Keith Romney thought he was making a conservative investment when he became involved with Lloyd's of London 10 years ago. Now he is tormented daily by the possibility of losing everything he owns.
"I have this hanging over me all the time. I'm hoping my children will not be deprived of things I've worked a lifetime to provide for them," he says now.Along with 26 others in Utah, the brother of former Utah attorney general Vernon Romney agreed to "unlimited liability," putting up everything he owns for a chance to belong to the once-prestigious and now troubled English institution.
The 300-year-old insurance marketplace has a unique practice of using members, called "names," to guarantee policies arranged through syndicates associated with the company.
The Utah names, wealthy and often prominent, say they were promised an investment with high security and reasonable profit.
Instead, many of them ended up buying into policies with huge environmental cleanup payoffs, such as the Exxon Valdez oil tanker and policies saddled with decades-old asbestos liabilities.
Lloyd's syndicates lost $12.4 billion in a five-year losing streak that ended in 1992. Like the Utah names, many others around the world are now facing financial crises.
In all, the Utah names already have paid out nearly $2 million, according to figures compiled by the American Names Association and the federal Securities and Exchange Commission.
The accounting firm Chatset, based in London, expects the total debt incurred by syndicates comprised of Utah underwriters to exceed $16 million. But the amount Utah names will actually have to pay will vary widely because many of them purchased stop-loss insurance on their liability.
Also, the company is offering $4.7 billion to help absorb some of the marketplace's losses.
On April 30, the state of Utah and 10 other states separately sued Lloyd's, saying it failed to register with the state securities commissions and defrauded investors by not disclosing past problems.
A 3rd District judge has granted a restraining order preventing Lloyd's from collecting further from the Utah names. Lloyd's has had the case moved to federal court, where a judge will soon decide whether to hear the case or remand it back to state court.
David Connors, one of the attorneys defending Lloyd's against the state's suit, said the transactions made by Utah names were not securities-related and therefore are not subject to securities laws such as disclosure.
"The decision was not to invest in an insurance company. It was just a decision to become insurers. I think that's critical," Connors said.
Also, if the names manage to get out of paying on the policies they underwrote, some insurance policyholders in Utah, such as Thiokol, will be hurt. The state should weigh the interest of a couple dozen wealthy Utah businessmen against 1,000 Lloyd's policyholders in Utah, he said.
Utah's underwriters knew exactly what they were getting into, said Gary Chandler, a spokesman for Lloyd's in Utah.
"We are talking about some very sophisticated individuals. Each and every one of them were required to fly to London in becoming a name with Lloyd's and go over the ground rules of what their potential obligations were," he said.
Many of Utah's names indeed are noteworthy, including senior partners in prestigious Salt Lake law firms and powerful business people.
So why would a group with such business savvy and so much to lose agree to unlimited liability?
"It's a question we have all asked ourselves," said Wallace Bennett, a law professor at the University of Utah who estimates he could lose up to $350,000.
Bennett had confidence in the 300-year-old legacy of Lloyd's when he joined in 1979 and felt honored to become a part of the company.
"You get lulled by the persona of Lloyd's," agreed Calvin Gaddis, who along with attorneys Robert S. Campbell, David K. Watkiss and James R. Kruse have signed affidavits saying they were misled. The affidavits were attached to the state's complaint.
When Gaddis agreed to unlimited liability he felt reassured by the fabled history of the company. If Lloyd's had been operating under the same rules for so long, he reasoned, who was he to question them?
"You get to the point where you think `unlimited' in name and not in fact. These people talk so nicely. Nobody who talks like that could ever be devious," said Gaddis.
Romney had similar reasons for being interested in Lloyd's.
"I am an Anglophile. I love England. I have gone over there over 40 times," said Romney, a retired real estate consultant who served a two-year LDS mission in Great Britain 50 years ago. "That was a part of it."
Now that love could prove Romney's ruin.
Unlike many of the other Utah names, he doesn't have stop-loss insurance and if Lloyd's collects only part of what they say he owes, Romney will lose everything.
Especially difficult for Romney has been facing his family, who thought his decision to become a name was a mistake from the beginning. Romney's wife, Janet, worries about the family's finances constantly.
"It's always gnawing at you because it never comes to a close," she said.
But not all of the Utah names have had such a bad experience.
Frank Suitter, the new state Republican Party chairman, said he is still making money with Lloyd's and has asked that his name be removed from the state's lawsuit.
Suitter, who has adequate stop-loss coverage, feels that many of the Utah names would not be faring so poorly if they hadn't tried to pull out of the company.
"The reason I have come out of this better than anyone else is because I rode on through," he said. "If they had continued writing with Lloyd's, they would be pleased today."