The Australian Securities and Investments Commission (ASIC) has filed civil proceedings against three former directors of GIO for breaches of duty during AMP’s takeover bid for the insurer in 1998/99.
The three directors in question are Geoffrey Vines, Frank Robertson and Timothy Fox and were described by ASIC chairman David Knott as having “improperly used their positions and failed to exercise their duty of care”.
ASIC says the three were responsible for the financial outlook of the company’s reinsurance business, which was forecast to announce a before-tax profit of $80 million in the company’s Part B statement issued on December 1998.
It was quite a different story after the takeover, however, as this profit actually turned out to be a loss of $759 million.
The securities watchdog says the information released to AMP shareholders was seriously defective and misleading. Vines and Fox were also accused of attempting to conceal the losses in 1998/99, which are believed to be a result of Hurricane George which hit the US in September 1998.
ASIC has filed a civil proceedings against the former GIO directors in the NSW Supreme Court and is pushing to ban each defendant from acting as manager or director of any company for as long as the Court allows.
On top of this, each defendant is facing a fine of $200,000, and collectively face a $489,000 compensation bill for GIO as a result of attempting to conceal the Hurricane George loss.
“These proceedings complement the class action damages case already instituted on behalf of former GIO Australia shareholders,” Knott says.
He adds that while the purpose of ASIC’s action is not to recover shareholders’ losses, the findings and evidence in the prceedings could assist in resolving issues in the class action.
AMP sold its general insurance division, including the GIO arm to Suncorp Metway, only last week.
