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

Press Releases: 30/10/2003 - PO does a "U turn", thanks to EMAG.

The Parliamentary Ombudsman does an astonishing " U turn" on her Equitable Life Report's conclusion, thanks to EMAG.

At a packed AGM meeting attended by 150 members, EMAG announced a major achievement. The Ombudsman Ann Abraham has confirmed, contrary to a central conclusion in her Report into regulation of the Equitable Life, that she has changed her mind and is now willing to consider investigating maladministration in the 1990s in the light of the Penrose Inquiry, after its publication.

Her report, which exonerated the FSA, was met with widespread dismay. The seemingly unequivocal last words of its summary were: ""I have decided, therefore, to exercise my discretion under the 1967 Act not to investigate further complaints about the prudential regulation of Equitable."

At the AGM, well respected ex-regulator and one-time Parliamentary Standards Commissioner Sir Gordon Downey attacked the Report:

"The Ombudsman has concluded, not only that the FSA did no wrong, but that there is no case for inquiring into the previous regulators at all. She also concluded that she had no powers to examine the role of the Government Actuaries Department, to whom the Treasury and the FSA had substantially delegated regulatory responsibility. I have seen no evidence to support this view and cannot believe Parliament intended that the Ombudsman's role should be circumscribed by such a manoeuvre. I have to say that I think this is a craven acceptance of a Government agenda." *

The "U turn" is the result of EMAG having given the Ombudsman notice of its intention to lodge a High Court claim. EMAG's application for a judicial review, lodged at Court on Sept 30th, seeks to quash the Ombudsman's Report. At a meeting last week, Ann Abraham was urged by EMAG to reopen her investigation and look into maladministration in the 1990s. The Ombudsman's formal response to a series of questions posed will be considered by EMAG before progressing its claim.

"Ann Abraham has actually come full circle. Last December she wrote to all MPs saying she would wait for Penrose before deciding whether to look back. Her Report, which was a shabby travesty, then said 'no way' - despite everyone acknowledging that 'the die was cast' during the 1990s. Now she's rescinded. The Parliamentary Ombudsman is vitally important in our democracy, because it's function is to focus on maladministration by Government departments and, as in Barlow Clowes, she can recommend Government compensation. EMAG therefore welcomes Ann Abraham's change of heart as an encouraging step in the right direction."

Paul Braithwaite, General secretary of EMAG

* The transcript of Sir Gordon's speech is at: www.emag.org.uk

For further information contact:
Paul Braithwaite
General secretary of EMAG

30th October, 2003

Notes for editors:

EMAG delivered to the Parliamentary Ombudsman a letter before claim on 11th Sept, which led to a response by the city-based solicitors for the PO (Mayer, Brown, Rowe & Maw) on Sept 25th containing the volte-face.

In the Sept 11th letter EMAG offered to meet with Ann Abraham in an attempt to achieve a non-judicial resolution to its complaint about the Report. The meeting took place on Thursday 24th October. There was a full and frank exchange. Subsequent to that meeting, EMAG's solicitors Bindman & Partners have lodged a series of ancillary questions that the Ombudsman has undertaken to answer by early next week. The responses will be reviewed by EMAG before it decides how to proceed.

EMAG's other core complaints are:

  • The Ombudsman was legally incorrect to exclude the Government Actuary's Department (GAD) from her jurisdiction. The GAD bears a heavy responsibility for the serial failure of regulation over the 1990s because it was, de facto, the prudential regulator.
  • Her procedure was flawed, and she disregarded relevant considerations. She received evidence from those accused of maladministration (Government departments and the FSA) but made no effort to seek evidence from any of the 540 complainants, industry experts, potential bidders, academics, policyholder groups etc. She did not even interview the "lead case" selected (Mr P) and in consequence made factual errors about his circumstances.
  • She concluded that "the requirements placed on the prudential regulator were firmly grounded in a light touch approach to regulation". In fact the primary legislation, the 1982 Insurance Companies Act, says no such thing. "Light touch" was enshrined in a secret Service Level Agreement between the Treasury and the FSA, which was unknown to any Equitable policyholder.
  • She failed to consider and address key issues and relevant evidence. The FSA should not have allowed The Equitable Life to continue generating unrealistic expectations by issuing annual notices showing a high level of projected benefits. Nor should it have continued to allow The Equitable systematically to "over-bonus" throughout the 1990s, causing on-going deficits of billions of pounds, as revealed by the Burgess Hodgson (BH) forensic accounting Report that receives no mention in the 120 pages of her Report. The BH Report's conclusions were shown to have been conservative by Equitable's own actuarial figures revealed in the Appeal Court.