Equitable Life - Opinion

Anne Ashworth - From the Times

29 March '03

Equitable Life has been called many things some of them unprintable in a newspaper that cares about its readers' sensibilities. But no description has been as damning as the latest terms: pyramid scheme and Ponzi. The Equitable Life Members Action Group (Emag) alleges that the insurer operated like a pyramid scheme during the Nineties, making overly generous payouts to customers who retired or transferred. These payments were funded from the money invested by newcomers. In a Ponzi fraud (named after the notorious Twenties swindler Charles Ponzi) the new victims of a fraudulent investment scheme support the returns made to the early investors. The result of Equitable's alleged practice was a Pounds 1.3 billion hole in the with-profits fund, which the company concealed. The Penrose inquiry into the Equitable scandal will appear in June. Equitable investors will expect it to investigate Emag's claims thoroughly, taking into account the role of the former directors and also that of the Department of Trade and Industry, which at that time regulated insurers, although without any great diligence. The Treasury has the right to withhold full publication of the Penrose report. The latest accusations make this veto even more unacceptable. The least that Equitable Life investors deserve is the truth about what really happened at the company. Anyone who never had anything to do with Equitable may now be suffering a certain fatigue at the affair. But we should all care that a company charged with the responsibility for long-term savings was run in such a deplorable fashion.