| 07.07,09. 01:40 AM |
Turnbull closer to deal on HIH claim
July 7, 2009
FORMAL steps have begun to settle a $500 million damages case relating to the HIH collapse, which has been hanging over the federal Opposition Leader, Malcolm Turnbull.
He is one of nine defendants who agreed in principle in September to settle with the HIH liquidator, McGrathNicol partner Tony McGrath.
Mr McGrath claims FAI Insurances was worthless when HIH paid $295 million to take it over in 1998, three years before the merged group collapsed.
Mr Turnbull is being sued as an adviser to FAI during the takeover, along with the investment bank he headed at the time, Goldman Sachs Australia. In the recent controversy over financial assistance for car dealers, senior ministers repeatedly raised Mr Turnbull's HIH involvement.
Minutes published yesterday show that a committee of FAI creditors voted on June 24 to settle. Committees of other HIH companies were also due to vote last month, before a Supreme Court hearing on Thursday to ratify their expected approval. The matter returns to court for final approval on August 6.
The case was complicated by defendants filing 44 cross claims, some of which drew in other parties such as the partners of FAI's auditing firm, the now defunct Arthur Andersen, who also need to sign the settlement.
Mr Turnbull did not comment yesterday. In the past, he and Goldman Sachs have said the suit was "a baseless claim, which seeks to revisit matters rejected by the HIH royal commission".
Including interest, the claim is nominally worth more than $500 million.
The FAI minutes say the creditors received legal advice that "the settlement terms were considered appropriate given the various cost and risk factors associated with taking the matter to trial".
The chief contributors to the settlement are likely to be General Reinsurance (now a wholly owned subsidiary of Berkshire Hathaway), reinsurance broking firm Guy Carpenter & Co, and Goldman Sachs.
Executives such as Mr Turnbull are usually covered by indemnities from their employer or by corporate insurance policies.
Individual defendants include three former FAI executives, Rodney Adler, Daniel Wilkie and Tim Mainprize.