Mark Westfield has written 66 columns which mentioned HIH in the past two years and deservedly picked up the 2001 Walkley for best business reporting but not everything he wrote was correct and he did rely too heavily on the discredited Rodney Adler. His reponse right at the bottom is the latest addition to this piece.

Before we start this analysis, let’s go back and have a look at the amazing attacks HIH launched on Westfield when he started writing his critical articles.

There is nothing like attacking a journalist to produce a torrent of hard-hitting articles and this is precisely what happened to HIH after they sent these rebuttals to the Australian Stock Exchange.


An article by Mark Westfield appearing in “The Australian” newspaper of 30 May 2000 is a preposterous collection of baseless assertions.

There is no truth in Mr Westfield’s allegations concerning corporate activity. The two alleged bids for HIH that Mr Westfield refers to were not made and the dollar amounts he quotes are a complete fiction. HIH management refutes, absolutely, suggestions that the interests of all shareholders would be anything other than paramount in any such matters and/or that management would act to the detriment of all shareholders.

Mr Westfield’s article on HIH is one of a series, the timing of all of which have coincided with litigation activity surrounding a long-running professional indemnity matter known as the “Duke” case.

Mr Westfield is wrong (now for the fourth occasion) to suggest that the HIH maximum liability in relation to the “Duke” case can be anything other than $1 million.

Mr Westfield is entitled to be hopelessly wrong – as he is, for example, in referring to alleged details of an HIH directors’ and officers’ cover even though such a policy does not even exist.

However, Mr Westfield is not entitled to use his privileged position to publish allegations that are false and damaging and, as a consequence, the matter has now been referred to HIH’s legal advisers.


The following day Westfield followed up with another article which sparked an even more vicious attack:


An article by Mark Westfield which appeared in “The Australian” newspaper on 31 May 2000 repeated false claims made by that journalist in the same publication on 30 May 2000. HIH is yet to be approached by the journalist in relation to those false claims and does not intend to engage in a protracted series of media releases denying those false claims. The matter is now in the hands of HIH’s legal advisers and legal proceedings will be instituted forthwith.

However, for the benefit of HIH’s shareholders and other interested parties, the company wishes to make the following points clear:

* The alleged bids referred to by Mr Westfield did not occur.

* No situation has ever occurred where a bid has been made to HIH but a request for due diligence been rebuffed.

* As with all listed companies operating under proper principles of corporate governance, HIH would deal scrupulously in the interests of all shareholders if a bid were to be made.

As a final comment on this matter, the company notes that Mr Westfield has made mistakes before, not only in relation to HIH. In convicting Mr Westfield of Contempt of Court in 1998, Justice Gillard noted that Mr Westfield’s work was not only factually incorrect but also that his conduct was “nasty” and “spiteful” and “unnecessary” and “grossly careless”.


Now Crikey doesn’t want to pick a fight with Westfield but he was a finalist in our “Beat up of the year” award for his front page splash saying that Heinekin was about to buy Foster’s for $10 billion.

But it would be interesting to know which of his HIH articles were submitted to the Walkley judges because the following article is inaccurate in light of what we know about the HIH collapse. Adler was given $10 million by HIH chief executive Ray Williams and finance director Dominic Fodera and used part of this to illegally buy HIH shares on the market to prop the stock up.

For Westfield to buy Adler’s line that it was his money was not award winning stuff. Adler was actually breaking the law and Westfield was writing that he was saving the company and could take over as CEO or chairman. Anyway, enough from me, let’s take a look at the article in question.

Adler pays his way to save HIH

Published in The Australian on June 28, 2000

THE market has written off Australia’s second largest general insurer, HIH, and its share price is being kept above the $1 threshold only through support from director Rodney Adler.

Had Adler not started his buying spree a fortnight ago after the company released an unconvincing explanation to the Australian Stock Exchange about its capital adequacy and earnings outlook, HIH shares would still be wallowing in the 90c range, perhaps lower.

There is no other support in the market for the company and for HIH management under long-term chief executive Ray Williams. Two of its largest shareholders, Winterthur Insurance and Templeton are both sellers, with Templeton having aggressively sold down its stake from about 9 per cent to around 3 per cent. Winterthur’s interest is held by Credit Suisse First Boston, which has desisted selling, fearing the impact on the HIH share price.

Adler’s Adler Corp has topped up his family’s interest in HIH to just over 5 per cent and is now a credible offset to the 3 to 4 per cent held by Williams and his senior management.

For the time being, Williams and his company are dependent on Adler to stave off a slide in the stock and in confidence in HIH. Adler appears not to have settled his plans for the company which acquired his FAI Insurances last year, but the market expects him to play a key role in a management shake-up over the coming months.

HIH will report a disappointing full-year result in late August or early September, and its annual meeting could be the catalyst for a proxy fight for board control. The board is dominated by former partners of HIH’s auditor, Arthur Andersen.

Market talk that Adler might be interested in taking over as chief executive has given way in recent days to suggestions that he would prefer the chairman’s role.

One asset that HIH inherited from FAI and which it has been keen to sell to free up capital is the St Moritz Hotel in New York. It is understood negotiations are in an advanced stage for the sale over the next fortnight.

HIH’s most pressing problem, however, is to restore market confidence and that can only come through the replacement of Williams as chief executive and an infusion of new people in senior management ranks.

Its next challenge is to raise about $250 million in fresh capital to meet the looming new capital adequacy standards soon to be imposed by the Australian Prudential Regulation Authority.

Perhaps of more concern is the expected requirement for general insurers like HIH to keep a prudential margin of 25 per cent above liabilities. HIH maintains a policy of reinsuring its liabilities rather than keeping a prudential margin.

If APRA holds to its foreshadowed policy, then HIH will need at least the $250 million envisaged to keep within the guidelines. At its present low trading levels, this represents a formidable task, given that the capital it needs is more than half its market capitalisation of $495 million.

In January, HIH was valued by the market at $740 million, and 12 months ago $967 million when the stock was trading in the low $2 range. Williams and HIH have denied it vigorously, and have split hairs as to what constitutes an offer or an approach, but the company has received two indications of interest, from Liberty Mutual of the US two years ago and from Suncorp Metway two months ago.

Because both potential suitors wanted to do due diligence before making their approach more formal, they were sent on their way.

The moment of truth is fast approaching for HIH and Williams. Once Adler stops his buying, the stock becomes vulnerable again, and pressure will immediately come back on to the veteran chief executive to stand aside. Otherwise, HIH stock is doomed to languish.

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What really happened as explained by the SMH

The former director of HIH, Rodney Adler, wanted to stem the company’s declining share price by giving the impression he bought significant quantities of shares with his own money, the NSW Supreme Court was told yesterday.

On the first day of civil hearings, the counsel for the Australian Securities and Investment Commission (ASIC), Robert Macfarlan QC, told the court that at no time did Mr Adler let it be known that the source of funding for the purchase of $4 million worth of HIH shares was not himself, but HIH.

ASIC is alleging Mr Adler and fellow director Ray Williams breached the Corporations Law by transferring $10 million from HIH Casualty and General insurance to Pacific Eagle Equities Pty Ltd on June 15 last year.

Some of the $10 million was then used by Pacific Eagle to buy the HIH shares, ASIC claims.

Mr Adler is a director of Pacific Eagle, which is fully owned by Mr Adler’s family company, Adler Corporation.

ASIC is suing Mr Adler, Mr Williams, and Adler Corporation over the action, as well as HIH’s former finance director, Dominic Fodera, for assisting in implementing the payment.

Mr Macfarlan said authority for the payment was not obtained from the investment committee or boards of HIH and HIH Casualty and General insurance.

One of Mr Adler’s purposes in getting the payment was to stem HIH’s declining share price by giving the market the impression he used his own money to buy the shares, he said.

“It was of course a matter of interest … that a high-profile director was increasing his interests in the shareholding of HIH in a very significant way,” Mr Macfarlan said.

“Mr Adler did not at any time let it be known that the source of the funding for HIH shares was not himself but HIH.”

Of the remaining $6 million, at least $3.8 million was used to purchase from Adler Corporation three investment holdings in which Mr Adler “had clearly lost confidence”, he said.

Although HIH shares buoyed briefly after the purchase, the loss from making the payment was more than $7 million, he said.

The hearing continues today.


CRIKEY: All of this is not to begrudge Westfield his Walkley but merely serves to point out the dangers of relying on a colourful Sydney business identity such as Rodney Adler when he is pedaling lies and using you to manipulate the market.

Mark Westfield responds

You keep slagging me off over Adler, yet decline to mention that no-one who wrote about Adler’s buying at the time (in June 2000) mentioned (or knew about) the Pacific Eagle Trust.

It was undeniably true that the only thing keeping the HIH share price up at the time was his buying. I was stating the obvious. I assumed it was his (or borrowed) money, as did everyone else. Also, you also don’t say what date the SMH article was published.

It appeared 18 months after I wrote the piece for which you criticise me and nine months after the collapse. Hindsight is a wonderful thing, particularly if it is reporting a court case where all the information is presented on a plate.

CRIKEY: And the Walkley certainly vindicated Westfield’s overall HIH performance, even if there were a couple of mis-steps along the way.