HIH

The collapse of HIH was not caused by insufficient regulations but by plain and sheer fraud. Indeed, on top of revealing themselves lousy businessmen, HIH key executives tricked auditors, lied to regulators and other HIH directors and more generally gravely misled the public. For instance, HIH executives:

- bought FAI for $300m where the business was worth $20m at most; collusion of FAI executives with a well-known investment bank can be suspected here;

- sold the profitable HIH's retail insurance business to receive a one-off cash inflow instead of on-regular and much-needed income streams so as to improve group results for 2000;

- forged fake reinsurance contracts to pretend they were covered for insurance risks;

- engaged in fraudulent or at minimum very dubious accounting practices to present HIH books in favourable light when the company was already in deep troubles and on the verge of trading insolvent;

as an example, they included already committed assets into solvency calculations to make these appear adequate.

As summarised by one commentator, HIH executives "knew what they were doing was wrong, yet they did it. No system of regulation can rule against behaviour like this [in which] perpetrators have no fear of being caught and, if they are, believe they will get away with it" (Westfield 2003). This is the case because it is impossible to have an ASIC or an APRA officer behind each and every company director or attending each and every board meeting in Australia.