All Members Please Read - SoA v’s DCS and Equitable Life Conclusions

  • Tricky Dicky
  • 24/10/08 30/05/09
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Posted: Mon, 06/04/2009 - 17:43

I have recently tracked down the company that was employed by EMAG (Equitable Members Action Group) as Forensic Accountants during their ‘problem’ with Equitable Life. This company eventually found from their investigations a £1 billion black hole in the accounts of Equitable Life.

It is also necessary to explain here that, in their (EMAG) situation they were offered a ‘Compromise Scheme’, which they accepted. This Compromise Scheme is effectively another phrase for a ‘Scheme of Arrangement’.

Following several conversations with a Senior Partner of this Forensic Accounting company, their comment is:

Quote:
“It seemed to me, wearing my EMAG director’s hat, that there were two specific matters that really had to be dealt with. Firstly the action group has to collect a sizeable chunk of money very quickly. Secondly the group should consider very seriously opposing the government's plan to introduce a compromise scheme.

I explained how Equitable Life policyholders originally had the option of putting the company into liquidation, but had been persuaded not to do so. This was mostly on the grounds of the considerable cost, but also on the delay in making payments to policyholders. Instead we were "sold" a compromise scheme, which sounded good at the time. What we didn't know was that both the directors and the regulators of the company were covering up the misdeeds of their predecessors. If we had known this at the time, we would almost certainly have pressed to have the company wound up. Once the decision had been made to give up that option, the opportunity was lost.

I made it clear that this was not a cure-all and there were downsides. Certainly liquidation will be expensive and it will be slow. However the liquidator will not have any split responsibilities. He will be acting for the creditors, that is, the depositors. This may be contrasted with the position of the directors and the regulators in the Equitable Life case, who were allegedly acting in the interests of policyholders, but both of whom had a great deal to hide.

We have assisted the Equitable Members Action Group to raise sufficient funds to keep fighting for nearly 9 years. We also were involved in a good deal of forensic accounting, which may also be required in this case.”
Unquote

I will leave you to make up your own minds – mine is made up

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<£50K ers

  • Tricky Dicky
  • 24/10/08 30/05/09
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  • Wed, 08/04/2009 - 13:37

For this group, can I ask how the effect of the undoubted extra pwoer the LP has has on controlling exactly how much each depositor gets paid affects your group. Plus the fact that joint account holders are not each treated as an individual, and that the interest rate on your account up to 9th Oct 2008 willl be capped at 5% - and any remaining £'s of interest will only be paid out right at the end of all payments IF there is any money left - ie it could be you may not receive 100% but only 98% for example

The problem to my mind again is that this SoA is totally unclear, and like trying to fight your way through a bramble infested wood, - personally I would prefer a reasonably flat and clear field, so I can see whats coming


Under the SoAScheme of

  • expatfrance1
  • 15/10/08 31/05/09
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  • Wed, 08/04/2009 - 14:02

Under the SoA joint account holders will each receive upto 50k. I am not sure why you assume otherwise?


Tricky Dicky

  • Ramsey resident
  • 22/10/08 31/05/09
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  • Wed, 08/04/2009 - 13:54

Surely the interest UP TO 9th October is actual at whatever rate you were on. This has already been confirmed in statements sent out by bank since

The 5% as i read it is AFTER 9th October and as you say only if there are sufficient funds to pay it, therefore the under 50K people will be paid out in full as per their termination statement and then if interest is eventually paid later on they will get a small bonus probably years down the line covering the period between 9th Oct and whenever they were paid out???


TD

  • Tricky Dicky
  • 24/10/08 30/05/09
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  • Wed, 08/04/2009 - 14:14

Interest Rates - Section 27 says up to and including 9th October 2008 - there is no mention about after that date

As for joint acct holders this is abunantly clear in both DCS and previous SoA but reading 12.5.3 B) of the new one it is totally unclear and talks about deposits held in partnership will be treated as one


I think you will find that

  • expatfrance1
  • 15/10/08 31/05/09
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  • Wed, 08/04/2009 - 14:24

I think you will find that this refers to accounts held in trust. Anyway surely that is something to be clarified and once it has a decision on which way to vote can be made.

It seems that some people would gladly vote against the SoA because they are unclear of a piece of detail rather than find out what it actually means.


Trusts

  • Tricky Dicky
  • 24/10/08 30/05/09
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  • Wed, 08/04/2009 - 14:27

These are dealt with under 12.5.4


DCS and liquidation

  • Hawkerman
  • 29/10/08 31/05/09
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  • Wed, 08/04/2009 - 06:41

If the SOA is rejected tomorrow and liquidation goes ahead, The first 50k of everyones money is protected by the DCS. But the DCS is unfunded? Maybe but it is in the legislation so there is no get out for the IOM over this. They would have to borrow!
Therefore the way I see it it can be compelled through the legal process and the world will then see how the IOM sells something they do not have, hastening their financial demise?
Surely this would get worldwide attention?
That "pressure" may then in turn put the screws on the UK returning the 557m?
Just a thought!


@Hawkerman: Absolutely, and they are already borrowing.

  • follow_the_tao
  • 11/10/08 31/05/09
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  • Wed, 08/04/2009 - 08:54

This majority of this 'vast sum' of 180M GBP that the IoMG is allocating to fund the SoA is essentially to provide an advance on the banks 'DCS' (or the way the IoMG sees it, the SoA) contribution.
The rest is a loan to accelerate payments for those with deposits greater than 50K, but will be clawed back pari passu once dividend payments reach (current info..) 60%. We don't have more detail than this.

We have no detail of the IoMG's negotiations with the banks (but see Elgee's post, fifth post under the header article i.e currently five posts down in this forum "Speculative - how did we get to where we are"- but the money is there as I see it.
To withdraw this funding to teach the depositors a lesson for not voting for the SoA would I think be a shameful embarrassment, and like you suggest a political error. Say, cutting of your nose to spite your face, an argument used by many who have been intimidated by the IoMG's pronouncements on the 'delicacy' of their, yes their much advertised and much vaunted DCS.

I am of total agreement with the thrust of your comment.

Moving on and out...
I'll take this opportunity to put two links in to comments on the 'history' of the DCS. It does have a rather an interesting history. The first is by Jonathan Smalley, a lawyer with an interest in our situation:
http://www.law-man.com/library/news-02.pdf
The second comes from PAG (Positive Action Group - a political initiative on the IoM) and I've taken the link form the "Timeline of events" document that can be found in the "facts" resource available in the header on the public site:
http://www.positiveactiongroup.org/PAG_DCS_Submission_2.pdf
One of the aims of DAG, apart from trying to get 100% return, was if I remember correctly to correct the situation so others didn't find themselves in a situation like ours in future. I'll leave you to draw your own conclusions.

I think somebody is 'playing games' with us. And I think it's time we called time.

Today I'm delighted with the news in the "DST legal team update" posting that we are going to challenge the SoA and their current conclusion that is basically 'smoke and mirrors'. They state that this conclusion is given the current information but that they are possibly expecting to see further affidavits (rather late I think - another game?).
We do not have the Insurance Cos responses at present in any form, and I assume they will be putting forward affidavits. But from the information that has drizzled out of IoMG to date I don't see that the Ins Cos wish list, given in the February affidavits, has been met. If they vote against the SoA we have no problem.
If not, then given the conduct of the Court so far it seems virtually inevitable that the SoA will be put out to vote. It shouldn't be inevitable but I'm losing faith in the Court in this round.
In this case we will need to co-ordinate a 'No' vote. We will need to produce sound and coherent arguments so that we manage to persuade enough members, and non-members, to deliver a 'No' vote of greater that 25% by value in order that we can proceed with the liquidation. Hopefully with a strong lead from London team and with the HNW totally aboard.

This is going to take some thought and work. It is for consideration after the hearing. But it wouldn't hurt for people to start thinking about it now. Let's see what happens with the affidavits and the hearing.


There seems to be a lot of

  • expatfrance1
  • 15/10/08 31/05/09
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  • Wed, 08/04/2009 - 10:47

There seems to be a lot of posturing on this forum but to date nobody has yet explained to me how voting against the SoA (or for liquidation) is going to get me my money back! Getting a 10% distribution from the liquidator does not and neither does waiting an eternity for the DCS to payout. If someone can convince me then may be I will vote against it, however at the moment I feel that for my own circumstances the SoA would be they way to go.


The camps are split along predictable lines

  • klauseriksen
  • 10/10/08 31/05/09
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  • Wed, 08/04/2009 - 11:58

It is really not surprising how the camps are split on this one, it is simply a matter of peoples own situation that is expressed here. Many Sub 50K depositors see the SOA as a safe way to get 100% return within a secured time period and therefore don’t have concern about eroded powers of the administrator whereas many >50K depositors seem to think they have absolutely no advantage as they are not going to benefit from any IOMG subsidies and at the same time may end up having the IOMG gaining influence which may enable it to affect/block future actions by the creditors.
Personally I don’t see much point in the various camps trying to persuade one another as each will vote according to their own best interest anyway


Powers of administrator eroded???

  • Anonymous
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  • Wed, 08/04/2009 - 12:47

You claim that the powers of the administrator would be eroded under an SOA. Why then, does our Provisional Liquidator (M. Simpson) support the SOA? He made that statement in his affidavit which he filed for Court review on April 9th. His current position, as defined by Law, is to protect the interests of all depositors so why would he advocate acceptance of the SOA if it wasn't in the best interest of ALL depositors?


Undone, Here we go again.....

  • klauseriksen
  • 10/10/08 31/05/09
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  • Wed, 08/04/2009 - 13:24

As you may have noticed from my previous post then I didn’t try to convince anyone with any particular view but instead summed up what the different groups have written on the forum. I am not really interested in a heated discussion on this as we both have to vote for what is best for us, but since you ask. As a <50K depositor you seem to have some advantages in the SOA but as a >50K depositor my main concern with the SOA is that it gives the IOMG a deciding say in how the scheme is administrated whereas a DCS is run purely by the liquidator. In your case I would probably also be voting for the SOA but in my case the disadvantages of the IOMG increased influence outweigh the potential benefits. I hope we can leave it at that as I don't intend to convince you and hope you will show me the same courtesy


klauseriksen, like you...

  • Anonymous
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  • Wed, 08/04/2009 - 15:38

I have no interest in arguing which scheme may be best. I accept your conclusion as stated above. However, I would like to point out that I have much more than £50,000 at risk.


I thought that the

  • expatfrance1
  • 15/10/08 31/05/09
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  • Wed, 08/04/2009 - 13:57

I thought that the DCS was administered by a Scheme Administrator appointed by the IOM who may or not be the same person as the liquidator?


To solve or not to solve, that is the question.

  • conned
  • 13/10/08 n/a (free)
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  • Tue, 07/04/2009 - 15:34

WE WANT ALL OUR MONEY BACK! .A solution to this fiasco has been put forward many times. The IOMG has no enthusiasm for solving this. WHY? While our money is swimming about it is an ideal opportunity for every man and his dog to syphon it off! There have been many questions asked recently about circumstances surrounding MPs expenses. These are the kind of people we are dealing with.


Don't forget, we are paying some of these people

  • klauseriksen
  • 10/10/08 31/05/09
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  • Wed, 08/04/2009 - 06:54

I agree and don't forget that there are several individuals in power on the IOM who are still getting a salary from KSFIOM paid by us as long as the matter is protracted. Effectively we are paying some of these people to shaft us.


No to SoA

  • dj
  • 07/11/08 31/05/09
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  • Mon, 06/04/2009 - 21:38

I shall not be voting for the SoA. By doing so it does not mean i am voting for the DCS. It is the IoM Government who are saying that by rejecting the SoA I will be therfore be supporting the DCS.

I support neither. I support the return of the £557Million from London as nothing substantial can be done until then.


Thanks for your post tricky dicky re Equitable Life

  • fight theft
  • 10/10/08 28/05/13
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  • Mon, 06/04/2009 - 19:54

I too have a small pension with Equitable life from the 1980's up until its collapse in 1991. Thankfully a tiny fraction of what was in KFIOM, into which I thought I had deposited (for just over one month from August!) a very nice comfortable egg for my future pension to maintain a good lifestyle.

I am a member of Emag too as well as KIOM DAG - 9 years of fighting and pensioners dying at a rate of 15 per week, while Devil Darling ducks and dodges even the Parliamentary Ombudsman ruling and decisions. The bastard Darling has fought against it and is delaying compensation for another 2 years and then trying to say only some pensioners will be compensated not all. If I was face to face with Darling at present he would be in danger and I’d better not be carrying a gun. We have to see him in court and he has to “go down” for his criminal actions and continued lack of actions to put his diabolical actions right. I think Gordon brown had better think very seriously about firing him if he wants labour to be voted in again at the next election. Of course will not be voting for Gordon either or the Labour party.


totally agree with you fight theft..

  • hippychickrobbed
  • 03/11/08 31/05/09
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  • Tue, 07/04/2009 - 13:11

Darling needs to face up to what he has done, we have to deal with them one by one. lets not make the mistakes of equitable life, we really all have to get really tough about this. Apparently we have to find an mp who we can sponsor who will loobby for a loan for the isle of man,does that make sense?


Speculative - how did we get to where we are

  • Anonymous
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  • Tue, 07/04/2009 - 02:12

I offer the following, which is purely speculative, in the hope that it may assist in understanding how we got to where we are. It appears to me that some time in late October 2008, when the IOMT became aware of the resistance of the banks to contributing to the DCS and the possibility that the scheme might be challenged by the banks in the IOM courts (possibly on the ground of inadequate consultation, but perhaps also on the basis that the default was brought about by regulatory failure or mistake) and considering the likely consequences for the Island's financial services industry of a major bank liquidation, the IOMT set about some kind of damage limitation exercise. I imagine that the objectives would be to avoid invoking the DCS and avoid a liquidation and avoid any uncomfortable proceedings against the government, regulator and perhaps also the company's directors and to do all of this at minimum cost to the Island's taxpayers. It would be realised that they would have to give us depositors no less money than we could reasonably expect from the operation of the DCS + liquidation, but at some point it must have been decided that it could get away with not giving us any more than that while also depriving of our rights as creditors under a liquidation. What followed was the negotiating process that I have previously described as "racheting", in which the proposer of a settlement, which it recognises would be rejected out of hand if set out at the outset, discloses some of the terms incrementally over a long period of time, but does not reveal the entire proposed agreement until the very last minute, by which time the other party's expectations have been considerably eroded and much of what would have been unacceptable has been tacitly accepted.


I think that there could be

  • manx-person
  • 17/10/08 31/05/09
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  • Tue, 07/04/2009 - 11:55

I think that there could be some truth in some of what has been said above.

I haven't read the SoA so I don't know what rights are compromised, but and I say this without wishing to be flamed or cause controversy, if there is uncertainty about the funding and timing of a DCS scheme for the reasons stated above, and no material rights are lost by implementing the SoA then it might be a better option for depositors.

Any news from KSF UK on recoveries yet?


SoA

  • Brabander
  • 15/10/08 31/05/09
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  • Tue, 07/04/2009 - 13:14

Manx-person,
the problem with the proposed SoA is that it reduces our rights in terms of deposit recovery for higher value depositors, interest accrued prior to appointment of the LP etc.
In addition it also compromises our rights of legal redress. Furthermore the SoA results much higher administrative costs which will be borne by the depositors and it most importantly it gives the IOMG a deciding say in how the scheme will be administered. Straight liquidation is now therefore the now the best option.
By the way until last week I was open minded (but cautious) and willing to give the SoA a chance. I have now totally changed my mind. The IOMG clearly do not have our interest at heart as is very well demonstrated by this extremely inequitable piece of one sided legal skullduggery!


SoA

  • manx-person
  • 17/10/08 31/05/09
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  • Tue, 07/04/2009 - 13:22

If you read my post above it said if there were no loss of rights. If these rights are lost as you say, and there are no benefits to losing those rights, and you consider these lost rights to be valuable, then I guess one would need to vote against.

As I said I haven't read the SoA so I can't comment on the specifics


SoA

  • Brabander
  • 15/10/08 31/05/09
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  • Tue, 07/04/2009 - 09:48

Very rational analysis.
I believe that at the same time the IOMG has attempted to reduce the possible backlash from local depositors, at no extra cost to them, by structuring the SoA in such a way as to make the larger depositors pay for the fact that smaller depositors get their money more quickly through a recovery mechanism for their loans and the interest on those loans.


Exactly Tricky Dicky

  • hopeful
  • 11/10/08 31/05/09
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  • Mon, 06/04/2009 - 19:30

The important issue raised in your post concerning the directors and regulators covering up their misdeeds is the very point that I highlighted in my posting earlier today (Clause 8.2.2 of SOA on the legal forum).

I too have made up my mind on the SOA and hope others do likewise.


No Point

  • bellyup
  • 10/10/08 09/01/10
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  • Mon, 06/04/2009 - 20:46

The thing is even if you do sue the company it has no money so whats the point?


@ hopeful clause 8.2.2

  • Ally
  • 13/10/08 31/05/09
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  • Mon, 06/04/2009 - 19:42

I am definitely not posting in favour of the SoA but just to point out that if KSFIoM goes into liquidation then no one could sue the company anyway.

As for going after the regulator's clause 8.2.2 specifically says that all legal remedies are avaiable against anyone else.


Hi Ally how are you? I met you at the Feb IOM Court hearing

  • fight theft
  • 10/10/08 28/05/13
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  • Mon, 06/04/2009 - 20:12

What is the general opinion with the IOM depositors, including the bank staff who lost their money too?

Apparently Mr. Cashen is appearing in a theatrical production in the IOM at present or soon. One IOM DAG member suggested booing him off the stage while throwing rotten tomatoes etc. What do you think as an additional protest to be in the press? Group ticket rates for large numbers of DAG members will be available at group discount.

I know you as an individual are too diplomatic and a very nice person to probably second this idea alone, but large group action is a thought. We have to fight from all fronts.


ally sueing the company

  • amar
  • 13/10/08 31/05/09
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  • Mon, 06/04/2009 - 20:02

Ally - the issue is not really about sueing the company. We know they have nothing to offer even if we win. It is about maintaining our rights or that of the Liquidator to sue third parties. Under the SOA he has to first get agreement from the creditors committee, the treasury and the IOMG. Now what do you think will be the outcome of that?


Another point re:Equitable Life

  • brokefirefly
  • 12/10/08 31/05/09
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  • Mon, 06/04/2009 - 18:33

I, too, was suckered into the Equitable Life "compromise". It's worth noting that there were grounds to look at the actions of the regulators with respect to Equitable Life too. There was a huge investigation, but months after the Parlimentary Ombudsman concluded that there had been huge regularoty failure with respect to Equitable Life and the government should pay compensation, not a penny has been paid and I wonder if it ever will be. Does anyone else see the parallel here?


Another point re:Equitable Life

  • Anonymous
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  • Tue, 07/04/2009 - 11:14

I think the problem with Equitable was that it was (rightly) perceived that an action against the regulator would fail (presumably because it would be in negligence and would likely founder on the issue of duty of care) and that ultimately all that was left was an investigation by the Ombudsman. As I understand it, on finding regulatory failure the latter recommended that compensation should be paid to investors and the government has yet to take a decision on whether to do so, since the Ombudsman's recommendation obviously does not have the force of law. Is that the correct position?