A former Bermuda Fire & Marine Insurance Co. Ltd. director yesterday told a court he depended on the advice given by auditors Cooper & Lines in voting for the 1991 reorganisation of the company and asserted that their role extended beyond that of auditors.

Under cross examination from Robin Potts, defending lawyer for the five former directors on the company's finance committee, Appleby Spurling & Kempe partner Richard Spurling described Cooper & Lines' role as that of financial advisors to the reorganisation.

The assertion seems to contradict Cooper & Lines claim that the firm acted only as auditors to the company and provided no business advice. In his opening argument a few weeks ago lawyer Ian Croxford described the role of the firm as akin to that of "mechanics'' who prepared financial statements on instructions from the board. He claimed that the firm had not been hired to give business advice.

However during Mr. Potts cross examination Mr. Spurling disputed this version of Cooper & Lines' role. He said their role was to provide financial advice on the solvency of Bermuda Fire, the valuation of the domestic assets that were transferred to newly created BF&M Ltd. and whether a share dividend could be made.

"Were they just humble number crunchers?'' Mr. Potts asked.

"Absolutely not,'' Mr. Spurling answered.

Mr. Spurling, a former UBP MP, is appearing as a witness for defendant BF&M Ltd. The line of questioning by Mr. Potts yesterday indicates a growing rift in the competing aims of the defendants in the fraud trial, especially with lawyers for BF&M and the five directors attempting to lay potential liability for Bermuda Fire's insolvency off on the hired professionals.

Mr. Spurling had previously stated he would not have allowed the 1991 reorganisation of the company to go ahead if he believed it would have led the business into insolvency.

Cooper & Lines was the company's auditors and Conyers Dill & Pearman gave legal advice. Through questioning Mr. Spurling, Mr. Potts yesterday attempted to establish that the auditors were ultimately responsible for the financial figures showing Bermuda Fire remained solvent.

Mr. Spurling, who joined the Bermuda Fire board in 1984, said the legal aspects of the reorganisation were fully explained to the board and that it was fairly common sense that creditors must not be prejudiced.

He said Conyers Dill & Pearman advised that the board should proceed with the transaction if they believed the Cooper & Lines figures were reliable. Since Cooper & Lines didn't express any uncertainty about the figures the board trusted their expert advice, Mr. Spurling said.

Allegations against BF board `ludicrous': Witness Mr. Potts asked who the board relied on to ensure the valuations were proper and accurate and that Bermuda Fire would not be rendered insolvent.

"Cooper & Lines,'' Mr. Spurling answered.

"As auditors or as financial advisors?'' Mr. Potts said.

"As financial advisors,'' Mr. Spurling said.

Mr. Spurling denied Bermuda Fire liquidator's allegations that the defendants had fraudulently transferred profitable assets out of the company because of patriotism to protect the interests of Bermudians.

He said the board acted responsibly and were aware of their duties to international and local policyholders without prejudice.

"Would you describe those allegations as ludicrous?'' Mr. Potts said.

"I would go so far,'' Mr. Spurling replied.

He said the creation of separate companies, one holding the ongoing domestic business, the other holding the runoff international operations made good business sense. He said international creditors gained the benefit of having segregated assets isolated in Bermuda Fire, which held the runoff operations.

"They would have the assets available exclusively to themselves, in legal and economic terms a pool of assets for themselves,'' he said.

Mr. Potts asked whether the international creditors benefited from the reorganisation.

"There was certainly no disadvantage,'' Mr. Spurling said. "... They would be no worse off.'' He affirmed that under the reorganisation the international operations gained a yearly income stream of $900,000 a year from preference shares in BF&M with the option of convertibility into common shares, a stop-loss protection cover, and a surplus of $12 million in case there were any future problems.

Mr. Spurling said there was always a possibility that the company would run into problems and the surplus would be depleted. However based on advice from Cooper & Lines the directors believed the risk was "not significant''.

"With hindsight you could perhaps say the directors got it wrong,'' Mr. Potts said.

"Yes,'' Mr. Spurling replied.

"But as of 1991 did you believe the creditors were fully protected?'' Mr.

Potts said.

"Yes,'' Mr. Spurling said.

He denied there was any attempt at preventing creditors from getting access to profitable assets.

"Do you think there was any motive by any of the directors to do down the creditors?'' Mr. Potts said.

"No way,'' Mr. Spurling said.

Later, under questioning from Geoffrey Vos, lawyer for Conyers Dill & Pearman, Mr. Spurling agreed that the decision on the reorganisation ultimately rested with the board of directors and that it was a commercial decision.

His testimony continues today with cross examination from Cooper & Lines lawyers.

Rick Spurling BUSINESS BUC