A self-made billionaire businesswoman has won a damning appeal against two subsidiaries of the now defunct Mutual Risk Management group and two of its Bermuda-based senior executives.The Bermuda Appeal Court judgement could have major implications for the rent-a-captive industry in finding the structures initiated in the 1990s are totally ineffective in law.Siding with building supplies magnate Diane Hendricks, her late husband Kenneth and their company American Patriot Insurance Agency, the Appeal Court overturned a judgement made last July by Puisne Judge Geoffrey Bell, finding the appellants were victims of a huge commercial fraud.Mr Bell had dismissed the Hendricks/AMPAT claim for fraud, negligent misrepresentation and negligent misstatement against Mutual Holdings (Bermuda) Ltd and Mutual Indemnity (Bermuda) Ltd, and against Glenn Partridge (director of MRM and president of Legion Insurance), David Alexander (president of Mutual Indemnity) and former group employees Richard Turner and Andrew Walsh.Mr Bell had awarded MRM $3.4 million on its own claim against Hendricks/AMPAT regarding the enforcement of a shareholder agreement that formed part of its programme aimed at insuring roofers and workers in the construction industry.AMPAT had been a client in a rent-a-captive (used generally when a company isn’t big enough to finance its own insurance company) scheme with the Mutual group.However, Justice of Appeal Sir Anthony Evans giving the judgement of the court ruled: “I would hold that the appeal should be allowed to the extent indicated above, on the ground that the allegations of fraudulent misrepresentation and fraudulent conspiracy are proved against (Mutual) Holdings, Mutual Indemnity, Mr Alexander and Mr Partridge.“I am satisfied that this is an exceptional case where the Court of Appeal is entitled, indeed bound, to reverse the Judge’s findings as regards Mr Partridge and Mr Alexander which I am satisfied are plainly wrong ...”Hendricks/AMPAT had accused MRM of mismanaging its programme by failing to cap AMPAT’s liability, as allegedly agreed.The appellants had also accused Mutual, having found that it was exposed to much higher liability than thought, of then falsely inducing AMPAT to pay a $1 million premium for reinsurance coverage that was never subsequently ever purchased, something that AMPAT described as “bogus reinsurance”.MRM, on the other hand, had claimed that AMPAT owed $3.4 million to cover losses suffered by the programme.But Mr Justice Evans ruled that the claim made by Mutual Holdings under the Shareholder’s Agreement must be dismissed, and the claims against Mutual Indemnity, Mr Partridge and Mr Alexander should succeed, while the claims against Mr Turner and Mr Walsh should be dismissed.Mrs Hendricks’ lawyer Andrew Martin, partner in Mello Jones & Martin, said yesterday his client was happy her long legal battle was finally over. The American billionaire had flown to Bermuda a number of times to testify before the court.“Mrs Hendricks is very pleased that after many years of hard fought litigation in Bermuda and the United States her claim has been completely vindicated by the Court of Appeal’s decision,” Mr Martin told The Royal Gazette. “Her determination to prove that she had been the victim of a fraudulent scheme has been fully justified by the Court of Appeal.”He added on the issue of rent-a-captives: “The Court’s additional view was that the contractual structure of the rent a captive was wholly ineffective in law.“This will have wider implications for contractual rent-a-captive structures which have been used since the 1990s, both here in Bermuda and in other captive centres.”Mr Martin and Mr Jeremy Garrood, along with Michael Todd QC represented the Hendricks/AMPAT parties and Ben Adamson of Conyers Dill & Pearman Ltd. together with Robert Hildyard QC, represented the MRM defendants.Mrs. Hendricks, a 64-year-old mother of seven from Wisconsin, is listed by Forbes as the 170th richest person in America and No 540 in the world, with a net worth of $2.2 billion.Together with her late husband Kenneth, she started ABC Supply, now America’s largest roofing, window and siding wholesale distributor.Mr Hendricks died in 2007 after an accidental fall.The MRM group is now defunct but parts of it have been spun off or reorganised.Although he was not a defendant, one of the witnesses was former MRM boss Robert Mulderig.Two of Hendricks/AMPAT’s key witnesses were effectively whistle blowers from the former MRM group.But in reaching his judgement, Mr Bell had determined that the two witnesses were not credible witnesses and pointed to evidence that they had been paid at least $400,000 by Mrs Hendricks to testify on AMPAT’s behalf.However the Appeal Court in rejecting the judge’s conclusions, said, the Hendricks had accepted Mutual’s reinsurance proposal and had paid the $1 million as the “premium” for that cover.“The central factual issue,” he wrote, “is whether the individual Defendants believed that AMPAT/the Hendricks were at risk for that excess, or whether they decided to take advantage of the Hendricks’ belief that they were, as was alleged ...”Mr Justice Evans concluded in the judgement:“Where the appeal is allowed, the Court in my view should grant Declarations to the following effect:(1) (a) That the renewal of the AMPAT Programme for the fourth year (2000/2001) was procured by the fraud or fraudulent misrepresentation of Legion and/or Mutual Indemnity Bermuda;(b) That the renewal is rescinded and/or set aside; and(c) That Mr and Mrs. Hendricks (and American Patriot) have no liability to indemnify Mutual Indemnity (Bermuda) and/or Mutual Holdings (Bermuda) against any losses arising under the Programme in respect of that underwriting year.(2) (a) That Amendment No. 5 to the Shareholder’s Agreement (dated 23 March 1997) was procured by the fraud or fraudulent misrepresentation of Legion and/or Mutual Indemnity (Bermuda);(b) That the said Amendment No. 5 is rescinded and/or set aside; and(c) That Mr and Mrs. Hendricks and AMPAT are not liable to indemnify Mutual Holdings Bermuda or Mutual Indemnity Bermuda or Legion against any losses arising under the said Programme in respect the underwriting year 2000/2001, whether under the Shareholder’s Agreement or otherwise.”ENDS