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 ? a move that could benefit the insurance industry to the tune of �1bn a year ? has investments worth at least �250,000 in companies with insurance arms.
He is also weighing up proposals that 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 is pushing a bill through parliament that will attempt to slash the legal aid budget by �350m as well as shifting part of the costs of bringing "no win, no fee" cases from losing defendants to winning claimants. This reduces the 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, 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 reveals shareholdings 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 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 potential cases on to lawyers and insurance firms.
According to company accounts, Djanogly's brother-in-law, Ben Silk, made �130,000 from the two firms last year.
Going Legal, according to its website, deals with employment cases. 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 comes under Djanogly's ministerial portfolio. 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 the cabinet secretary Gus O'Donnell calling for an investigation into Djanogly. Slaughter points out a slew of conflict of interest claims given that the minister has neither resigned or removed himself from discussions from which he could personally profit.
The letter argues that Djanogly'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: "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."
Particularly complicated issues surrounding a minister's investments are often referred to Downing Street. 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.
Djanogly's spokesman 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."
Despite repeated requests to the ministry of justice, Djanogly has yet to respond to the Guardian.
But 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 , saying there was "no breach of the ministerial code".
Djanogly told BBC Radio 4 earlier this year that his reforms, based on Jackson's 2010 report, would change the current system which "helps claimants to the detriment of defendants, who would normally be the insurance companies".
Experts say the changes to legal aid will benefit the insurance industry, which has to pay out compensation in personal injury cases, to the tune of hundreds of millions of pounds. The Association of British Insurers admits the reforms will be to the industry's advantage but says it is consumers, not shareholders, who 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%.
Source: http://www.guardian.co.uk/politics/2011/sep/20/justice-minister-companies-shares-legal-aid
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