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 until 1997.
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
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 incompetent agent.
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
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
Trident funds, based in the Cayman
Islands, have raised more than $3bn over the past decade from
outside investors and Marsh executives
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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