The lawyer for Cooper & Lines went on the attack yesterday in Supreme Court against testimony from a former director that the firm acted not only as auditors, but also as financial advisors for the company during the 1991 reorganisation.

Appleby Spurling & Kempe partner Richard Spurling has been testifying in court as a witness for defendant BF&M Ltd., the company set up to hold Bermuda Fire's profitable domestic assets. Bermuda Fire's liquidator Ernst & Young alleges the reorganisation and subsequent dividend of shares in BF&M to shareholders was a fraud.

Under previous cross examination Mr. Spurling described Cooper & Lines' role as auditors extending to that of financial advisors in the reorganisation.

It's a characterisation that has been disputed by the firm. Defendants BF&M and the five former directors who sat on the board's finance committee claim the board depended on advice from their legal firm Conyers Dill & Pearman and auditors Cooper & Lines in making a decision to go ahead with the reorganisation.

The claim is an attempt to shift the focus of the fraud allegations on to the firm's hired professional advisors. Yesterday Tom Weitzman, lawyer for Cooper & Lines, honed in on Mr. Spurling's previous testimony.

Under questioning Mr. Spurling, a former UBP MP, agreed that the board depended on actuarial estimates and recommendations from Tillinghast for setting reserves for future claims relating to Bermuda Fire's international operations in runoff.

He agreed that it was Bermuda Fire and not Cooper & Lines that had hired Tillinghast and that the auditor's job would be to ensure that the actuarial estimates were based on reliable statistics.

The line of questioning is important in that Bermuda Fire's liquidator alleges the defendants deliberately hid the company's insolvency by not adequately reserving for future pollution claims and bad debt on the international business.

Mr. Spurling agreed that statements in key minutes referring to a committee being given the authority by the full board to carry out the details of the reorganisation related to the finance committee and not to a reorganisation committee.

Mr. Spurling said he understood there was a committee set up to work out the details of the reorganisation. The committee was made up of the finance committee, Conyers Dill & Pearman and Cooper & Lines, he said.

He agreed that a professional firm only carries out work as instructed. He agreed that he was not the person giving instructions to Cooper & Lines and that he didn't know what the firm's instructions were in relation to Bermuda Fire.

"Your assertion that Cooper & Lines acted as financial advisors is just an assertion,'' Mr. Weitzman said.

"Yes,'' Mr. Spurling said. "It's my understanding from what I saw at the meetings.'' Mr. Weitzman later questioned Mr. Spurling about the pro forma balance sheet used to determine the level of reserving needed for Bermuda Fire's international operations.

Mr. Spurling had previously characterised a footnote referring to overseas liabilities as being fully funded by cash and investments as a factual statement.

Mr. Weitzman said at the time of the July 9, 1991 board meeting when the pro forma balance sheet was discussed the reorganisation hadn't occurred and that the figures were as at December 31, 1990.

He contended that the footnote was therefore an assumption and that the way to determine whether the reserving was adequate for the reorganisation was to get further estimates from Tillinghast.

He noted that the valuation of the domestic business at $56 million was noted by Cooper & Lines in the financial statements as a "directors' valuation''.

He said this indicated that Cooper & Lines was not taking responsibility for the valuation estimate.

At issue is whether Bermuda Fire had received fair value for its domestic assets when these were transferred to BF&M.

Mr. Spurling said he understood the figure was produced by Cooper & Lines.

Mr. Weitzman said the firm's case was that the valuation figure had been produced by Cooper & Lines but that it was based on "rough calculations''.

He also claimed that former board member and company director Donald Lines had instructed the firm not to carry out a full valuation of the domestic assets.

"As it turns out this valuation was right,'' he added.

Mr. Spurling said he was not aware of what instructions had been given to Cooper & Lines regarding the valuation. He added that while the ultimate decision on the valuation of the company rested with the directors, he understood the figure was produced by Cooper & Lines.

"You had, as experienced businessmen, had an idea of what the business was worth?'' Mr. Weitzman said.

"Yes, but I would not try and value a business ever,'' Mr. Spurling said.

Mr. Weitzman is temporarily acting in the place of Cooper & Lines lead lawyer Ian Croxford.

Mr. Croxford, in his opening argument had previously 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.

Mr. Weitzman continues his questioning of Mr. Spurling when the case resumes Monday. Clare Montgomery, lawyer for the liquidator, will then take her turn.

BUSINESS BUC