KPMG 'negligent' over Independent Insurance

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The Independent Online

The Administrators of Independent Insurance are suing its auditors, KPMG, for negligence over the collapse of the insurance company in 2001.

The Administrators of Independent Insurance are suing its auditors, KPMG, for negligence over the collapse of the insurance company in 2001.

The administrators claim that KPMG should have spotted clues to the giant hole that opened up in Independent's accounts, and are demanding it pays tens of millions of pounds in damages.

The suit is the second major legal action launched by the administrators, from PricewaterhouseCoopers, following a similar negligence claim against Watson Wyatt, Independent's actuaries.

KPMG said it has not yet seen the details of PwC's claim - which are expected to be served today or tomorrow - and would not comment on the lawsuit.

The particulars of the claim are believed to tot up losses caused by board decisions to continue writing new business or pay shareholder dividends based on a financial picture that resulted from KPMG's allegedly negligent audit performance. It argues that the directors would have made different decisions if they had been aware of the true state of Independent's finances.

The company collapsed in 2001, after Watson Wyatt revealed that it could not put a figure on the company's employer's liability insurance claims. That admission triggered the withdrawal of a fund raising aimed at propping up the company's balance sheet and it went into administration soon after.

The company had been worth almost £1bn at its height, and Michael Bright, its founder and chief executive, had a stake worth £58m. He had secured loans on his Independent shares, however, and was declared bankrupt after its collapse.

Watson Wyatt is being sued over claims it should have spotted a massive shortfall when it reviewed Independent's reserves in the years from 1997 to 2000. PwC is demanding damages from Watson Wyatt of a similar order of magnitude to those wanted of KPMG, described by those close to the suits as "tens of millions of pounds".

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