THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, August 23, 1996 TAG: 9608230100
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY ROB WELLS, ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: 67 lines
Lloyd's of London was hoping Thursday for a resolution to the remaining legal challenge to its restructuring plan. Instead, the federal judge delayed his decision for a day, and two states began some serious saber rattling.
The Colorado attorney general's office said it intends to file a lawsuit to force Lloyd's to give investors extra protections, such as allowing them to sue for future claims and requiring an independent audit of its losses.
And the New York attorney general urged U.S. District Judge Robert E. Payne, in Richmond, to order that all disputes between Lloyd's and American investors be resolved in U.S. courts.
One participant in the Lloyd's legal saga, Colorado securities commissioner Philip Feigin, observed that the litigation seems never-ending.
``The more and more I deal with this, the more I feel this is a financial Vietnam,'' said Feigin.
Meanwhile, Payne continued to sift through two days of testimony and boxes of exhibits in a lawsuit brought by American investors against Lloyd's of London.
The lawsuit seeks to force Lloyd's to provide investors greater financial details about their participation in a plan to rescue the insurance market. It asks Payne to issue a temporary injunction that would delay investors' participation until the new financial details are released.
Payne told attorneys earlier this week he expected to file his decision late Thursday, but he issued a brief statement saying the opinion will be issued this afternoon. He didn't explain the delay.
The outcome of the case is critical to final approval of the restructuring plan, and consequently, the future of the 308-year-old Lloyd's of London. Investors have until Wednesday to approve or reject the plan.
Colorado's chief deputy attorney general, Stephen K. ErkenBrack, said in an interview his agency intends to sue Lloyd's to improve consumer protections within a July settlement the insurer signed with 38 state securities regulators.
ErkenBrack, in a letter sent Wednesday to Lloyd's attorneys, requested major revisions to an agreement signed by Feigin in July to reduce investors' losses by up to $63 million.
``If you assume there were misrepresentations, Colorado citizens were induced to enter a relationship with Lloyd's. That relationship continues to be ongoing. That makes us unwilling to walk away from this case,'' ErkenBrack said.
In London, Lloyd's spokesman Nick Doak said he had not seen the letter from Colorado, but he found the deputy attorney general's action ``perverse'' because Feigin had already struck a deal with the insurer. Feigin was the main negotiator for state insurance regulators in the agreement reached with Lloyd's.
``I find it quite remarkable that Phil Feigin has done what he believes is an honorable and adequate deal for the state, and now this other department's doing this,'' Doak said.
Feigin said he intends to abide by his agreement with Lloyd's, but added that he lacks the authority to bargain on behalf of the state attorney general.
Dennis Vacco, New York's attorney general, sent a letter to Payne late Wednesday urging him to include in his order a requirement that all disputes between Lloyd's and American investors must be resolved in this country.
``Given the global controversy Lloyd's seeks to resolve, it is a modest concession,'' Vacco wrote.
Lloyd's has argued the agreements all investors signed specify that any disputes must be heard in British courts. The letter from Vacco is significant because Lloyd's American trust funds reside in New York bank accounts. by CNB