Allegations of dishonesty, fraud and improper conduct were lobbed against some of Bermuda's top businessmen in Supreme Court yesterday, as the liquidators of failed insurer Bermuda Fire & Marine Insurance Co. begin their attempt to seize back assets they claim were wrongfully stripped out of the company to create BF&M Ltd.

The liquidators' suit began yesterday in the newly-created Supreme Court 4 at the Booth Building on Court Street. Up to 1,000 shareholders in BF&M could lose their investment if the liquidators win their case in Supreme Court.

Bermuda's reputation, and the reputation of the former directors and the local professional firms involved are also being brought into question by the case.

The liquidators are claiming unspecified monetary damages against the company's former directors William Cox, Donald Lines, Greg Haycock, Michael Collier and Charles Collis, who died last year.

They are also suing law firm Conyers Dill & Pearman and accounting firm Cooper & Lines, a predecessor partnership to PricewaterhouseCoopers Bermuda. The firms acted as the former professional advisors to Bermuda Fire (BFMIC).

Yesterday Gabriel Moss, lawyer for the liquidators, alleged that through the close nature of personal relationships the law firm and the accountancy helped the directors complete what he termed an "illegal'' transaction in setting up BF&M.

At the time Mr. Collis was senior partner at CD&P, where his son John was the legal advisor to Bermuda Fire. Mr. Lines' brother David is the partner in Cooper & Lines. Mr. Lines was at the time president and chief executive officer of the Bank of Bermuda.

The liquidators claim the directors and the firms knew that Bermuda Fire was insolvent when BF&M was created. BF&M was set up by the directors in 1991 to buy Bermuda Fire's profitable domestic assets, leaving the unprofitable international business in the company.

Two years later Bermuda Fire went into liquidation with about $450 million in debts on its international business, money owed mainly to US insurance companies.

Mr. Moss alleged that the five directors, the lawyers and the accountants were attempting to save themselves and the mostly Bermudian shareholders when their duty was to the company and its US creditors.

"It does look as if the individual defendants and the professional advisors in this case put a kind of misguided loyalty to Bermuda and Bermudians ahead of their legal duties, which were, of course, essentially to the company and its creditors, at the time when BFMIC was insolvent, or at the very least on the verge of insolvency, and the law is clear that at the time the directors are obliged to look primarily at the interests of the creditors, and to put the interests of the shareholders second,'' he said in court. "This is a situation where in terms of a relatively small island, the individual defendants were very prominent people on this Island and the effect of what they did was to put themselves, their relations, their friends and their neighbours in effect ahead of their legal duties to the creditors who were American.'' He claimed the directors were in "breach of duty'' and were "recklessly indifferent'' to the company and the creditors. He alleged that Cooper & Lines knew the company was "grossly insolvent'' when the accountancy produced a report showing that Bermuda Fire had a $12 million surplus.

Meanwhile Conyers Dill & Pearman failed in their duty to advise the directors not to create BF&M to hold the profitable business, he claimed.

"The 1991 transaction as a whole was a fraudulent convenance of property with the intention to defraud the creditors of the international business,'' he said.

Bermuda Fire's 1991 directors have said they acted in the best interests of the shareholders and policyholders, who include the creditors.

Bermuda Fire got into financial trouble by providing insurance through London-based H.S. Weavers (Underwriting) Agencies Ltd. and others for risks such as asbestos and pollution. H.S. Weavers is also in liquidation.

Mr. Moss alleged that Bermuda Fire directors knew long before 1991 that the company was in trouble from its Weavers' business as claims started coming in for asbestos and pollution, eating up the profits from the domestic business.

Mr. Moss' opening argument continues today. He is expected to finish by the end of this week after which lawyers for the defendants will make their arguments.

There were about 40 lawyers in court yesterday. Lawyers are separately acting for shareholders group made up of 830 members and BF&M. Another set represent the former Bermuda Fire directors. Conyers Dill & Pearman and Coopers & Lines also have separate teams.

First day: Lawyers involved in the Bermuda Fire & Marine civil case taking place in new Supreme Court rooms on Court Street leave at the end of the first day of the trial which began yesterday.

Michael J. Collier Charles Collis William Cox Greg Haycock Donald Lines BUSINESS BUC