Fascinating reading for those interested in finance and cooking (the books). Also a warning to those who invest in insurance co's with dodgy corporate governance standards, Warren Buffett had his hand in it too.

Spitzer sounds like a maverick attorney from the American prohibition days, he's got my vote...wish we had one like him downunder, instead we've got....wait for it... yes...that's right, A-S-I-C...strikes fear into the hearts of mortal men now doesn't it??!! No wonder corporate crims don't give a damn, just a cost of doing business, let's hope the HIH/FAI sentencing fixes that.

April 16, 2005 Sydney Morning Herald

Some insurers have taken unacceptable risks to prop up profits, write Elisabeth Sexton and Lisa Murray.

Justice James Wood takes a dim view of people who publish misleading annual reports. When he sentenced former HIH boss Ray Williams on Friday, the chief judge in common law said the offence involved "serious criminality".

"[It] risks undermining the public confidence in published accounts, that is essential for the orderly conduct of financial markets," he said.

Williams will go to jail for at least two years and nine months, subject to a foreshadowed appeal.

The term should send a powerful message to others in business.

It's rare to see a chief executive heading to Silverwater jail. More ominously, there are many signs that Williams is not the only executive to have been tempted by the same method of falsifying accounts.

Five, six, seven years after the doctoring took place, prosecuting authorities and those left out of pocket finally are coming to grips with a scandal extensively investigated by the royal commission three years ago. It now appears the practice has spread well beyond HIH and its subsidiary FAI.

Known as the misuse of "financial reinsurance", the issue recently exploded on Wall Street where New York Attorney-General Eliot Spitzer has turned his crusading zeal to it. It has flared again in Australia with a fresh regulatory crackdown.

On March 28, Spitzer claimed the scalp of Hank Greenberg, who quit after running America's largest insurer, American International Group, for 37 years, as the company acknowledged it had "improperly" accounted for a $US500 million contract.

Spitzer said: "The evidence is overwhelming that these were transactions created for the purpose of deceiving the market. We call that fraud. It is deceptive. It is wrong. It is illegal."

AIG bought the contract from a company called General Reinsurance, a subsidiary of the much-admired investment company Berkshire Hathaway.

On Monday, the legendary chairman of Berkshire, Warren Buffett, suffered the indignity of giving evidence to state and federal investigators in New York about the contract AIG bought from General Re.

Berkshire has also quietly repaid $82 million to the HIH liquidator, a sum which equates to money FAI deposited with two Berkshire subsidiaries as part of controversial financial reinsurance arrangements.

On Thursday, a more serious fate befell the Australian arm of General Re when an official inspector with wide-ranging powers was appointed to investigate its conduct.

The inspector, insurance expert Estelle Pearson, has access to all of the company's books and records and can compel company insiders and external parties such as auditors and clients to answer questions on oath. The penalty for refusal to co-operate is three months' jail.

The Australian Prudential Regulation Authority has armed Pearson with these powers to get to the bottom of General Re's marketing of financial reinsurance.

A spokesman for General Re's local arm said on Thursday the reinsurer would continue to "co-operate fully" with APRA.

The regulator welcomed this statement, but has clearly not been persuaded by General Re that it has cleaned up its act since 2002, when several of its senior executives endured stints in the witness box at the HIH royal commission.

General Re's name landed on the front pages when a former executive, Andrew Allison, gave evidence that the FAI deal was not a one-off.

In a dramatic development, commissioner Neville Owen asked Allison to....
(read the rest here http://www.smh.com.au/news/Business/...09926764.html)
If anyone thinks high finance is boring read some of the accounts on Enron and other coporate collapses, very entertaining.