The Secretary
The Accountants Joint Disciplinary Scheme
First Floor
1 White’s Row
London E1 7NF

18 October 2005

Dear Sir

Equitable Life – Justice should be seen to be done.

I would like to draw your attention to an article published on 13 October in Accountancy Age under the title "E&Y could face biggest-ever JDS fine". The first two paragraphs describe the position and "sources familiar" with the case speculate about the seriousness of the allegations and draw attention to the largest fine in the tribunal's history on Coopers & Lybrand in respect of Maxwell. In advance of the hearing and publication of the complaint this should, I suppose, be taken as journalistic hype.

However the article then says:

"The case is set to be heard in private next year, with a QC involved in the Shipman enquiry and the Ladbroke Grove rail disaster due to preside. Roger Henderson QC is a former chairman of Joint Disciplinary Tribunals. He presided in the JDS’s Coopers & Lybrand/Maxwell enquiry. The charges brought against E&Y are much broader than criticisms made by Equitable itself in its recent negligence action. The JDS complaints concern 11 different audits from 1990 to 2000 and a general complaint in relation to a ‘failure to understand [Equitable’s] business'. Equitable’s own action concerned audits over the three years 1998, 1999 and 2000, and specific failures to include provisions for guaranteed annuity rates. The case was settled recently, with the two sides dropping the action and each side paying their own costs."

This quotation has caused me extreme disquiet; this is because I am a Fellow of the Institute of Chartered Accountants and a former member of its Council and recall clearly the debates in Council when the revised JDS scheme was brought in. In addition as a policyholder in the Equitable Life Assurance Society I believe I have suffered loss. I would say that over the last five years I have followed this financial debacle and even attended the High Court to listen to the proceedings. Further I am currently vice chairman of the Equitable Members Action Group Limited.

The first aspect that is worrisome is that of the hearing being in private. If Ernst & Young are to be tried for their work it should be in public. This was the aspect that I recall from Council when I was given a verbal assurance by the President that this provision would only be used for cases where there was an element of commercial confidentiality. There is no such issue involved in this matter: much has been aired in public in Court 76 in the Strand and further the report by Lord Penrose (a member incidentally of the Scottish body which constitutes, in part, the JDS) is now public.

From your website ( http://www.castigator.org.uk/ ), in relation to the European Convention on Human Rights the officers of the JDS state:

"There has always been a provision in the Scheme whereby a respondent, against whom an adverse finding has been made by a Joint Disciplinary Tribunal, can ask for an Appeal to be heard in public. In order to ensure that the Scheme's procedures comply with the Convention, the Executive Committee has amended the Regulations governing procedure to allow respondents before Joint Disciplinary Tribunals to ask for these hearings to be in public as well. The amended Regulations also provide both for the situation where there is more than one respondent and at least one wishes the hearing to be in private; and for the situation where it is not in the public interest for all or some of the evidence to be made public. "

The regulations of the scheme say, now, at 17A, state:

"(a) At any time before the hearing of a complaint, the Chairman of the Joint Disciplinary Tribunal may, either of his own motion or on the application of any of the parties, give such pre-hearing directions as are necessary or desirable for securing the just, expeditious and economical disposal of the complaint.
(b) Without prejudice to the generality of paragraph (a), such directions may include:
(i) Fixture of hearing dates.
(ii) The admission or otherwise of the public and protection of confidentiality."

Accordingly I take it that the Chairman, Mr Henderson, has been appointed and decided on the hearings being in private. Is this the case please? Could you either confirm or advise me (and Accountancy Age) that the hearing will be in public. Alternatively if Ernst & Young have asked for the Tribunal to be private could we please be advised?

If it is to be in private then may I suggest that my human rights as a member of the Institute, policyholder in the Equitable and as a member of the public are adversely affected by this action? Whilst it is costly and capricious to utilise the judicial review procedure this may be one time where my personal recourse to the Courts would be worthwhile.

The second area, which causes me concern, is the delay. There is now no litigation between Ernst & Young and The Equitable Life - it has settled. The litigation continues against the past directors now numbering 11, which includes a member of the Institute, one Peter Davies who was a partner in Price Waterhouse and also a member of the Council of the Institute. Should not the complaint against Ernst & Young now be formulated and published? I can see no reason for either delay or secrecy; indeed to maintain any reputation for auditors in the UK the complaint should now be made public.
I would add here that all your website has is:

"... Investigation covers Ernst & Young, the former auditors of the Equitable Life Assurance Society, as well as a former Equitable director and a former Equitable manager both of whom are chartered accountants. Ernst & Young sought to stay the investigation by bringing proceedings for judicial review in the Administrative Court. These were dismissed, and an appeal to the Court of Appeal was abandoned. The investigation continues. "

It is clearly time for the JDS to act for the benefit of the public and members of the profession.

Yours sincerely

John Newman FCA