Consider the cases of HIH Insurance and Westpoint, and answer the following questions:

1. What were the facts relating to each of these corporate scandals and how did the scandals occur? This discussion should include key players and stakeholders.
2. What were the penalties incurred by participants, if any?
3. Identify any similarities across these two scandals.
4. What were the ethical, legal, accounting and/or corporate governance issues involved in each scandal?
5. Compare each case with Enron, identifying any similarities or differences.
6. Discuss the overall lessons from these cases in relation to major theories of ethics such as utilitarianism and rights theory.

HIH INSURANCE [No Title] In March 2001, Australia's largest insurance company, HIH Insurance Limited, was placed into provisional liquidation This followed actions taken by the Australian Securities and Investments Commission (ASIC) to seek suspension of trading in HIH shares, and to commence a formal investigation into its corporate governance, disclosure and possible insolvent trading activities The HIH directors' assets were frozen in May 2001 . Due to the unprecedented impact the collapse had on the operations of businesses left without insurance cover, the Australian government approved a $500 million-plus rescue package and ordered a Royal Commission into the HIH collapse x At the same time, ASIC commenced criminal proceedings against ex-CEO Ray Williams and one ex-director, Rodney Adler Both Williams and Adler were jailed for up to 4 yearsx The auditor of HIH (Arthur Andersen) was alleged to have ceded to management on controversial accounting issues, breached professional standards and failed to display independence - HlH's accounts overstated profits and understated liabilities, inadequate reserves - Three former Arthur Andersen partners sat on the board of HIH, and close relationships existed between the former partners and the audit team - HIH was placed into liquidation with estimated losses of $5 billion HIH Chairman Cohen was both the chair of the board and chair of the audit committee; he admitted he did not read the auditors' presentations and rarely supported the auditors over management Cohen was a former Arthur Andersen partner Inadequate audit methodology was used - relying on the HIH consulting actuary The HIH Royal Commission summarised the issues including: Financial failures Mismanagement of risks Mismanagement of culture Corporate governance failures Accounting frauds and lack of independenceWESTDOINT CORPORATION Westpoint Corporation * Westpoint was a developer of retirement villages, shopping centres and apartment blocks in Sydney, Melbourne, Brisbane and Perth * In April 2006, the Australian Securities and Investments (ASIC) commenced an investigation into the collapse of Westpoint WESTPOINT CORPORATION * 4000 investors (mostly retirees) lost over $320 million * Some of these investors put all their life savings in Westpoint x Others borrowed, even mortgaging the family home, to invest in WestpointWESTPOINT CORPORATION Westpoint liquidator stated the reasons for Westpoint Corporation Westpoms ranure included: + high gearing, inappropriate and costly financial structuring, inappropriate or ineffective risk management The liquidator was investigating the Westpoint directors for insolvent trading, preference payments and uncommercial transactions WESTPOINT CORPORATION x In October 2008 ASIC commenced civil action against KPMG over its audit of Westpoint ASIC claimed that KPMG acted negligently in its audits of Westpoint by failing to identify issues relating to the solvency of the Westpoint companies * ASIC sought damages of $200m from KPMGWestpoint Corporation IT CORPORATION * August 2009 - ASIC accepted undertakings from three KPMG auditors who were involved in the Westpoint audits that they would not practice as auditors for periods of two years, 18 months and 9 months The KPMG auditors were to also undertake additional professional education on audit matters WESTPOINT CORPORATION * February 2011 - ASIC reached agreements totalling $67m to settle the actions it had conducted on behalf of the Westpoint Group of companies against certain directors of the companies and KPMG x Investors expected to see a return of around $160 to $170 million of the $388 million in losses