'Lack of controls' at Mercury

MERCURY Asset Management had no formal controls to monitor investments and depended on fund managers to be reliable and trustworthy, a member of the group's internal audit team warned in 1995.

The report by a Ms Waits, given to the High Court today by Unilever counsel Jonathan Sumption QC, said Mercury relied on quarterly performance reviews to spot problems and on communication between fund managers. 'It is apparent that the more senior fund managers get, the less control conscious they become, which is worrying in itself,' she wrote after an interview with John Richards, then a Mercury director.

Unilever is suing Mercury, now owned by Merrill Lynch, for £130m over the poor performance of its £1bn pension fund in 1996 and 1997. Waits said fund managers were 'left very much to their own devices' and that Richards had said 'nothing much can go wrong'. If the fund underperformed, the manager might be asked to leave, he told her. But Richards rejected the document's contents, saying the conclusions were 'terrible'.

'I would never have said nothing much can go wrong,' he said. 'I don't think I would have used such strong language.'