Legal aid reforms minister has £250,000 invested in firms with insurance interests

Jonathan Djanogly is piloting controversial proposals which could net insurance industry £1bn a year Jonathan Djanogly, the justice minister piloting controversial plans to cut legal aid and curb payouts, which could benefit the insurance industry to the tune of £1bn a year, has stockmarket investments worth at least £250,000 in companies with insurance arms. He is also weighing up proposals which may have a profound effect on his brother-in-law’s business which advertises compensation claims for accidents. Labour wrote to the cabinet secretary, Sir Gus O’Donnell, on Monday night to demand an investigation following the Guardian’s inquiry. Djanogly, a Conservative MP the legal services minister, is pushing a bill through parliament which will attempt to slash the budget for legal aid by £350m as well as shifting part of the costs of bringing cases on a “no-win, no-fee” basis from losing defendants to winning claimants. This reduces the costs liabilities of companies and their insurers if they unsuccessfully defend a claim as it will force claimants to pay out of any awarded damages their lawyers’ success fees and insurance policies that cover court costs. Last week the Guardian revealed that the minister could personally profit from the changes. In the past three years Djanogly has been entitled to an average annual payout of £41,000 from being a “minority partner” in his family’s firm of insurance underwriters, The Djanogly Family LLP. The 46-year-old, considered to be one of the 10 richest MPs, is heir to a £300m family fortune and has amassed a sizeable personal stake in the insurance industry. In the most recent declaration of MPs interests he continues to hold shareholdings of worth at least £195,000 in three banks with insurance arms – Barclays, HSBC and Lloyds TSB. He also has at least another £65,000 in Amlin insurance stock. Djanogly also declares in the ministerial register of interests that his “brother-in-law owns ‘Going Legal Ltd’ and ‘Legal Link Introductory Services Ltd’”. Both are claims management companies, which advertise “no-win, no-fee” compensation claims for accidents and charge a referral fee for passing on potential cases to lawyers and insurance firms. According to company accounts, Ben Silk, Djanogly’s brother in law, saw a combined profit from the two firms last year of £130,000. Going Legal, according to its website, deals with employment cases and Legal Link asks: “Suffer an injury caused by someone else?” on its homepage. Both offer 0800 telephone numbers for people to call. The regulation of the claims management industry is part of Djanogly’s ministerial duties. Last week, after pressure from former Labour justice secretary Jack Straw, he announced that “rising insurance costs will be tackled by a ban on referral fees” while admitting there was “no universally recognised definition of ‘referral fees’.” Labour’s justice spokesman, Andy Slaughter, has written to cabinet secretary Gus O’Donnell calling for an investigation into Djanogly. Slaughter points out a slew of conflict of interests claims given that the minister has neither resigned or removed himself from discussions from which he could personally profit. The letter argues that the minister’s assertion that his financial interests are in “blind trust/blind management arrangement” does not bear scrutiny as the “minister’s holdings are concentrated into financial services companies with exposure to the insurance market and The Djanogly Family LLP is explicitly set up to act in the insurance and reinsurance market”. Slaughter argues that as Djanogly “did not resign from the LLP and dispose of his interests (he has a) fiduciary duty to promote the interests of The Djanogly Family LLP”. This, says Slaughter, is in conflict with “his duty as a minister to promote the public interest”. Slaughter says “his shareholdings, weighted towards financial services companies and those with insurance interests, are incompatible” with being a minister adding that Djanogly “holds stocks in Lloyds and Tesco, both of which responded to consultation” backing the Jackson changes. The Labour MP adds that “given the minister’s role as regulator of claims management companies and his brother-in-law’s ownership of two claims management companies, it is reasonable to perceive a conflict of interest”. “Given the sums of money involved, the multiple ways in which the minister would benefit from this legislation, this would appear to be a severe breach of the code.” Slaughter says that if the MoJ’s permanent secretary, Sir Suma Chakrabarti, was informed of these arrangements it calls into question his judgment. In some cases when particularly complicated issues surrounding a minister’s investments prove too difficult for his or her own department to resolve the matter is sent to Downing Street. Slaughter notes: “In the event the prime minister was consulted, as per clause 7.9 of the Code, this poses serious questions as to the judgment of the prime minister.” The ministerial code states that “ministers must scrupulously avoid any danger of an actual or perceived conflict of interest between their ministerial position and their private financial interests”. It advises ministers to dispose of interests or recuse themselves from discussions and policy if there could be even a perception of a “conflict of interest”. The Cabinet Office said it had received the letter from Labour’s justice team. A spokesman for Djanogly said: “As Mr Djanogly made clear on Friday, his financial interests are a matter of public record, in declarations made both as a minister and as an MP. The government’s reforms to the no-win, no-fee system are based on an independent review by Sir Rupert Jackson.” Djanogly’s Liberal Democrat colleague at the Ministry of Justice, Lord McNally, described the Guardian story as an “example of shoddy journalism” at the party fringe on Tuesday in Birmingham saying there was “no breach of the ministerial code”. Djanogly told Radio 4 earlier this year his reforms, based on a report by Lord Justice Jackson in 2010, would change the current system which “help[s] claimants to the detriment of defendants, who would normally be the insurance companies” earlier this year. Experts say the changes to legal aid will benefit the insurance industry, which has to pay out compensation in personal injury cases, by at least “hundreds of millions of pounds”. The Association of British Insurers admits that industry will benefit from the reforms but argue that consumers, not shareholders, will benefit – pointing out that in Ireland similar measures to those contained in the legal aid, sentencing and punishment of offenders bill saw motor insurance premiums drop by up to 16%. Conservatives guardian.co.uk

Posted by on September 20, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.