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Rich, Powerful On Roster of U.S. Investors in Lloyd’s

July 21, 1996

WASHINGTON (AP) _ What’s in a name? When it comes to Lloyd’s of London, plenty.

State regulators’ decision to pursue lawsuits against Lloyd’s highlights a policy debate: When should sophisticated, wealthy investors get the protection of securities laws?

U.S. investors in Lloyd’s complain they were misled by the insurer about the risks of investing in the world’s most prestigious insurance market.

As Lloyd’s losses mounted due to various catastrophes, Lloyd’s required investors _ known as names _ to pledge additional money to pay claims. Investors faced unlimited liability, meaning they could be required to pay out their house, car and personal savings, down to the last cuff link.

Were the investors sophisticated enough to know what they were doing? Were the names politically influential people urging the government to intervene on their behalf?

A review of the background of 220 investors showed some were heavy political campaign donors, as well as highly sophisticated investors and business people. Among the prominent figures:

_Martha Ingram, chairman of Ingram Industries in Nashville, one of Tennessee’s biggest privately held companies, employing more than 6,000 people, according to Standard & Poor’s.

_James L. Clayton, chairman and chief executive officer of Clayton Homes Inc. in Knoxville, Tenn., a New York Stock Exchange-listed company that sells manufactured homes and offers some financial services.

_Ryal Robert Poppa, retired chief executive of Storage Technology Corp. of Louisville, Colo., a computer equipment maker with more than $410 million in revenues, also listed on the NYSE.

Lloyd’s investors are not homogenous, and some are middle-class professionals who viewed Lloyd’s as a safe investment opportunity.

Overall, the investors generally lived in well-off neighborhoods, and their typical household income was $40,729, or about 26 percent above the national average, according to a comparison of names’ zip codes with U.S. Census Bureau data.

Fifty-two had contributed a total of $264,000 to federal campaigns since 1991.

Dee R. Harris, president of the North American Securities Administrators Association, acknowledges that Lloyd’s investors ``were fairly affluent at the time they invested. Were they financially sophisticated? ... I have a feeling that they were not.″

The federal securities laws allow sale of investments to well-heeled, sophisticated investors without registration with the Securities and Exchange Commission, on the assumption that professional investors can fend for themselves. The definition of a professional investors and what protections they deserve has been hotly debated among regulators for years.

But the sophisticated investors caught up in the Lloyd’s case said in interviews their expertise was of little use: They claim Lloyd’s lied to them.

``I asked all the right questions,″ said Henri Wedell, a Memphis stock broker. ``And in retrospect, either they didn’t know the answers and pretended they did or they told me bald faced lies.″

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