One of the largest providers of financial services in the US is to sue several insurance companies for refusing to cover claims related to the massive Solo Industries frauds that were uncovered in the late 1990s.

Wachovia is suing Lloyd's of London and six other insurance companies for refusing to cover the claims.

L/C frauds

Around 20 banks lost at least US$300 million in the letters of credit (L/C) frauds perpetrated by Dubai-based metals entrepreneur and Solo Industries and Simetal owner, Madhev Patel.

Banks that fell foul of his fake L/Cs and false bills of lading include Citibank, ABN Amro and Barclays.

Payout

Wachovia argues that insurers should pay up on L/Cs that the bank or its predecessor, First Union Corporation paid out on.

At the time of the frauds First Union's London office essentially cashed L/Cs issued by other banks to First Union account holder, Simetal Ltd. First Union then demanded payment from the issuing banks.

Fraud size

The court filing lodged by the bank in London does not disclose how much Wachovia is liable for under the settlements, perpetuating the mystery of exactly how many millions of dollars banks actually lost in this massive L/C fraud.

Reports in specialist insurance publications, however, suggest from earlier lawsuits brought against Wachovia by the issuing banks that the case against the insurers might involve a sum of around US$8 million.

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