LEGAL pressure is mounting on embattled insurer QBE over a controversial product forced on struggling home owners in the repossession-hit US.

In two class actions in Florida, lawyers acting on behalf of tens of thousands of home owners have made serious allegations of profiteering, collusion and kickbacks in cosy deals between lenders and QBE.

While the allegations have yet to be tested in court, a judge last week allowed one class action over the product, known as ”force-placed insurance”, to go ahead and is considering whether the second should proceed.
Advertisement: Story continues below

At the same time, QBE is among insurers that New York authorities are investigating over force-placed insurance, while insurance market Lloyd’s recently warned participants – including QBE – to comply with US laws covering the product.

Lenders take out force-placed insurance to protect their investment when home owners fail to keep their property insured, often because they are also struggling to meet mortgage payments.

The cost, which is alleged to be up to 14 times more than equivalent insurance on the open market, is then passed on to the home owner.

With about $US50 million in premiums reported to be at stake in Florida, QBE is vigorously fighting both cases.

A QBE spokesman said there had been no findings of insurer fault or wrongdoing.

”QBE believes that its approach to the pricing of force-placed insurance in Florida appropriately reflects the risks, particularly in relation to catastrophes that prevail in this market,” he said.

QBE has already had a partial victory in the first action, limiting the potential class of litigants to residents of Florida.

In that proceeding, QBE has admitted it did not use an actuary to set the price of force-placed insurance.

Instead, it ”simply added 20 per cent to the rates of another insurance company”, Southern District of Florida judge Robert Scola said in a ruling.

In the other class action, QBE subsidiary Balboa, which the company bought just last year, is accused of conspiring with GMAC in ”abusive forced-placed insurance practices”.

Lead plaintiff Christina Ulbrich alleges she was paying $US890 a year for hazard insurance through her insurer. She alleges that despite having a valid policy in place, in January last year GMAC made an ”unfair, unconscionable, unjustified, and unlawful” attempt to force-place her with insurance that cost 14 times as much – more than $US12,700.

Ms Ulbrich also alleges that GMAC received a kickback for force-placing windstorm and flood insurance with Balboa.

Judge Scola is considering whether to allow the case to proceed or agree to a motion by GMAC to throw the case out.

American companies should be able to side-step the Australian legal system in the event of certain legal disputes a US business lobby says.

The US Chamber of Commerce wants US-domiciled companies to have the option of dealing with legal issues in courts outside Australia under the rules being hammered out for a new Pacific-wide trade agreement.

The demand comes ahead of the nine-nation negotiations over the Trans-Pacific Partnership agreement being held in Melbourne over the coming week. The Australian government generally opposes so-called investor-state dispute settlement provisions in trade deals, including in the current talks.

“If Australia were able to extract such a major exemption, other countries would press forward to seek their own major exemptions from core commitments, which would ultimately unravel the ability to achieve a comprehensive, 21st-century TPP agreement,” the US Chamber of Commerce wrote in a letter to US president Barack Obama this week

The TPP is an agreement that aims to lower trade barriers between nine Asia-Pacific nations including Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the US and Vietnam. The barriers include what’s dubbed as “behind-the-border” impediments. In November, Japan signalled their interest in possibly joining the group.

The US Chamber of commerce said any exemption achieved by Australia could set “a potentially damaging precedent” in the discussions that could spur other, particularly less-developed countries, to seek similar provisions.

“It’s a bit surprising, but it is a try-on (by the US Chamber of Commerce),” said University of New South Wales economist Tim Harcourt. “Australia already has a very open foreign investment regime and in most cases ours is an improvement on most countries.”

‘Overdone’ demand

Typically investor-state dispute settlement provisions are included in treaties between developed and developing countries because of concerns for the integrity of legal systems or institutions in those developing countries said Australian National University international trade lecturer John Tang.

“For the US to demand this clause from Australia, just seems overdone,” he said. “Especially since we’re still negotiating this TPP to demand a comprehensive agreement on all aspects, it just seems premature.”

The US Chamber of Commerce – which is not an arm of the US government – has found itself under fire domestically recently.

Google reportedly threatened to exit the lobbying group over its support for the Stop Online Piracy Act and the Protect IP Act designed to curb online privacy but which were strongly opposed by web search companies.

The Australian government estimates that an TPP bloc could account for annual trade totaling $US17 trillion ($15.7 trillion) in 2010 terms, forming a “building block” for Asia-Pacific economic integration. Trade officials from the nine nations are hoping to conclude negotiations by the end of 2012.

Australia’s total imports and exports rose 12.1 per cent in 2010-11, to $572.2 billion, driven by sustained demand for natural resources from Asia, according to the Department of Foreign Affairs and Trade.

czappone@fairfax.com.au

EARLIER THIS MONTH after more than two years of debate and delay the federal government passed a law aimed at advancing a controversial radioactive waste dump on contested Aboriginal land in central Australia.

This week Maurice Blackburn lawyers, with special assistance from Ron Merkel QC and Julian Burnside QC, will be representing Northern Territory Indigenous elders in a Melbourne courtroom in a move aimed at stopping the Federal government’s plan for Australia’s first purpose-built national nuclear waste dump at Muckaty, 120 kilometres north of Tennant Creek.

To take a step back, on 13 February 2008 Kevin Rudd made a welcome and long overdue apology to Indigenous Australians as the first order of business for the recently elected Labor government. In making the apology, then Prime Minister Rudd named Lorna Fejo as a personal example of the necessity for a national apology.

Lorna Fejo is a traditional owner of land that includes Muckaty Station. She is now part of the group that has launched legal action in the Federal Court challenging the nomination of the Muckaty site. She has made her feelings about the proposed waste dump crystal clear. “I’m very, very disappointed and downhearted about that [Muckaty legislation]. I’m really, really sad,” she said.

“The thing is – when are we going to have a fair go? Australia is supposed to be the land of the fair go. When are we going to have fair go? I’ve been stolen from my mother now they’re stealing my land off me”.

At its most basic, advancing the Muckaty site is a case of politicians in Canberra dumping the most dangerous and poisonous radioactive waste we produce on one of Australia’s poorest and least resourced Indigenous communities.

It has happened without transparent or democratic processes and in clear contravention of international obligations, including under the UN Declaration on the Rights of Indigenous Peoples. If Muckaty were to become home to Australia’s radioactive waste it would be a body-blow to the reconciliation process set in motion with the apology to the stolen generations.

It is crucial to realise that what is being proposed is Australia’s new ‘greenfield’ approach to radioactive waste management. However, instead of developing a credible process the government has been obsessed with identifying a vulnerable postcode. To place Australia’s worst radioactive waste on the lands of some of its poorest people – without broad community understanding or consent – is not cutting edge scientific thinking, robust policy or best practice.

It is a heavy-handed 1950s-style approach to Indigenous land and rights and a quick and dirty attempt to deal with a long lasting and dirty waste. Martin Ferguson, the Minister who has most actively pushed the dump plan, is using the emotive argument that it is necessary for Australia’s nuclear medical waste.

However medical experts dispute this claim. Louise Emmett, a physician from St Vincent’s Hospital in Sydney says, “in the vast majority of nuclear medicine practices the storage issue is not particularly current, in terms of what we keep is short half-life, up to sort of eight days half-life, so it would be difficult to take that long distances for storage.”

Nuclear radiologist Dr Peter Karamoskos uses even plainer language in response to Minister Ferguson’s justification for a nuclear waste dump on medical grounds. “That’s a furphy that Minister Ferguson has been promulgating to get the public on side through an emotive campaign of disinformation.”

What we know to be true is that most of the waste slated for Muckaty is currently located at two secured and dedicated federal facilities. One is on the Woomera defence lands in South Australia and the other at the Australian Nuclear Science and Technology Organisations (ANSTO) Lucas Heights reactor complex in southern Sydney. Assessments have shown both sites can continue to host this waste while we dump the Muckaty plan and get serious about a responsible approach to radioactive waste management.

We can’t take the heat out of radioactive waste but we can take the heat out of the increasingly polarised debate about how best to manage this waste. We need to learn from countries like the UK and the USA who have far greater volumes of nuclear waste and have both accepted the need for transparency, accountability and community consent as an essential pre-condition to its responsible and effective management.

The Muckaty community might be under great pressure because of Minister Ferguson’s plan but they are vigorously defending their country from the threat it poses.

Recently they invited the Governor-General to visit their lands and this week they are taking legal action aimed at getting the Muckaty nomination declared invalid in the federal court. With key issues of ownership, consultation and consent unresolved and legal action under way, it is clear that there is no certainty or social licence surrounding the Muckaty dump plan.

Instead of radioactive divide and rule we need an expert approach, removed from the politicians but engaged with the community, to examine and assess the most credible and responsible way to manage Australia’s radioactive waste in the long term. We need to bring diverse stakeholders out of the trenches and to the table.

Minister Ferguson argues that the dump is needed for nuclear medicine – untrue. He argues that it is needed urgently – untrue. And he argues that it is supported by traditional owners – untrue. No matter what the code three strikes means you’re out.

Muckaty constitutes a fundamental test of our technical capacity, but more importantly it is a test of our national responsibility and maturity. Australia can and must do better.

Dave Sweeney is Nuclear Free campaigner for the Australian Conservation Foundation. source: abc.net.au

Adrian Lowe, theage.com.au

PROMINENT Melbourne lawyer Alastair Grigor has been cleared of rape allegations.

Mr Grigor, who owns a boutique criminal law firm, was alleged to have raped a woman he met at a Collingwood hotel in September last year.

He was accused of raping the woman on a car bonnet in a nearby car park.

Advertisement: Story continues below Four witnesses and the complainant had testified on Wednesday at a committal hearing at the Melbourne Magistrates Court.

But yesterday, when the remainder of the witnesses were due to be called, prosecutor Michele Williams, SC, told Deputy Chief Magistrate Felicity Broughton: ”I advise the court that we seek to withdraw the charge against Mr Grigor.”

Shortly after, Ms Broughton replied: ”The charge is struck out, having been withdrawn.”

Mr Grigor replied: ”Thank you, your honour.”

MICHAEL WEST BUSINESS EDITOR

POLICE and corporate regulators have raided homes and businesses to smash a crime syndicate that launders money through the sharemarket after getting inside tips from leading investment banks.

The crime ring, whose network extends from NSW to Western Australia, uses young people with little means to extract cash from ATMs after successful share trades executed through the Commonwealth Bank’s online broker, Commsec.

Police raided the homes of two employees of Deutsche Bank on April 9 searching for email and phone records and documents in connection with the WA syndicate. They were searching for trades in brewing giant Lion Nathan before an $8 billion takeover bid by the Japanese brewer Kirin.

Shares in Lion shot up from $8 to more than $11 in late April last year when the deal was announced, delivering a stellar profit to those who had bought shares before the announcement. Among those who profited are those with links to organised crime in WA.

Deutsche is not suspected of any wrongdoing and is co-operating with authorities. The bank was, on the same day as the raids, issued with a notice to produce information by ASIC, which it complied with.

In late May last year, regulators from the Australian Securities and Investments Commission were alerted to suspicious trading in Caltex shares. Caltex’s share price rose from $11 to $12 on news that it intended to buy Mobil’s petrol stations.

Another leading investment bank, UBS Australia, has been the subject of preliminary ASIC inquiries in connection with the Caltex trading but has not been issued with a notice to produce. One of its employees is alleged to have provided information to the syndicate about Caltex before the announcement. The bank itself is not suspected of any wrongdoing.

The Caltex deal was later blocked on competition grounds but a taskforce from ASIC homed in on one $500,000-plus trade where parties linked to the crime syndicate had benefited. Sources said the syndicate members relied on young people of little means to remit the cash by withdrawing $1000 amounts – the daily limit – from ATMs.

This was a method, said the source, of laundering money from illegal activities. Police from the Tactical Response Group are believed to have also raided homes in Perth in connection with the irregular trades.

Commsec and Deutsche Bank declined to comment on the investigation.

The trading in Lion and Caltex shares is one part of a wide-ranging investigation into insider trading in which a number of companies and individuals have been issued with notices to produce information. The crime syndicate is believed to have garnered trading tips from a number of sources and traded in many different shares on the stock exchange.

The trading has been conducted through what are thought to be fake company names along with fictitious names of individuals behind them.

Insider trading is hard to prove because tips are mostly provided by word of mouth and there is rarely a paper trail to produce in evidence.

SELMA MILOVANOVIC

A PROMINENT Melbourne criminal lawyer who has appeared in some of the state’s highest-profile trials has been charged with rape.

Alastair Grigor has been charged on summons with rape over an alleged incident that happened in Collingwood in September last year.

It is understood that Grigor – who has acted as defence lawyer for Mick Gatto and in the David Hookes manslaughter trial – met a woman while drinking at the Grace Darling Hotel. The pair exchanged numbers and are understood to have left the pub together.

The Age understands it will be alleged that while Grigor and the woman were walking in a nearby street, he pulled her into a car park. The pair had sex there and Grigor allegedly left.

Police were called and the woman was medically examined. It is understood Grigor, who is expected to defend the rape allegation, told police he had consensual sex with the woman.

Grigor, who has run boutique criminal law firm Grigor Lawyers for the past four years, is a respected and experienced member of Melbourne’s legal community.

Previously he was a senior associate at Galbally Rolfe and commercial litigation solicitor at Maddens Lawyers.

Grigor has acted in several prominent underworld cases as well as the AWB inquiry. He is due to face court later this month.

Source: The Age

DYLAN WELCH AND VANDA CARSON
A MEMBER of one of Australia’s most notorious crime groups has pleaded guilty to his role in a $150 million bank fraud, dubbed Australia’s very own Ocean’s Eleven.

The conspiracy was so named after federal police charged 11 men over the theft of $150 million from the Commonwealth Superannuation Scheme. The men include: a Sydney nightclub owner; an international banker; a fraud investigator; a Telstra worker; and a pensioner.

Jamieson Vincent, 40, pleaded guilty yesterday to money laundering on the first day of a four-week trial. The guilty plea came more than six years after he committed the crime.

He is part of a crime group. Members of that group ran strip clubs, were associated with the Bandidos Motorcycle Club and worked with the late Sydney Mr Big Leonard Arthur ”Lennie” McPherson.

The funds the men tried to pilfer were held by the investment bank JP Morgan. On Christmas Eve 2003 a fake request to transfer $150 million was sent from three members of the group, including a JP Morgan employee.

The money was moved to four accounts in Hong Kong, Switzerland and Greece. Federal police were alerted by a mistake during the Greek transfer and they froze all four accounts.

All the money – except for $3.4 million that was gambled away on a casino boat off Hong Kong – was recovered.

Eight men have since been convicted over the fraud. They include Ernst Hufnagl, a pensioner, Barry Osbourne, a Telstra employee, and Gregory Bourchier, a JP Morgan employee, who were convicted over the conspiracy in 2008.

Five others, including Vincent, have since been convicted of money laundering. Two men, Richard Kurland and Leon Kuris, were acquitted and one man has yet to be tried.

Yesterday in the Sydney District Court Vincent, a short, heavy-set man, stood while the court officer read out the charge against him. When asked how he pleaded, he responded with a sharp ”guilty”.

He sat down and the Chief Judge of the District Court, Reg Blanche, QC, turned to the barrister representing the man who has yet to be tried.

”That leaves just you,” Judge Blanche said.

The final defendant will face a two-week trial beginning on May 31. Vincent will be sentenced on May 14.

JOEL GIBSON
LAWYERS are out of touch with the level of consumer protection in other industries and professions, according to a consumer advocate advising the federal government on reforms to legal regulation.

Carolyn Bond from the Consumer Action Law Centre – the only consumer representative on a government-formed consultative group – said fears that the government’s regulation taskforce is biased against the profession ”may reflect the fact that lawyers are not used to the range of protections that consumers now expect”.

Her comments followed the publication in the Herald of a letter from the country’s nine largest law firms to the secretary of the attorney-general’s department, Roger Wilkins, alleging his drafters displayed bias and prejudice against lawyers in their proposals for increased consumer protection.

Mr Wilkins’s taskforce was accused of foisting unnecessary and unfair constraints on all lawyers for the sins of a few who had been caught overcharging.

But Ms Bond said lawyers needed to be brought into line with other professions and industries.

Lawyers had a special role and obligations but ”many consumer problems are similar to those they have with their mortgage broker or insurance company – and the laws should respect that,” she said.

Many lawyers disagree, among them the NSW Chief Justice, Jim Spigelman, who has argued that the consumer-service provider model has ”become a feral metaphor” for lawyer-client relations.

”Its unthinking application to the legal profession could have serious consequences for the rule of law in this country, unless the centrality of independence of the profession is kept firmly in mind throughout the process,” he has said.

But consumer advocates had a win over lawyers and judges yesterday with the announcement that one of their number would sit on a planned National Legal Services Board setting standards for lawyers.

The Attorney-General, Robert McClelland, said state and federal governments would appoint the majority of the board and consumer expertise would be included.

Lawyers want all the board positions to be appointed by the profession, including any community representative, and a majority of the board to be lawyers.

Impassioned debate about the new rules for lawyers and who will set and enforce them has stalled the drafting,which was to be finished by a Council of Australian Governments meeting in May.

Mr McClelland said yesterday that a draft bill and national rules would go before COAG but the consultation period on them would be extended.

The president of the NSW Law Society, Mary Macken, welcomed the extension. ”It is imperative that there is first extensive consultation and it is not rushed through,” she said.

At a fiery meeting held in December, an advisory group set up by the federal government described the process as rushed and expressed its dismay that the group was seen merely as ”window dressing” and was being ignored.

According to meeting minutes obtained under freedom of information laws, a taskforce representative said the May deadline was a window of opportunity that would close, to which members of the group replied that that was ”rubbish”.

The Chief Justice declined to comment, as did the Law Council of Australia.

It’s nice to see a touch of the old putting its mark on the new year. Would you believe it, a group of big wigs from the lawyer trade unions has come out in opposition to a reform floated within the Commonwealth Attorney-General’s Department that proposes lawyers face disciplinary action for overcharging?

The legal establishment doesn’t much like the idea of discipline for legal practitioners who charge more than is ”reasonable”, ”proportionate” and ”fair” for the reason that those terms are subjective.

Nor is it keen on new regulations being too prescriptive. Between opposing vagueness and prescriptiveness there’s a lot of wriggle room.

However, the sage heads of the law industry gracefully concede that something called ”gross overcharging” could be subject to disciplinary action. In this context disciplinary action does not mean criminal prosecution, although some overcharging is criminal – for example, obtaining and attempting to obtain by deception.

However, consumers need to be reminded that judges in this state in effect did away with the offence of ”gross overcharging”, which is a form of theft. The Court of Appeal has said that if a lawyer does not have the ”intention” of grossly overcharging, then no penalty can be imposed. In the case considered by the appeal judges, a secretary, not the principal of the firm, sent out the vastly inflated bill. It was all a terrible mistake.

This explains why the legal business is opposed to another component of the reform agenda – that all bills sent out to clients have to be signed by a principal of the firm. ”We are opposed to the suggestion ‘to require principals of law practices to take responsibility for the content of bills sent to clients’.”

That would all be too much additional and costly administration. It would also mean that if lawyers were signing the bills they would be unable to argue that gross overcharging was unintentional.

It’s comforting to know the legal profession is in favour of disciplining practitioners who grossly overcharge their clients as long as there is no way the charge can stick.

Professor David Lemmings of Adelaide University, in his landmark study of how the legal culture of England changed between the 17th and 18th centuries, noted that between 1580 and 1640 there was a civil litigation boom. Lawyers charged reasonable fees, typically less than 10 per cent of the amount at stake. The common law was accessible by every man.

Today charges in some cases are getting close to 100 per cent or more of the amount in dispute.

In the first half of the 18th century England was hit by a severe recession. Lawyers responded by concentrating on work that would support higher fees, that is working for the rich.

By 1750, the number of civil cases being pursued was one-sixth of the figure in 1640. Seventy-five per cent of barristers turned away from the common law to the Court of Chancery, which concentrated on commercial disputes and deceased estates.

By 1800 the Court of Chancery was finalising only 30 to 90 cases a year, but creating 5000 to 8000 hearings a year. The perfect make-work scheme for lawyers had been created. Professor Lemmings says: ”There are substantial grounds for suspicion that the 18th century Chancery was operating an elaborate racket in the administration of the law, which amounted to a conspiracy for making the most out of a declining source of work.”

Lawyers had captured control of the process from the judges and the fee machines went into overdrive.

More recently in Britain, research produced the alarming figure that in commercial claims of up to £12,500 ($22,300), litigants were spending £5 for each £1 argued about.

Here’s a final consideration. In 1887 in the English case of Re Hill, a lawyer’s fees were taxed (reduced by the court) to 45 per cent of the amount claimed. The court said this gave rise to an inference of fraud.

In 2000 or thereabouts Cherie Blair, the wife of the then prime minister of Britain, sent out a bill in a legal aid case for £9500.

It was reduced by the billing authorities to 53 per cent of the original amount. She appealed and got it up to 59 per cent. No one suggested that this was fraud.

You have to go back a long way to understand how things evolved in the law and why we’re where we are now.

justinian@lawpress.com.au

Celebrity client … Seinfeld’s Jason Alexander has joined the Jenny Craig weight-loss program in recent weeks. Photo: Getty Images

NEW YORK: Weight Watchers International has sued its rival Jenny Craig, charging that it lied in an advertising campaign that said its weight-loss program was superior to Weight Watchers’.

A television advertisement featured a spokeswoman, Valerie Bertinelli, in a lab coat saying that ”a major clinical trial” had shown that ”Jenny Craig clients lost, on average, over twice as much weight as those on the largest weight-loss program”, which referred to Weight Watchers, a complaint filed in federal court in New York on Tuesday said.

”The Jenny Craig advertisements are false,” Weight Watchers said. ”Jenny Craig did not conduct ‘a major clinical trial’ comparing its product with the Weight Watchers program.”

Weight Watchers, which is based in New York, asked the court to stop Jenny Craig, a unit of the Swiss company Nestle, from using advertisements claiming that its weight-loss program was superior. It also seeks damages.

Weight Watchers said the start of the year was ”a critical time for weight-loss companies” because people sought to stick to their New Year’s resolutions to lose weight.

Julie Safer, a spokeswoman for Jenny Craig, had no immediate comment.

Bloomberg