Dominic Fodera, the former chief financial officer of HIH Insurance Ltd., was sentenced to three years in prison for authorizing the release of a prospectus that omitted a material fact. The $4.5 billion collapse of HIH in 2001 is considered Australia’s biggest corporate failure.
In a press release, Australian Securities & Investments Commission chairman Tony D’Aloisio said that the sentence “shows that company officers who withhold information from investors will face serious consequences.”
The ASIC pointed out in its announcement that it has successfully prosecuted nine individuals arising out of its ongoing investigations into the HIH group of companies, with jail time having been handed down for eight of these.
Fodera was found guilty in April of authorizing the issue of a prospectus created to raise up to $130 million of convertible notes intended to help HIH fund the takeover of the FAI Insurance Group.
According to ASIC, the prospectus failed to disclose the effect of a transaction entered into at the same time between HIH and Societe Générale Australia Limited (SGAL). Under the transaction, SGAL took up a priority allocation of about $30 million in notes in exchange for HIH depositing roughly the same sum with SGAL and entering into a swap arrangement. “The effect of the transaction was that HIH in fact bore the financial risk” on the convertible notes rather than SGAL, as the prospectus suggested, ASIC stated in its announcement Thursday.