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Documents: 29/10/2007 - John Newman and Paul Braithwaite’s accounts of their day in Court 16

John Newman and Paul Braithwaite’s accounts of their day in Court 16

Equitable Life
URL: http://boards.fool.co.uk/Message.asp?mid=10814326

Subject: Who pays the piper? Date: 29/11/07 10:43

Author: megalochori Number: 68387

After protracted correspondence over the last five months with the FSA, Lovells and Steve Sarjant (the Independent Expert, IE, of Watson Wyatt - Actuaries), the great day arrived and yesterday I was in Court 16 for the hearing of the Scheme to transfer the WPAs to the Pru.

My role was as one of 2 policyholders who turned up and as Chairman of EMAG - unacknowledged, of course. One other person spoke - Herr Weyer, a German lawyer, for the German policyholders who he represents. I would have rather had another QC trained in the job to speak for the WPAs and EMAG but at a cost of approx £20,000+ for a good junior, I reluctantly stepped up to the task. We maintain EMAGs funds for PO2 and the inevitable Judicial review that will follow. Well rather I stepped down into a kind of pit below the Judge right at the front of the Court below the Clerk of the Court and an assistant. Not much leg room and in front of the main performers - the 2 QCs for ELAS/Pru and the FSA and behind them a packed Court room containing CT and VT, I am told, along with brass from the FSA. I suppose the fact that they were behind me and invisible was a good thing.

The morning was spent from 10:30 to 1:00 listening to Martin Moore QC (who had handled to Can Life hearing for ELAS) and who was now instructed by ELAS & the Pru. A good solid peformance although he still hasn't really grasped what WPAs are - the Court bundles of 8 binders of documentation contained no illustration of how they worked so he attempted one in his skeleton and the Judge interjected. But he deftly gave a slanted and sanitised history avoiding any criticism of any of the management of ELAS - well done and the piper sang a clear and compelling tune.

The afternoon was spent by a brief complaint from Ms Houghton: dealt with charmingly by the Judge who is also the top Judge in the Companies Division and called Chancellor. Then Herr Weyer who was fluent; the point he raised was that the German policyholders who are WPAs are a seperate class. As I am re-reading the Origin of Species my mind wondered a bit as Darwin speculates over classes called in his work species and sub-species. Before dealing with the finches of the Galapagos, Darwin takes as examples breeds of pigeons and dogs the result of un-natural i.e. human selection. The definitional point Darwin makes is that they are seperate species if they cannot be cross-bred or the result is infertile. My delightful dachsund/jack russell cross breed came into my thoughts and I wondered if the German WPAs could liaise with the Brits? Memories of my happy times in Germany with the frau & fraulein sprang to mind!!

But then back to the policies issued to the Germans which are, briefly:

  1. written under German law
  2. written in German
  3. payable in euros and calculated in euros
  4. were on a different bonus series somehow
  5. not subject to UK Inland revenue rules
  6. contain a restricted recission clause whereby the funds are paid back given insufficient funds in ELAS.

I think they are a different class, should be viewed seperately and that they are, in effect, an oppressed minority in this transaction. If they have legs for a claim for recission then given the transfer to the Pru they have to sue ELAS and the Pru. If they got satisfaction then a secret deal would put ELAS in some of the funds that went to the Pru to fund the recission. So they are disadvantaged. But of course the IE's report does not make them out, (as I had criticised in correspondence) as a seperate class. Again a piper paid by two paymasters of ELAS and the Pru who want only two classes of the WPAs and the rest - he looked and found that what the Actuaries of ELAS and the Pru had told him was OK. The Court is, following precedent, unminded to interfere with the IE and hasn't had a precedent of an oppressed minority so this was all crushed. Then the complaint of loss of rights was swiftly categoridsed as a GAR related complaint and hence compromised in 2002. Mr Moore had used the word bleat in his opening to complain about herr Weyers comments being sent in German, so I naturally thought that the germans were goats and the Brits sheep!

Then me on my feet and wearing the wrong glasses - frankly I give myself 3 out of 10. I managed to suggest to the Judge (who I suppose is in his early 70s) that the WPAs, who are on average over 75, may as a class not be internet adept and that the FSA notice over the internet of approval delivered 6 days ago - their report - was not good enough. His response was that he was quite capable on the internet and implied I was being condescending to the aged. Ho hum - the fact that many delightful members of EMAG are 100% on the ball and in their late 80s versus some in their 60s who are not was not something to get across - move on!

The performance from Mr Glick QC was smooth and practised; short simple and wholly admirable in being a protector of the FSA: he pipes an admirable tune too. He said sorry that he hadn't dealt with the lateness of teh FSA report but it was for the Court and that was it. The statutory objective of the protection of the poliyholder was presumably dealt with. On the question of independence of the expert the Chancellor observed that the "question of his terms often came up and gave rise to disquiet for the parties - they should have regard to this; since remuneration may effect result. Does the FSA routinely ask for the terms?". Glick responded that the FSA did not after a whispering session. I felt that the FSA must like to see people banging their head against a brick wall - we raised this in June 2007 and December 2006 for the Can Life deal because of our concerns over Mike Arnold of compromise fame. Incidentally Arnold turns out to be a member of the 3 man independent With profits committee of the Pru. So more brick wall!!

I think class identification and voting we can pass over; the two issues for me which I thought important and which I suggested the Scheme be amended for. The second was PO compensation and the second was the unfairness of the deal for the WPAs if the 80% is sold off at a profit subsequently - some part of this should be for the WPAs. No says Moore clean break and nothing committed. Same tune from Glick - "we asked ELASs yesterday - no bids had been invited or received". So if the Equitable gets lucky and on the ides of March 2008 a fat rabbit is pulled out of the hat by VT that is tough for the WPAs. I fluffed it here. Then on PO compensation why no agreement on this? well Glick felt that to deprive the WPAs would be inconceivable (heard many times in the ELAS story); I failed to get across my real concern that the compensatiobn, if any, would follow the pension provider into ELAS first for tax reasons. For ELAS this would be a dead policy bonanza as their records for 2000 and 2001 are probably not on a cd or two even one in transit to the criminal russian mafia!

I felt depressed and clearly who pays the piper does pay for the tune. The FSA demonstrates that it is paid by the industry and sings their tune even though this means it is the worst in Europe. Glick did make in his closing speech a fatuous argument about paying IE's out of the FSA's funds - the taxpayer wouldn't like it. I wonderd if he really has thought about who pays the FSA, and then his fee!

Then we all rise and the Chancellor says "JUDGEMENT 2:15 ON FRIDAY 30 NOVEMBER SAME COURT!. I bet it is a rubber stamp with hopefully a few comments.

Equitable Life
URL: http://boards.fool.co.uk/Message.asp?mid=10814607

Subject: Re: Who pays the piper? Date: 29/11/07 12:37

Author: PaulBraithwaite Number: 68392

I too sat through the entire painful proceeding in Court 16 yesterday, and had lunch with John Newman and Markus Weyer of DAGEV in the middle.

I can confirm that the Society's silk, Mr Moore had a very thin grasp of what a with-profits annuity is, which only goes to show what little chance the 56,000 WPAs had - given Moore must have had the very best actuarial advice!

John does himself an injustice as to the competence of his stand up performance, which in front of leading silks rated at least a five (with extra points warranted for being a beginner).

I was perhaps in a better place to form a view as I sat amongst almost the entire FSA regulatory team on the shelves.

There were about 35 people in Court. Aside from silks, I counted at least 14 from the legal profession.

As well as a nervous FSA team I was utterly astonished to see Vanni Treves himself arrive at 10.42 am and stay for the day. That has never happened AFAIK on any of ELAS's 70 or so Court days. He sat alongside the hugely expensive Society's lawyers Lovells' partner Neill Fagan. Immediately behind them sat Charles Thomson and "I know where ALL the bodies are burried" Alistair Dunbar, along with the Society's Counsel advisor.

It was noticable that the Society's brief was very very nervous and protective about ELAS's total refusal to analyse the voting and, in particular, how many of the votes had been cast by Chairman Treves. I disturbed the decorum when I hooted at Moore QC's assertion that the Society (and I quote): "...places importance on the anonomnity of voting..."

Excuse me, but is this the same Society that authorised Gabriel Moss QC to reveal in open court how I had voted in the compromise? HUMBUG.

John Newman certainly DID get through to the Judge, Sir Robert Morritt (aka Chancellor), on the issue of transparency of the contract of the Independent Expert.

The affidavit from EMAG was predominantly concerned with the contemptuous and utterly useless contribution of the FSA to helping policyholders and I venture to say its overarching interest in the entire proceedings was not consumer protection but arse covering.