In May 2001, a distressed Marilyn Reidy explained how she found out that HIH had collapsed. Reidy and her husband, who has been totally incapacitated by a brain tumour, were dependent on his HIH insurance cheques to survive; when Reidy tried to cash a cheque on March 15, it bounced. The Reidys were without an income for at least the next three months.
Things were a little different at HIH HQ. The day before the HIH collapse, HIH finance manager Bill Howard invoiced HIH for $134,000 in the morning and had the money paid to him in the afternoon. A payment of $1 million was transferred into the account of Sydney entrepreneur, and friend of HIH director Rodney Adler, Brad Cooper.
HIH's lawyers, Blake Dawson Waldron, spent the day invoicing and collecting $1 million before the lights went out. After close of business, an invoice from company director Charles Abbott came through — a employee was instructed to catch a train to the North Sydney late-opening ANZ bank and get a cheque cashed "before tomorrow".
Like the thousands of others left stranded and desperate by the company's collapse, the Reidys are unlikely to get much satisfaction from the royal commission into the collapse. Not because the commission hasn't uncovered the lies, cheating and almost unbelievable greed that led to their plight. But because nothing is likely to be done about it.
There will be a few "heads on poles", as the Australian Financial Review has described it, but as Chris Merritt argued in the January 18 AFR: "In a perfect world, those who break the law are always punished. Anyone who expects that outcome from the HIH Royal Commission is about to be mugged by reality... If just a small proportion of [the illegal acts] result in prosecutions, it will exhaust the budget of the Australian Securities and Investment Commission."
The worst part of the HIH scandal is not the naked theft and fraud perpetuated by the likes of Adler, Cooper, Howard and HIH CEO Ray Williams. It is just how deep into the ranks of the corporate elite the scandal reaches.
For years before the disaster, HIH and FAI, the company HIH purchased in 2000, used accounting and reinsurance deals to cover up the fact that the company did not have the reserves to cover its claims.
While company directors lived it up on company money — and siphoned off as much of it as possible — shareholders quietly pocketed the dividends of non-existent profits. No-one was interested in bursting this very comfortable bubble. But when those funding this, the company's customers, began making claims, the whole house of cards collapsed.
Those who turned a blind eye to this theft go far beyond the "heads on poles". They include the Australian Securities and Investment Commission and the Australian Prudential Regulatory Authority (APRA).
APRA, the only body with even a token concern with the welfare of the company's customers, failed so dismally because it is composed of those making a fortune out of the insurance industry. Federal treasurer Peter Costello set up APRA, appointed the board and curtailed the activities of other watchdogs. He was briefed in 2000 on the state of HIH's finances but refuses to reveal what he was told.
In an environment where the share price is everything, dodgy accounting has become commonplace. The point is to make big bucks: not to help your customers or even guarantee the long-term survival of the company. This is the culture that ensured the whole business community let the Adlers and the Coopers strip the Reidys clean.
From Green Left Weekly, January 29, 2003.
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