privileges of the financial industry, as we have seen more recently, is that they have been so deregulated that they also have immunity for the results of their negligence, though not, so far anyway, for their fraud. In practice, it is hard to distinguish between the two.
The British establishment closed ranks, and for the first time – but definitely not the last – ordinary middle-class investors found themselves on the outside. Even when the implications for the Names should have been growing apparent, Lloyd’s continued their recruitment campaign to attract new ones.
In his Oxfordshire home, running his businesses, Christopher Stockwell knew nothing of this. He realized at the start that it made a big difference which syndicate he joined. He met one of the rising stars of Lloyd’s, Dick Outhwaite, liked him and joined his syndicate – and then joined others too. The first sign that there might be anything wrong appeared when it came to closing the books on that fateful year of 1982, because the Outhwaite auditors insisted on leaving the year open. Stockwell was angry about it and remonstrated with the auditors. By 1987, it was clear that something was extremely wrong and that losses on other syndicates had somehow been diverted onto one of his syndicates as the bearer of the ultimate risk. The following year, he summoned up his old campaigning experience and formed an action group.
Even so, he wasn’t too worried. The losses at the troubled syndicate were being covered by profits from others. Never one to do things by halves, Stockwell was by now a member of many other syndicates, but more accounts for more years were being left worryingly open. Not until the end of 1991 did the penny drop. He had been expecting a cheque for £250,000. Instead, he got a demand for an immediate £500,000. Most ordinary investors would baulk at anything remotely on that scale, but Stockwell was no ordinary investor. The trouble was that, six weeks later, there was a similar letter. By February 1992, in the run-up to the election stand-off between John Major and Neil Kinnock, the demands were pouring in at the rate of £100,000 a week.
‘It coincided with the collapse in property values and astronomical interest rates after Black Wednesday, and I was facing total wipeout,’ he says. ‘I had no income coming in. All my businesses were in receivership. I was spending 30 or 40 per cent of the time with the receivers, just picking up the pieces out of the chaos.’
The Stockwell family lost their home, which was then sold by the bank later in the summer, while they rented a cottage on what had been their land. In July, his bank made him bankrupt too. It was a desperate situation for a self-made man, and a huge strain on any marriage and on the children, especially when the furniture had to be sold.
‘It was a catastrophic blow,’ he says now. ‘It was emotionally traumatic, leaving your home and everything, totally unclear about where the next meal was coming from.’
By then, Lloyd’s was threatening 39,000 Names with legal action for failing to pay up. They could have approached the Lloyd’s hardship fund they had set up under the fearsome chairmanship of Mary Archer, novelist Jeffrey Archer’s fragrant spouse. But like Stockwell, many desperately resisted that fate too, because they would have had to accept all their losses, abandon any appeal over their fairness, and hand over all their other assets to Lloyd’s.
Behind that 39,000 figure, the suffering was also now widespread. Elderly couples who had been persuaded to invest their money as Names found themselves evicted from their homes and living in caravans. There were very public suicides and very quiet divorces and evictions. People who had saved for their retirement their whole lives were finding themselves effectively on the street. Yes, they were a privileged class with family to fall back on. Yes, they had been chasing unlimited profits in return for those unlimited liabilities, but they had not been told the risks and were often no wealthier than the theoretical rise in value of their homes.
Within eighteen months there were more than twenty-five action groups, and Stockwell was involved in many of them. At one meeting of the activists, there was a stand-up row between two prominent Names. Stockwell, towering over both of them, told them to sit down and shut up. He attributes to this the decision to ask him to chair the meeting, which led him to chairing the Lloyd’s Names Association and made him the obvious choice to chair Lloyd’s Open Years Working Party, Lloyd’s own attempt to hammer out a compromise.
Either way, it put him at the heart of a whirlwind. The phone rang at home all the time, and his young children had to learn how to deal with the outpourings of fear and betrayal that came down the line.
‘I spent hours and hours listening to tales of human misery,’ he says. ‘From people who had just done what they had been told. Who never intended to take any real risks and who were losing everything. They just couldn’t understand how this could happen.’
In that same year, 1992, the Sunday Times concluded that ‘the professionals at Lloyd’s are not fit to regulate a flea circus, never mind a multi-billion market’.27
But it was worse than that. It was quite clear by then that some Lloyd’s professionals regularly kept the most profitable business for their own mini-syndicates, for their families and relatives, and shifted the loss-making ones onto the absent Names. It was also clear that the leading underwriters were themselves avoiding the worst-hit syndicates and warning friends and family away from them. They knew, but said nothing in public. The nod-and-wink culture that the English middle classes specialize in was being turned against them. ‘Many members of the Lloyd’s community in senior positions’, concluded the 1986 Neill Report to Parliament, ‘were not even vaguely aware of the legal obligations on agents to act at all times in the best interests of their principals, not to make secret profits at their principals’ expense and to disclose fully all matters affecting their relationship with their principals.’28
The journalist Adam Raphael, himself a Name, described the plight of a secretary who had worked at one insurance brokers for twenty-five years. As a reward, the company chairman had asked her and a colleague if they would like to be Lloyd’s Names, promising to provide the guarantee and an insurance ‘stop-loss’ policy. As her losses began to mount, she contacted the retired chairman, who had completely forgotten her existence. The new chairman replied in 1988: ‘I am afraid there is nothing to suggest any sort of commitment to indemnify you against losses incurred by that membership. Indeed it would be highly unusual if any such arrangement did exist.’ Her insurance policy would not pay out because the wording was wrong. When, in desperation, she contacted the chairman of Lloyd’s, he warned her to do nothing that might ‘prejudice the reputation of Lloyd’s’.29
Julian Tennant attacked the underwriter of his syndicate at a meeting of Names in the Albert Hall in May 1993. ‘Our faith in Lloyd’s has been totally destroyed,’ he said. ‘It’s bad enough to be forced to move out of your house into a small cottage, but it’s even worse to learn that Mr Brockbank’s salary [underwriter of his syndicate] was £430,000 last year. That is obscene.’30 In 1988, the Lloyd’s market made a loss of £500 million, but the managing agents and members’ agents earned £124 million in commission. As late as 2009, another group of thirty-five Names were bankrupted at the end of their legal process.
Two decades on from the eye of the storm, Stockwell accepts that there were aspects of the experience that provided some compensation for the lost years and lost money. It was fascinating to work at the cutting edge of the law, dealing with some of the cleverest lawyers in the country. But in the end, the establishment shut the door on the Names and bolted it, and, despite the new evidence that he had amassed, the Court of Appeal refused to reopen the case against Lloyd’s. Now, viewed with hindsight, the Lloyd’s Scandal looks like a curtain-raiser for the banking scandal – the same refusal to provide proper regulation, the same scramble to cover things up, and to provide immunity for the financial community rather than to protect vulnerable people.
‘The legal system let us down badly,’ says Stockwell
