XL Capital's chairman Brian O'Hara is facing legal action in a USDistrict Court for alleged failure to repay $1.5 million in loans from UBS Bank of Salt Lake City.

The complaint is related to the same $10 million loan for which Mr. O'Hara was already forced to sell over 600,000 of the insurance giant's common shares following a margin call in early October.

Mr. O'Hara's wife is also named in the civil complaint which was filed in Utah on October 29.

According to a report in OffshoreAlert, an Internet-based newsletter, the causes of the action listed are "breach of contract, breach of covenant of good faith and fair dealing, unjust enrichment, and account stated against Brian O'Hara and breach of guaranty against Nancy O'Hara".

A margin call occurs when an investor borrows against his portfolio but the value of the portfolio falls before the loan is repaid. The investor is then forced to pay off the loan or sell his or her shares. Mr. O'Hara was margin called for the loan on October 9 following a collapse in XL's share value.

He was forced to sell 643,374 shares representing over 80 percent of his stock holding in XL for $3.45 to $6.19 a piece. Mr. O'Hara took on the loan in April in order in order to exercise a share option from the company which was set to expire. At that time, the shares he purchased were valued at $29.50, having already tumbled from $81.46 a year earlier. The $2.6 million in proceeds from the forced sale was applied to the loan.

XL's shares rebounded the week after the margin call but have since fallen again and were trading yesterday at $4.64.

According to the complaint filed by UBS, the bank called for immediate, full repayment of the loan one week after the forced sale.

The bank alleges that the O'Haras were notified in writing that the bank wanted the loan repaid in full, immediately on October 15.

"The loans were secured by assets in accounts the O'Haras maintained with UBS Bank and UBS Financial Services Inc., an affiliate of the Bank that offers wealth management services, including stock broking, and guaranteed by Nancy O'Hara," OffshoreAlert reported.

The complaint says Mr. O'Hara failed to repay the outstanding principal and interest and that the bank then liquidated the collateral securing the loan and applied it to the amount owed but it still was not sufficient to cover repayment.

"As of October 27, 2008, the amounts due and owing on the loans totalled $1,535,079.53, upon which amount interest has accrued and is continuing to accrue," OffshoreAlert quoted the legal complaint as saying.

Mr. O'Hara was a long-serving president and CEOof XL Capital, having worked for the company since its formation in 1986. He was succeeded by Michael McGavick in May of this year.

OffshoreAlert said its research showed Mr. O'Hara has earned more than $60 million in compensation over the last ten years, including $23 million in salary and bonuses.

Mr. O'Hara did not respond to a request for comment from The Royal Gazette yesterday.

OnOctober 14, XL issued a press release on his behalf commenting on the margin call.

"I regret that last Thursday I was forced to sell approximately 80 percent of my XL shares," he said at the time. "I had pledged those shares as collateral to secure a personal loan used to fund purchases of XL shares in order to avoid the expiration of certain options. The forced sale was due to the precipitous drop in XL's share price last week. The sale in no way reflects a lack of confidence in XL's current and future prospects."