Former CFO of HIH nets prison sentence
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SYDNEY, Australia--Dominic Fodera, former chief financial officer of HIH Insurance Ltd., was sentenced on Thursday to three years in jail for his role in the company's collapse.
In November 2005, the Australian Securities and Investments Commission charged him with authorizing the issue of a 1998 prospectus for convertible notes from which there was a "material omission."
The issue, which raised $155 million Australian ($96.7 million) for HIH, did not disclose a deal between HIH and the Australian unit of French bank Societe Generale, which was described by the HIH Royal Commission that investigated HIH's collapse-in April 2003 as a "total return swap."
Under the arrangement, HIH agreed to provide $35 million Australian ($21.6 million) to enable Societe Generale to buy the convertible notes and that any risk or loss associated with the notes would be borne by HIH, thus reducing Societe Generale's exposure as an underwriter.
The failure to disclose these matters gave the false impression to investors that Societe Generale would have a financial interest in the notes after they had been issued and subscribed, and that Societe Generale regarded them as a sound financial investment.
Several institutional investors continued to hold the notes at the date of HIH's collapse. The notes helped finance HIH's bid for FAI Insurance, which was launched in 1998.
HIH became Australia's biggest-ever corporate collapse when it failed in 2001.
A former chief executive and a former director of the insurer have been jailed for their part in its downfall.
Mr. Fodera will be released after two years upon agreeing to a good-behavior bond.
Elizabeth Fry contributed to this report.
