Excerpts from Inside Eye, April/ May 1996, "State of California Complaint Against Lloyd's," page 13
Chuck Quackenbush, the elected California Insurance Commissioner, has failed in an attempt to stop the action filed against Lloyd's by his compatriot down the corridor, California Corporations Commissioner Gary Mendoza. A federal district court in Los Angeles dismissed Quackenbush's Complaint in Intervention, first filed on 5 March and designed to "defend the critical interests of policyholders and insurers" in California.
The in-house fighting was sparked off on 21 February 1996, when Mendoza filed an action against Lloyd's in the Los Angeles Superior Court. The action included a temporary restraining order including ‘stopping unlawful offers and sales of securities', and ‘stopping draw downs of cash or letters of credit by defendants'. On 9 April, the California Department of corporations took its action a stage further by filing a First Amended Complaint, which upgraded the temporary restraining order with a request for Preliminary Injunction, seeking a freeze on draw downs of Names' funds and an ‘equitable lien' of $500m on the Lloyd's American Trust Funds: "Seeking the Preliminary Injunction against Lloyd's is the only way the Department can ensure that Lloyd's ends the fraud that it has perpetrated against California Names and stops its current violations of state securities laws", said Department General Counsel Peter Kezirian.
The First Amended Complaint alleges additional violations of California Securities Law by Citibank and by the LeBoeuf, Lamb, Greene & MacRae law firm. The original complaint, aimed specifically at Lloyd's, states;
THE PEOPLE OF THE STATE OF CALIFORNIA, by and through GARY S. MENDOZA, California corporations commissioner, allege as follows:
1) Defendant LLOYD'S has, and presently is engaged in a scheme to defraud California investors in connection with the offer and sale of unqualified securities in California, and elsewhere in the United States. LLOYD'S California investors number at least 500 and constitute the single largest group of LLOYD'S investors, both in numbers and in monies in the United States. LLOYD'S current plan is to obtain assets from current California investors in an amount in excess of $500,000,000 and to transfer those assets to other states and countries.
2) Defendant LLOYD'S has been and is offering to sell and selling securities in the form of:
Defendant LLOYD'S has offered and sold and continues to offer and sell these securities without qualification to California investors.
3) Defendant LLOYD'S purpose has been and is to obtain investors' funds purportedly for business purposes both in the State of California and elsewhere in the name of LLOYD'S.
4) LLOYD'S has been and is altering the rights, preferences and privileges of outstanding California investors without disclosing the requirement of qualification or exemption from qualification for such changes. Such changes include:
5) In recruiting California investors, LLOYD'S, and its agents have also failed to disclose material information in connection with investments in LLOYD'S, including but not limited to:
6) As a separate act, LLOYD'S, its employees, agents, including Members' Agents have been and are collecting funds from California investors for alleged losses which either cannot be documented, or for which LLOYD'S and its agents refuse to provide documentation.
Return to main Litigation page
|Home | Q & A | Regulation | Litigation | News | Fraud
Contact Truth About Lloyd's