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Cook takes on Lloyd's of London

February 28, 1996
By: Reece Rushing
State Capital Bureau

JEFFERSON CITY - When William Wenzel decided to invest with Lloyd's of London back in 1978, he felt safe.

After all, Lloyd's had been around for 300 years. And a Lloyd's investment agent told him that no one ever lost money with Lloyd's - that he could expect to make 7 to 10 percent profit each year.

Lloyd's' stellar reputation along with the agent's rosy picture were more than enough for the Herman resident to lay his money down. But what the Lloyd's agent didn't tell him, Wenzel said, was that the firm anticipated heavy liability as a result of pollution and asbestos cases.

These cases meant heavy losses for Wenzel, as well, who has lost money and assets every year since 1978. He wanted to pull out of his investment when he started to lose money, but he couldn't because of an agreement he signed when he first invested with Lloyd's. Wenzel said he was stuck as he watched his money and his assets fly out the window.

On advice of his attorney, Wenzel declined to disclose the size of his losses, except to say his original investment with Lloyd's was $150,000.

But he was not alone. Wenzel and others brought their problems to the attention of the secretary of state's office, which began to investigate the alleged misdealings of Lloyd's. At least 79 Missourians lost about $17 million since 1977 as a result of investing with Lloyd's, the investigation concluded, and nationwide, there were 2,700 investors who lost $170 million.

These numbers prompted Secretary of State Rebecca Cook to slap the 300-year-old insurance firm with a cease and desist order on Wednesday for possible securities fraud, stopping any Lloyd's activity on securities in Missouri. Cook said other states are considering similar action.

"This large and prestigious company used its name to take advantage of Missouri investors," Cook said.

The secretary of state's report alleges that Lloyd's agents misled potential investors in the sale of securities in the form of memberships. Agents knew the investments were not safe, the report says, but failed to disclose the risks to investors. Further, Cook said that the securities were not registered to be sold in the state and had received no exemption from registration.

Cook said the reason Lloyd's engaged in the fraud was to make up for the losses that were expected from the asbestos and pollution cases, most of which were pending in the United States.

"Their feeling was, 'If the United States is taking our money, hey, let's take some back,'" Wenzel said.

Lloyd's then began the process of conning Missourians out of their money, Cook said, which led to Wednesday's action against the firm.

"Missourians aren't going to pay for the bill anymore than they already have today," she said.

Lloyd's has no registered agent in Missouri and the secretary of state's office said they knew of nobody in the U.S. who could speak for the firm.

In fact, Cook said her office would hire a British solicitor to serve the cease-and-desist order on Lloyd's.

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