ROANOKE TIMES 
                      Copyright (c) 1996, Roanoke Times

DATE: Wednesday, August 21, 1996             TAG: 9608210045
SECTION: BUSINESS                 PAGE: B-8  EDITION: NEW RIVER VALLEY 
DATELINE: RICHMOND
SOURCE: Associated Press

SHARP EYE TURNED ON SEC STAFF DID LLOYD'S SWAY STOCK REGULATORS?

A federal judge on Tuesday asked if a top Lloyd's of London official and a senior British diplomat lobbied the Securities and Exchange Commission last week concerning Lloyd's $4.7 billion rescue plan.

U.S. District Judge Robert Payne also criticized SEC officials for not appearing during the hearing or taking a position on whether the British insurance underwriter's dealings with Americans violate U.S. securities laws.

The judge's remarks came as testimony continued for a second day in a lawsuit filed by American investors seeking to delay the Lloyd's complex restructuring plan until more financial information is disclosed.

The restructuring plan not only would rescue Lloyd's but also provide an end to the financial nightmares of American investors. Anyone who becomes a Lloyd's investor pledges his entire net worth to make good on the insurance polices Lloyd's agrees to underwrite.

Gigantic losses from pollution and asbestos lawsuits, as well as natural disasters, between 1988-1992 left thousands of investors in desperate shape. The plan proposes to put their money-losing policies into a new reinsurance company, thereby allowing investors to exit Lloyd's.

But they have to pay a premium to get into the new reinsurance venture, and agree to not to sue Lloyd's or its agents for policies covered in the settlement.

Payne said the SEC, by trying to remain on the sidelines, was engaging in unlawful activity.

Over the past five years, the SEC staff has written several letters to U.S. senators and others about Lloyd's recruitment of American investors.

Payne had ordered the SEC to clarify its relationship with Lloyd's, which included a 1993 letter that defended Lloyd's activities and suggested Lloyd's deals only with sophisticated investors who understand the risks and can fend for themselves.

``If the SEC feels that way, they have a responsibility to stand up,'' Payne said.

The SEC responded late Friday by saying it wouldn't take sides in the matter, but supports the right of American investors to sue in U.S. courts. Lloyd's earlier argued that its reorganization plan could be approved solely by British regulators.

Ronald Sandler, Lloyd's chief executive officer, told Payne that he didn't discuss what the SEC should say in response to the judge's order when he and SEC officials met Aug. 15. Sandler said he didn't encourage the agency's neutrality in the case, either.

Sandler said, ``My particular purpose [of talking with SEC officials] was to encourage the SEC to understand that ... the reconstruction plan ... was time critical.'' Lloyd's 34,000 investors worldwide have until Aug. 28 to accept or reject the plan.

Involved in the Aug. 15 meeting were Nicholas Davidson, a first secretary at the British embassy in Washington, D.C.; Harvey Pitt, an attorney for Lloyd's; Richard Walker, the SEC's general counsel; Norman Johnson, a SEC commissioner; and several SEC staff members.

Sandler said the meeting, which lasted 15 minutes, also didn't address whether Lloyd's dealings with American investors involved the sale of securities as defined by U.S. law. That's a critical point in the numerous private lawsuits pending against Lloyd's in this country.

Under U.S. law, investors could claim securities fraud. But British law, which Lloyd's contends applies in the case, would not consider similar securities claims, a SEC lawyer has said.

Walker, the SEC general counsel, refused to comment on the judge's remarks.

The lawsuit, backed by 450 of Lloyd's 3,000 investors, seeks to force Lloyd's of London to provide greater financial details about its massive restructuring plan. The lawsuit asks Payne to block the plan unless Lloyd's provides the additional information, particularly in detailing its losses.

Sandler defended the rescue plan during more than eight hours of testimony since Monday. Any court order delaying participation of U.S. investors in the settlement would undermine a deal that's essential to keeping Lloyd's in business, Sandler said. ``The consequences, in my view, would be devastating,'' Sandler said.

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