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Ray Williams and HIH: The Inside Story -

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Ray Williams and HIH: The Inside Story

Reporter: Emma Alberici

MAXINE McKEW: It remains Australia's biggest corporate collapse and former HIH Insurance boss Ray
Williams has taken ultimate responsibility for the company's $5.3 billion crash.

The one-time business high-flier and lavish entertainer faces up to 12 years in jail after pleading
guilty to three counts of misleading and deceptive conduct.

For those still living with the fallout from the HIH demise there was some comfort in the news.

Now a former auditor of the company, who was a key witness at the royal commission into HIH,
reveals for the first time the inside story of how Ray Williams and the insurance giant he created
went off the rails.

Emma Alberici reports.

PETER SCHMIEDEL BUILDER: When I heard that Ray Williams pleaded guilty, I was ecstatic.

You know, I mean, these guys obviously know what they're doing and, um, in my opinion, I think
they've just been rorting the system just to line their own pockets and all the rest of it at the
expense of others.

EMMA ALBERICI: It's the best news Peter Schmiedel's had in the four years since HIH collapsed,
leaving him holding a worthless insurance policy.

He couldn't get a building permit without that insurance, which meant his construction company was
idle for more than three months.

PETER SCHMIEDEL: I'd say I would have lost in the vicinity of about $50,000.

JOHN DALY, FORMER HIH INVESTOR: Williams really should be punished for his actions and it would be
nice to sue him and throw him into jail at the same time.

EMMA ALBERICI: Retiree John Daly took a gamble on HIH shares and lost his life savings - $38,000.

JOHN DALY: Personally, I would like to see Ray Williams thrown into prison and have the key thrown
as well in the opposite direction.

EMMA ALBERICI: Judgment day for the man who turned a tiny underwriting business into Australia's
biggest insurer only to preside over its failure in March 2001 owing more than $5 billion.

The former HIH boss Ray Williams today pleaded guilty to three criminal charges: Failing to
properly exercise his director's duties, misleading investors in an annual report by overstating
the HIH profit by $92 million, and omitting an important piece of information about the company in
an attempt to raise money from the public.

SUELLEN HENRY, FORMER INSURANCE ANALYST: I didn't think Ray Williams was a good CEO because I
thought - I think that a good CEO surrounds themselves with good, strong people so that there's a
lot of debate about the strategies and how to run the business.

And, in my mind, you know, he surrounded himself with people who said, you know, "Yes, Ray.

Whatever you think, Ray, we'll do."

EMMA ALBERICI: Suellen Henry was a key witness at the HIH Royal Commission.

She knew the company well, first as part of the HIH audit team at Arthur Andersen and then at
Deutsche Bank where she was an insurance analyst during the rise and fall of HIH.

She was the first member of a stockbroking team to advise investors to sell their shares in the
insurer, issuing this research paper three years before the company's demise.

This is the first time she's gone public about her dealings with HIH.

Why were you called on to give evidence at the HIH Royal Commission?

SUELLEN HENRY: Um, I think I was called upon because they, they were trying to understand why, um,
why I had come to the conclusion, um, two or three years or whatever it was, before the company
actually collapsed, why I'd come to the conclusion that they with were underreserved, so much ahead
of the regulators and what not.

So they wanted to understand that chain, you know, my logic, my thought process.

EMMA ALBERICI: In his findings from the HIH Royal Commission, Justice Neville Owen concluded that
Ray Williams headed a company for 30 years where unpleasant information was hidden, filtered or
sanitised, something Suellen Henry knew all too well.

SUELLEN HENRY: He didn't listen.

He didn't like to hear any criticism of his strategies or the way he was running HIH.

So, you know, he could be very aggressive if you asked any difficult, um, questions.

EMMA ALBERICI: And you did ask difficult questions?

SUELLEN HENRY: I did ask some difficult questions and, um, you know, when I, when I had access to
the company but then, but then I was banned from talking to - um, or the management of the company
were banned from talking to me so then I had no access to the company.

EMMA ALBERICI: Is that the normally done thing among companies?

SUELLEN HENRY: No, no.

It's not the typical thing.

And, you know, in some ways, I think it was the biggest sign that there was something wrong at the
company.

Because I think companies - if you question what a company does, I think the best thing they can do
is to prove you wrong and actually give you information and, you know, let you talk to whoever you
want to talk to and actually prove that you're wrong so I think that was a big signal to me that
there was something wrong.

EMMA ALBERICI: Why did you have a sell recommendation on the stock?

SUELLEN HENRY: I put the sell recommendation on HIH because, you know, I just thought that the
company had grown too quickly and I thought they were acquiring things all over the world and I
just didn't think they understood what they were acquiring and I didn't think they had the
management depth to integrate those businesses and then, on top of that, based on the information
that was available - and it wasn't much very much information - I thought that the company had
reserving problems.

JEFFREY LUCY, CHAIRMAN, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION: I welcome today's guilty
plea by Mr Williams as a significant development in ASIC's HIH investigation.

EMMA ALBERICI: While the Australian Securities and Investments Commission has been responsible for
sending one of the other members of the HIH management team, William Howard, to jail and
prosecuting six others, Ray Williams is the biggest scalp they've claimed so far in the wash-up of
the $5 billion disaster.

PROFESSOR IAN RAMSAY, CORPORATE LAW, MELBOURNE UNIVERSITY: I was surprised that he had pleaded
guilty.

EMMA ALBERICI: Ian Ramsay is professor of corporations law at Melbourne University.

He believes Ray Williams's guilty plea is a common ploy among white collar criminals trying to
avoid lengthy jail terms.

PROFESSOR IAN RAMSAY: Because he has pleaded guilty - and therefore saved the prosecution the time
and effort and resources of running what would be clearly a very complex and lengthy trial - that
that might be a factor that could play a role in reducing the potential penalty that could be
imposed.

SUELLEN HENRY: I don't think he was a bad person.

You know, I think he was a person that was so blinded by growing his business and so passionate
about his business, that he just, um, got too carried away with growing it and grew too fast and
didn't understand the risks that he was taking on.

MAXINE McKEW: Emma Alberici with that report.