Lang of Monckton, a former Secretary of State for Scotland, has
become embroiled in a US class action over his role as a part-time
director of Marsh & McLennan, the world’s largest insurance
brokers, which has been accused of massive fraud.
with other directors, he is being accused of breaching his fiduciary
duty to shareholders by leading New York
law firm Goodkind Labaton Rudoff and Sucharow.
The action alleges that the former Tory minister
and other directors should have known that shares in the company
were "an imprudent investment alternative" for Marsh
follows a collapse in shares of the company after New
York’s attorney general
Eliot Spitzer alleged
his office’s review of documents from 2003 found that Marsh
collected $800 million (£431m) in improper contingent commissions
- more than half of the $1.5 billion (£907,000) in profit
it reported - last year in return for business.
prominent UK politicians to have been hit by problems on the other
side of the Atlantic have included the former Washington-based
British Ambassador, Sir Christopher Meyer,
who was a non-executive director of the American bank Riggs
which was accused of money-laundering, and former Tory
minister Lord Wakeham,
who was on the board of collapsed energy giant Enron.
Lang joined the Marsh
group as a non-executive back in November 1997. A former
MP for Galloway and Upper Nithsdale
from 1979 to 1997, he was Scottish Secretary
from 1990 to 1995 when he took over as trade and industry secretary
with other non-executive directors of Marsh &
McLennan, he recently announced that he had authorised
a thorough independent review of all activities.
have full confidence in the company’s leaderships,"
the directors said in a statement yesterday.
the review has been concluded, the board will take all appropriate
action in the interests of our shareholders, employees and clients."
has a history of taking tough action on leading names on Wall
Street - last year he was involved in a near £1bn
settlement with top stock broking firms after allegations that
their research was biased in favour of client companies ahead
of the collapse of shares in a number of big internet companies.
& McLennan is now the world’s best-known
as well as biggest insurance broker following its alleged involvement
in the scandal. Last week, as legal dangers hung over it,
trading was revealed as suffering badly as a result, with profits
down 94 per cent in the past quarter. Marsh
has also just announced that 3,000 of its workforce - one in ten
of the total - are to lose their jobs.
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Tory heavyweight Lord Lang
was last night under further pressure to quit his lucrative post
on the board of a huge American insurance company after it emerged
that a federal financial watchdog is probing executives’
and directors’ investments in controversial schemes that
have brought in billions of dollars over the past 10 years.
& McLennan, the world’s largest insurance
brokers, admitted that the Securities and Exchange
Commission (SEC) had begun
a formal investigation into investments by its executives and
directors in partnerships set up by the company.
The revelation follows months of damaging claims about alleged
"fraudulent and illegal" schemes entered into by the
company. The new investigation has brought the business
affairs of a man who was president of the Board of
Trade in the last Tory government
back into the spotlight.
has been mounting on the directors of Marsh,
including Lang, since the firm was accused
by New York Attorney General
Eliot Spitzer of manipulating insurance
bids to collect inappropriate fees, collusion, improper steering
of business, paying rivals not to make competitive quotes and
threatening firms that would not agree to Marsh’s
a result of the law suit, several executives of Marsh
have resigned and executives of several other insurance firms
have been arrested on anti-trust charges. This has started
a wider investigation into insurance companies and their practices
in the US.
the Attorney General’s action
Lang was named, along with other directors,
in a class action against the company which alleges "bid-rigging
schemes" and breach of fiduciary duties to Marsh
statement from the company said: "We take very seriously
the allegations made public by Attorney General
Spitzer. We are committed to getting
all the facts, determining any incidence of improper behaviour,
and dealing appropriately with any wrongdoing. This
is our highest priority."
seven-year stint with the troubled insurance giant has been a
lucrative one. He received more than £71,000 in fees,
stock and expenses from the group last year and owns shares worth
more than £140,989.
the controversy surrounding Marsh has
increased pressure on Lang to resign
his directorship. It has also focused fresh attention on
the former Scottish Secretary’s
mixed fortunes in the business world since he relinquished his
post as the UK’s trade supremo after the Labour landslide.
was one of a group of Lloyd’s
Names who went to court in 1996, while he was still at the Board
of Trade, alleging negligence by underwriters who carried out
catastrophe reinsurance business.
is believed to have lost some £800,000 in the collapse of
the Lloyd’s system.
His syndicate was one of those involved in the reinsurance spiral
whereby syndicates reinsured each other against catastrophe claims.
he left office he pursued another legal action against Lloyd's,
along with other names, claiming the organisation had failed to
meet the terms of an agreement to reimburse their legal fees as
part of a deal in which they agreed to drop a suit against an
former minister’s involvement in the business world has
been beset with problems. As recently as Christmas Eve,
Thistle Mining, the Scottish-Canadian
gold-mining firm he chaired, confirmed that its executive office
in Edinburgh was to close.
setback emerged after the company announced the departure of president
and chief executive Willie McLucas,
amid financial restructuring proposals which would see principal
lender Meridian Capital seize control
of the company.
drastic shake-up, which followed a series of disappointing financial
returns, renewed speculation over Lang’s
future at the helm.
problems with Marsh are a further blow
to Lang’s business career, and
threaten to plunge him into an embarrassing ordeal similar to
that endured by his former ministerial colleague Lord
was forced to resign as chairman of the Press Complaints
Commission because he was on the board of Enron,
the collapsed energy giant.
latest legal action case against Marsh
alleges that the firm forced its employees to use their retirement
savings programmes to invest heavily in its shares. Employees
face heavy losses since the firm’s stock plunged after Spitzer’s
revelations about the SEC investigation will
increase the pressure on all those in the Marsh
last week confirmed that the SEC had
requested documents and other information about "related-party
transactions" in which directors, executives or large Marsh
shareholders acquired a material interest, according to a report
in the New York Times.
transactions included dealings with the company’s Trident
funds, which were created by MMC Capital,
the company’s private equity business, and specialised in
investing in insurance companies and in starting insurance companies.
Trident funds, based in the Cayman Islands,
have raised more than $3bn over the past decade from outside investors
and Marsh executives and directors.
it is not unusual for financial and insurance companies and their
executives to invest together in partnerships created by the companies,
it is rare for directors of a company, whose duty is the interest
of shareholders, to do so. The Trident
III fund that was set up last year excluded directors from investing.
did not respond to requests for an interview.
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