Early in the year the HIH Royal Commission investigations into FAI’s financial reinsurance arrangements with General & Cologne Re began. The Royal Commission also had its mandate extended by the Federal Government to allow it more time to carry out its investigations.

As the royal commission continued to reveal a long line of unsavoury practices in FAI and HIH, ASIC was also at work. In June ASIC sued former FAI CEO Rodney Adler, former HIH CEO Ray Williams and former HIH CFO Dominic Fodera over a $10 million payment made by HIH to a trust run by Mr Adler. The money was used by Mr Adler to buy $4 million in HIH shares, giving the impression that he was using his own money. He also bought shares in unlisted technology companies from his company Adler Corporation.

Mr Adler was ordered to pay a fine of $900,000 and compensation of $5.3 million to HIH creditors. He was also banned from acting as a company director for the next 20 years. Mr Williams was banned from being a director for 10 years, fined $250,000 and ordered to pay $2.6 million compensation. Mr Fodera was fined $5000.

In early December Mr Adler was charged with three criminal counts of stock market manipulation and two counts of false or misleading statements in relation to securities. The matter is listed for mention on February 18. ASIC alleges that Mr Adler contravened the Corporations Act in relation to stock market manipulation with the purchase, in the name of Pacific Eagle Equities Pty Ltd, of 3.25 million HIH shares in three transactions over three days in June 2000.

Litigation against players involved with the HIH debacle will not stop there. Last month the liquidator of HIH, Tony McGrath, said it was “highly possible” criminal charges will arise out of the royal commission and that some people could be jailed. He said he would seek to lay charges against auditors, actuaries, advisers, directors and other third parties that allegedly played a role in Australia’s largest corporate collapse.

Mr McGrath has already filed court proceedings against the Federal Government, APRA, auditor Arthur Andersen and HIH’s actuary David Slee. Despite the Federal Government being a key creditor, Mr McGrath said the liquidator has “genuine claims” against it.

The question of whether or not the HIH collapse could have been prevented – or at least would have not been as severe – if there had been effective regulatory intervention was put to rest with the public release of the Palmer report in November. Compiled by former Canadian regulator John Palmer, the report confirmed that APRA was under-resourced and lacked good staff in the three years leading up to the insurer’s demise.

Speaking as a witness at the HIH Royal Commission, APRA CEO Graeme Thompson said that in hindsight he and his staff should have been more sceptical of what they were being told by HIH. He also conceded that APRA did not have the same degree of expertise as its predecessor, the Insurance and Superannuation Commission.