The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

Correspondence: 04/03/2003 - Paul Braithwaites letter to the Select Committee on Public Administration

4 March '03 - Letter from Paul Braithwaite to Dr Wright Parliamentary Commissioner for Administration re Equitable Life

Dear Dr Wright,

Parliamentary Commissioner for Administration and Equitable Life

I want to raise an issue with you which is of great concern to EMAG's 10,000 paid-up members and to MPs (many of whom have referred cases to the Parliamentary Commissioner) to ask whether the Committee you chair has any power to look into the matter.

EMAG represents former and existing policyholders of the Equitable Life, the difficulties of which I am sure you are aware. Many of those policyholders, particularly 50,000 with-profits annuitants, are in severe financial difficulty as a result of the managerial and regulatory failures surrounding the Society over a period of many years. I'm sure you would agree that it is essential that the causes of their plight should be looked into properly. And yet, although 285 MPs have referred cases to the Parliamentary Commissioner, only one test case is being looked at and that one very, very slowly!

This study has been underway for sixteen months and will, apparently not be completed before summer. It appears to those affected by the Equitable Life debacle that the Commissioner is doing everything she can to avoid reporting before Lord Penrose's inquiry into the Society is published, which will in all probability not be until Parliament reconvenes in October. In addition, the single case being evaluated is from the recent period 1999-2000, because that is a conveniently amply evidenced by Ron Baird's report of October 2001.

The Commissioner, and her predecessor, has steadfastly refused to look at any of the hundreds of referred cases prior to 1999, yet failed to give a satisfactory explanation as to why. All seven policyholder groups ("E 7") made representations back on October 29th, 2002 that the P O study be immediately broadened back to embrace the 1990s. A comprehensive letter from Ann Abraham on December 4th to all interested MPs refused to reconsider and persisted with the excuse of waiting for Penrose.

The Penrose Inquiry is looking at "lessons to be learned for the industry" by evaluating ALL surrounding circumstances over a 50 year period. It reports to the Treasury who will determine what and when it is published. By way of contrast, the office of P O is exclusively focussed on evaluating maladministration, and reports to Parliament a very important distinction when the Treasury itself is a possible culpable party.

There has been very considerable confusion over the remit of Penrose. It does not embrace addressing liabilty, as implied in Abraham's above mentioned letter. This has been explained at length to EMAG by the secretary to the Penrose Inquiry in the following unequivocal terms:

29th January, 2003 from the Penrose Inquiry to EMAG:

"There has been a consistent confusion between the concepts of determining liability, which only a court can do, and drawing critical conclusions and making adverse comment on the basis of findings of fact, which Lord Penrose has consistently made clear that he can do and will do if justified by the evidence."

That letter including a restatement of a para from an earlier communication on December 20th, 2002:

"He (Lord Penrose) has made clear that he will not shrink from making adverse comment about the conduct of individuals or institutions. Thus it is entirely possible that he will arrive at findings that are critical of specific parties. That is quite different from determining breach of a legal duty or liability for any resulting loss, which could only be done by a court of law, following all the necessary adversarial processes and making a full assessment of damage for each claimant."

These comments seem to EMAG to remove any logic for further delay by the PO. The case for investigating maladministration in the 1990s was made apparent by the excellent tenth interim report of the Treasury Select Committee (27th March, 2001) where, at conclusion "n", was the unequivocal statement:

"It is important that the role of regulator since 1993, when Equitable Life began to operate a policy of terminal bonus differentiation, should be analysed in order for the regulatory lessons to be properly learnt, for policyholders to fully understand the history of the affair and for Parliament to undertake its scrutiny of this topic properly ..."

For the two years since the subject of possible regulatory failure in the 1990s has remained seemingly unaddressed. Most recently Lord Penrose wrote to the chairman of that same Select Committee (7th February, 2003) and included at para 7:

"The work I have described above has confirmed my initial view that there are wider issues than the guaranteed annuity rates, and that the factors leading to the situation at Equitable go back a good deal further than the early 1990s when the GARs came into the money."

This would seem to confirm that the period of focus for causes of failure of both anagement and regulators stretch back to 1990 and maybe earlier. Sir Howard Davies has repeatedly expressed the view that "the die was cast" at Equitable Life before the inception of the FSA on 1st January 1999.

There is a weight of evidence of a strong possibility of maladministration by regulators under the supervision of the Treasury in the 1990s. Only the office of the P O as the independence and focus to conduct a sufficiently independent investigation with a view to addressing liability. But there has been an inexplicable resistence to embracing this much needed study.

If you and your Committee are able to do anything to look into this matter and to persuade the Commissioner to radically broaden her investigations into the 1990s as well as to expedite the current investigation so that it is concluded shortly and not after the Penrose inquiry has finished, very many policyholders and elderly annuitants would be in your debt. Thank you.

Yours sincerely,

Paul Braithwaite
General Secretary of EMAG