Stung by claims of fraud and racketeering, Bermuda-based Stirling Cooke Brown Holdings Ltd. has hit back by condemning what it termed a "baseless suit, wholly without merit,'' filed by Odyssey Re London.

Odyssey Re last month filed a multi-million law suit against Stirling Cooke in the US District court for the Southern District of New York claiming that the company engaged in a fraudulent scheme to "improperly extract millions of dollars in commissions and fees'' on business it brokered.

Stirling Cooke managing director Nicholas Brown yesterday accused Odyssey of attempting to avoid reinsurance claims. He also stated that Odyssey was attempting to use civil provision in US law to get around binding arbitration clauses in the reinsurance contracts.

"All of the reinsurance placed with Odyssey Re by Stirling Cooke Brown was placed lawfully and in a manner consistent with established brokerage practices in the London market,'' he said. "While Odyssey Re's complaint seeks recission of all the reinsurance contracts it underwrote, Odyssey Re has not sued any of the actual parties to those reinsurance contracts -- the ceding insurers on whose behalf Stirling Cooke Brown acted.'' Mr. Brown said Stirling Cooke represented the interests of the ceding insurers, and Odyssey Re was one of many reinsurers who reinsured the risks of the company's clients.

He also denied that Stirling Cooke had acted for Odyssey Re in connection with the risks assumed by the company. Instead an Odyssey Re subsidiary had underwritten the risks.

"The foundation of Odyssey Re's claim -- that American workers' compensation business is not encompassed by `personal accident' business in the London market -- is unsound,'' he stated. "In the London market, personal accident business traditionally includes the health and accident portion of US workers' compensation risks.'' Mr. Brown also denied earlier Press reports that Stirling Cooke had acted as a reinsurance broker for the Unicover pool of reinsurance cover. He also said that no Stirling Cooke Brown director or officer served as a director or officer of Unicover Managers, Inc.

He also cited support from clients and shareholders for Stirling Cooke as "gratifying'' and said the company's most recent earnings report showed strong growth, with 1998 earnings up 20 percent over 1997.

However, Stirling Cooke's shares have taken a battering in the stock markets.

On Monday, the company's share price fell about 27 percent to 5 3/8. Since the start of 1998 the company's stock has declined 80 percent from a high of $30.

On March 31 PaineWebber downgraded its recommendation from a "buy'' to a "neutral'' position.

Odyssey Re suit is lodged against some of Stirling Cooke's subsidiaries and other unrelated companies for which Odyssey provided reinsurance for millions of dollars worth of workers' compensation and personal accident coverage.

Stirling Cooke hits outat `baseless' lawsuit The suit names various subsidiaries of Stirling Cooke, Nicholas Brown, a founder and significant shareholder in the company, Bermuda-based Centaur Underwriting Management Ltd, Raydon Underwriting Management Co. Ltd., JEH Re Underwriting Management (Bermuda) Ltd., Reginald Billyard, Euro International Underwriters Ltd., John Hubert Whitcomebe and Christopher R. Henton, and Connecticut-based WEB Management.

Centaur is managing general underwriter on behalf of Sun Life of Canada and Phoenix Home Life.

Odyssey's suit states that through Stirling it provided reinsurance for a number of companies, then sought reinsurance to protect itself from losses on the policies. The companies are Phoenix Home Life Insurance Co. and Lincoln National Insurance Co.

Odyssey claims Stirling, acting as a broker for Odyssey, disguised the policies and sold them back to Odyssey. Other defendants include various subsidiaries of Stirling Cooke and Nicholas Brown, a founder and significant shareholder of the company.

Odyssey claims Stirling Cooke and its "co-conspirators'' induced the company "to act as a reinsurer for what ultimately was grossly underpriced business guaranteed by its structure and terms to generate overwhelming losses''.

Odyssey Re has asked for a jury trial, treble damages and a judgment directing cancellation of the reinsurance and other contracts that have been placed with it.

Odyssey Re London is a unit of Fairfax Financial Holdings, which acquired the company as part of the purchase of Sphere Drake Holdings Ltd. The Bermuda operation became Odyssey Re Bermuda.

COURTS CTS