Lord Penrose defends inquiry into Equitable

Lord penrose, the judge leading an independent inquiry into the downfall of Equitable Life, has defended his investigation against criticisms that it was flawed.

The judge said he had been "asked to investigate the facts, not to determine fault" in the events that led to the closure of Equitable to new business in December 2000 with a £1.5bn bill to policyholders it could not afford to pay. Thousands of customers have since seen their pension funds slashed as the company teetered on the brink of insolvency.

MPs and policyholders have reacted angrily to news that emerged this week that the former directors and auditors of the society look set to avoid censure by the report, because they are being sued by Equitable's current board. Ernst & Young has been told it is not part of the Maxwellisation process of the report, where those criticised in it are offered the chance to put forward a defence, because the inquiry believes it would be inappropriate to make observations on the company from 1995 onwards as this is the focus of litigation.

This has given rise to fears that the Penrose Inquiry will be incomplete and ineffectual. But Lord Penrose said that although he cannot "adjudicate on liability", this does not mean that he will "not describe or comment on the role of those involved". He also said that the inquiry would give a "full and accurate account of the relevant events" regardless of court proceedings. But, in a statement from the inquiry yesterday, he said whether "what happened might or might not give rise to a legal remedy through the courts is not a matter for him".

The Treasury asked Lord Penrose to conduct his investigation in 2001, and it is already more than a year late on delivery. Policyholders have pinned their hopes of compensation on the Penrose report, as Equitable has said it will sue the Government if Penrose finds evidence of misconduct.