Penrose report could spell trouble for Equitable; As Equitable Life's

0 Comments | Sunday Herald, The, Jan 11, 2004 | by Teresa Hunter

The publication of Lord Penrose's report into the collapse of Equitable Life is appearing on the horizon at long last. The word on the street is that we should see it before the month is out.

I have some very cynical friends who believe it will likely be published the day after Lord Hutton's report into the death of Dr Kelly, the Iraq War and sexed-up dossiers, if not on the very same day.

Which only goes to prove, I need to get out more and widen my circle of acquaintances. That said, given this government's record of burying bad news, it's not hard to conclude it will find the temptation of such a timetable damned hard to resist.

Equitable's current management is already out there, ahead of publication, attempting to bolster policyholders' confidence. In an interview published on Friday, chairman Vanni Treves painted all kinds of golden scenarios, whereby post-Penrose, the company could be sold and equities reintroduced into the investment portfolio.

If anyone ever deserved a medal for trying, it has to be that man.

Love him or hate him, it's hard to deny he has had the most difficult job of probably any chairman ever.

This latest wave of optimism comes in stark contrast to the recent comments by chief executive Charles Thomson, who confessed that Equitable would always be a sick animal, and all hopes of a miraculous recovery were now spent.

Treves is also confident that those against whom it is litigating, including former auditors Ernst & Young and former directors, will event-ually settle out of court, prob-ably later this year.

Anyone who has discussed the case with Ernst & Young will know that the accountancy firms holds a very different view.

Interestingly, though, he is much cooler about taking action against the government even if Penrose points to regulatory failure. The extent to which this is the result of political pressure we can only speculate.

The brutal truth is that without a big injection of cash from somewhere, Penrose may do the society and its members more harm than good.

It is perfectly possible that the Scottish judge has uncovered evidence of failure by the former management which could lead to even more claims for compensation.

I have it on good authority that the annuitants, for example, are seriously considering legal action for being sold a product which was fatally flawed.

They have received their latest newsletter which seems to be pointing to further sizeable cuts to their income, greater than the 10% hinted at.

It is clear that the government is very uncomfortable at the prospect of Equitable limping on in its current disagreeable state for a further 30 or 40 years, tainting Labour's financial record for years to come.

A sale or wind-up would suit its purposes very nicely indeed. But who will buy? Would you?

It was with great sadness that I heard of the death of Dame Sheila McKechnie, chief executive of the Consumers' Association. She will be a terrible loss to us all.

I didn't always agree with her. Far from it. And sometimes she drove me round the bend.

But until she took over the CA, never before has an individual or organisation had the courage to take on the big institutions as she did.

Her various campaigns on switching current accounts, fairer deals for mortgage borrowers, and better terms for credit card customers made an immeasurable impact on the value for money available to consumers today.

Looking round, it is hard to see anyone capable of replacing her. But before we get too gloomy, there are other good people doing good work. Yvonne Gallacher, chief exec-utive of Money Advice Scotland (see Serious Money) works tirelessly on behalf of those who struggle with money.

Like Sheila she is not afraid to tell it like it is. Glasgow should be proud of its daughters.