Former Lifemark director Stewart Ford has launched a scathing attack on the FSA in a letter to Financial Secretary to the Treasury Mark Hoban, asking him to "intervene urgently" in the financial restructuring of the troubled fund.
In what would be an unprecedented intervention, Ford argues the government should force the FSA to come up with alternatives to a planned stabilisation package led by US hedge fund CarVal and Norwich and Peterborough Building Society (N&PBS).
He accuses the independent regulator of "willing the liquidation" of the fund to justify its Division's decision to put Lifemark-backer Keydata into administration in June 2009.
Ford, who is under investigation by the FSA and the Serious Fraud Office (SFO) for his actions at Keydata, accuses key members of the Enforcement Division (Rebecca Irving, Georgina Phillippou and Lillian Small) of trying to "sabotage rather than safeguard" Lifemark's future.
Ford asks Mark Hoban to suspend the FSA trio from working on the Lifemark case.
Copies of the letter to Hoban have also been sent to Chancellor George Osborne, the Treasury Select Committee, the House of Lords Economic Committee and all other members of the House of Commons.
The Keydata founder also accuses the Luxembourg regulator, the CSSF, of causing Lifemark's initial liquidity crisis with a u-turn on its decision to allow the issue of new bonds in July 2009.
But KPMG's Eric Collard, Lifemark's administrator, has previously questioned claims by Ford that issuing more new bonds would have saved the fund.
"A fund's own assets are supposed to generate revenue to pay the premiums on the fund. So far this has not been possible. No-one can say for sure this is because the portfolio is bad but in the past it has not been self-funding", he has said.
He has also queried Ford's assertion, repeated in the Hoban letter, that the "essence" of a rescue deal is to provide "financial support" to Lifemark for the next three to four years, saying the fund should be self-funding from the start, without the need for extra financial support.
In the letter, Ford also accuses PwC, which helped broker the CarVal and N&PBS deal, of acting with the US hedge fund to the detriment of Lifemark bondholders.
PwC, which charges Lifemark £200,000 a month in fees, is also owed money by Keydata as its joint administrator. Ford alleges PwC is seeking to ensure Lifemark pays the due amount in any restructuring.
N&PBS and CarVal last month agreed to provide Lifemark with £1.5m and $7.5m respectively in a short-term loan to pay premiums on the second-hand life policies which make up the fund's underlying assets, and to avoid their default.
The loan facility, offered at interest of 14.5% above three-month LIBOR, was approved by the FSA and bought the pair a three month exclusivity period to produce a longer term restructuring plan for the fund.
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