Controversy greets head of Exchange

The Stock Exchange yesterday ended a five-month search for a new chief executive when it named Gavin Casey to replace Michael Lawrence, who was ousted in January after bitter clashes over his management style. But controversy soon surrounded Mr Casey's appointment when details of his role in the infamous Blue Arrow affair in the 1980s resurfaced.

The Stock Exchange chairman John Kemp-Welch said: "We have been rigorous and thorough in checking this matter with the relevant regulatory authorities and we are satisfied he had no more than a peripheral role [in the Blue Arrow affair]. There was no criticism of him in the [DTI] report."

Mr Casey, 49, was deputy chief executive of County NatWest when the merchant bank launched Blue Arrow's pounds 837m rights issue in 1987 that led to a fraud trial four years later.

He denied being closely involved in the unsuccessful rights issue and rejected allegations made on behalf of one defendant during the trial that he had ``run for cover'' when the official investigation into affair began. "I strongly refuted those suggestions at the time and I do so again," he said yesterday.

It was alleged that City advisers bought into the Blue Arrow rights issue to bail out the recruitment agency after realising the cash call would flop. The Court of Appeal quashed convictions of four financiers linked with the rights issue four years ago.

Mr Casey joined Smith New Court in 1989, and became chief operating officer before the broker was bought by Merrill Lynch last year. He has since played a key role in the integration of the two businesses.

"He is a proven manager of change," Mr Kemp-Welch said. "He will lead the executive team in the implementation of the Exchange's strategy, which is now close to being finalised."

The appointment comes at a crucial time for the Exchange, which is nearing momentous changes that will introduce a new electronic system of trading shares.

The Exchange is transforming its current trading system from a quote- driven one where prices are displayed electronically but deals done by phone, to an order-driven system with electronic matching of trades.

The move threatens the traditional privileges given to market-making firms. However, Mr Casey denied his association with the broker would colour his view of the debate. "I have no strong theological position either way," he said.

Mr Casey is the Exchange's third chief executive in as many years. Both Mr Lawrence, who was paid a basic salary of pounds 345,000 and received a pounds 500,000 pay-off, plus his predecessor, Peter Rawlins were sacked. Mr Rawlins left in 1993 amid controversy over the Taurus electronic share settlement system, which was abandoned at an estimated cost to the City of pounds 400m. But Mr Kemp-Welch denied the chief executive's position was a poisoned chalice. "There was no shortage of people interested in doing the job," he said.

Mr Casey, who takes up his new post in August, said he looked forward "to implementing what needs to be done" at the Exchange. Mr Kemp-Welch refused to disclose any details about Mr Casey's salary, but did say he would be on a two-year rolling contract.

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