Criminal probe into 'Australia's Enron'

Criminal probe into 'Australia's Enron'

The management of collapsed insurer HIH - widely known as "Australia's Enron" - could face criminal charges, the Canberra government has said.

A Royal Commission looking into HIH has listed boardroom domination by chief executive Ray Williams, improper accounting, conflicts of interest and inadequate reserves as reasons for its A$5.3bn (£2bn; $3.2bn) downfall, the biggest financial scandal in Australian history.

The Treasury said 56 separate issues relating to the collapse were being referred to investigation authorities, and that the government would consider whether a Special Prosecutor will be appointed.

The Commission also blamed the industry regulator, the Australian Prudential Regulation Authority (APRA), for failing to keep tabs on the industry.

Risky business

HIH was Australia's second-largest general insurer when it was declared insolvent two years ago, leaving tens of thousands of policy-holders uninsured and claimants out of pocket.

The Commission, which has been hearing evidence for 18 months - a task resulting in 18,000 pages of legal transcript - uncovered evidence of eccentric business practices at the firm.

One HIH unit insured the Taiwanese military against personal injury, and even wrote policies covering football results.

The Commission found that senior executives HIH had manipulated accounts to show non-existent profits, and charged into the US and UK markets without making adequate financial provision.

The firm was eventually brought down by the purchase of Australian former insurer FAI, for which it paid A$300m without verifying its value properly.

The company turned out to have a net worth of minus A$300m.