The Penrose Inquiry into the demise of Equitable Life was attacked yesterday as "emasculated" after its decision not to comment on the actions of key players in the company's troubles because of pending litigation.
Policyholders and MPs accused the Penrose Inquiry of being deeply flawed after it emerged that Ernst & Young, former auditors of Equitable, will not be criticised in the report due to its £2.6bn lawsuit from Equitable's current board.
Fifteen former directors of the society are also being sued by Equitable for £3.2bn. It seems likely that they too will escape criticism. However, it is understood that some of the directors have received parts of the Penrose report under the maxwellisation process, which allows parties that are criticised in the report to put forward a defence against the claims.
Paul Braithwaite, of the Equitable Members Action Group (EMAG), said: "There are only three parties involved in this situation - the regulators, the auditors and the directors. We are now right up to the wire on this report finally being published and it is being emasculated."
E&Y has been told it is not part of the maxwellisation process. Lord Penrose said it was "inappropriate for the Inquiry to make any observation regarding the issues forming the focus of the continuing litigation between Equitable and E&Y."
MPs were also confused by what Penrose hopes to achieve. Norman Lamb, a Liberal Democrat, said: "How can this be an all-encompassing report when it is silent on the role of key players?"
The Treasury and the Department of Trade & Industry have confirmed they have received parts of the report that criticise them. Equitable intends to sue the Government if the Penrose report gives them enough evidence of negligence.
The criticisms came as policyholders were celebrating a victory yesterday in overturning a ruling in a separate inquiry into Equitable that reignites the hope for compensation. After lobbying by EMAG, the Parliamentary Ombudsman, Ann Abraham, said she would consider reopening her investigation into the role of regulators in the demise of Equitable in light of what is found in the Penrose Inquiry. In July, she said she had "decided not to investigate further".