The opening HIH skirmish has put the focus on Rodney Adler as well as Ray Williams. This week the first of what will inevitably be a torrent of litigation spawned by the collapse of HIH Insurance started in the NSW Supreme Court. While the action is a sideshow to some extent, even in its earliest phase it gives a fascinating and somewhat disturbing insight into the failed insurer. The action is a sideshow because it doesn't relate to the Main Event - the investigation of how HIH came to collapse and the assignment of responsibility and liability which will flow from the proposed Royal Commission and ASIC's own investigations. The intriguing aspect of the ASIC claims are that they bring Rodney Adler firmly into the spotlight that has previously been shone fiercely on Williams, his management, his board, the auditors and the prudential regulator, the Australian Prudential Regulation Authority.
Litigation does tend to flow towards the biggest pots of money and the highest-profile targets.
Adler has money and a profile and his transactions with HIH are curious enough to ensure his role will be exhaustively reviewed. In a series of dealings involving HIH funds, ASIC has claimed Adler was able not only to sell his inheritance, FAI Insurance, to HIH for what now appears to be several hundred million dollars more than it was worth but also to offload a load of worthless investments to HIH at the price he had paid for them. What isn't explained by anything submitted to the court or learned thus far is why Williams was prepared to be consistently on the wrong side of such obviously bad dealings, particularly as some of them occurred in September last year when it should have been obvious to Williams that HIH couldn't afford to simply give away its shareholders' funds. Until the defendants have their day in court, ASIC's contention that Williams and Fodera breached their duties and had knowingly failed to observe procedures which could have led to the transactions being reviewed by other persons remains unchallenged. An issue central to understanding how HIH could collapse, however, is the extent to which Williams ran the public company, and was allowed to run it, as if it were entirely his own.