Former HIH Director Gets 4 Year Sentence

April 14, 2005

Rodney Adler, 45, has received a 4 year prison sentence, stemming from his part as a Director in the collapse of HIH Insurance Ltd. in March 2001, Australia’s largest corporate failure. He will be eligible for parole in 2 years.

Reuters quoted Justice John Dunford of the New South Wales State Supreme Court as stating: “The offences are serious and display an appalling lack of commercial morality. They were not stupid errors of judgment but deliberate lies, criminal and in breach of his fiduciary duties to HIH as a director.”

Adler, a prominent Sydney businessman, entered a guilty plea in February to four criminal charges of giving false information that was likely to induce people to buy HIH shares, lying to obtain money from HIH for another company he had investments in and failing in his duties as a director.

HIH was the country’s second-biggest general insurer before it collapsed with estimated losses of up to A$5.3 billion (U.S.$4.1 billion). Its founder and former CEO, Ray Williams, is scheduled to appear in court on Friday, April 15, for sentencing for his part in the collapse. He faces up to 12 years in jail on three charges, although a concurrent sentence would result in up to five years.

Losses by HIH’s California Workers Comp subsidiary were at least partially responsible for its financial woes. The company effectively shut down its U.S. operations at the end of October 2000, when it announced that it had agreed to sell the renewal rights and other tangible assets associated with the large account Calif. Workers’ comp business to Alaska National Insurance Co. It subsequently sold the renewal rights to the rest of its U.S. workers comp business to Argonaut.

Reuters reported that the Australian Securities and Investments Commission (ASIC) said Adler’s jailing sent “a clear message to corporate Australia that ASIC, the community and the courts will not tolerate criminal behavior against the interests of shareholders.” ASIC Chairman Jeff Lucy noted that he had been in a “position of trust as a director of HIH but he put his own financial interests before the interests of HIH shareholders.”

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