It is also Exhibit JPC5 attached to my second affidavit sworn on 14 December 1994. This brief document (by an angry man) gives the nuts and bolts of the Anglia fraud and cover up as it stood at that time. While I hold no special place in my heart for Lloyds Names they are the thin end of the sovereignty wedge. And like many who come from a less privileged background I do hold in my heart a special place for the rule of law as protector of the weak. Remember Sir Thomas More in A Lion in Winter? In my humble opinion Mr Richard Breeden cut down all the laws of America passed by Congress with the stroke of a pen. By sleight of hand he stripped these innocent American taxpayers of their American citizenship and turned them into feudal subjects of the British Crown. For in the United Kingdom the people are not sovereign, but subjects, and subjects have no rights at all to justice or truth other than those the Sovereign chooses to bestow. For cash. Look at that forged court order of 9 February 1995. Look at those two replies from the Court Service dated 28 April and 27 October 1995. The reference they studiously avoid using is the official case number: Queens Bench 1994-C-2024. On neither letter is this case number to be found anywhere because it is being systematically buried, and John Cleary with it. This is Denning’s Dictum, on which all Feudal jurisprudence is necessarily based, operating in all its glory. The reference they actually choose to employ is C 95/9/2 (Counterfeit 1995 9 February?). Clearly a second secret filing system is in operation here for cases like this. This is a jurisdiction which systematically issues, monitors and actively conceals counterfeit orders of the Court. This is a jurisdiction which regularly and systematically cheats its victims. And lies to Parliament about it. That forgery out of the English High Court was served on me in my own home country, the Republic of Ireland. A month later they came after me Mafia style with a trumped up complaint from a particular aristocrat, the Countess of Dalkieth (see my statement to the Dunleary police on 10 March 1995). For more than five years I have protested loud and often about what is, in English law, a capital offence. But Britannia waives the rules. All that happens is that British gangsters cross border and sea to shut my mouth, Mafia style. That second half of the Tyrone Power quote is completely accurate. Lloyds of London is the British Crown, and it is in the nature of the Windsor dynasty to shape that destiny and outwait resistance. It was not by chance coincidence that the nauseous and disgusting Financial Services Act and the “English Jurisdiction” clause were both enacted in 1986 under barrister Thatcher ready to bear fruit under barrister Blair. They are two sides of the same coin. So I ask you, Ms Reno: what protection against Denning’s Dictum can innocent American taxpayers expect when taking on their Sovereign in her own court? The British Crown had already stolen everything I had and taken away my reason for living when I repudiated on19 April 1995. They have subsequently tried to end my life many times and renewed my will to live and fight. I care only about my children and fulfilling my natural parental functions of love, care and nurturing towards them. There is no power on earth greater than my love for Victoria and Georgia. I will make common cause with any who are victimised, persecuted, oppressed or mugged by that cruel and heartless Sovereign who inflicts this illegal pogrom on me and my little girls. The enemy of my enemy is my friend. That is my interest. But surely if Lloyds losses are in any way tax sheltering, is not Uncle Sam taking a hit on this too? Is that not America’s sovereign interest? So why oh why is the Government of the United States of America helping this cruel and grasping family to get their hooks into the people who pay your salary? Yours sincerely, John P Cleary BScMAMBA cc Vice President Al Gore The Head of the U.S. Internal Revenue Service enc. Forged Court Order 9.2.1995 [C 95/9/2] Court Service 28.4.1995 (Anna Lee) Court Service 27.10.1995 (Michael Huebner) Cleary statement to Dunleary police 10.3.1995 Nolan Submission 16.xii.1994

Posted: **Mon Oct 03, 2005 7:06 am**

Ms Janet Reno C/Eusebio Navarro 12 Attorney General of the USA 35003 Las Palmas de Gran Canaria Ref: English Jurisdiction Spain 29 May 2000 Queens Bench 1994-C-2024 JP Cleary v Anglia Television Dear Ms Reno, The sovereign people of America are in great danger from a malign foreign power. Some salient facts: 1) Lloyds of London and the British Crown are one and the same. What happened at Lloyds (Time Magazine 21 February 2000) represents the precedent for the surrender of American sovereignty. This process if unchecked will culminate with the re-absorption of the United States into the British Empire and the full extension of English jurisdiction over all American citizens 2) There is no public scrutiny or supervision of the English Court because the people are not sovereign. 3) Queens Counsel, though professional advocates and litigators, also have the power to sit in judgement and deputise as a High Court judge. 4) This obscene combination inevitably leads to reciprocity and a secret, though active market in purchased decisions. 5) The Royal Courts of Justice in the Strand personify this culture of cheating and corruption with High Court Judge John Baker available to issue forged documents under a false name. 6) Mr Blair trained as a barrister with Derry Irvine and formed his character within this culture of cheating and corruption. Though Scottish and still in his twenties he was given the safest Labour seat in England. Likewise Mr Major, when unknown, was given Huntingdon, the safest Conservative seat in the country. 7) Mrs Blair QC also trained with Irvine and obtained her powers from the Queen on the day Mr Blair became Prime Minister. She can now cheat low-paid council workers with greater efficiency and even more profit. <img src=http://www.ezboard.com/images/emoticons/glasses.gif ALT="8)"> Despite its poor public image the House of Lords served a clear constitutional purpose as an independent check. Hereditary Peers sit as of personal right and are not dependent on Crown patronage. By stripping these Peers of the right to vote but not their right to sit Mr Blair has completed the creation of a de facto hereditary dictatorship behind a smiling democratic façade. 9) The court is a diligent enforcer of draconian libel and secrecy laws buried deep within obscure legislation. There is no free speech, no plurality of the press. Look at the party line on the Princess of Wales and the Blairs’ reproductive achievement. Look at the suppression of Lloyds stories and the banning of Kitty Kelley’s book on the Windsors. Look at the career of Jeffrey Archer, from Star libel to withdrawal from the race to be mayor. The people are not stupid but they know nothing because they are subjects. And subjects have no rights to truth, information, balance or free expression other than those the Sovereign chooses to bestow. 10) Extra-territorial action and conquest is now an established fact. Look to Ireland’s leadership of liars paid by the British Crown and look to the future (two directly elected Presidents, the Prime Minister and Attorney General. And a press monopoly controlled from England). 11) This dictatorship actively and aggressively interferes in American politics and subverts the democratic process in many ways. Just one: she creates “Honorary Knights” – second identities with bank accounts and a passport which are not American citizens and so not subject to the universal “worldwide income” rule for American taxes. Not everyone pays their fair share and not everyone is chased by the IRS. 12) With American politics ruled by money and secrecy who can compete with those who pay no taxes? With those who maintain absolute personal privacy through a secret second identity in London? With those who take commissions from money grubbing brokers? With those who cheat? I repeat: the sovereign people of America are in great danger from this malign foreign dictatorship. 13) And last, the big secret. There are two persons called “Her Majesty Queen Elizabeth”. Both hate democracy and ordinary people with a passion. Both exercise Royal Prerogative powers. Both command private armies with “the right sense of duty”. But only one has sworn and is bound by the Coronation Oath of fidelity to the Nation. Do you know the story about the king who relied on two independent judges: one, always fair; the other always unjust. The king appoints the judge and lets him make his own decision. In England, the decision you get depends on which “Her Majesty Queen Elizabeth” the judge is obeying. So I say to you what I told the French Prime Minister two weeks ago. That “any State which recognizes this obscenity as a legitimate and trustworthy jurisdiction is laying its own people open to British totalitarianism by stealth”. The Feudal Menace. I write in this way because 42 days after I wrote to you to provide information pertinent to the furtherance of justice you have chosen to send no acknowledgement. I begin to smell plausible deniability in the air. “If the Brits can get him we can all go on pretending this never happened”. But that game has been going on since I gave Admiral Crowe the full story in November 1995, and how many lives have been ruined by “Lloyds of London” since then? American lives. I write to you personally because you interpret the law on behalf of the people, and that is real power. You will recall Spring broke his word and brought down the Reynolds government on the single issue of who gets to appoint the Attorney General of Ireland. I see your great nation, which once I knew so well, with a healthy growing body but with maggots worming their way into the brain. I see the one remaining superpower in which democracy is safe because the people are sovereign, but those who interpret and apply the law say otherwise. I see a new world order. Not Jorg Haider who, though nasty, is more diversion than threat. But a British Reich that will last a thousand years. I have an ailing mother, now in her eighty-first year and completely alone. At whatever risk to my own safety I am going back to tend to her, and I will tell you why with a little family history. Like Alfred Dreyfus I too come from a cultured people, persecuted for centuries, which then saw one-third its number murdered in four years. I too am the offspring of a death camp survivor. My late father lived through four years of hell in Burma as a war prisoner of the Japanese. When the hero came home broken and riddled with disease he was not the man my mother had married. He was put to work cleaning lavatories at Imperial Chemical Industries in Milbank. Deeply embittered, friendless, and racked by pain he turned to alcohol, then violence. We grew up in the slums of South London and my poor dear mother had a truly terrible time. When my father collapsed and died age 59 (walking to work at five in the morning) it was a release for her. I still remember how she would get up, walk to Victoria, clean offices, walk home and then, and only then got the three of us up and ready for school – every day. I love my mother very much and, as my own difficulties have mounted, I have come to admire deeply her stoic courage, good cheer and fortitude. I know that every extra day I spend on this earth is a gift from God to be used and I will not allow her to be alone at the end of her life, come what may. So I say that the British Harlot Queen can go and fuck herself. That’s what Peter Cook said and he’s dead. That’s what John Smith said, and Mr Blair stepped into his shoes. That’s what Jill Dando said. That’s what the Princess said too. Tom Wolfe’s stoics all. But the Harlot gang attacked me and used force on 6 June 1994 (D Day +50). They have robbed me of more than a million pounds. And I am an Irish citizen. We will see if any counts for aught. I have a very simple system of personal belief. I believe in the story of Eden and the final judgement. I believe each of us is put here by God for one purpose only – to learn the knowledge of good and evil. All other fruit is free but we must learn to tell the difference for ourselves. We then make the final judgement when we choose the path of one or other. The final judgement is made not of us, but by us. This year, signposted by scripture since time immemorial, that judgement is being made by men and women of power throughout the world. Whither thee, Janet? Yours sincerely, Freeborn Englishman & Citizen of Ireland John P Cleary BScMAMBA cc His Royal Highness the Prince of Wales

Posted: **Mon Oct 03, 2005 7:09 am**

C/ Eusebio Navarro, 12 Paul Braithwaite Esq 35003 Las Palmas de Gran Equitable Members Action Group Spain Canaria 28 February 2004 Dear Sir, You know all about the Equitable Life fraud from your own experiences. I have told you, through Gordon Pollock, about the fraud at the Bank of Credit and Commerce International. I have told you about the fraud at Anglia Television. How many examples does it take to demonstrate a pattern of racketeering? Let me give you one more, from that same insurance industry as Equitable Life. I imagine you are old enough to remember the Miners Strike in 1984/85. Once Thatcher had broken the union there was nothing left to restrain the Windsor Gang and their filthy homicidal Freemasons. The very next year, 1986, three seemingly unrelated events took place. First, the Thatcher government passed the Financial Services Act. Second, a controversial “English Jurisdiction” clause was quietly inserted into the contracts signed by Americans recruited as Lloyds “Names”. Third, Jeffrey Archer published A Matter of Honour. You probably remember the headlines from ten years ago. Massive losses at certain Lloyds syndicates. Names wiped out by unlimited liability. Respected men and women, pillars of their community, ending their own lives. Did you know that the very final face confronted by these doomed individuals was none other than Her Ladyship Mary Archer? The Chairman of Lloyds “Hardship Committee” was the hard-nosed debt collector for the Windsor Mob. But then who has sympathy for a Lloyds Name? With the benefit of hindsight it is easy to see how Lloyds salesmen targeted gullible wealthy Americans by playing to their snobbery. Thousands of American citizens were actively recruited as names during the 1980’s, only to have the sky fall in on them in the early 1990’s. Many felt cheated, and decided to fight. But when they tried to sue they found that they had signed a contract that stipulated that any dispute must be fought-out under English jurisdiction. How could this be? What competent US attorney would allow his client to agree to such ruinous terms? For not only did this mean that all disputes were to be settled in English courts by English judges, but it also meant that English law applied – specifically the Financial Services Act and the Lloyds Act. (And of course lurking in the background, out of sight, lay the Treason Felony Act of 184<img src=http://www.ezboard.com/images/emoticons/glasses.gif ALT="8)"> . The answer of course is that none of those thousands of attorneys did allow his client to agree such suicidal terms. Which brings us to A Matter of Honour. It’s a crappy novel, of course. But there is one revealing exchange between a Swiss banker (Bischoff) and a Soviet agent (Poskonov). They have conspired to defraud a third party, Romanov (yes, Archer is that inspired!). But let Archer tell the story. “Not at all, my dear Bischoff,” said Poskonov. “After all these years the honour is entirely mine. And kind of you to open the bank on a Sunday. But now to business. Did you manage to get Romanov to sign the release form?” “Oh yes,” said Bischoff matter-of-factly. He did it without even reading the standard clauses, let alone the extra three you asked us to put in.” “So his inheritance automatically returns to the Russian state?” “That is so, Mr Poskonov, and we in return…” “…will represent us in all the currency exchange transactions we carry out in the West.” So there you have it. The spook targets the “mark”. The aristocrat recruits the “mark”. The banker switches contracts at the last moment. The “mark” can’t be bothered to read the “whole damn contract”. S/he signs. With fatal consequences (literally). I’ve enclosed about one half of a Time Magazine special report written by David McClintick, and which was my prime source of information about the scams at Lloyds. It was a great piece; it was enormous; it was true. So it got buried. At this point I suggest you read that material (Time, Feb 21 2000; pp41-51) To my mind understanding what happened at Lloyds, and why it happened, is the key to understanding quite a few present-day riddles. The three I personally would highlight are these. First, the amazing and enduring political influence enjoyed by the Archer family under successive governments of both left and right. During the Tory Supremacy of 1979 to 1997 he was noteworthy for being a “valued and trusted friend” of Thatcher and Major. Both nominated Archer for a peerage. Yet Blair was prepared to deliver Archer’s chosen opponent as Labour’s candidate for London Mayor. Blair was also preparing to endorse the Major treatment of what happened at Anglia Television. The favourable treatment from the courts (“the Fragrant Mary Archer”). The never-ending efforts at rehabilitation. The assassination of Jill Dando and Monica Coghlan. It seems the Windsor Mob is willing to grant any favour to their favoured son who dreamt up the Lloyds scam. A scam that grossed “at least $23.8 Billions for just the years 1988 through 1992”. Second, the massive push currently underway to marginalize the role of the jury as arbiter of fact, and to promote the role of the judges. You will have noticed that Archer was convicted by a jury of twelve honest men and women. But the Lloyds scam, like the rest of the Windsor protection rackets, was facilitated by pliable “professional judges” (i.e. failed Queens Counsel). In point of fact judge nobbling (the “subconscious influence” of the Treason Felony Act) is absolutely central to the Windsor plan for their Thousand Year Judicial Reich. Not that all of this has gone unnoticed elsewhere. You may have seen that Richard May was dumped this week from the International Criminal Court for the former Yugoslavia. Even Kofi Annan has had enough. So let me quote myself writing to Slobodan Milosevic right at the beginning of the Hague extravaganza of victors’ justice. “Richard May, of the English Court, and Patrick Robinson, of the Jamaican Court, both swear to obey the same person. She is really out to get you, isn’t she? Another of her agents is Mr Blair. I think you will find that Mr Blair was an impostor at the time of the NATO campaign in former Yugoslavia. Check with anyone who was at Feira on 19 June 2000. Best of luck.” (19 February 2002) Third and most important this drama explains why Blair took Britain to war in Iraq. Nobody is satisfied with Blair’s own various explanations. The British people still have no satisfactory accounting for what has been done in their name to the sovereign state of Iraq. And Blair wants to “draw a line and move on”. Well he would, wouldn’t he? Trying to understand “Blair’s reasons” is a chimera and a red herring because they do not exist. You might as well try to understand a hologram. Tony Blair is a first class Mob lawyer, untroubled by any moral implications of his craft. His flexibility is purely tactical. He represents the interests of his client (our Most Gracious Lady the Queen) at all times, and most notably when espousing his various personal missions from God. If the British held more faith he would never be able to get away with it. Blair took Britain to war in Iraq to pay off a private debt, pure and simple. It is the Windsor interest that maintains British subservience to the USA. A deal drawn up by Thatcher, brokered by Major, and delivered by Blair. A sweet deal, as they say, with a macabre inherent symmetry. For just as the people of Iraq had no possible defence against George Bush and his machine of death, so those American Names had no possible defence against our Most Gracious Lady the Queen and her Treason Felony Act. A few days ago I was reading about some of the treatment handed out by invading British squadies to Iraqi civilians in their own country. Of how one blameless man was bound and hooded, and then kicked to death. If you have taken the trouble to gain access to the documents lodged with the European Court of Human Rights* you will understand why I feel a certain affinity with that poor man. There but for the grace of God go I. Yours faithfully, John Cleary BSc MA MBA cc Allan Beith MP (with attachments, correos Certificado 54826) Dr Tony Wright MP ( “ “ ) Lord Goldsmith ( “ “ ) Gordon Pollock QC ( “ ) *See ECHR (Strasbourg) ref. 24316/03 John Cleary v United Kingdom Addendum 14 Marzo 2004 Michael Mansfield, President of the UN Court for Sierra Leone, is under the same pressure as Richard May. Mansfield too will be dumped. According to today’s London Observer, the financier behind the aborted coup in Equatorial Guinea is Ely Calil, a close associate of Lord Jeffrey Archer. Small world!

Posted: **Mon Oct 03, 2005 7:13 am**

Treason Felony Act (1848 ) 3. Offences herein mentioned declared to be felonies ...If any person whatsoever shall, within the United Kingdom or without, compass, imagine, invent, devise or to deprive or depose our Most Gracious Lady the Queen, ...from the style, honour, or royal name of the imperial crown of the United Kingdom, or of any other of her Majesty's dominions and countries, or to levy war against her Majesty, ...within any part of the United Kingdom, in order by force or constraint to compel her... to change her... measures of counsels, or in order to put any force or constraint upon her or in order to intimidate or overawe both Houses or either House of Parliament, or to move or stir any foreigner or stranger with force to invade the United Kingdom or any other of her Majesty's dominions or countries under the obeisance of her Majesty... and such compassings, imaginations, inventions, devices, or intentions, or any of them, shall express, utter, or declare, by publishing any printing or writing, ...or by any overt act or deed, every person so offending shall be guilty of felony, and being convicted thereof shall be liable, ...to be transported beyond the seas for the term of his or her natural life.

Posted: **Mon Nov 05, 2007 7:53 am**

Lloyd's And Mr. Ponzi

The most infamous fraudster in the history of the United States was Mr. Ponzi. He was convicted of operating a massive investment scheme in which he offered unusually high interest rates to his depositors. He paid these high returns out of the new capital he attracted from new depositors. Eventually, of course, his scheme collapsed when he could not atttract sufficient new deposits to both pay interest to his old depositors and repay those of them who asked for the return of their money.

There are interesting parallels between Lloyd's and Mr. Ponzi's scheme. A major difference, however, is that Lloyd's made and executed its plans with the knowledge and connivance of a great Department of Government, the Department of Trade and Industry.

Oh what a tangled web we weave
When first we practise to deceive.

Sir Walter Scott

We hope that, after reading this report, you feel that the NDA is achieving its aims. Please pass it on to a friend and encourage them to join the NDA by writing to:

Town Farm, Langton, Malton, North Yorkshire YO17 9QP.
Tel & Fax 01653-658292

A Names Defence Association Paper
LLOYD'S OF LONDON

"Lloyd's was, and is, an institution of vital national importance. The job to be done was daunting, but it would involve things I knew about: the unravelling of fraud and the development of accounting rules." Ian Hay Davison, Chief Executive of Lloyd's 1983-86

LLOYD'S – A DRAIN ON THE UK's DOLLAR RESERVES

Lloyd's Annual Settlements Statistics Package indicates that Lloyd's has been a large drain on the UK's dollar reserves since at least 1967. A summary of the profits and losses earned by Lloyd's from its main American business class "US $ Non-Marine, All Other" is contained in Appendix 1 to this report. It shows that Lloyd's has recorded losses in 21 of the last 25 policy years in that major class of business, with aggregate underwriting losses over those years of $4.6 billion. In addition, provision for a further worsening of the losses from the policies written during those years amounting to approx. $790 million is indicated by the most recent set of Lloyd's Settlement Statistics. This additional loss will be provided for in the 1992 year Syndicate Accounts which are now being finalized.

LLOYD'S – A LONG TERM LOSS MAKING INSTITUTION

For the Syndicate Account years from 1979 to 1991, Lloyd's Annual Global Accounts, which cover all classes of business worldwide, have recorded aggregate underwriting deficits of £5.7 billion and overall pre-tax trading losses of £4.2 billion. As shown in the Summary of Lloyd's Global Accounts in Appendix 2 to this report, those losses are equivalent to £6.2 billion and £3.4 billion in today's currency, that is after adjusting for the reduction in the purchasing power of the £. Further losses for the 1992 Year of Account, which are due to be announced in May of this year, are widely forecast at £1 to £2 billion.

FALSE PROFITS – FALSE TAXATION REVENUES FOR THE TREASURY

On 24 February 1982 the magnitude of the ultimate losses from long standing unlimited US Liability policies was officially admitted by the Lloyd's Panel of Approved Syndicate Auditors when they wrote to the Lloyd's Council for guidance. The auditors had learned that the ultimate losses from those policies, based on the US Attorneys Reports to Insurers, were so large as to be unquantifiable. Lloyd's reply simply referred the problem to the Directors of the Managing Agencies. A few weeks later almost all the 1979 year Syndicate Accounts were closed without provision for those losses, without any informatory notes about them, and without any qualifications by the auditors in their audit certificates.

In all the years since then, nobody has explained what happened during the intervening weeks to make those losses quantifiable.

As is clearly evident, full provision for the losses mentioned above should have been made in the Accounts for the syndicate years of the late 1970's and early 1980's. Alternatively, and what probably would have been the best decision, the Accounts of many afflicted syndicates should have been left open. In the event, no adequate provisions were made and one or two syndicates left their Accounts open. The same happened in most of the following years in the 1980's. As was inevitable, the losses eventually started to impact on Lloyd's Syndicates in the late 1980's and the early 1990's. Thus only recently have syndicate Accounts and Lloyd's Global Accounts started to reflect the deficits for which provision should have been made so many years ago.

The results of all those years of falsely overstated profit declarations benefited working Names in general and those Names whose syndicates were able to re-insure their risks at a sizeable undervalue to other less knowledgeable syndicates. In addition, the Inland Revenue and the Treasury benefited handsomely. Had adequate provisions been made when they properly should have been, Lloyd's as a whole would have declared substantial losses and UK taxation revenues would have been substantially lower.

The overstatement of profits continued throughout most of the 1980's. It has been estimated that over those years the Treasury collected between £500 million and £1 billion more than was truly justified as a result of those false profits being declared at Lloyd's.

More recently, however, the Inland Revenue's taxation receipts have been lowered as a result of the current losses at Lloyd's being offset against the insurance incomes of those Names who were fortunate enough to still have some. In the longer term the reduction in Inheritance Tax revenues will be substantial; the beneficiaries, of course, being many residents of the USA and the Internal Revenue Service of that country.

CONCEALMENT OF INFORMATION ABOUT UNQUANTIFIABLE US LIABILITY LOSSES

Extensive research by the Names Defence Association and other Names has revealed that a few leading Lloyd's Committee and Council members and underwriters were aware in the mid 1970's that Lloyd's was facing unquantifiably large losses resulting from its old American Liability policies. These were policies, issued over many years by Lloyd's, which were unlimited as to the number of claims which could be made by any policyholder.

No evidence has been found that Names in general were informed either directly or indirectly by the Council or by Lloyd's officials either at that time or in following years as more and more evidence of the forthcoming avalanche of asbestos related and pollution claims was collected. Throughout the 1970's and 1980's the Chairmen of Lloyd's were publicly silent on the enormity of the forthcoming losses. Other than a brief mention in the June 1985 Annual Chairman's Speech by Sir Peter Miller, to the effect that the Wellington Agreement had been drawn up to cope with the asbestos crisis, no Chairman's Annual Speech in the 1980's made any reference to the US Asbestos and Pollution Liability problems. Not until 1992 did a Chairman publicly refer to them, when Mr. David Coleridge talked of "huge uncertainties on pollution" and of the need to ". . . strengthen North American long-tail reserves".

In addition, no evidence has been found that Parliament was informed of the magnitude of the coming losses when it was considering the Lloyd's Bill in 1982.

Extensive proof that Lloyd's insiders had that knowledge in considerable detail over many years and from impeccable sources is contained in the Names Defence Association's 280 page Research Report No. 2. This factual record consists of extracts and summaries taken from many thousands of pages of source documents, from the early 1970's to the 1990's, including many yearly and half-yearly US Attorneys' Reports to Lloyd's and other insurers on asbestos related claims, official Working Party minutes, reports of Lloyd's Toplis and Harding subsidiary, US and UK Government reports, US and UK legal testimony, official Lloyd's Enquiry findings, letters, Lloyd's Committee minutes and other such papers.

BREACHING OF THE LLOYD'S ACTS

The concealment of all that material information about the magnitude of future US Liability losses was contrary to both the spirit and the letter of the Lloyd's Acts. The objects of Lloyd's are laid down in section 4 of the Lloyd's Act of 1911. They are:

"The carrying on by Members of the Society of the business of insurance of every description including guarantee business;

The advancement and protection of the interests of Members of the Society in connection with the business carried on by them as Members of the Society and in respect of shipping and cargoes and freight and other insurable property or insurable interests or otherwise;

The collection publication and diffusion of intelligence and information;

The doing of all things incidental or conducive to the fulfillment of the objects of the Society."

Particularly relevant to the allegations by some Names that Lloyd's was guilty of fraudulent concealment is that Lloyd's has had, since 1911, the statutory obligation, as stated above, for: "The collection publication and diffusion of intelligence and information".

Lloyd's properly collected material information relating to those forthcoming US Liability claims and they monitored developments carefully and conscientiously over all the years of the 1980's. It collected that information in detail and at considerable cost from the most knowledgeable professional experts. But it did not publish or diffuse that information to its Members. We now know that only a few key inside working Names were privy to it.

Some Names have now concluded that the withholding of that material information, essential for any Name and his agents to properly assess his underwriting commitments at Lloyd's, could only have been made deliberately. They believe that the failures to publish that information over so many years could only have resulted from a series of knowing and deliberate decisions. It is not credible that a series of simple oversights is the explanation. Lloyd's, they say, did not have the option of publishing or not publishing information of such importance; it had a statutory obligation to publish it.

INITIAL REASONS FOR THE CONCEALMENT

Insider Trading

One reason for the deliberate early concealments can be deduced from other research studies of the Names Defence Association. A number of key Lloyd's insider working Names took advantage of their privileged information to re-insure their own syndicates' US Liability risks to other less knowledgeable and unsuspecting syndicates. The first examples of such insider trading took place in the mid and late 1970's. More have been identified in 1981 and early 1982 prior to closure of the1979 Syndicate Accounts and prior to the passage of the Lloyd's Bill through Parliament.

Like insider trading on the Stock Market, which is illegal, insider trading by insureds which involves the concealment of material information from the insurer is cause in law for the resulting policy to be voided. The possibility now exists for a number of critical reinsurance policies and indeed whole re-insurance programs at Lloyd's to be challenged and voided. This process may start as an unplanned side-effect of the Gooda Walker Action Group's forthcoming legal action against brokers, if that is successful. If it is not, other Names can be expected to take the initiative. The effect on the Lloyd's market might then ultimately be terminal.

Closure of the 1979 Year Accounts

The closure of the 1979 year Syndicate Accounts was effected by the setting of artificially low Reinsurance to Close (RITC) ‘premiums'. The reality was that the long term losses now known to be inevitable were so large that actuarially sound RITC ‘premiums' were incalculable. The repercussions of leaving open the Accounts of all the badly affected syndicates would have destroyed Lloyd's worldwide reputation of professional expertise and financial soundness. It would have caused many Names to resign and it would have reduced the attractions of Lloyd's to prospective new members.

Lloyd's take the view that a Re-Insurance to Close contract is a policy of insurance, under which risk is transferred at a premium. As the then Chairman of Lloyd's, Mr. Peter Miller, told Names in November 1986 "The crucial point, as far as Lloyd's is concerned, is that we view the reinsurance to close not as a reserve but as a policy of insurance transferring risk at a premium. It is a policy of insurance. We have always believed that, . . ."

Some Names now seek counsel as to whether in fact that is true for all RITC contracts which have been effected in the last twenty years. In law an insurance policy requires the payment of a "premium" to cover the possibility of unforeseen risks and liabilities. Lloyd's RITC policies involve a payment by the old year syndicate to the new year syndicate when it transfers its outstanding risks. The sums of money paid are commonly but misleadingly described as "reserves", these being calculated to cover both the reported claims and "incurred but not reported" claims (IBNR's) from policyholders. It is believed that many do not normally include an additional "premium" to cover the possibility that further as yet unknown and unforeseen liability risks might materialize in the future.

Consequently, some Names seek counsel as to whether a number of RITC policies can be set aside in law as not being contracts of insurance.

Other Names further question whether RITC policies, with ‘premiums' which were fixed by the Managing Agents at an undervalue in relation to the known risks and liabilities, amounted to contracts which were imposed on the unwitting Names of the next year syndicate under a state amounting to duress or undue influence. If so, they question whether those RITC policies might be voidable on those grounds also.

The 1982 Lloyd's Bill – Immunity from Damages

The information in Lloyd's possession about forthcoming US Liability losses was not disclosed to Parliament in 1982. Had it been disclosed the Lloyd's Bill might well not have been enacted, at any rate not in the form it ultimately took. The Bill as enacted was particularly important to Lloyd's Council members and officials in that it granted, in the absence of bad faith, the Society and themselves personal immunity from claims of damages for negligence and lack of care.

Disclosure of that information to Parliament might also have alerted hitherto unsuspecting syndicate managers that they might have underwritten policies as a result of material non-disclosure by the cedants.

If such disclosure had been made, the Bill might well not have been enacted in its final form and Lloyd's Council members would have risked being sued personally for their own past negligence. In addition, many re-insurance contracts within the market would have been able to be cancelled: Lloyd's reputation would have been severely damaged.

REASONS FOR THE CONTINUING CONCEALMENTS

Profit Sharing and Agency Commissions

The closure of the 1979 Accounts allowed Managing and Members Agencies to take profit sharing commissions based on those false and overstated profits. If the Accounts had been left open, those Agencies would not have received those particular revenues and they would have seen a further significant reduction in their future management fees, salaries and expenses as some Names resigned and as fewer Names replaced them. The revenues of agencies and the personal incomes of working Names throughout the market would have suffered.

Research findings suggest that plans were agreed by senior Lloyd's and Department of Trade and Industry officials to both encourage recruitment campaigns for new Names and increase the amount of capital to be deposited by all Names. The objectives of those plans were to provide Lloyd's with substantially larger capital funds to settle the inflow of US Liability claims due to start in size at the end of the 1980's.

As most agency fees and expenses are directly related to the number of Names and to the amount of their committed capital, which affects the amount of business which can be executed, the attractions of quietly accepting those plans were evident. An ever increasing personal income stream, at least for several years ahead, was clearly attractive to any working Name, whether he was one of those privileged few with knowledge of the US Liability problem or not. There was no obvious reason why any unsuspecting agent would wish to question the opportunities which these recruiting drives would produce.

The Selling of Lloyd's Agencies.

If the 1979 Syndicate Accounts had been left open and the recruitment campaigns for new members not been introduced, the reduction in revenues of Lloyd's Agencies would have adversely and immediately affected their profitability. The Agencies themselves would have become far less attractive to potential purchasers. Some Managing Agencies were sold to their staff as a result of the Lloyd's Act 1982 which forced the segregation of brokers from underwriting agencies. Other agencies were spruced up by their partners and shareholders for sale to major Groups or for flotation on the Stock Market. Few of these sales would have been possible at anywhere near the prices actually realised if their profits had properly reflected the true state of affairs of the syndicates for which they were responsible.

One of the most remarkable examples was the Sturge Group, the largest of the Members and Managing Agencies at Lloyd's. Sturge floated its shares on the Stock Exchange in the mid 1980's on the strength of sizeable and fast rising profits over the preceding five years, that is for those years when the concealment of US Liability losses allowed Sturge Syndicates' Accounts to be, as some Names allege, falsely closed and falsely reinsured. The published syndicate profits allowed profit sharing commissions to be paid to Sturge, and they encouraged ever rising numbers of new clients to that Group and its syndicates. Had those developments not occurred, Sturge would almost certainly not have obtained a listing on the Stock Exchange and two of its leading shareholders would not have been able to sell their own shareholdings within a few years thereafter for the estimated £40 to £50 million which they each received.

Sturge's top executives at that time included Mr. David Coleridge, who later became the Chairman of Lloyd's, and Mr. Ralph Rokeby Johnson who were both, of course, key Lloyd's insiders. Mr. Rokeby Johnson has been reported, under affidavit, as advising privately on 4th October 1973 that long term US Liability risks would eventually bankrupt Lloyd's.

"STAIR-STEPPING" – THE DTI'S INVOLVEMENT

Research findings of the Names Defence Association also show that the Department of Trade and Industry and its predecessors were also aware of Lloyd's long tail US Liability problems. The solution as to how those claims could be paid was worked out and agreed by Lloyd's and DTI officials in the early 1980's. It was twofold.

The first part of the solution was to increase the ‘reserves' at Lloyd's gradually over the coming years through a policy which they described as "stair-stepping". This term first came to the knowledge of damaged Names at meetings in 1994 between their representatives and DTI officials. In brief, stair-stepping involved the gradual increase in the Minimum Percentage Reserves laid down by Lloyd's for the setting of RITC "premiums" each year.

This policy might have been appropriate to incorporated insurance company with its own permanent fixed capital and on-going separate legal persona. But it was totally inappropriate for Lloyd's syndicates which are annual business ventures whose members vary from year to year.

As is clearly shown by Lloyd's own Annual Settlement Statistics, "stair-stepping" was implemented progressively and successfully throughout the 1980's and into the 1990's.

Some Names now seek counsel as to whether that policy of "stair-stepping" might have been a deliberate and criminal fraud on new members joining certain new syndicate years in view of the fact that those members did not receive proper financial consideration for the risks they were assuming; risks so large that, at least since 1979, they were known to be unquantifiable.

The second part of the solution was, as discussed earlier, to encourage the recruitment of ever increasing numbers of new Names at Lloyd's and to increase the total capital provided both by them and by existing Names. These objectives were also executed successfully. The number of members of Lloyd's increased from 7,710 in 1975 to 18,506 in 1980, and then to 32,433 in 1988. Increases of this magnitude were totally unjustified by the growth of the worldwide insurance market and in particular by the business likely to be introduced to Lloyd's over those years. During these same years, Lloyd's also increased the financial deposit requirements of Names, while it reduced the total wealth requirement demanded to be shown by members individually. As a result of the substantial increase in the funds and guarantees deposited directly with Lloyd's by its members, the gross underwriting capacity at Lloyd's increased from £3.42 billion in 1980 to £11.02 billion in 1988.

CONSPIRACY

Although conspiracy is said to be the most difficult allegation to prove in Court, some Names now seek advice whether a conspiracy of concealment and criminal fraud may have existed at Lloyd's. They wonder if the actions of the Lloyd's Panel of Approved Syndicate Auditors do not indicate a prima facie case. They ask what caused those eminent firms of chartered accountants to issue unqualified audit certificates for the 1979 year Syndicate Accounts when only a few weeks earlier they had taken the unprecedented step of writing to Lloyd's Council for official guidance over their knowledge that future US Liability claims were so large as to be unquantifiable. The doubting Names have never received a satisfactory answer. The only conclusion that they have reached so far is that those firms of auditors might themselves have been so dependent on their large volume of Lloyd's related business that they found it relatively easy to accept whatever arguments, no matter how tenuous, that were put to them during those few brief weeks.

These facts, some of them say, are the evidence.

FRAUD

"From the middle of 1982 it became increasingly apparent that there was something seriously wrong . . . Fraud occurs in the City from time to time. Rarely are those who suffer the private investors, even less frequently is it true that the perpetrators of the fraud are the trustees for the investors. These were not frauds on Lloyd's; they were frauds by insiders at Lloyd's on their own members. Ian Hay Davison – Chief Executive of Lloyd's 1983-86.

Many Names suspect that the concealment of material information concerning future US Liability losses, together with the other malpractices discussed in this paper, by key insiders and by the syndicate auditors might have been fraudulent. Those persons had legal, professional and ethical reasons to publish and disclose the unquantifiable magnitude of the forthcoming losses, but none did so. They had personal financial reasons for the concealment, and many of them benefited from it. Some Names now believe that they are near to having sufficient evidence of criminal fraud to justify them presenting it to the Serious Fraud Office for the possible prosecution of leading Lloyd's personnel and others for offences under the Theft Act and other criminal statutes. One eminent London solicitor, who has been consulted by the Names Defence Association and by other members of Lloyd's, has assembled such a dossier and it is understood that he might have already presented it for informal consideration to the SFO.

LATER ABUSES AND MALPRACTICES

"Many members of the Lloyd's community in senior positions were not even vaguely aware of the legal obligations on agents to act at all times in the best interests of their principals, not to make secret profits at their principals' expense and to disclose fully all matters affecting their relationship with their principals."

Sir Patrick Neill – Regulatory Arrangements at Lloyd's, Report of the Committee of Inquiry 1987.

The LMX Spiral

The substantial increase in capital funds provided by the unsuspecting Names during the first six or seven years of the 1980's had no immediate genuine business to finance. The growth in insurance business worldwide did not match the growth in Lloyd's capital, and because the US Liability claims were not due to start reaching Lloyd's in size until the late years of the decade, a vacuum of legitimate opportunity developed. Some of the more unscrupulous underwriters, members' agents and brokers found ways to fill it. They introduced unprofessional and improper practices which had little or no valid commercial justification.

The most infamous development was the LMX Spiral. This was initiated when a few syndicates re-insured the excess risks of other better run syndicates. Those first spiral syndicates then started to re-insure those same risks with other syndicates. Syndicate A reinsured with Syndicate B. Syndicate B with Syndicate C. C with D, and then the spiral commenced as D reinsured a higher layer of the original risk with Syndicate A. And so it started again. The spiral developed in ever decreasing circles at ever higher layers of risk and ever decreasing Premiums. During the course of the spiral the syndicates writing spiral business reinsured themselves several times over. And at every turn a Lloyd's broker took 10% of the premium in commission.

A financial disaster was inevitable. It would happen with the first major catastrophe. Surprisingly no major catastrophe occurred for several years, but then the Piper Alpha oil rig blew up in late 1988. The death knell of the LMX Spiral was sounded and it collapsed within a year or two.

The business making up the spiral was not insurance. It was a series of bets that a major catastrophe would not happen within the next twelve months. It was guaranteed to end in total and overwhelming loss for the unsuspecting members of the spiral syndicates; the only question was when. The rates charged and its spiral circularity were such that no competent broker would have touched it, far less any competent or ethical underwriter. Yet Lloyd's regulators condoned it and a number of leading underwriters re-insured their worst risks with the spiral syndicates.

The Names who were placed on the LMX spiral syndicates were overwhelmingly the new Names who had been lured into Lloyd's as a result of the recruitment policies described earlier. Those new Names were, for the most part, unable to join well-run syndicates as the latter found themselves unable to attract sufficient legitimate new business to justify taking on more Names. To all this the regulators at Lloyd's turned a blind eye.

False Accounting

As the LMX Spiral developed in the early and mid 1980's the managing underwriters of the spiral syndicates found that their business was barely profitable, even without a major catastrophe hitting the market. To maintain the facade of profitability and to preserve their incomes and lavish life-styles, they then manufactured a record of false profits by the use of new and creative accounting practices, for example those concerning Time and Distance Policies. The latter were not, in reality, insurance policies at all. They were medium and long term investments akin to deeply discounted, long term no-coupon bonds. The false accounting device used was to credit as profits in the syndicates' Accounts the total discount value of the investment on the day that it was made. The correct practice would have apportioned the total discount in equal annual installments over the life of the ‘policy'.

Needless to say, Names on the spiral syndicates were never informed of the nature of the Time and Distance Policies nor of the accounting principles applied to them. And nor did Lloyd's regulators, approved syndicate auditors or accounting practice supervisors interfere.

Insider Trading with a Difference

Research studies have shown that Members of the Council of Lloyd's were noticeable by their absence as members of Spiral syndicates. The most knowledgeable and professionally competent of Lloyd's working Names did not themselves participate as members either; and most kept their old established clients and friends from joining them. Nevertheless, many well respected underwriters placed their own syndicates' reinsurances with the spiral syndicates. They believed that, although the spiral syndicates themselves were doomed to disaster, their own syndicates as policyholders would not suffer. Lloyd's and its Central Fund would stand behind every contract.

The widening conspiracy of silence, however, ensured that new Names were never informed. It was insider trading with a difference; insider trading at its most cynical.

Working Names Preferential Stop Loss Policies

Unknown to external Names on such syndicates as 162, 317 and 843 who underwrote the policies, a number of working Names were able to effect personal stop loss policies at very low, preferential rates and with guaranteed annual renewals at those same rates. Some of the cover provided went as high as 100% of the individual's total underwriting, making membership of Lloyd's for those favored few a one-way bet. They could not lose. Only the external Names could.

ADMINISTRATIVE ABUSES, MALPRACTICES & ILLEGALITIES

Further research has discovered that back office administration, both within the Society of Lloyd's itself and throughout many of Lloyd's agencies, is scandalously weak and inefficient. Claims, large and small, are paid without reference to the underlying policies for the simple reason that neither agencies nor Lloyd's itself have copies of these policies. Claims are commonly paid without question on the simple written application of the brokers. Instances have been discovered of claimants being paid two and three times for the same claim. Some US asbestosis patients have submitted claims through different attorneys in different cities. Yet Lloyd's paid them all.

The overcoming of these administrative problems is the subject of much present concern at Lloyd's but it is understood that little real progress is being made. One of the side benefits of Equitas, should it ever be founded, might be the centralised tackling of this enormous backlog of administrative chaos. But the problems may be insurmountable.

Evidence of Lloyd's administrative inefficiencies can soon be discovered by any Name who asks for an accounting of his interests in the US Dollar Trust Fund or in the Canadian Dollar Trust Fund. Some Names have asked for such an accounting but none has so far been produced. It appears that the Society of Lloyd's itself, which has the ultimate responsibility for those funds, and members agencies have been unable to produce any statements of the accounts of individual Names in either of those Trust Funds. Yet Names alone are the direct owners of those Trust Funds.

Other evidence is believed to have been uncovered by an Association of US Names that, contrary to the Trust Deed of the American Dollar Trust Fund, monies have regularly been loaned and borrowed from within it. Lloyd's itself alluded to these malpractices in its 1994 proposals for the establishment of a centrally promoted $500 million to $1 billion line of credit for the use of illiquid syndicates.

THE REWARDING OF ILLEGAL AND UNLAWFUL ACTIVITIES

The Sasse and Savonita affairs are well-documented in literature about Lloyd's. In brief, Lloyd's paid the policyholders' claims in full even though it had evidence which proved beyond any reasonable doubt that the claims were fraudulent and that organized crime was heavily involved. Also well documented is Lloyd's lethargy in processing legal papers for the enforced return of Mr. Peter Cameron Webb and Mr. Peter Dixon to the UK to stand trial for theft and fraud at Lloyd's. In addition there are a number of other well recorded instances where Lloyd's failed to take appropriate action for the investigation or prosecution of criminal activities.

More recently, evidence has been accumulating that Lloyd's may not have been able to pay out on the Piper Alpha policy. Some Names claim that evidence exists which indicates that Lloyd's and a number of leading underwriters knew that the Piper Alpha rig did not satisfy the Government's minimum approved safety standards. That failure would have been sufficient reason to void the policies. Other Names question whether the quantum paid out by Lloyd's for loss of production properly reflected the discounted cash flow shortfall, alleging that Lloyd's paid out the full value of the immediate loss in oil revenues without making allowance for the fact that the oil itself remained in the ground and would be extracted in later years.

Lloyd's has also regularly paid penalty and punitive damage awards levied by US Courts on corporations for industrial pollution and other anti-social offences. Some Names question whether these should rightly have been paid. Consequently they further question Lloyd's bona fides, at least as regards its own members' interests, in rewarding the perpetrators of those illegal, unlawful and anti-social activities.

Senior underwriters have often justified those payments as being in the best long term interests of Lloyd's as a whole as the goodwill of brokers and policyholders must be retained in order to protect future business. But if a Name leaves a syndicate which has made such payments, he has done so for the benefit of Names in succeeding years, not for his own future benefit and he receives no reimbursement or compensation from his successors. This practice makes a mockery of the Lloyd's Acts which state that a Name underwrites for his own account only and for no other person's.

Thus, the practice of paying out such sums may be seen to reward illegal, unlawful and anti-social activities. It may also indicate that Lloyd's acts, at times, with mala fides in regard to its own members' best interests.

NEW AND PROSPECTIVE ABUSES

Run-Off Management

At the 1994Lloyd's Annual Meeting the Chairman of the Names Defence Association drew the attention of the Chairman and the Chief Executive of Lloyd's to the massive conflicts of interest and the high administrative costs of Run-Off Managers. Although Lloyd's issued new byelaws in early 1995 concerning the appointment and regulation of managers of syndicates in run-off, it has not addressed the underlying problems and present ongoing abuses which may, even now, be worse than ever.

Members of syndicates in run-off are the victims of outrageous practices which Lloyd's regulators ignore and which some advisers suspect may be contrary to agency contracts and to Lloyd's byelaws. A recent study commissioned by the Names Defence Association has identified ten firms of run-off managers who, at 31 December 1993, had charged their client syndicates a total of £81.36 million for their future administration and future claims handling fees and expenses. Other Run-Off Managers made no such charges.

Further abuses resulting from these charges for future services involve the draw-down of deposits and guarantees and compulsory withdrawals from the Central Fund. Under Lloyd's byelaws, Names are liable to pay only for costs and expenses which have been made or incurred. They are not liable for costs and expenses which are "to be incurred". It is possible therefore that Names' deposits have been drawn-down and Central Fund withdrawals have been ordered by those Run-Off Managers and by Members Agencies for sums for which there was no lawful justification.

These huge provisions for future expenses may have provided opportunity for still further abuses. It is possible that, early in 1994, the Run-Off Managers paid themselves those monies out of syndicate funds. The subsequent interest earned by them on such massive sums would have further supplemented their own revenues at the expense of their syndicates' Names. Certain members of the Names Defence Association and their personal advisers have been endeavouring to exercise their rights of inspection of the syndicate books and records to ascertain whether such further abuses have in fact occurred. So far no such rights of inspection have been honoured by the Agencies concerned.

This same study has highlighted the concentration of the management of run-off syndicates into the hands of a tiny number of run-off agencies and service companies. According to the records studied, for example, 57 syndicates with 157 open years have either their accounting, administration or claims handling functions provided by one-particular firm of Run-Off Agents. Such a concentration is completely contrary to the intent of the Lloyd's Act of 1982 which sought to diversify the management control of syndicates.

Some Names now seek advice as to whether they have cause for legal redress against Lloyd's and against those run-off agencies.

The $500 Million Line of Credit

If Lloyd's succeeds in establishing a centrally organized $500 million to $1 billion line of credit for the use of illiquid syndicates, damaged Names on syndicates which make use of those facilities may be placed in a very much worse situation. At present, many damaged Names refuse to pay their alleged losses because they believe those losses are invalid or illegal. If, however, a major bank sues them for repayment of a loan which was taken out by a syndicate manager in their name, they may have scant redress. It is one thing to argue over the legitimacy of insurance underwriting losses; it is quite another to dispute a simple bank loan.

Damaged Names may in due course be faced with having to defend themselves in the Courts against major banks who seek recovery of their loans. When that happens Lloyd's will, in one quick and cynical move, have succeeded in distancing itself from its problems of collecting money from its recalcitrant members.

MORE INSIDER TRADING – BABY SYNDICATES: PREFERRED SYNDICATES: DEDICATED SYNDICATES

"Parliament's concern had begun in April 1985. These concerns were aggravated in August and September by revelations about the extent to which parallel underwriting syndicates continued to be used by insiders at Lloyd's to benefit themselves at the expense of the innocent outside member." Ian Hay Davison – Chief Executive of Lloyd's 1983-86

Baby syndicates were banned in the latter part of the 1980's. Some of those syndicates contained only one member; others contained as few as two, three or four. Only influential and favored Names appeared on the lists of the babies, for example the wives and family members of some syndicate auditors.

In 1979, 54% of all the 360 syndicates were operating "in parallel", that is a major syndicate had a closely associated baby or preferred syndicate alongside. This high ratio reduced gradually year by year until 1986 when 30% of syndicates operated in parallel. And only then were baby syndicates banned.

Research findings of the Names Defence Association indicate that abuses were rife. Baby syndicates opened up to accept the high layer excess of risk re-insurance policies on a claims made basis; and were closed down within two or three years before any claims could be expected. Baby syndicates re-insured their outstanding risks to their ‘parent' syndicates at an undervalue before closing down. Delays in processing paperwork allowed some baby syndicates to accept very short-term risks when there was no risk, for example kidnapping after the expedition had been completed and the risk had terminated. And so on.

Some Names now seek counsel as to whether the underwriters involved in forms of insider trading such as those might have been guilty of illegal or unlawful acts.

External Names on Sturge syndicate 206 for the years 1979 to 1983, for example, did not fare as well as the favoured insiders on Sturge syndicate 207. During those five years, syndicate 206 had an average of 1,510 members, while syndicate 207 averaged 35 members. The net profitability per £10,000 line, however, was vastly different. Syndicate 206 averaged net profits of 6.13% over those years, while syndicate 207 averaged 33.35%.

The members for the time being of the Committee and Council of Lloyd's were well aware of the above abuses and there is evidence that some of them participated in them. One former Chairman of Lloyd's has publicly admitted that he was a member of a baby syndicate together with certain other former Chairmen of Lloyd's. Since baby and preferred syndicates could only have been tolerated because they enriched the insiders who participated in them, including those members of the Committee and Council who did, at the expense of the generality of external Names who did not participate, some of the external Names impoverished by these baby and preferred syndicates consider that they may have been the victims of malfeasance or abuse of power on the part of Lloyd's.

After baby syndicates were banned the rather larger Preferred Syndicates were permitted, and they continue today. It is believed that further abuses may still be practised in preferred syndicates through reciprocal understandings among some of the less ethical underwriters, their brokers and favoured clients.

Another manifestation of insider trading may emerge with the introduction of Dedicated Syndicates, where one corporate investor provides all the capital, which run alongside non-dedicated syndicates managed by the same agency. The scope for substantial abuse remains.

REGULATION OF LLOYD'S – FAILURE OF THE DTI'S RESPONSIBILITIES

Monitoring of Risk and Asset Diversification

Research findings indicate that neither the DTI nor Lloyd's regulators adequately monitored the spread and magnitude of underwriting risks in individual syndicates on any regular or systematic basis. Nor did they properly monitor the spread and diversification of the financial assets of individual syndicates.

Financial reporting procedures which cover such obvious matters are fundamental in the regulation of financial institutions throughout the developed world. They are particularly applied to insurance companies and money market funds, the types of organisations most akin to Lloyd's syndicates.

The most basic of regulatory procedures were either lacking or non-existent when it came to the regulation of Lloyd's syndicates.

The Solvency of Lloyd's

Research undertaken by the Names Defence Association indicates that the DTI has in the past years considered only claims paid and claims incurred and accounted for as specific liabilities by Lloyd's syndicates when making its annual solvency examinations. It has not taken into account any provisions for the long term US Liability losses known to be facing the Lloyd's market, even though it had detailed knowledge that those would be massive, unquantifiable, and unavoidable.

Lloyd's syndicates in run-off are akin to insolvent and bankrupt businesses. Financial businesses elsewhere seldom become insolvent or bankrupt when they are overseen by competent regulators. When they do, like Barlow Clowes, BCCI, Johnson Mathey Bank and Barings, they are exceptional; they make headline news.

In 1994, there were 478 Lloyd's syndicates in run-off.

The DTI has the ultimate responsibility for regulating the solvency and financial well-being of Lloyd's. It has clearly failed.

Names as Policyholders

The DTI also has a staturory responsibility to protect the interests of insurance policyholders, whether of Lloyd's policies or of other British insurers. Names at Lloyd's, because of their status as RITC, excess of loss re-insurance, E&O insurance, or personal stop-loss policyhokders, must represent numerically the largest group of policyholders at Lloyd's. As was evident at recent hearings of the Treasury Select Committee, the DTI has so far not considered the interests of Names as policyholders.

TRADING WHEN INSOLVENT OR BANKRUPT

The actions of Lloyd's and DTI officials in assessing solvency might be likened to those of directors and auditors of a company who ignore its long term debt when considering its financial strength and ability to continue trading. If company directors allow their company to continue trading when they know that it will in due course be unable to pay all its creditors in full, those directors are guilty of a criminal offence. Lloyd's syndicates have certainly been solvent in recent years, that is using solvency in its common layman's business meaning of being able to pay creditors as they present their bills. But bankruptcy is a different phenomenon. Bankruptcy means that the debtor will be unable to pay in full all his known creditors when eventually those debts fall due. The DTI and key Lloyd's insiders have for many years had material information which clearly indicated that many of Lloyd's syndicates have been in the bankruptcy category.

Short-term liquidity is one thing. A state of secret bankruptcy is another.

This issue is particularly relevant in view of the one year nature of Lloyd's syndicates. A one year syndicate with significant exposure to US Liability risks would have had little chance of making sufficient profits in that one year to cover the totality of its ultimate liabilities. If, as was generally the case, that syndicate did not receive a sufficiently large opening RITC ‘premium' from the preceding year's syndicate, it would have traded for the rest of its year in a state of secret bankruptcy. It would have been unable to pay all its current creditors and in addition pay an actuarially sound and proper RITC ‘premium' to the succeeding year syndicate. Many long-tail syndicates were able to trade and then to close out their Accounts only because they in turn managed to pay out improper and fraudulently low RITC ‘premiums' to their successors.

It is now evident that during the 1980's many syndicates were in the above situation. Some Names seek counsel whether Lloyd's officials, DTI officials and some Agency directors and managers might have been criminally guilty of allowing those syndicates to trade while knowing that they would be unable to satisfy all their contractually committed liabilities in full.

Eventually, of course, the long tail US Liability problem manifested itself in such magnitude that syndicates found themselves unable to even go through the motions of setting up RITC ‘premiums'. Those syndicates now make up the mass of syndicates in run-off.

SOLVENCY AND THE SOCIETY OF LLOYD'S

Damaged Names May Have Little to Fear

Contrary to much current speculation, there may be little chance that the Society of Lloyd's itself is at risk of being declared insolvent. The Society may not in fact be a party to Lloyd's policies and it may have no ultimate financial liability to policyholders. Although it has increasingly used the monies held in the Central Fund to finance the payment of claims and Managing Agents' expenses, it does so only on the advice of its Council where, in its opinion, it is expedient for the advancement and protection of the interest of the members of the Society in connection with the business carried on by them as members. The Council might be quite able to refuse to give similar advice in the future. The Society of Lloyd's itself may therefore not be at risk of insolvency.

If and when the Central Fund's assets are exhausted many syndicates will face almost certain eventual insolvency; particularly those whose members will not or cannot pay their alleged debts. External policyholders will then be forced to sue Names through the English courts if they wish to have their claims settled. Detailed and exhaustive legal advice has, however, been given to some American Names which states clearly and unambiguously that the practical obstacles and the technical difficulties of doing this would make such a course of action quite uneconomic and unrealistic.

In addition, the likelihood of Lloyd's syndicates suing other Lloyd's syndicates for non-performance raises the spectre of an institution in the madhouse. It is simply not a realistic scenario where defaulting Names find that they are on two syndicates, one of which is suing the other. Not only would they find themselves suing other defaulting Names, they would find themselves suing themselves. Although this may in fact already have started to happen as litigating Names sue for E & O awards or damaged Names to sue for stop loss reimbursements, the likelihood of a mass of syndicates suing each other is remote. An uncontrollable chain reaction which would clog the Courts and arbitration offices for years ahead could not be tolerated, much though it would please many damaged and aggrieved Names.

It therefore seems probable that damaged Names may have little to fear, and perhaps much to gain, if the Central Fund is exhausted or ceases to be used to pay the alleged debts of the so-called defaulters.

DTI Annual Solvency Tests

It is also clear that the annual tests of solvency set by the DTI for Lloyd's are theoretical and inappropriate for the situation in 1995 where syndicates in run-off outnumber syndicates still trading by a factor of perhaps three.

A strong argument can be made that syndicates in run-off should be segregated by Lloyd's from syndicates still trading in all matters, and that they should be treated as the bankrupt business organisations which they essentially are and placed under the control of official receivers for a speedy winding up, leaving the policyholders to sue underwriting Names individually thereafter.

There may be little likelihood that many syndicates are at risk of becoming insolvent in the near future at least not as far as having their cheques bounce. At 31 December 1993 Lloyd's syndicates held in their totality cash funds and reserves of more than £12.75 billion. On a speedy winding-up of syndicates in run-off some damaged Names might even recover some money.

LLOYD'S STATUTORY DUTIES AND ITS POLICYHOLDERS

Nowhere in the Lloyd's Acts is it stated that the Society of Lloyd's has a duty to its policyholders. Such duty as Lloyd's has to its policyholders is incidental and secondary to its obligations to Names. It has a duty to policyholders only in the same way that any business undertaking has a duty to honour the contracts it makes with its customers. It is a truism that it is much easier to obtain repeat business from a satisfied customer than it is to find a new customer.

It is unfortunate that many persons, including some learned judges and many senior Lloyd's personnel, appear to be under a wrong impression of what the Lloyd's Acts actually state.

LLOYD'S – ITS DUTIES OF CARE AND UTMOST GOOD FAITH

Power without Responsibility

During the years 1992 to 1994 the High Courts and Court of Appeal decided that Lloyd's has no duty of care to its members. The Courts decided that, under its Acts, Lloyd's has powers over its members, but it has no duties or responsibilities to them.

Some Names were confused when, in spite of the Court of Appeal's decision that Lloyd's has no duty of care, they read what the Master of Rolls said about the Lloyd's Council in that judgement. He wrote, "The decision makers were representative of Lloyd's Names, mostly elected by them. There was no obligation on the decision makers to make their decisions independently on the basis of considerations relating to the public interest. They were obliged to act in pursuance of the objects of Lloyd's. . . as set out in section 10 of the 1871 Act. . ."

Those recent major Court decisions make little sense to many Names who have read the Lloyd's Act, 1911 which lists the current objectives of Lloyd's and which replaced those in the 1871 Act to which the Master of Rolls erroneously referred. Those Names argue that, if Lloyd's does not have a duty to act at all times to achieve its statutory objects, there is no reason to have those objects enshrined in an Act of Parliament at all. They do not understand why the Courts have interpreted the "objects" of Lloyd's as meaning "powers" as they have been unable to find any dictionary which even remotely assigns it such a meaning. They speculate that if Parliament had wished Lloyd's to have only "powers" it would have used that word in its enactments; it would not have used the word "objects". They, who are not trained in the arcane language and interpretations of the law, believe that when Parliament specified that Lloyd's has "objects" which are clear, unambiguous and unqualified by any provisos, Parliament inferred a distinct duty and obligation on Lloyd's to endeavour to implement and achieve those objects.

In addition, in the light of those judgements, they wonder why Section 14 of the Lloyd's Act, 1982 should exist at all. That section gives Lloyd's immunity from being sued for damages by Names for negligence or anything else in the absence of bad faith. They argue that such an exemption is only needed if Lloyd's does indeed have a duty to its members. Without such a duty, there is no need for immunity.

To the consternation of some Names, the Courts also decided in 1994 that the Crown Prosecution Service and the Coastguard Service have no duty to act with care when they go about their daily tasks of prosecuting suspected felons or of saving lives on the high seas. The Courts of England have thus found that the Society of Lloyd's and other great national institutions have powers but no responsibilities. Some Names find that a frightening prospect. They liken such a state of affairs to a corrupt third world dictatorship where private citizens have no status or rights. They believe that these decisions of the English Courts are fundamentally flawed and should be challenged at the first major opportunity. They realise, therefore, that their task of obtaining justice as regards their grievances at Lloyd's may be unusually difficult in England.

Indeed, a number of them now believe that they will be forced in due course to look to the Laws of the European Community and the United States of America. Already the Writs Response Group is sponsoring the defence of Mr. John Clementson against a solvency writ from Lloyd's, his defence being based on alleged illegalities and infringements of European law by Lloyd's concerning inter alia its operation of the Central Fund.

Misrepresentation – Good Faith

It is unlikely that any person ever joined Lloyd's except on the understanding that Lloyd's would act in good faith and with care and diligence in all circumstances to all people, including themselves. Many Names now believe that they were fraudulently encouraged to join Lloyd's by the Society itself through the false promises of its brochures, its records of false profitability as shown in its Annual Global Accounts, its false reputation as a major dollar earner, and particularly by its carefully developed but false reputation for its probity, a reputation built up over centuries. In brief, they believe that they were totally misled by Lloyd's. In fact, they now believe, it was not an honourable and profitable body.

Had those Names been told that the Society of Lloyd's and its Managing and Members Agencies believed that they had no duty to act with care and diligence as regards the members' and clients' interests, they would not have joined. Had they been told that the Society of Lloyd's itself, together with its leading Agencies, would put forward those pleas in the High Courts and Court of Appeal, they even more certainly would not have joined. But that is just what Lloyd's and its leading Agencies did plead in several recent cases. Why, those Names wonder, was no Name ever told of those beliefs and attitudes at a Rota meeting, or on any other occasion.

For those and other reasons, some members of the Lloyd's Action Group for Restitution and Deposit Defence are now planning Court action to have their memberships of Lloyd's set aside.

LITIGANTS IN PERSON

Some damaged Names are increasingly determined to take a hard line regarding their alleged losses at Lloyd's. Because legal costs are so high as to be unaffordable to all but the seriously rich, a number of them have indicated that if necessary they will be prepared to defend themselves by acting as litigants in person if they are sued by Lloyd's. The Names Defence Association will endeavour to assist them in this course of action particularly if it becomes apparent that damaged Names will not or cannot subscribe the very substantial funds which will be required to proceed through a trial in a more conventional manner.

It is foreseen that several hundred Names might then be able to supplement the basic NDA master Defence with uniquely different and personal arguments when they represent themselves in Court. The volume of evidential information already assembled by the NDA, together with the products of the individualised programmes of evidence gathering by each of those Names, would ensure that when any of them comes to Court for trial, his case will not be quickly completed.

The possibility exists that the High Courts could be tied up for years by aggrieved Names, each determined to have his own particular say, and at length.

THE DISSEMINATION OF LOSSES THROUGHOUT LLOYD'S

Many Names who are so far relatively little hurt by the losses at Lloyd's will find that they too do not remain unscathed. The spreading of the E & O awards over other syndicates and the impact of personal stop loss claims will hurt many. The voiding of re-insurance policies on the grounds of material non-disclosure will hurt still more. The failure of more Names to meet their commitments will place further demands on those who wish to continue.

As time goes by the number of complacent Names will diminish; and the number of those who believe they have been deluded and defrauded will increase. Lloyd's is Britain's biggest financial scandal since the South Seas bubble; and it will only get worse. The formation of Equitas, should it happen, will provide a little breathing space but ultimately Government action and new legislation, whether in the UK or the USA, may be needed before the problems of Lloyd's and the US insurance industry are fully resolved.

The tragedy is that if the Cromer Report had not been concealed from the Names for fifteen years, and if its recommendations had been implemented by Lloyd's during the 1970's, the damage inflicted by long-tail US Liabilities would have been quickly confined and isolated to only a few, and Lloyd's would not now be in its present perilous state. The responsibility for that rests firmly with successive Lloyd's Councils and with the DTI.

APPENDIX 1

LLOYD'S NORTH AMERICAN US$ BUSINESS - Non-marine; All Other

(Asterisks ( * ) see note 2 below)

Net Claims Net Claims Lloyd's
Policy Net Paid Out Est. Final Paid Out Est. Final Est. Final
Year Prem. To 31.12.93 Pay Out To 31.12.93 Pay Out Profit/Loss
$(millions) (percent) (percent) $ (millions) $ (millions) $ (millions)
1967 41.48 1,499.76 *1,499.76 622.00 622.00 -581 loss
1968 45.38 333.54 *333.54 151.00 151.00 -106 loss
1969 49.46 394.35 *394.35 197.00 197.00 -147 loss
1970 56.22 299.74 *299.74 169.00 169.00 -112 loss
1971 56.46 211.87 *211.87 120.00 120.00 -63 loss
1972 60.46 220.73 *220.73 133.00 133.00 -73 loss
1973 53.38 221.80 241.80 118.00 129.00 -76 loss
1974 67.39 257.51 276.51 174.00 186.00 -119 loss
1975 84.02 163.92 176.92 138.00 149.00 -65 loss
1976 106.31 148.33 165.33 157.00 175.00 -69 loss
1977 154.16 91.88 107.88 142.00 166.00 -12 loss
1978 197.36 84.38 104.38 167.00 206.00 -9 loss
1979 229.24 87.61 114.61 201.00 263.00 -33 loss
1980 229.94 121.99 167.99 281.00 386.00 -156 loss
1981 265.21 139.14 205.14 369.00 544.00 -279 loss
1982 305.54 326.06 426.06 996.00 1,302.00 -996 loss
1983 253.20 238.48 338.48 604.00 857.00 -604 loss
1984 368.50 191.95 291.95 707.00 1,076.00 -707 loss
1985 571.45 102.92 165.92 588.00 948.00 -377 loss
1986 563.79 37.09 77.09 209.00 435.00 129.00
1987 630.06 27.35 67.35 172.00 424.00 206.00
1988 509.57 45.52 95.52 232.00 487.00 23.00
1989 637.94 77.05 167.05 492.00 1,066.00 -428 loss
1990 870.34 27.37 92.37 238.00 804.00 66.00
1991 1,195.05 20.08 100.08 240.00 1,196.00 -1 loss
$million $million $million $million
Totals 7,602.00 7,616.00 12,191.00 -4,589 Loss
Notes: 1. The above figures are calculated from Lloyd's Settlement Statistics Package at 31 Dec. 1993.

( * ) Lloyd's have not laid down minimum reserves to close for the years 1967 to 1972.
The above figures do not account for agency expenses, agency profit commissions (where profits were shown at year 3), nor for Lloyd's expenses, or other Names "personal" expenses.
LLOYD'S GLOBAL ACCOUNTS

(Data sources: Lloyd's; Barclays de Zoete Wedd Securities)

Year Names Underwriting Gross Net U-writing Pre-tax Profit
of Acct. No. % of 1988 Capacity Premiums Result to Names
(£ millions) (£ millions) (£ millions) (£ millions)
1979 17,279 53% 3,049 1,457 37.1 229
1980 18,506 57% 3,415 1,862 21.7 352.7
1981 19,089 59% 3,562 2,258 -43.5 248.3
1982 20,095 62% 4,111 2,893 -187.9 161.7
1983 21,547 66% 4,381 2,570 -114.7 119.6
1984 23,377 72% 5,090 2,959 137.8 278.2
1985 25,917 80% 6,682 3,056 190.5 195.5
1986 28,242 87% 8,511 3,712 744.6 649.4
1987 30,936 95% 10,290 4,195 411.7 509.1
1988 32,433 100% 11,018 3,714 -549.2 -509.8
1989 31,329 97% 10,956 3,966 -1,902.00 -2,063.20
1990 28,770 89% 11,070 5,281 -2,417.70 -2,319.10
1991 26,539 82% 11,382 6,014 -1,993.50 -2,047.80
1992 22,259 69% 10,046
1993 19,537 60% 8,878
1994 17,526 54% 10969
1995 14,800 46%
Total trading losses: -5665.1 -4,196.40
(£ millions) (£ millions)
Note: The pre-tax profit or loss to Names is arrived at after adding investment income to the underwriting surplus or deficit, and then deducting management, agency and Lloyd's expenses and agents' ‘profit-sharing' commissions.

UK INFLATION ADJUSTED RESULTS

Year Cost of Gross Net U-writing Pre-tax Profit
of Acct. Living Index Capacity Premiums Results to Names
1979 764 7,332 3,503 89.2 550.7
1980 879 7,134 3,890 45.3 736.8
1981 985 6,641 4,210 -81.1 462.9
1982 1039 7,271 5,116 -332.3 286
1983 1094 7,358 4,316 -192.6 200.9
1984 1144 8,174 4,752 221.3 446.8
1985 1209 10,153 4,643 289.5 297.1
1986 1254 12,469 5,438 1,090.90 951.4
1987 1300 14,537 5,926 581.6 719.2
1988 1388 14,578 4,914 -726.6 -674.5
1989 1495 13,459 4,871 -2,336.50 -2,534.50
1990 1635 12,437 5,933 -2,716.20 -2,605.50
1991 1708 12,241 6,468 -2,143.90 -2,202.30
1992 1752 10,533
1993 1785 9,135
1994 1837 10,969
Total trading losses: -6,211.60 -3,365.10
(£ millions) (£ millions) (£ millions)
Note: It is probable that the inflation adjusted figures would show materially worse overall losses if the (much lower) US and Canadian cost of living inflation factors had been applied to US$ and Cdn$ underwriting profits and losses

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Contact Truth About Lloyd's

http://www.truthaboutlloyds.com/fraud/ndalloyds.html

Posted: **Wed Dec 19, 2007 11:14 am**

.

Although the links between the Windsors and the Walker-Bush clan go back at least to the 1920s, the roots of this present crisis can be found in events in 1992.

June 6-8, 1992
Prime Minister John Major
United Kingdom
Met with President Bush during a private visit to Washington, and Camp David (Maryland).

http://www.state.gov/r/pa/ho/15738.htm

1/8/03 HYPERLINK "http://www.newsday.com/news/nationworld/nation/wire/sns-ap-obit-mcclendon0108jan08,0,6212268.story" \t "_blank"

White House Reporter Sarah McClendon Dies

"If the people were to ever find out what we have done, we would be chased down the streets and lynched." -- George Bush, cited in the June, 1992 Sarah McClendon Newsletter

rigorousintuition.ca

Lloyds of London Asbestosis Fraud

Lloyds of London Asbestosis Fraud

Janet Reno

Janet Reno

Re: Lloyds of London Asbestosis Fraud

Treason Felony Act

Names Defence Association paper

June 1992