Lloyd's of London negotiators, despite hours of acrimonious debate at a meeting here, were unable to persuade Utah to stand aside for a proposed multimillion dollar restructuring plan.
Led by general counsel William Marcoux of San Francisco, the Lloyd's team offered to cover 75 percent of the $10 million debt owed by 27 Utah residents whose investment in the British insurer entangled them in asbestos and pollution claims predating their involvement.In exchange, Lloyd's wants Utah to drop its federal lawsuit charging the company with securities violations, including defrauding the investors, known within the company as "names."
Utah is a holdout to the $62 million nationwide settlement, intended to put an end to 11 pending state lawsuits and make peace with 3,000 U.S. investors. At issue: Lloyd's unique 300-year-old system that holds investors personally liable for covering insurance loss-es.
Utah Division of Securities director Mark Griffin said he had heard nothing to convince him to withdraw the state's securities fraud suit. State law requires that investors be fully repaid in cases of fraud.
"If there is a settlement that would be acceptable to the securities division, we haven't heard it," Griffin said. "We'll just continue to try to enforce the law and enforce this action despite the powers that are arrayed against us."
"It's a risk," Ogden auto dealer and Lloyd's investor Kent Petersen said of the state lawsuit. "But I'm willing to take a risk."
Lloyd's has the backing of state insurance commissioner Robert Wilcox, who called the meeting at Insurance Department offices. But Wilcox acknowledged questions remain about possible insurance fraud.
"There's no question but that there was misrepresentation . . . . For several years I've been concerned about whether Lloyd's would survive to be a viable firm in the insurance market," Wilcox said. "I'm probably on the fence between fraud and stupidity. I've almost come to the conclusion that you can't be that dumb and that smart."
Wilcox said his department will not pursue action against Lloyd's, because it would not be a good use of its limited resources.
"I've got a small fraud division that's totally occupied," he said. "There are enough crooks in Utah to keep them totally busy."
Thursday's meeting included state insurance and securities officials, assistant attorneys general, the Lloyd's team and 16 Lloyd's investors.