An insurance boss involved in one of Britain's "worst ever financial disasters" lied about his company's finances in a £250 million fraud, a court heard today.

Independent Insurance Group Plc went bust after investors, employees and shareholders were conned in a financial report.

Finance director Dennis Lomas, 56, of Balcombe Rd, Haywards Heath, denies conspiracy to defraud.

More than 1,000 jobs were lost and £57 million had to be paid out in compensation when the company collapsed.

Three months before Independent Insurance was the ninth biggest insurance company in Britain and was hailed as an industry success story.

Lomas appeared at Southwark Crown Court today alongside chief executive Michael Bright, 62, managing director Philip Condon, 48.

Prosecutor Andrew Baillie QC told the jury: "This was one of the worst commercial disasters to have ever occurred in the UK in recent years.

"But this is not an inquiry into why the company folded or an allegation of theft. It is about misleading statements.

"The prosecution say the defendants told sustained and deliberate lies over a period of months and years to the financial advisers of the company and to their fellow directors.

"These lies were told about two different aspects of the company's business.

"What these two areas had in common presented the group's finances in a more favourable light compared to the truth."

He said investors had continued to buy shares in "blissful ignorance" of the truth of the company's position.

He told the court: "The prosecution say that in the accounts, the position of the company was dishonestly improved by £250 million."

In a financial report, published in March 2001, Bright stated: "The difficult events of the year should not detract from Independent's position as a quality operation well-placed in an improving market environment."

Meanwhile Lomas reassured interested parties that the "outlook remained positive".

In June 2001 the firm went bust.

Jurors heard even without the defendants' "deliberate lies" the company may have still collapsed and huge losses may have accrued.

The QC said: "It is fair to say that the main reason the group failed was that it had been trading unprofitably.

"Mistakes had been made in the running of the company which may not have involved these defendants and were not dishonest.

"Shares were perhaps sold too cheaply and an unwise pension scheme put in place.

"There was also a senior chief executive not before the court who might be said to have made some important mistakes.

"Perhaps the auditors should have asked more questions and perhaps the other directors apart from these defendants should have asked more questions.

"But the prosecution say the defendants told lies about different aspects of the company.

"The intention of these lies was to prevent the truth being known and the effect was that the financial group was even more falsely stated than it otherwise would have been.

"Dividends were being paid which would not have been if the truth had been known.

"Investors were buying shares which they would not otherwise have done.

"Ultimately when the lies came out and the truth was discovered by the directors and by the people in the City who were told them, the lies had destroyed the credibility of the company so it became impossible to mount a rescue."

Bright, of The Oasts, Biddington Rd, Smarden, Kent, Condon, of Ashley Rd, Sevenoaks, Kent; and Lomas each deny two counts of conspiracy to defraud and two counts of fraudulent trading.

The allegations relate to a period between January 1, 1997 and June 17, 2001.

The trial continues.