Letter: Thomes Siefert Esq. to Sec. of State Madeleine Albright
May 14, 1998
The Honorable Madeleine Albright
The Honorable Philip Lader
Re: Fraud Committed by Lloyd's of London;
Dear Secretary Albright and Ambassador Lader:
This letter is being sent in response to the letter of April 8, 1998 from Mr. Charles P. Ries, Minister for Economic Affairs at the American Embassy in London (a copy of Mr. Ries' letter is enclosed for your reference as Exhibit A). Mr Ries' letter is in response to my letter of March 18, 1998 (a copy of which is also enclosed for your reference as Exhibit B). This letter is divided into two parts, Part I and Part II. Part I of this letter addresses and takes serious issue with the U.S. Department of State's policy of "non-intervention" in assisting U.S. citizens who have been defrauded by Lloyd's of London ("Lloyd's") out of billions of dollars, as such policy is articulated in Mr. Ries' letter of April 8, 1998. Part II of this letter addresses the issue of the apparent intervention of the U.S. Government in, unwittingly, assisting the English Government and Lloyd's in defrauding U.S. citizens out of billions of dollars.
PART I The U.S. Department of State Non-Intervention Policy Is Ill Advised And Is Totally Contrary To The U.S. Department of State's Own Published Policy "Encouraging" Foreign Governments To Intervene In U.S. Courts Proceedings.
My clients were extremely disappointed to receive the letter of April 8th from Mr. Ries in response to my letter of March 18, 1998. Mr. Ries' letter of April 8th (received by the undersigned on May 5, 1998) states,
". . . as a matter of law and policy, the U.S. Government is not in a position to intervene in matters before British courts. . ."
My letter of March 18, 1998 to Ambassador Lader (copy enclosed) went into great detail concerning the highly unique set of egregious facts and circumstances that are involved in matters relating to the fraud that was committed by Lloyd's and, under any circumstances I can not accept the response that to assist American citizens under such egregious circumstances is against the "policy" of the Department of State. But, when you: (a) take into consideration the fact that English Government has taken, and continues to take, a very pro-active role in both the American courts and in the English courts to the very substantial detriment of American citizens, and (b) take into consideration the U.S. Department of State's own published policy (as set forth below) of "encouraging" foreign governments to become directly involved in U.S. litigation, the policy (stated in your letter of April 8th) of non-intervention in connection with Lloyd's matters is not just ill considered and ill advised, it is unconscionable.
That is to say, first, if the English Government, as has been the case for at least the past several years, takes a very pro-active stance on behalf of Lloyd's of London ("Lloyd's") in U.S. courts, why can't the U.S. Government in a like manner take the some action on behalf of U.S. citizens. Second, if the English Government, as has been the case for, at least, the last fifteen years, takes a very pro-active role in both the English courts and with other English agencies that have jurisdiction over Lloyd's, why can't the U.S. Government likewise take an active role in the same matter on behalf of thousands of American citizens who were defrauded out of several billion dollars by Lloyd's. It is no answer and my clients do not accept the response of the Department of State that
"as a matter of law and policy, the U.S. Government is not in a position to intervene in matters before British courts."
The U.S. Government should not be afraid of Lloyd's or the English Government and the U.S. Government should not hide behind timid and trite clichés (as the one quoted immediately above) when thousands of Americans are being defrauded out of billions of dollars as a result of the actions of Lloyd's with the active complicity and the active participation of several branches as the English Government. I am not complaining to the United States Department of State about the actions of Lloyd's in defrauding U.S. investors out of billions of dollars. (Needless to say, that very important and very valid complaint is one that I and others are making in other forums other than the Department of State.) But I am complaining to the United States Department of State about, and requesting your assistance in connection with, the very active participation in this Lloyd's fraud by the English Government in both the U.S. courts and other U.S. agencies as well as in the English courts and in other English agencies. This conduct of the English Government is clearly within your area of responsibility and the U.S. Government should not condone actions by agencies of the English Government that defraud American citizens out of billions of dollars. I trust that it is your policy to become involved in such matters.
Please do not lose sight of the fact that the Lloyd's fraud was committed over a period of approximately thirty years and that Lloyd's knew that sooner or later the Lloyd's fraud would be discovered. That is to say, as set forth in detail in my March 18, 1998 letter (copy enclosed), Lloyd's knew in 1970 about (but failed to disclose) the huge losses that would occur (and Lloyd's went about recruiting thousands of unwitting Americans solely and only to pay for these huge but undisclosed losses). These losses did not begin to become public until the announcement in 1991 of the Lloyd's financial results for 1988. As a result, Lloyd's had approximately thirty years to "feather its nest" with the English Government and Lloyd's, with active participation of several branches of the English Government including the Prime Minister's Office, did 'feather its nest" in such a grand, pervasive and extensive manner that even Henry VIII might have been embarrassed by the conduct of the English Government. The net effect of Lloyd's efforts over the past thirty years is that Lloyd's has systematically achieved virtual immunity from prosecution, exemption from almost all legislation and, as a result essentially, Lloyd's only answers to itself. In addition, Lloyd's has totally co-opted every agency of the English Government that has any limited jurisdiction over Lloyd's activities and the English Government (through its well placed Lloyd's pawns) will do whatever it takes and say whatever it takes to see to it that Lloyd's survives the consequences of Lloyd's own fraud even if this means that the English Government is required to cover up Lloyd's fraud and even if this means that the English Government is required to cover up the English Government's own coverup of this matter.
(Although it not the concern of the Department of State, in a very similar Lloyd's-related matter, it should be noted that Lloyd's has also begun the process of co-opting the New York State Insurance Department (by far the most important insurance regulatory agency in the world), e. g., on September 15, 1997 Lloyd's outside legal counsel for the past few years became the General Counsel of the New York Insurance Department and, shortly thereafter, that General Counsel and the New York Insurance Commissioner ("NYID") went to London and negotiated an ill-advised agreement with Lloyd's that would have, unadvisedly, permitted Lloyd's to remove somewhere between $500 Million and $1 Billion from the Lloyd's American Trust Fund ("LATF") on deposit with the Citibank, N.A. in New York and send these funds to England. (The LATF was established in 1939 for the primary benefit of the Lloyd's U.S. policyholders and for the ultimate benefit of my clients and other Lloyd's investors similarly situated as my clients.) Fortunately, the NYID was called upon to justify its ill-advised actions that were supposed to become effective December 31, 1997 and, as result, of the pressure put on the NYID, the NYID "secretly" rescinded the order that would have permitted Lloyd's to send these funds to England.)
For illustrations of the very pro-active positions that have been taken by the English Government on behalf of Lloyd's I refer you to the following:
1. English Government's Letter On Behalf of Lloyd's in the U.S. Richards Litigation: The English Government retained the Washington, D.C. Office of the United States law firm of Morgan, Lewis & Bockius LLP to prepare and send a letter dated October 1, 1997 as "Counsel for the British Government" in favor of the position of Lloyd's in the Richards case pending in the Ninth Circuit Court of Appeals in San Francisco. (The Richards case was brought by several hundred American investors in Lloyd's who had been defrauded by Lloyd's out of billions of dollars.) A copy of this letter is enclosed for your information as Exhibit C.
2. English Government's Filing Amicus Statements on Behalf of Lloyd's in the U.S. Richards Litigation: The English Government also retained Morgan, Lewis & Bockius LLP to prepare and file a "Motion of the British Government For Leave to File A Letter As Amicus Curiae" ("English Government Motion") dated March 20, 1997 as "Counsel for the British Government" and the Letter as Amicus Curiae (the "English Government Amicus Curiae Letter") dated March 20, 1997 that accompanied this motion. The Amicus Curiae Letter was in support of and in favor of the position of Lloyd's in the Richards case. A copy of the English Government Motion and the English Government Amicus Curiae Letter are enclosed herewith as Exhibit D.
Please note with particular interest what the English Government states (at pages 2-3 of the English Government Motion) about the policy of the U.S. Department of State,
"In 1978 the [U.S.] Department of State, at the suggestion of the Clerk of the Supreme Court of the United States,[note 2] encouraged foreign governments to present their views with regard to pending judicial proceedings in which they have an interest directly to the U.S. courts.[note 3] Since then friendly governments have relied upon the State Department position and have submitted Statements as amicus curiae in relevant U.S. courts." (emphasis added)
In light of the above quoted policy of the Department of State announced in 1978, please advise how the Department of State can possibly justify and reconcile: (a) the position the Department of State took in its April 8, 1998 letter to the undersigned, i. e. the statement,
". . . as a matter of law and policy, the U.S. Government is not in a position to intervene in matters before British courts. . ."
with (b) the 1978 statement of the Department of State position contained in English Government Motion quoted immediately above. That is to say, is it possible for the Department of State to "encourage" foreign governments to intervene in U.S. courts and for Department of State, at the same time, to state that it is the policy of Department of State "not . . . to intervene in matters before the British Courts." I certainly do not understand how it is possible to reconcile these two positions that appear to be totally contradictory but I, nevertheless, would like to hear the explanation.
3. English Government's Intervention In the U.S. Allen Case: As the State Department knows, the English Government took a very active role in lobbying the U.S. Government in connection with the Allen case in August and September 1996. In the Allen case, U.S. Federal District Court Judge Payne issued an order that would have scuttled the Lloyd's "Reconstruction and Renewal Plan" ("Lloyd's terminology for a process that was equivalent to a U.S. Chapter 11 Bankruptcy Proceeding) and the English Government took an extremely active lobbying role in seeing to it that Judge Payne's decision (in favor of the U.S. investors in Lloyd's and against Lloyd's) was not allowed to stand for more than a few days.
4. English Government's Intervention in Quashing An Investigation of Lloyd's by the Securities and Exchange Commission: As the State Department also knows, in 1993 the English Government took a very active lobbying role to see to it that the Securities and Exchange Commission ("SEC") investigation of Lloyd's (underway since 1990) was abandoned with no adverse action being taken against Lloyd's.
5. English Government's Attempt to Thwart and Delay U.S. Attorney's Office Criminal Investigation Of Lloyd's: I enclose, as Exhibit E, a copy of the April 19, 1998 article in the London Observer that discusses the actions being taken by the English Government "Home Office" to blunt, postpone and thwart the criminal mail and wire fraud investigation of Lloyd's activities currently being conducted by the U.S. Attorney's Office for the Southern District of New York. As you are probably aware, the U.S. Attorney's Office for the Southern District of New York has, for the past several months, been conducting an active criminal investigation concerning the activities of Lloyd's and, as part of this investigation, the U.S. Attorney's Office had planned to send an investigation team to England in mid-April to interview a substantial number of English citizens with respect to the activities of Lloyd's but, due to the actions taken by English Government on behalf of Lloyd's, this visit was postponed and the English government has imposed some very strict and "chilling" conditions upon which such interviews may be conducted, including but not limited to, requiring that a representative of the Serious Fraud Office ("SFO") be present during such interviews and in the SFO going out of its way to "underline" that
"the witnesses [to whom the U.S. Attorney's Office and the Postal Inspectors wishes to speak] are under no obligation to speak to these U.S. Postal Inspectors."
With respect to the intervention of the SFO in Lloyd's matters, you should be aware of two very important facts:
(1) that Ian Hay Davidson, the Chief Executive ("CEO") of Lloyd's from 1983 to 1986 (and formerly the CEO of Arthur Andersen in England) went to the SFO during his tenure as CEO of Lloyd's to report the Lloyd's fraud to the SFO, but Prime Minister Margaret Thatcher on "policy grounds" elected to coverup Lloyd's fraud and ordered that no action be taken against Lloyd's; and
(2) many of the individuals that work at the SFO are former Lloyd's employees, i. e., Lloyd's has co-opted the SFO and the SFO certainly does not want U.S. Attorney's Office finding evidence of Lloyd's fraud on the SFO's "own turf," especially when the SFO has been well aware of Lloyd's fraud for at least fifteen years and, on "policy grounds" has never taken any action whatsoever against Lloyd's.
I trust that the "policy" grounds upon which your office has thus far declined to act in this matter are not the same "policy" grounds that caused Prime Minister Margaret Thatcher to refuse to act when Ian Hay Davison, the Lloyd's CEO, reported Lloyd's fraud to the SFO. That is to say, I trust that it is not the policy of the U.S. Government to coverup the English Government's coverup of the Lloyd's fraud. U.S. citizens deserve better. (In this regard please see Part II of this letter.) As you can see, stating that one can or can not do some thing on "policy grounds" can cover a "multitude of sins" but under any circumstances, the United States Department of State should not "wash its hands" of this matter based on "policy grounds." That is not and never will be a satisfactory position.
I also trust that, in light of the English Government's pro-active role on behalf of Lloyd's (as discussed above) and in light of the Department of States' 1978 statement of policy (quoted above), that the United States Department of State will reconsider its "non-intervention" policy announced in your letter or April 6, 1998. It is difficult enough to "do battle" with Lloyd's in light of the very substantial home court advantages that Lloyd's was able to obtain from the English Government over the past two decades (see my letter of March 18, 1998 for details of the very substantial advantages that Lloyd's was able to obtain from the English Government). U.S. citizens should also not be required to "do battle" as well with the English Government (staffed with many former Lloyd's employees) but unfortunately that is exactly what is being required.
Suffice it to say, if the English Government is willing to take a very aggressive, very public and very pro-active stance in support of Lloyd's in both the U.S. and England, why can't the United States Department of State, at the very least, use some quiet diplomacy to act on behalf of thousands of U.S. citizens who, with the very active aid and comfort of the English government, were defrauded and continue to be defrauded by Lloyd's. Certainly, the actions that we are requesting that you take in England are exactly the same kind of action that you "encourage" (pursuant to your 1978 policy quoted above) foreign governments to take in the U.S.
In light of the very pro-active stance being taken by the English Government on behalf of Lloyd's and in light of your policy of encouraging foreign governments to take a pro-active role in the U.S., please reconsider your "policy" about non-intervention. Lloyd's should not be able to get away with the largest fraud in history and the English Government should not be permitted to assist Lloyd's in this regard. Your prompt action is required and requested because, although most of the several billion dollars that Lloyd's has fraudulently obtained from U.S. citizens is already in the hands of Lloyd's (most likely never to be seen again) there is still several hundred million dollars which Lloyd's is currently actively seeking to recover from U.S. citizens as part of Lloyd's continuing fraudulent scheme.
I enclose copies of the two very recent documents that should be brought to your attention in the regard :
1. A copy of the Bloomberg News Service story on 11 May 1998 relating to the U.S. Attorney's Office criminal mail and wire fraud investigation of Lloyd's. (Exhibit F)
2. A copy of a letter on the Letterhead of the Serious Fraud Office where it is being officially acknowledged by the SFO that there is an investigation being conducted by the U.S. Attorney's Office relating to violations of the criminal mail and wire fraud statutes of the United States. I should point out that the SFO, as expected, is an unwilling and reluctant participant in this matter and the SFO goes out of its way to discourage involvement of the witnesses to whom this letter was sent. Michael Freeman, to whom the attached letter was sent will, of course, not be intimidated by the SFO because Michael Freeman is one of the English Solicitors who is and has been representing investors in Lloyd's in litigation against Lloyd's. I can only speculate as to what less sophisticated witnesses must think when they receive a copy of this letter. (Exhibit G)
Please do not misinterpret the action being taken by the U.S. Attorney's Office vis a vis Lloyd's and please do not consider their action as a substitute for your action. The action by the U.S. Attorney's Office, as welcome as it is, does not address or resolve any of the problems of my clients (and the problems of the several thousand other U.S. citizens who are in exactly the same position): that is to say, if the U.S. Attorney's Office obtains criminal indictments and even convictions against Lloyd's officials and even if Lloyd's officials are imprisoned: (a) these actions will not assist my clients (or the other U.S. citizens) in obtaining back from Lloyd's the billions of dollars that Lloyd's obtained by its fraud and (b) these actions will not assist my clients (and the other U.S. citizens) in preventing Lloyd's from obtaining hundreds of millions of dollars of additional monies from American citizens. Stated another way, it will be small consolation for my clients (and the other U.S. citizens) after they have been defrauded by Lloyd's out of billions of dollars that some Lloyd's officials are indicted, convicted and imprisoned. My clients are seeking the civil remedy of rescission (they want their money back and they do not want to pay Lloyd's any additional monies) and Lloyd's officials being indicted, convicted and imprisoned will not be of any assistance towards this end. According, please do not assume the actions by the U.S. Attorney's Office are in place of the actions that should be taken by the Department of State. Needless to say, the actions by the U.S. Attorney's Office support the position set forth in my March 18, 1998 letter and perhaps the Department of State and the U.S. Attorney Office should confer on this matter.
I trust that the U.S. Department of State will reconsider its non-intervention policy. Certainly, the English Government is involved on behalf of Lloyd's "up to its eyeballs" and I see no reason why the U.S. Department of State has to play by different rules than the English Government especially when the Department of State encourages foreign governments to actively address U.S. courts. My clients only seek a "level playing field" but, in light of the very pro-active role being taken by the English Government, the only way to level the playing field is for the Department of State to become involved in the same manner as the English Government.
PART II The Apparent Involvement of the U.S. Government in, Unwittingly, Assisting the English Government and Lloyd's In Defrauding American Citizens Out of Billions of Dollars.
As alluded to in Part I of this letter (particularly in describing the five examples of the English Government's successful intervention in U.S. matters listed above), one other very important Lloyd's related issue should be addressed: i. e., the apparent (based upon circumstantial evidence) active role of the U.S. Government in not only not intervening to assist American citizens (as stated in your April 8th letter) but, to the contrary, the U.S. Government being very actively involved and, in fact, intervening at the behest of the English Government, unwittingly, to assist Lloyd's in defrauding American citizens out of billions of dollars in the largest fraud that was ever committed.
Please note that I am not claiming that the U.S. Government knew of the Lloyd's fraud and, nevertheless, assisted Lloyd's in this regard. Obviously, the English Government, when it sought the assistance of the U.S. Government, did not admit to the U.S. Government that Lloyd's committed fraud. But, as stated in my March 18, 1998 letter, Ian Hay Davison, the CEO of Lloyd's from 1983 to 1986, disclosed the Lloyd's fraud to the London Serious Fraud Office. As a result of at least this disclosure, the English Government was well aware, through that source (and most likely through other sources) of the fraud committed by Lloyd's.
Although my clients are most appreciative of the actions being taken by the U.S. Attorney's Office and the U.S. Postal Inspectors Office to investigate the activities of Lloyd's in connection with possible criminal mail and wire fraud violations, as discussed above, none of these activities, even if they do lead to indictments, convictions and imprisonment of Lloyd's officials, will be of any benefit to my clients and none of these activities will compensate my clients and the others for the billions of dollars that Lloyd's fraudulently obtained from them.
That is to say, based upon what has transpired in connection with Lloyd's activities in the United States in the past eight years, except for the criminal mail and wire fraud investigation (which my clients welcome but which will be of no benefit to my clients) it appears, based upon the circumstantial evidence that the undersigned has observed, that the English Government has prevailed upon the U.S. Government to "look the other way" in matters relating to Lloyd's and that, unfortunately, the U.S. Government, unwittingly, has acceded to the requests of the English Government in this regard.
Even if the U.S. Government received what it considered adequate consideration from the English Government (in the form of some action or inaction on the part of the English Government that was favorable to the U.S. Government) for "looking the other way" when dealing with Lloyd's, my clients and the others should not be required to pay for this back door de facto "bail out" of Lloyd's by the U.S. Government. If the U.S. Government received adequate consideration for "looking the other way," then the U.S. Government should pay for the "bail out" of Lloyd's. If, as a matter of "policy," the U.S. Government has decided, for whatever reason, never to ever take any action against Lloyd's, although my clients do not agree with or accept this "policy" of permitting fraudsters to go unpunished, I suspect that this policy could be made much more palatable to my clients (and the others) IF the policy was paid for by the U.S. Government and not by my clients and others similarly situated. Normally when there is a governmental bail out of a company, the government pays for the "bail out" (or makes loan guarantees or takes whatever action is necessary to effectuate the bail out) but not the private citizens of that government. Unfortunately, this back door bail out of Lloyd's is being paid for by the very people that have already been defrauded out of billions of dollars. In addition, in a governmental "bail out" of a company, procedures are put in place to monitor the activities of the company and fail safe mechanisms are put in place to make sure that the problems will not be repeated. In the case of Lloyd's nothing has changed and same management that committed the fraud is still in charge and there can be no assurance that this fraud will not continue far into the future. In short, the actions of the U.S. Government vis a vis Lloyd's constitutes a de facto U.S. Governmental "bail out" of Lloyd's to the substantial detriment of U.S. citizens and this de facto U.S. Government bail out has been accomplished in a "worst of all possible worlds" basis from my clients point of view and from the point of view of the other American citizens that were defrauded by Lloyd's: i. e.,
(a) my clients (and other U.S. investors in Lloyd's) are forced to pay for the de facto bail out;
(b) no regulatory agency in England is seriously monitoring Lloyd's activities in either England or anywhere else in the world and the lack of any federal insurance regulator in the U.S. means that Lloyd's can deal one on one with each of the states and, as discussed above, Lloyd's has already co-opted the most important insurance regulator in the world, the New York Insurance Department;
(c) no safe guards of any kind have been put in place to assure that Lloyd's will not continue its fraud or repeat this disaster;
(d) the insiders at Lloyd's that committed the fraud and who have profited handsomely over the past 30 years are not being called upon in any fashion to account for any of the losses and in some cases these insiders have even been honored by the English Government for their activities on behalf of Lloyd's;
(e) Lloyd's, through its co-opting of the New York Insurance Department which claims jurisdiction over the handling and disposition of the Lloyd's American Trust Fund, will probably, to the detriment of Lloyd's policyholders and to the detriment of my clients (as beneficiaries of the Lloyd's American Trust Funds), receive more favorable treatment and be permitted to withdraw as much as $1 billion from the Lloyd's American Trust Fund. In contrast, what the New York Insurance Department should do is to subject Lloyd's and the Lloyd's American Trust Fund to more stringent regulation and higher funding requirements rather than relaxing these regulations and funding requirements as the New York Insurance Department recently announced.
In short, the de facto bail out of Lloyd's by the U.S. Government is not only appalling and shameful, it is as bizarre as "Alice Through the Looking Glass:" everything is upside-down, inside-out and backwards.
Very truly yours,
Thomas L. Seifert, P.C.
cc: (all with enclosures)
The Honorable Alfonse D'Amato;
The Honorable Orrin G. Hatch;
The Honorable John D. Dingell, Jr.;
The Honorable Henry J. Hyde;
The Honorable Janet Reno, Attorney General of the United States;
The Honorable Arthur Levitt,
Chairman, the Securities and Exchange Commission;
The Honorable Norman S. Johnson, Commissioner,
the Securities and Exchange Commission
The Honorable Isaac C. Hunt, Jr., Commissioner,
the Securities and Exchange Commission
The Honorable Laura S. Unger, Commissioner,
the Securities and Exchange Commission
The Honorable Paul R. Carey, Commissioner,
the Securities and Exchange Commission
The Honorable Richard Walker,
Director of Enforcement, the Securities and Exchange Commission;
The Honorable Mary Jo White, U. S. Attorney, Southern District of New York
Mr. Charles P. Ries, Minister for Economic Affairs, The American Embassy, London, England
The Honorable State Insurance Commissioners of each of the Fifty (50) States of the United States
The National Association of Insurance Commissioners ("NAIC")
The New York Times (New York Office)
The New York Times (Washington, D. C. Office)
The Washington Post
The Wall Street Journal
The Financial Times (New York Office)