NSW: Committal hearing opens for former HIH director Fodera

AAP General News (Australia)
08-07-2006
NSW: Committal hearing opens for former HIH director Fodera

SYDNEY, Aug 7 AAP - Former HIH director Dominic Fodera today faced a court hearing
to determine if he will stand trial on charges of making false statements and failing
to act honestly as a director.

Fodera was the chief financial officer and executive director of insurer HIH, which
collapsed in March 2001 with debts of $5.3 billion.

He faces six criminal charges - two counts of failing to act honestly as a director
and four counts of knowingly giving false or misleading information.

HIH entered into two agreements in 1999 with German re-insurer Hannover Re, crown prosecutor
Tim Game SC told Downing Centre Local Court today.

Under the agreements, known as Hannover 1 and Hannover 2, it appeared HIH would pay
money into a managed fund and Hannover Re would carry the risk if the fund failed to grow
quickly enough to meet HIH claims, Mr Game said.

But other agreements, known as LOC (letters of credit) agreements, were entered into
by HIH subsidiary Underwriting and Agency Services Limited (UAS), and were not disclosed
to the board of HIH, Mr Game said.

In those LOC agreements, "HIH was in fact guaranteeing the funds would meet the ultimate
levels so risk was not being passed to Hannover Re," he said.

In 1999, HIH "were able to produce a profit of $92.4 million on their financials because
of these transactions," Mr Game said.

"In Hannover 1 and 2 agreements, Hannover is bearing the risk, when you bring in the
LOC agreements, Hannover is not bearing the risk, HIH is bearing the risk," Mr Game said.

He said the agreements were "unnecessarily complicated" and difficult to understand
"even for people well versed in re-insurance".

The three-day committal hearing resumes before Magistrate Antony Townsden tomorrow.

AAP lma/hn/sp

KEYWORD: FODERA

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