A partner in Independent's auditors, KPMG, gave evidence at Southwark today

The morning began with cross examination of yesterday’s witness, Garth Ramsay, Independent’s former executive chairman, by Dennis Lomas’ counsel Mukel Chawla QC.

Chawla concentrated on an investigation which Lomas initiated on May 14, 2001 looking into the London market account.

Chawla asked whether or not Lomas had expressed to him an opinion that Independent’s reserves where “woefully inadequate.” Ramsay replied that he had not.

The prosecution then called Andrew Sayers, a partner in Independent’s auditors KPMG, to the stand.

Sayers took to the stand in the afternoon. He was asked by chief prosecutor Andrew Baillie QC to explain to the jury what role the auditors played within a publicly listed company such as Independent.

Sayers said that KPMG relied on work undertaken by actuaries Watson Wyatt to form an overall opinion of Independent’s accounts.

Baillie also asked how much KPMG knew about side agreements relating to reinsurance contracts signed around the time of the March 5, 2001 board meeting.

Sayers explained that KPMG knew about three reinsurance contracts that appeared beneficial to Independent and wanted to confirm the existence of any other agreements. The witness said KPMG obtained confirmation from Independent that there were no other agreements.

Baillie asked: “Were you ever told of details of negotiations between ERC and Independent leading up to March 5, 2001?”

Sayers replied: “No, apart from knowing negotiations were ongoing to conclude contracts A, B, and C [the courts designation for Independent’s London and provincial market liability reinsurance].”

Baillie also touched on Independent’s claims reserving, he asked: “Did you ever receive any information about claims deliberately kept off Independent’s computer systems?”

“No,” replied Sayers.

Michael Bright’s counsel, Ian Winter QC, kicked off the cross examination of the witness.

He began by asking Sayers to explain his role as an auditor. Sayers said he was in charge of a team of between 8 and 9 people who gathered appropriate information on Independent to form an audit opinion.

“You never saw any evidence of management inappropriately interfering with claims handling?” asked Winter.

“That’s right,” the witness replied.

Winter then asked if KPMG knew that Independent’s London market operation was causing significant problems. Sayers confirmed that he did and that he was aware Independent were making efforts to rectify the situation.

Winter said: “But there was a large backlog of claims?”

“Yes, and Independent was addressing the problem by targeting the backlog,” replied Sayers.

Sayers confirmed that by the end of 2000 the claims backlog had been cleared to a “normal” level.

Winter also asked what KPMG knew about delegated authorities. Sayers said: “I knew at various times that claims held by delegated authorities would not be on the system.” He also explained to the jury that the practice of delegated authority was not uncommon in the insurance industry.

When Winter asked about whiteboard claims the witness said that, at the time, he wasn’t aware of the existence of such a system.

Michael Bright, Philip Condon and Dennis Lomas deny charges of conspiracy to defraud. The case continues.