JUDGE THROWS OUT SEVEN-YEAR, MULTI-MILLION DOLLAR PROSECUTION

A crucial piece of prosecution evidence was completely missing. Justice was done in the end but why was the prosecution ever brought?

Three key players in Australia's biggest corporate failure walked free yesterday after a case involving what prosecutors described as a "breathtakingly dishonest scheme" sensationally collapsed. Former FAI Insurance executives Timothy Mainprize, Daniel Wilkie and Stephen Burroughs can never be tried again. NSW Supreme Court judge Rod Howie directed a jury to acquit the trio on all charges relating to the $5.3billion collapse of the HIH insurance group in 2001.

The three men hugged friends and family inside the court as a seven-year ordeal that saw them adversely named at a royal commission and the loss of high-flying careers came to an end. "We won't ever come back here again," Marjoh Mainprize said to her husband as they left the court arm in arm.

The trial centred on jailed businessman Rodney Adler's former company, FAI Insurance, which was taken over by HIH shortly before its collapse. The Australian Securities and Investments Commission brought dishonesty charges based on evidence given to the 15-month royal commission into the nation's biggest corporate collapse. The prosecution accused the trio of a "breathtakingly dishonest scheme" of hiding secret side-deals to a reinsurance contract that allowed the struggling and under-reserved FAI to post an $8.6million profit instead of a $19.9million loss just before HIH acquired it in a $300million takeover in September 1998.

Justice Howie said he agreed with the defence that the prosecution had failed to answer a critical question in the case. He was "troubled" because of a lack of evidence of an oral agreement between the accused men and executives from reinsurers General Cologne Re that FAI would not claim against a $12.5million reinsurance policy. "The Crown's circumstantial case can't be proven beyond reasonable doubt that there was an oral agreement," Justice Howie said yesterday.

Defence barrister Philip Strickland SC had earlier described the prosecution case as a "corpse" and defence barrister Geoff Lindsay SC said there was a "yawning gap in the evidence".

Former chief operating officer Mr Wilkie and FAI finance director Mr Mainprize pleaded not guilty to two charges each of failing to act honestly as company officers and one each of misleading FAI's auditors. Mr Burroughs pleaded not guilty to one charge of failing to act honestly as a company officer. Mr Wilkie and Mr Mainprize were acquitted last week on charges of misleading FAI's auditors, on a direction from Justice Howie. Justice Howie said it was the first time in his 10 years at the bench that he had been forced to direct a jury to acquit on all charges.

ASIC chairman Jeffery Lucy yesterday blamed the failed attempt to have the men jailed alongside HIH founder Ray Williams and Adler on the complexity of financial prosecutions. But he said the acquittal would not deter the corporate regulator from pursuing complex matters where it believed the law had been breached. "Just because a case is complex should not provide a shield against prosecution," Mr Lucy said in a statement. But defence lawyers rejected Mr Lucy's claim, pointing to the Crown prosecutor's comment to the jury on the first day of the trial. "It was very, very simple indeed," prosecutor Stephen Rushton SC told the 12 jurors.

The committal hearing held last year and three-month trial cost millions of dollars in taxpayers' funds.

Report from here



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