Insurance director jailed for role in company's collapse
A former director of HIH insurance was sentenced today to four-and-a-half years in prison for his role in Australia’s largest-ever corporate collapse.
HIH Insurance was Australia’s second largest insurer when it folded in March 2001 with debts of €3.2bn, leaving thousands of policy holders with unpaid claims and sparking the collapse of several home-building companies insured by HIH.
Rodney Adler, 45, pleaded guilty in February to four company law charges, including two charges of disseminating false information likely to induce people to buy shares in HIH in June 2000, one charge of obtaining money by false or misleading statements and a fourth charge of failing in his duties as a company director.
The last two charges were related to a €1.2m loan in 2000 from HIH to a company with which Adler was associated, Business Thinking Systems.
Earlier, Adler told reporters that he expected to serve time behind bars and did not plan to appeal his sentence.
As the sentence was read out, he bowed his head but expressed no emotion.
The failure of HIH was Australia’s biggest-ever corporate collapse and put the spotlight on corporate governance practices in Australia well before the Enron Corp and WorldCom Inc scandals in the US.
Judge John Dunford of the New South Wales state Supreme Court opened today’s sentencing by saying it was important to note that Adler had not been convicted of ”being a director of a large public company which went broke” and could not be punished for any shareholder or creditor losses resulting from the collapse.
Instead, Dunford described how Adler knowingly gave false information to the HIH executives and the press aimed at raising the value of HIH shares and furthering his own professional interests.
In earlier testimony, Adler said he had made “stupid errors of judgement” in his eagerness to impress his bosses and make HIH a success.
But Dunford rejected this claim, saying Adler’s behaviour showed “an appalling lack of commercial morality.”
“They were not stupid errors of judgement but deliberate lies, criminal and in breach of his fiduciary duties to HIH as a director,” Dunford said.
The judge also questioned Adler’s sincerity in pleading guilty, pointing to earlier testimony in which the former executive said he could still justify his actions.
“Although he accepts that his conduct is unacceptable to others, he does not really acknowledge to himself the full extent of its wrongfulness in the business sense,” Dunford said, adding that Adler’s offences warranted full-time imprisonment on every count.
Adler received prison terms for each of the four charges, some to be served concurrently. In total, the former executive was ordered to serve four-and-a-half years in jail, but could be free on parole in two-and-a-half years.
Treasurer Peter Costello said the sentence sent a strong message to corporate Australia.
“Criminal conduct in the corporate sphere will be investigated, it will be prosecuted and the courts have shown that they are prepared to impose heavy jail terms,” Costello told reporters.
He said the government had invested more money in the HIH investigation than any other corporate regulation.
“We did it because it affected millions of people, we did it because we wanted to send the message that corporate crime is crime and if you engage in it what follows is a jail term,” Costello said.
Adler is the first of three former HIH executives who have pleaded guilty to offences related to the collapse to be sentenced. The others are chief executive Ray Williams, who will be sentenced tomorrow, and director Terry Cassidy, who will be sentenced next week.
