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Monday, 22 June 2009
Page: 6709


Mr HAYES (3:39 PM) —My question is to the Minister for Financial Services, Superannuation and Corporate Law and Minister for Human Services. Minister, are you concerned about reports of misleading conduct with regard to the sale of Australian insurance companies? How important is it that people in the financial services industry maintain the highest standards of conduct, accountability and integrity? Minister, what recent threats have there been to these standards?


Mr BOWEN (Minister for Financial Services, Superannuation and Corporate Law and Minister for Human Services) —I thank the member for Werriwa for his question. When it comes to the proper functioning of markets and our public debate, it is more than a little important that the highest standards of integrity and honesty be maintained. Our legal framework for dealing with deceptive conduct in the business world is also vital to ensure that consumers and investors are fully informed in making financial decisions, because without access to truthful information the market simply would not function properly as poor economic decisions would be made. Investors, companies and consumers have the right to truthful information—much the same as citizens and voters have the right to that truthful information.

I was asked about concerns about the sale of certain insurance companies. The House may be aware of concerns relating to the tactics that surrounded the selling of FAI insurance to HIH, which played a very important role in the downfall of HIH. In 1997, Goldman Sachs Australia considered being a party to the purchase of FAI. After a thorough study of the business of FAI, the chairman of Goldman Sachs Australia concluded that the business was in bad shape and was worth very little. That chairman was Mr Malcolm Turnbull.

On 7 September 1998, Mr Turnbull sent a memorandum to Goldman Sachs executives in New York advising them that the assets of the business were worth very little. He said:

We estimate that the true net assets of FAI (that is, after write-downs and unwinding of reinsurance contracts) is approximately $20 million, compared with a stated book value of $220 million.

Fair enough. They did their work with due diligence and decided that it was not worth very much at all. But Mr Turnbull then agreed to help Mr Rodney Adler sell FAI insurance. In the process of finding a buyer, it would be common practice for FAI to appoint an independent valuation expert to give potential buyers some information about the value of the business. Mr Turnbull not only did not advise them to do this; he advised them not to do it. Mr Turnbull wrote to Mr Adler recommending against the appointment of an independent financial examination of FAI, stating, ‘It may not be in FAI shareholders’ interests to have such an investigation conducted and presented.’

On 11 January 1999—four months after Mr Turnbull argued that there was little value in the FAI business—on the basis of information provided by FAI and Mr Turnbull the insurance firm HIH purchased FAI for $295 million.


Mr Abbott —Mr Speaker, I rise on a point of order. I hate to be pedantic, but there is a standing order about referring to members by their proper titles. We all know what the government is trying to do here. It is smear and smear and smokescreen.


The SPEAKER —The member for Warringah will resume his seat. The minister will refer to members by their parliamentary titles.


Mr BOWEN —The now member for Wentworth therefore noted that the assets were truly worth $20 million but was involved in the sale of FAI insurance for $295 million. On 21 June 2006, the liquidator of HIH served a claim on Mr Turnbull, the now member for Wentworth—and others—seeking $529 million in damages, comprising the $295 million—


Mr Abbott —Mr Speaker, I rise on a point of order. Implicit in what the minister is saying are grave charges. If they want to make this kind of charge in the parliament, they should proceed by way of a substantive motion. These matters have all been heard by royal commission—


The SPEAKER —The member for Warringah will resume his seat. I will listen closely to the claims that are being made by the minister. The minister is responding to the question.


Mr BOWEN —Thanks, Mr Speaker. We have a claim seeking $529 million in damages, comprising the $295 million paid by HIH for FAI and $234 million in interest. The HIH liquidator—

Honourable members interjecting—


The SPEAKER —The member for Goldstein will resume his seat.


Mr BOWEN —This claim was that Mr Turnbull and others misled the non-executive directors of FAI. The Acting Leader of the House is on his feet!


Mr Hartsuyker —I rise on a point of order, Mr Speaker, on the matter of relevance. He is not being relevant to the question.


The SPEAKER —The minister is responding to the question.


Mr BOWEN —I should disclose to the House that this matter has now been settled by a confidential settlement. We do not know the details but we know it has been settled. But there will be no confidential settlement about misleading behaviour on other matters in the House over the last few hours. There is nowhere to hide from this one. There will be no confidential settlement on lying about an email, because he might be able to hide behind a confidential settlement in the business world but you cannot hide behind one in politics.


Mr Abbott —I rise on a point of order, Mr Speaker. He has accused the Leader of the Opposition of something of which people should not be accused in this way, other than by substantive motion. He should withdraw. Not only should he not say it; he should withdraw it.


The SPEAKER —The member for Warringah will resume his seat. Regrettably, during the 3½ hours that preceded question time there were accusations of a similar nature made. I ask members to desist from making those comments, and to be careful with the language that they are using.


Mr Abbott —I rise on a point of order, Mr Speaker. Strong language is traditionally permitted during a censure debate, which is effectively what the earlier debate was. It is not permitted to accuse members of lying, in question time.

Government members interjecting—


The SPEAKER —The member for Warringah will resume his seat. Those on my right! Regrettably, the contention that the member for Warringah is putting to me is not correct. It is assumed that there should be a more robust debate which I, as the predominant person that was in the chair for the debate, allowed. I am now learning my lesson! It is usual, if we are going to have those robust charges made, that they are part of the motions that we are discussing, and on this occasion they were not. Perhaps, to clarify the matter I should have pulled up these comments earlier in the debate. I have indicated to the minister and those who follow that they should be a bit more careful with the language that they use.


Mr Abbott —Mr Speaker, I rise on a point of order. I do not wish to needlessly prolong this, Mr Speaker, but the member did accuse the Leader of the Opposition of lying. That is normally unparliamentary and he should withdraw it. And he should not use that language in question time.


The SPEAKER —I have indicated my comments about that. The minister has the call but he will desist, from now on—and I think that is on the basis of what has happened over the last four hours. From now on I will be alert.

Honourable members interjecting—


The SPEAKER —Interjections and mumblings! I am saying to people, now, that that type of language will not be allowed.


Mr BOWEN —Thanks, Mr Speaker. We now know that the Leader of the Opposition never lets the facts get in the way of his ambition—whether it was HIH or the ute affair. He cannot hide in this particular matter. The Australian people will hold him to account for putting his ambition ahead of the facts.