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

Media Stories: 04/10/2005 - The disgrace of UK regulators and Vanni Treves.


Chris Blackhurst, City Editor,
London Evening Standard 4 October, 2005

"After years of misery and rancour, the Equitable Life debacle is over, bar the shouting. But it is not the only City catastrophe in which the company’s boss, Vanni Treves, has played a part.

A SENIOR lawyer friend of mine names different add-ons to his sumptuous country home after his best pieces of business. So, there's the conservatory paid for by the litigation from a City fraud, the swimming pool after a Department of Trade and Industry inquiry that lasted for years. You get the picture.

Doubtless, somewhere in Berkshire, Oxfordshire and Surrey, there will soon be paddocks built complete with ponies called "Equitable" and "Vanni".

It's been said and written many times that the only winners from the Sorry Equitable Life catastrophe are the lawyers. First, there was the cave-in over Ernst & Young, the society's former auditors

One minute, the mutual led by Vanni Treves says Ernst & Young should be made to suffer, and to pay, for alleged negligence in its part in the mis-selling scandal and its aftermath - which engulfed the society and left more than one million policyholders nursing reduced pensions and savings. Treves demands Ernst & Young pay £2 billion.

The next, the High Court reduces the claim to £700 million. Then, he Packs in completely - "the biggest climbdown in English legal history" is how Ernst & Young's barrister, Mark Hapgood QC, crowingly calls it - with both sides meeting their costs, thought to total around £50 million. At the same time as he goes for the advisers, Treves announces, amid great fanfare, that he is to pursue 15 former directors for £1.7 billion. Then, the same thing: he drops the suit against two of them with each party paying their legal bills, scraps a large part against a third, and is negotiating with the others. That's it.

After years of misery and rancour, the Equitable débâcle is all over bar the shouting. The customers have lost: on top of the loss they've incurred already, the hapless 600,000 remaining members will have to pay £50 each to cover the society's lawyers' charges of £30 million.

Ernst & Young has won - the firm is protected by professional indemnity insurance, so its legal costs of just over £19 million won't be paid by any of its 400 partners, who in the year to 30 June shared in a profits bonanza of £224 million. It remains to be seen just how much the ex-directors will have to fork out. As for Treves, himself a lawyer, he gets to keep his £1 million-a-year job, arguing that he had no choice other than to bring the actions because he had a duty to act in the policyholders' interests and he would be in breach of that duty and vulnerable to being sued if he didn't.

Equitable joins the great British board game of shame, where the little man, through no fault of his own, has landed on the wrong square at the wrong time, nobody has gone to jail and the lawyers have collected substantially more than £200. To Equitable can be added Maxwell, Shell, Lloyd's of London, Cable & Wireless, Blue Arrow, Independent Insurance, Aberdeen - the list goes on and on.

Meanwhile, in the US, corporate executives are led away in chains, if Found guilty receive long sentences. Fearsome New York attorney-general Eliot Spitzer provokes fear and loathing in country clubs across the land. Imagine, in the UK, a businessman receiving the same 25-year term as ex-World Com boss Bernie Ebbers did recently. Or us putting Delia Smith behind bars for a share trading misdemeanour. The Americans did with their Delia, Martha Stewart.

US attorneys, when they come to the UK, scratch their heads in disbelief. John Moscow, the Manhattan lawyer who unravelled BCCI, likes to make a comparison: in terms of size and position in the financial world, London and New York are of similar size, yet the number of cases brought here for financial crime are negligible versus New York. Do we suppose fraud and insider trading never occur on this side of the Atlantic, he asks, that somehow they're a US phenomenon? That's certainly the impression we give.

That's not to say, before this newspaper provokes another suit arising from the Equitable fiasco and another pay-day for m'learned friends, that the mis-selling was criminal (although try telling that to the poor policyholders who saw their life savings go up in smoke).

We may mock the US gumshoe and raincoat approach, may revel in John Grisham's storylines, but we could do with it here. Look at the Equitable victims, sorry, policyholders. In 2001, the Government announces the setting up of the Penrose inquiry, an independent investigation, headed by Scottish judge, Lord Penrose. Some three years later, in 2004, the good lord finally reports. What does Penrose conclude? That the regulatory system failed the policyholders and the Equitable was "the author of its own misfortunes".

Did the Government promise to hold up its hand and promise compensation? Not a chance. Ruth Kelly, then the Financial Secretary, launched a spin counter offensive denying responsibility. She, of course, has gone on to become Education Secretary, so she's an Equitable winner, too.

This, let us not forget, is a Labour Government. Coming from a Conservative one, with all its vested business interests, this indifference might be predictable - but no less objectionable.

The nadir surely, was Tony Blair's recent attack against the one watchdog we have - our own Spitzer, such as it is - the Financial Services Authority: "Something is seriously awry when the Financial Services Authority that was established to provide clear guidelines and rules for the financial services sector, and to protect the consumer against the fraudulent, is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone."

So, we march blithely on. There will be more Equitables and more Maxwells. And more Treves. In 1991, four directors of Maxwell Communication Corporation consulted their City lawyer because they suspected wrongdoing by the late tycoon. He advised them to keep quiet because their first duty was to protect shareholders. "On the evidence available it was the only advice that could be given," said the lawyer. His name? Vanni Treves."