Mutual Risk Management and three of its current and former officers have been hit with a lawsuit from a disgruntled investor.

According to newsletter "Inside Bermuda", the civil lawsuit filed at the United States District Court for the Southern District of California on June 7, 2002, involves plaintiff Marvin Marcus on behalf of himself and all others who bought publicly-traded MRM stock during the Class Period from February 16, 2000 to April 2, 2002.

Defendants are Mutual Risk Management Ltd., Robert A. Mulderig, the firm's chairman and CEO (pictured); James C. Kelly, former CFO; and Andrew Cook, former CFO and currently CFO of newly-formed Axis Specialty Ltd., based in Bermuda.

The complaint cites two counts of alleged violation of Federal Securities Laws.

Inside Bermuda says the lawsuit alleges that the individual defendants "disseminated materially false financial statements" during fiscal 2000 and 2001 which artificially inflated the firm's share price. They allegedly "materially overstated the Company's cumulative revenues and its net income" and made "a series of other materially false and misleading statements" about its "financial condition and performance".

MRM's financial statements that were filed with the SEC also "violated GAAP by, inter alia, understating reserves for potential claims", it was alleged.

According to the lawsuit, Mr. Marcus said the true facts which were known to the defendants but concealed from the public were firstly that the company's $17.5 million receivable (reinsurance recoverable) associated with Reliance Group Holdings was grossly overstated as it was not collectible.

The company did not take a charge for the $17.5 million until Q3 2001 - reported November 6, 2001.

In fact these receivables had become materially impaired at the beginning of the Class Period and totally impaired even before November 15, 2000 when reliance defaulted on its bonds sending Reliance's publicly traded shares below $.01 per share.

Secondly, the lawsuit alleges that the company's Program Operations Department had virtually no controls to insure proper underwriting standards on new and renewal programs.

Thirdly, the lawsuit alleges that the company's disputes with reinsurers resulted from the company's concealment of material information from its reinsurers, including losses associated with its Legion subsidiaries, unreported workers' compensation claims and losses Mutual Risk was suffering. This concealment allowed Mutual Risk to get reinsurance which it could otherwise not obtain and permitted the company to inflate its income.

Fourthly, the lawsuit alleged that the company also concealed its complete lack of internal controls and losses it was suffering.

Finally, the lawsuit alleged that the company's operating income and improved profit margins and return on equity was the result of the illegal accounting activities.

The lawsuit said that as a result of these points, the company's financial year 2001 projections of $1.25-$1.40 per share were "materially false and misleading."

Inside Bermuda said that William Lerach, of the law firm of Milberg Weiss Bershad Hynes & Lerach LLP, of California is representing Mr. Marcus. Lerach is considered to be one of the leading trial attorneys in the United States, as demonstrated by his role as the lead attorney in an ongoing shareholders' class action lawsuit filed against Enron Corp.

In news articles, Lerach is frequently referred to as the scourge of Silicon Valley because of his participation in class action lawsuits that allege securities fraud.

He has helped file such suits against the likes of Apple, Silicon Graphics, and Intel (five times in 1994 alone), according to Forbes magazine. Forbes reported that he is one of the highest paid trial attorneys in the United States, taking home an estimated $7 million per year.

Lerach's immediate client in the action against MRM, Marvin Marcus, owns just 400 shares of MRM, which be bought for a total outlay of $1,734, according to figures contained in the lawsuit. Marcus bought 200 shares for $6.20 each on December 28, 2001 and another 200 shares for $2.47 each on February 18, 2002.

Mr. Mulderig was participating in the Newport to Bermuda race yesterday and was unavailable for comment.

Mr. Cook was also unavailable for comment yesterday afternoon and Mr. Kelly could not be contacted.