Michael Bright, Philip Condon and Dennis Lomas have been found guilty of conspiracy to defraud in relation to their running of In dependent Insurance, of which they were directors. They are to be sentenced tomorrow morning.
Outline
In June 2001 Independent Insurance went into provisional liquidation. Hundreds of jobs were lost, thousands of shareholders lost investments and over £366 million has since been paid out under the statutory compensation scheme.
This disastrous turn of events was in stark contrast to the picture of the company given in the annual accounts (for year 2000) published in March 2001. During the 1990's the business had grown rapidly. It became stock exchange listed and was making its mark as a big player in the insurance sector. In 2000 the market value of the company had reached £900 million. The published report and accounts stated profits of £22 million, indicated net assets of over £300 million and expressed a positive outlook for the company. But in fact, in 2001 the company was in difficulties and it started to come to light that in two specific aspects of the company's business, actions had been taken which created a more positive financial picture than was the case. Namely:
- The withholding of claims data from the company's actuaries and,
- The incomplete disclosure of agreements between the company and its re-insurers.
This revelation prompted the opening of criminal investigation in June 2001 by the Serious Fraud Office with the City of London Police. Three senior directors of the company were subsequently charged in December 2005 with offences relating to (a) and (b) above. The trial opened at Southwark Crown Court on 31 May 2007. The persons tried were:
- Michael John Bright (d.o.b. 10.08.44), former chief executive officer
- Philip John Condon (d.o.b. 27.05.49), former deputy managing director
- Dennis Lomas (d.o.b. 04.11.50), former director of finance
The actions that constituted the offences were not in themselves the cause of the demise of the business but they were an attempt to disguise the true financial position of the company. The net effect was that the annual accounts for the year 2000, rather than showing a £22 million profit, should have recorded a loss of at least £180 million. A five page case briefing note is attached to this release to help explain this case.
Offences and verdicts
The jury delivered verdicts yesterday and today. The offences and verdicts are:
(A) Withholding of claims data.
That all three defendants between 1 January 1998 and 17 June 2001 conspired to defraud (contrary to common law) the directors, employees, re-insurers, shareholders, policy holders and others who had a legitimate interest in knowing the financial condition of Independent Insurance Co Ltd ("IIC") and Independent Insurance Group Plc (IIG") by dishonestly withholding claims data from actuaries Watson Wyatt LLP.
The verdicts:
- Michael Bright, guilty. Philip Condon, guilty. Dennis Lomas, guilty.
Each defendant was also charged with alternative individual counts of fraudulent trading (contrary to section 458 of the Companies Act 1985) in relation to withholding claims data. Upon returning verdicts on the conspiracy to defraud charge, the jury was not required to return verdicts on these fraudulent trading counts. These counts are to remain on the file.
(B) Non disclosure of contracts
That all three defendants between 1 October 2000 and 17 June 2001 conspired to defraud (contrary to common law) the directors, employees, shareholders, policy holders and others who had a legitimate interest in knowing the financial condition of IIC and of IIG by dishonestly making incomplete disclosure of all actual or intended agreements between IIC and its re-insurers.
The verdicts:
- Michael Bright, guilty. Philip Condon, not guilty. Dennis Lomas, guilty
Each defendant was also charged with alternative individual counts of fraudulent trading (contrary to section 458 of the Companies Act 1985) in relation to non-disclosure of contracts. However, in respect of Philip Condon, this offence was removed from the indictment at the end of evidence at trial, and he has been acquitted of that charge. Upon returning verdicts on the conspiracy to defraud charge, the jury was not required to return verdicts on these fraudulent trading counts in respect of Michael Bright and Dennis Lomas. These counts are to remain on the file.
Sentencing
Sentencing to take place at Southwark Crown Court tomorrow morning at 10.15am. Confiscation proceedings have been commenced and have been adjourned.
The case was heard before His Honour Judge Rivlin QC. Prosecuting counsel were Andrew Baillie QC, James Pavry and Emily Radcliffe
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