Commission calls for criminal charges in HIH scandal
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Your support makes all the difference.Top executives of the failed insurer HIH should face criminal charges for their roles in Australia's biggest corporate collapse, a government-commissioned report recommended yesterday.
In a final report after 18 months of hearings, a Royal Commission into HIH listed boardroom domination by the former chief executive, Ray Williams, improper accounting, conflicts of interest and inadequate reserves as reasons for the company's downfall.
Australia's second-largest insurer collapsed in March 2001 with debts of about A$5.3bn (£2.1bn), leaving thousands of policyholders with outstanding claims and leading to the collapse of many home-building companies insured by HIH.
In his 1,350-page report, Royal Commissioner Justice Neville Owen referred 56 matters against 17 executives of the company and related companies to regulators and state prosecutors for investigation and possible criminal charges.
Mr Williams faces eight possible charges. The report said he misled investors, gave away company money and kept crucial information from the board. "The hand and influence of Williams were paramount," the report said. "There was blind faith in a leadership that was ill-equipped for the task."
The report found HIH's "shambling journey towards oblivion" was mostly a result of mismanagement and a failure to set aside enough money to pay insurance claims over many years.
"Where did the money go? Some of it was wasted by extravagance, largesse, paying too much for businesses acquired and questionable transactions," the report said.
"But in the main the money was never there. The deficiency of several billion dollars has arisen because claims arising from insured events in previous years were far greater than the company had provided for."
The inquiry also heard details of corporate greed and excess, and the day before its collapse, HIH paid its executives A$10m in bonuses.
HIH's downfall reverberated through Australia's economy, leading to the collapse of other businesses, particularly in the home-building industry.
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