Equitable Life yesterday moved closer to launching wide-ranging legal action against former directors and professional advisers. It is writing to the different groups asking for full explanations of their role in the life assurer's collapse last December.
Letters will be sent to 20 former directors, Equitable's auditors Ernst & Young and its lawyers Denton Wilde Sapte. They are all required to respond early in January.
Equitable said in a statement: "If in all these cases we do not receive satisfactory explanations, and if it is cost effective to do so, we will commence legal proceedings."
Directors in the firing line include the 12 members of the board when Equitable was forced to close to new business last year. Among this number are Alan Nash, Equitable's old managing director, and Chris Headdon. Mr Headdon is being investigated separately by the Financial Services Authority for not disclosing vital information about Equitable's financial strength when he was appointed actuary in 1999.
Eight other senior executives who ran the society from 1993 will also have to account for their actions. It was in 1993 that Equitable first embarked on its controversial policy of paying smaller final bonuses to those who insisted on taking up the guarantee in guaranteed annuity rate (GAR) policies. The strategy eventually led to a surprising and highly damaging outcome of the House of Lords court case last year, which forced Equitable to compensate its GARs to the tune of £1.5bn.
Peter Martin, a past non-executive director of Equitable and the group's spokesperson, gave a guarded welcome to the letters being sent. "We feel apprehension and anxiety but also relief at being able to tell our side of the story at last."
Two of the most established figures at Equitable who will be recipients of the letters are Roy Ranson, 71, who joined in 1953 and was Equitable's appointed actuary. Another director on the list is John Scalter, president of Equitable Life from 1994 until his resignation in December 2000.
Equitable may also sue E&Y and Denton Wilde Sapte. Equitable said it had "serious concerns" about the actions of E&Y following a report into the actions of the company by its new auditors, PricewaterhouseCoopers.
Denton Wilde Sapte and its own barristers will have to account for legal advice given to Equitable in 1998 that it should test its differentiated bonus policy in court, without informing the financial regulator of this intention.
Equitable's board was advised to write to these groups by Herbert Smith, the law firm which has been investigating past key players for the last six months.It said it would not consider pursuing the FSA until the report by Lord Penrose was completed in the second half of next year.Reuse content