Lloyd's chiefs face fraud charges over pounds 5.4bn

A GRAND JURY in New York is to examine allegations that Lloyd's insurance market recruited 3,000 American members by hiding liabilities of pounds 5.4bn from them.

The legal move will be the first step in a process that could see senior figures at Lloyd's facing charges of fraud in America over a secret policy dubbed "recruit and dilute". No one has been prosecuted in the UK over the pounds 11bn losses dumped on unsuspecting recruits during the disastrous insurance years of the Eighties.

Twenty thousand new members - or names - were allegedly drawn into the market on the strength of figures that showed no hint of an impending flood of claims for asbestos pollution and illness.

British names have demanded that charges be brought against senior Lloyd's officials who, they claim, knew about the deluge of claims to come, but did nothing to warn them. While the authorities here appear content to let the market regulate itself, US prosecutors are gunning for Lloyd's.

It is understood that the American Federal Post Office service is close to laying evidence before a grand jury in a bid to launch criminal proceedings. Two investigators from the Post Office - who have police powers - visited Britain last year to gather evidence. Sources say that the men believe they have a prima facie case of fraud.

If charges are brought, they will centre on allegations that Lloyd's sent misleading material to American names during negotiations to settle losses in the early Nineties. Those negotiations involved names having their losses capped in return for agreeing not to take legal action against Lloyd's.

It has emerged that Lloyd's lawyers in America, Mendes & Mount and Lord, Bissell & Brook, sent annual reports to London warning of precise numbers of "asbestos bodily injury" claims in the US.

Lloyd's said it knew nothing of any grand jury hearing. A spokesman refused to discuss claims that information had been withheld from names, other than to say there was no evidence to suggest it had been.