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US investment firm White Oak has accused Marsh, the world’s biggest insurance broker, of fraudulent conduct in its work for Greensill Capital, the finance provider that collapsed in scandal three years ago.
The private credit firm has intensified its $143mn suit against Marsh in London’s High Court, arguing in a filing on Friday that the broker made “fraudulent misrepresentations” about insurance covering invoice-backed financial products that White Oak had bought from Greensill.
The San Francisco-based investment firm’s escalated claims against Marsh hinge on a series of internal emails and phone call records, in which executives at the broker appear to have privately expressed alarm about growing issues with Greensill’s main insurance provider.
Investors who lost billions in dollars in Greensill’s collapse have long focused on the role of Marsh. It was responsible for confirming to end-investors certain details regarding the insurance covering Greensill’s supply chain lending facilities for groups including Sanjeev Gupta’s GFG Alliance. The insurance was designed to pay out if debts went unpaid.
In the latest filing, White Oak accused Marsh of misrepresentations by not telling it about a series of concerns it shared internally about the credit insurance arrangements and the authority of a key underwriter.
“These allegations are false and Marsh looks forward to vigorously defending its position in court,” said a Marsh spokesperson. It is expected to argue that it was not its role to provide due-diligence or investment advice to White Oak, and that its contractual duty of care was to Greensill alone, according to a person familiar with its position.
According to messages quoted in White Oak’s claim, Marsh employees privately worried about events at Bond & Credit Co, the underwriting firm that was bought by Japanese insurance company Tokio Marine in 2019, and which was Greensill’s main credit insurance provider.
When Marsh became aware that Greg Brereton, the key executive at BCC, had been dismissed in 2020 for exceeding his risk limits, it sent shockwaves through the broker, according to the filing, being escalated through management.
A note of a July call from Marsh recorded its concerns that Tokio Marine was “rashly threatening to cancel coverage”, which they considered “could cause significant losses in Greensill customer failures”.
One note of a Marsh call from the same month said it was “critical” that the BCC situation remained an internal matter, as “any wrongful messaging or broader dissemination as to underlying issues would cause significant issues for Greensill”.
Another email from Julian Macey-Dare, a managing director at Marsh and a key contact for BCC, said “Greensill do not wish to disclose your issues at BCC beyond a v narrow team, as we are remaining discreet,” according to White Oak’s amended claim.
In an email exchange in 2020, one Marsh executive described the situation surrounding BCC as “a frightening absence of corporate governance: this is fraud which may well be in breach of the Australian legal code as it applies to insurance companies”.
The filing also quotes a 2021 phone conversation in which Macey-Dare purportedly told colleagues: “I think from our point of view what we are trying to balance is not to destroy everything by investors simply saying OK we now become aware of something because of the actions of this insurer which is beyond your control which then blows everything up.”
White Oak’s Greensill investments stemmed from a financing facility provided to Liberty Commodities, part of Gupta’s GFG Alliance. White Oak has separately pursued insolvency proceedings against the trading firm through London’s High Court.
At a hearing earlier this month, a judge adjourned that petition to wind up Liberty Commodities until early next year, in order to give both sides a final opportunity to reach an out-of-court settlement.
Tokio Marine and White Oak declined to comment.
A lawyer for Brereton declined to comment. Brereton has said in Australian court that he would not have approved the insurance cover if he had been aware of any alleged “misleading and deceptive conduct”.
Additional reporting by Nic Fildes in Melbourne
https://www.ft.com/content/fa1d2e08-8076-4bf6-a8f6-28665c010200
