September 20, 2002
FOR IMMEDIATE RELEASE
CONTACT: CHRISTOPHER GOETCHEUS
Trust Insurance Receiver Sues Arthur Andersen
Suit Alleges Negligence In 1997 Financial Audit
( BOSTON, MA) Massachusetts Insurance Commissioner Julie M. Bowler in her capacity as Receiver of Trust Insurance Company and on behalf of Trust's policyholders and other creditors has filed a complaint in Suffolk Superior Court against Arthur Andersen LLP.
The Receiver asserts that Arthur Andersen failed to exercise reasonable care:
The Receiver further asserts that Trust's financial statements for 1997 contained materially false, misleading, and inaccurate information and that representations in the management letter that there existed no material weaknesses in Trust's internal control structure were also false.
The complaint argues that absent Arthur Andersen's misrepresentations and misstatements, the Commissioner of Insurance would have been able to act sooner to exercise regulatory authority to put Trust into receivership, and/or to prevent Trust from continuing to conduct business. As a result of Andersen's negligent misrepresentations, Trust's policyholders and creditors have been substantially damaged in excess of $90 million. The effective regulation of insurance companies depends upon the performance by independent auditors of their professional responsibilities in the audits they conduct.
The Massachusetts Supreme Judicial Court for Suffolk County appointed the Insurance Commissioner Receiver of Trust Insurance in February 2000 after the Commissioner determined that policyholder and creditor interests were in jeopardy due to Trust's financially hazardous condition. In June 2000, after further evaluation of Trust's financial condition, the Receiver requested the Court's order to liquidate Trust Insurance. As of January 2000, Trust had over 176,000 policyholders and $167,500,000 in written premium.