Equitable Members’ Action Group
42 Bartholomew Villas
Kentish Town
London, NW5 2LL
15^th September, 2002

Mr Charles Thomson
Chief Executive
Equitable Life Assurance Society
55 Basinghall St
London, EC2V 6DR

Dear Mr Thomson,

Penrose - why wait?

On 6^thSeptember you replied on behalf of Vanni Treves to a letter from EMAG’s chairman Alex Henney. I am replying on Alex’s behalf, since he is at present away.

The content of your letter was disappointing. You did not address the points raised.

You wrote that Lord Penrose:

“….. will have access to a great deal of information that is not available to us.”

I had it confirmed to me by the Inquiry that the vast majority of the written evidence has in fact been supplied by the Society. In any event this is a “red herring” because the Inquiry will be extremely sensitive to confidentiality. So much so that we can’t be confident that any valuable new material will ever reach public domain. This was convincingly demonstrated (and spelled out in Alex’s letter) by the Treasury having already refused MPs on the Treasury Select Committee access to their 1998 briefing papers and minutes.

Also, see the Inquiry’s own website notes for confirmation:

“The Inquiry is required to report to Treasury Ministers. Much of the information being considered by the Inquiry is subject to legal and commercial confidentiality restrictions, and such restrictions may also attach to information included in the report of the Inquiry. It is not for the Inquiry, therefore, to determine whether the report can or should be published. That would be a matter for Treasury Ministers.”

The Penrose Inquiry will explicitly not seek to allocate blame but will merely describe the events leading up to the Society’s state at 31^stAugust 2001. I recently received a helpful written explanation from Hugh Burns, secretary to the Inquiry (dated August 29^th). This included the following verbatim quotes:

“Lord Penrose has been asked to report to Treasury Ministers. That is what his terms of reference require. The question of whether the report should be published is clearly a matter for Ministers, not for the Inquiry.”

“As for compensation, you will be aware that it is not for Lord Penrose to determine matters of liability, and that he is careful not to assume the proper function of the courts. Any decision to award compensation in the absence of a determination of liability would be a matter of public policy for the Government.”

You wrote that:

“…in announcing the Penrose Inquiry, the Government made it clear that there will be no financial ‘lifeboat’ to the Society.”

This is neither strictly true nor relevant.

The issue that EMAG earnestly wishes the ELAS board to embrace is one of Government compensation for serial regulatory failure – nothing to do with lifeboats. It is not the Treasury’s prerogative to rule out compensation. The courts here, in the E.C. and the Parliamentary Ombudsman all have jurisdiction unaffected by any “bluster” from the Treasury. We are very concerned at the risks your board runs of neglecting thorough exploration of this obvious major avenue and also of becoming “time-barred” from initiating litigation. Time is of the essence.

It is extremely difficult for current and previous policyholders to contemplate taking actions against third parties without the explicit co-operation of the board but we have formed the impression that your co-operation has not been forthcoming and there is little sign of change. This, despite total unanimity by ALL action groups on the paramount need to scrutinise possible mis-regulation to the fullest extent and the universal feeling of policyholders that they have been let down by the regulators.

Since one year on Lord Penrose has yet to take his first witness statement, we cannot be confident that his report will be available in any form before 2004. Whilst you allude to there not having been any delay, the chairman of the Treasury Select Committee, John McFall, may not agree. His amendment in March to Christopher Chope MP’s Early Day Motion proposed his committee delay revisiting the Equitable until after the Inquiry, “expected to report during 2002.”

The excellent Interim 10^threport in March 2001 by Giles Radice, his predecessor at the Treasury Select Committee, spelled out prima facie serial regulatory failure dating back to 1994. It is, therefore, incomprehensible to EMAG that you and Vanni Treves give the appearance of hiding behind the “fire-wall” of Penrose and to have “set your cap” against exploring avenues of compensation for mis-regulation. Many policyholders suspect that your board is seeking to protect the Government.

This impression may be the result of the board having communicated that consideration of pursuit of the regulator, prospectively THE largest single source of compensation, is on hold and will only be visited AFTER Penrose. An unfortunate misapprehension is that his Report will allocate blame, address compensation and provide new documentation. None of these outcomes is likely - hence delaying is not justified. It would be reassuring if you could confirm that Herbert Smith has given consideration to and comprehensive written advice on pursuit of the regulator here and in Strasbourg. The delays of both the GAR rectification scheme and the Bacon & Woodrow actuarial review have fuelled a growing concern that the board is “playing for time” for political reasons unknown, however unwarranted this may be.

In summary, let me restate Alex Henney’s point: We have no doubt that the board does have sufficient information to progress proceeding against the regulators without delaying until the Penrose Inquiry reports because, in its eventual published form aeons from now, it may contain very little extra actionable detail.

Yours sincerely,

Paul Braithwaite

general secretary, EMAG

cc EMAG committee and website, board members