Geoffrey Vos, counsel for the names, or members, claiming damages from the agents who placed them on the Gooda Walker syndicates, read a 1989 internal memo from Fenchurch, a members' agency, about Mr Walker's syndicate 290.
'I had not realised how heavily he had been buying time and distance policies, the effect of which has been to enhance considerably the profits disclosed on the years to which they applied,' wrote the agent. The use of the time and distance policies turned syndicate 290's 1981 closed-year loss of pounds 768,000 into a reported pounds 2.4m profit, and in 1985 turned a pounds 2.7m loss into a pounds 5.2m profit.
Mr Vos asked: 'Would you agree that the seven-year profit record shown in the accounts is what attracts names to a syndicate?' Mr Walker agreed. The number of names on syndicate 290 climbed from 713 in 1983 to 3,163 in 1989.
Time and distance policies are normally used by Lloyd's underwriters to manage cash flow and ensure adequate reserves. Under accounting rules, the premium paid is deducted from profits but the eventual benefit received is added simultaneously. Lloyd's did not require full disclosure of these in syndicate accounts until 1987.
Lloyd's has charged Mr Walker with 'discreditable conduct in the failure to notify auditors' of the cancelling and replacement of four time and distance policies in 1991 - a charge he denies.
Mr Walker said yesterday he had not calculated the probable maximum losses his syndicate could incur. The case continues on Monday.Reuse content