AlphaStar Insurance Group, the collapsed broker currently in liquidation, may seek to sue one of its founders over alleged mismanagement of the company.

A report in the May 31 issue of finance industry newsletter InsideBermuda states that details of the possible action against Nicholas Brown were disclosed in a filing of the firm's amended schedules on April 21 at the US Bankruptcy Court for Southern New York, where AlphaStar, formerly Stirling Cooke Brown Holdings Ltd., had filed for Chapter 11 protection last December.

The report states that the firm submitted an exhibit entitled 'Contingent Claims and Other Interests' when identifying its assets in the filing, which comprised a list of nine parties against whom it is considering filing a claim. Nicholas Brown is targeted in the document "for claims arising out of the management of the debtors prior to October, 1999." It was in that month that Mr. Brown resigned as managing director of Stirling Cooke Brown Insurance Brokers Limited and Stirling Cooke Brown Reinsurance Brokers Limited. However, according to the report AlphaStar still lists Mr. Brown as a disclosable shareholder in its bankruptcy proceedings, despite his resignation as an executive, although it described his holding as "unknown", as it did for several other shareholders including XL Capital.

Inside Bermuda says that the company also identified eight other contingent claims against several other parties. These include American Insurance Managers Inc., American Insurance Management Group Inc. and Atlanta Insurance Marketing Inc. for claims arising out of the issuance of unauthorized certificates of insurance allegedly on behalf of Realm National Insurance Company, and a failed attempt to acquire that company; KPMG for alleged failure to complete audit work in connection with several subsidiaries; and John Hancock Financial Management Company for alleged intentional breach of contract.

AlphaStar did not apparently attach a potential value on any of the contingent claims and they are not included in the company's stated assets of $4.75 million which, apart from $709 in cash at the Bank of Butterfield here in Bermuda, is made up of inter-company loans to Bermuda and UK affiliates.

The company estimated its liabilities at $2.6 million, which does not include any contingent liabilities arising from the reported fraudulent activity of the group. Inside Bermuda says that AlphaStar made no mention in its bankruptcy filings of the findings of fraud against some of its UK affiliates and possible liabilities that may result. The report says that AlphaStar also stated in the amended schedule that it paid $105,000 in January, 2003to buy-out the approximately 23% shareholding previously owned by Goldman Sachs, which had acquired the stake in 1996 as a prelude to taking the company public.