Australia threatens to jail fraud suspects
SYDNEY - Australian Treasurer Peter Costello said the leaders of failed insurance giant HIH should be jailed if they commited crimes and contributed to the biggest collapse in Australian corporate history.
In a damning report that bumped the Iraq war off newspaper front pages around Australia Thursday, a Royal Commission of inquiry said the leaders were guilty of mismanagement and should be pursued for possible breaches of criminal as well as civil law.
HIH Insurance sensationally imploded in March 2001 to the tune of 5.3 billion dollars (3.2 million US) and the story was subsequently embellished with tales of spending extravagance, witnesses trying to flee the country before giving evidence and doctored testimonies.
Comparisons were made with failed US energy giant, Enron.
"A calamity born of ineptitude," was the headline in the Sydney Morning Herald, which led other newspapers in devoting several pages to the report.
"The royal commission's report on the follies, indulgences and stupidities of the men who ran HIH would serve as a manual on how not to run an insurance company," said the Australian Financial Review.
In his 1,500 page report published Wednesday, commission chief Neville Owens detailed the events leading to the collapse, laying the blame squarely with those who managed the insurance group and criticising the industry watchdog and auditor Arthur Andersen for not doing their jobs.
He said HIH collapsed because it ran out of money – it failed to set aside enough money for future claims.
But its leadership continued to spend vast amounts, they misled watchdogs and the shareholders were non the wiser.
"There was blind faith in a leadership that was ill-equipped for the task," Owen said.
Costello said he had already referred some matters to prosecutors.
"All of the evidence will be put before the courts and, if the courts convict somebody of a criminal offence, yes, I believe it would be appropriate for a jail term to be imposed," Costello told Australian Broadcasting Corporation radio.
"... I can pledge to investors and policy-holders alike that the investigative bodies will be fully funded to get all of the evidence and we will be asking the prosecutors to aggressively prosecute in the courts."
In the Federal Court Thursday, about 1,200 HIH shareholders launched a class action against the group's directors, auditors and reinsurance firms to recoup an estimated 70 million dollars in losses.
Their lawyer said HIH had misled the shareholders about the value of the shares at a time when directors knew the company had a negative net worth.
Owens said founder Ray Williams could face three criminal charges for providing false or misleading information.
The offences each attract two-years' jail.
"No-one rivalled him in terms of authority or influence," said Owen.
Rodney Adler, the director of FAI insurance which was bought by HIH, faces a possible criminal charge for making false or misleading statements to secure a deal with entrepeneur Brad Cooper.
"Adler had a flawed understanding of the concept of conflict of interest," concluded Owen.
Cooper was paid millions of dollars by HIH through his failed burglar alarm business and could be charged with bribing an HIH executive with a BMW convertible.
"For reasons that were never satisfactorily explained, HIH's cashflow problems seeemed to present little impediment to Cooper receiving funds."
AFP |
