"doctoring'' company minutes to remove evidence that the insurer's directors may have known the company was in trouble before its 1991 break-up.

The allegation stems from Bermuda Fire liquidator Ernst & Young's statement of claim filed more than a year ago in the Supreme Court.

In the statement, liquidators claim Mr. Collis had fellow Bermuda Fire director Donald Lines' comments altered.

The suggestion that Mr. Collis altered minutes hinges on the liquidators' allegation that Mr. Lines had said no bank would underwrite a share offering to help finance the break-up of a company with a troubled subsidiary.

If liquidators can prove that directors, among them several prominent Bermuda businessmen, knew Bermuda Fire was in trouble before the break-up, they may be able to recover assets from BF&M Ltd. and/or BF&M shareholders to be distributed to Bermuda Fire's creditors.

But late on Tuesday, Mr. Lines said: "I may have said a bank wouldn't underwrite (an offering) but I never said the last part (about a subsidiary facing claims over its ability to pay them).'' The liquidators and creditors of Bermuda Fire claim the break-up was aimed at protecting the company's profitable domestic business from collapsing under the weight of mounting losses generated by disastrous international reinsurance operations.

The international business arose primarily from acceptances on behalf of Bermuda Fire by HS Weavers (Underwriting) Agencies Ltd., or the Weavers Stamp.

But the defendants claim the reorganisation was in the best interest of everyone -- including the shareholders and creditors -- involved with Bermuda Fire.

The allegation against prominent lawyer and former Government Senate Leader Mr. Collis was made in a 90-page consolidated statement of claim filed in the Supreme Court by Bermuda Fire liquidators Ernst & Young.

The allegation surfaced earlier this week in the inaugural edition of Offshore Alert, a Miami-based business newsletter produced by former Bermuda journalist David Marchant. It is understood that copies of the newsletter were faxed to about 1,000 individuals worldwide. Several went to Bermuda businessmen.

Mr. Lines described the Offshore Alert article as "fanciful wanderings'' and said he is considering legal action against Mr. Marchant.

Ernst & Young, which filed the document on November 10, 1995, claims Mr.

Collis, then Bermuda Fire chairman, instructed an unnamed person at the company to alter the minutes of a June 24, 1991 Bermuda Fire board of directors' finance committee meeting.

In the statement of claim, Ernst & Young alleges the June 24, 1991 meeting included a discussion by Mr. Collis and Mr. Lines, as well as other Bermuda Fire directors Gregory Haycock, William M. Cox and Michael Collier, on how to break-up Bermuda Fire.

Part of the discussion is alleged to have covered whether or not the banks would underwrite a Bermuda Fire share offering financing the company's break-up.

Mr. Lines is alleged to have said that no bank would underwrite an offering of a company which had a subsidiary which potentially faced claims in excess of its ability to pay them.

Ernst & Young claims that although Bermuda Fire's then secretary John Patterson originally prepared and/or signed a minute which recorded these views, the version of the minute signed by Mr. Collis was altered on Mr.

Collis' instruction.

Ernst & Young said in the statement of claim: "During the course of the (June 24, 1991) meeting, the finance committee was informed by Mr. Donald Lines that the banks (by which it is to be inferred that he meant the Bank of Bermuda of which he was president and the Bank of Butterfield of which Mr. Collier was chief general manager) would be unlikely to underwrite any share issue in circumstances in which the issuer had a subsidiary (Bermuda Fire) with a potential for claims in excess of that subsidiary's ability to meet those claims.

"Although, Mr. Patterson (as secretary) originally prepared and/or signed a minute which recorded the views expressed by Mr. Donald Lines, the version of the minute signed by Mr. Charles Collis (as chairman) was wrongly altered, on the instructions of Mr. Charles Collis, so that the words underlined in the quotation below were excluded.

(Editor's note: The allegedly excluded section has been set in italics below.) " `The committee took cognizance of the view of Donald Lines that the banks were likely to be reluctant to underwrite a share issue by Holdco where Holdco had a subsidiary with potential for claims in excess of its capacity to meet the same .'' Holdco was the proposed new holding company for Bermuda Fire.

Mr. Patterson had no comment when contacted on Tuesday.

Mr. Collis was said to be off the Island and could not be reached for comment.

In response to questions faxed to him by Offshore Alert, he said: "As I am sure you are aware, this matter is presently the subject of litigation by the liquidators and I am advised that, in the circumstances, it would be inadvisable to make any comment on the matters raised by you.'' Mr. Cox said that as a rule he does not comment on Bermuda Fire and Marine.

Mr. Haycock said he had read the Offshore Alert article and his only comment was that being described as a partner at Cooper & Lines was "typical of the inaccuracies in the article''.

Mr. Haycock is a partner at Butterfield & Steinhoff.

Mr. Lines also said: "There has never been any suggestion of fraud. Those are words of his (Mr. Marchant's). This suggestion of fraud is distorted.'' But Ernst & Young said in its statement of claim that Peter Rodger, the Bank of Butterfield's top in-house lawyer, had reservations about the bank loaning BF&M $5 million to buy back Bermuda Fire preference shares. The share buyback was part of the reorganisation.

Collis accused of `doctoring' minutes Liquidators said Mr. Rodger, in an internal memo dated August 14, 1991 to bank chief Mr. Collier, had advised that the Bank of Butterfield needed an "unequivocal opinion from BF&M's attorneys (Conyers Dill & Pearman) that the terms of the 1991 transaction did not constitute a fraudulent conveyance within the meaning of section 37 of the Conveyancing Act 1983 and indicated that he would have expected English leading counsel to be consulted''.

Mr. Rodger's alleged request for a legal opinion, which liquidators claim was never met, was revealed in Bermuda's Court of Appeal in March, 1996 during proceedings against BF&M shareholders.

Ernst & Young, in the statement of claim, said CD&P declined to advise the bank, apparently on the following basis: "You will appreciate, of course that we can only give opinions on questions of law. You will also know that section 37 of the Conveyancing Act specifically relates to conveyances `with intent to defraud creditors'. Whether or not an intention exists is a question of fact and not one of law. You will recall that `the state of a man's mind is as much a fact as the state of his digestion'.'' Liquidators, who estimate Bermuda Fire's potential deficiency at $300 million, claim the real reason for the 1991 reorganisation was "the board's desire to segregate the international operation from the domestic general business in order to deny the benefit of profits and assets of the profitable parts of the business to the creditors of the international operation''.

The statement of claim also said the firm of JP Morgan had appraised Bermuda Fire's domestic business at $78 million. Yet Bermuda Fire would value the business at $56 million in the reorganisation.

Ernst & Young accountant John McKenna, a joint liquidator of Bermuda Fire, said on Monday he could not comment on matters before the court. Nor would he comment on the Offshore Alert article.

Liquidators have taken legal action against not only the company's directors but also its former legal and accounting firms as well as BF&M shareholders.

Though resolution of the legal issues surrounding Bermuda Fire will likely take many years, creditors of Bermuda Fire should get an initial disbursement from liquidators this year under a scheme of arrangement.

Charles Collis Donald Lines