Equitable Life chief executive Charles Thomson was forced to admit that he had willingly signed off the society’s 1999 accounts, which he now regards as badly audited.
In the first day of oral submissions at the High Court, Thomson admitted under sometimes intense questioning that he had knowingly signed off provisions for guaranteed annuity rates (GARs) for 1999 that the society now says were insufficient.
Equitable is suing Ernst & Young for alleged negligence in its auditing of the mutual’s accounts in the late 1990s. It claims that E&Y should have advised it to make greater provisions for the extra cost of GARs.
E&Y has argued that the society is hypocritical, since Thomson himself signed off the same numbers as true and fair when he took over as chief executive, as well as, at the same time, issuing claims against E&Y.
This morning, the first of several days of cross-questioning of Mr Thomson, E&Y’s QC Jonathan Gaisman also alleged that Equitable had blanked out minutes of a meeting with Ernst & Young that absolved the society’s former auditors of blame.
Gaisman pointed to two records of the same audit committee meeting, one from the Big Four firm and one from the mutual.
In E&Y’s minutes of the meeting it was recorded that Vanni Treves and Charles Thomson, the society’s current chairman and chief executive respectively, had told Ernst & Young that there was no prospect of the society pursuing legal action against its former auditors.
But the same remarks were missing from Equitable’s minutes.
‘Why did the society redact [blank out] that part of these notes in which Mr Treves and you acknowledged no fault on Ernst & Young’s part?’ Gaisman asked Thomson.
Thomson replied that he had ‘no awareness’ of that part of the note. Gaisman went on to say that someone had clearly thought ‘that’s not very helpful to our case… that contains a statement about no grounds for suing and we will blank it out.’
Thomson replied: ‘It’s not something that I would necessarily expect to be aware of, in terms of precisely what got redacted and what did not.’
‘I see,’ Gaisman replied.
E&Y’s QC also probed Thomson about his past at Scottish Widows, which Thomson said he had left ‘amicably’.
Gaisman pointed to documents suggesting that Thomson had in fact left under a cloud, with suggestions that he might sue for constructive dismissal and breach of contract.
Thomson also admitted to having written his own reference when he applied for his present job at Equitable Life.
The document said that during Thomson’s time at Scottish Widows he had had an ‘exceptional level of success.’
It continued: ‘We will miss his intellect, integrity and energy and feel sure that he will bring great value to other organisations at the highest level.’
Thomson said he had drafted and sent the reference, expecting it to be signed off by his superiors at Scottish Widows. But it was not, in the event, approved, meaning he had to withdraw it.
Equitable is suing E&Y for more than £2bn for alleged negligence. The case continues.
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