Zurich Executives Won't Face Charges

Sydney Morning Herald

Thursday March 15, 2007

Lisa Murray

EXECUTIVES who were caught cooking the books for Zurich Financial Services' insurance arm in 2000 have escaped criminal prosecution.

The insurance regulator said yesterday that it was still "finalising action" against individuals involved in reinsurance transactions that resulted in Zurich Australian Insurance Limited's profit being overstated by $61 million.

But it said "no criminal actions will be pursued" and no further action would be taken against the company.

"The transactions, as booked by ZAIL, created the impression that the company had made a substantial profit in 2000, when in fact it had made a loss," the Australian Prudential Regulation Authority said in a statement, adding that the profit overstatement took place "at a time when the company was at risk of regulatory insolvency".

An APRA spokesman declined to explain further why the regulator chose not to pursue criminal actions after an investigation stretching almost three years. APRA chairman John Laker was unavailable to comment.

The Australian Securities and Investments Commission decided a year ago that it would not pursue criminal action against anyone involved in preparing and signing Zurich's misleading accounts because it believed such action would be expensive and the outcome uncertain.

Another factor in ASIC's decision was that Zurich is not listed on the Australian Stock Exchange and no Australians were left out of pocket.

Last month, APRA disqualified Zurich's former local chief executive, John Butler, from acting as a director or senior manager of a general insurance company. It has also disqualified four other executives and accepted an enforceable undertaking from former actuary Richard Mayo in August 2004 that he would not work as a senior manager or director of a general insurer for five years and as an approved actuary for 10 years.

APRA said Zurich had restated the relevant financial accounts and now met all of its prudential requirements, including those related to capital adequacy.

The regulator was "satisfied that [Zurich] has undertaken all necessary remedial actions in relation to the transactions".

A spokesman for Zurich said the investigation had concluded and nobody now at the company was under investigation.

Zurich had decided not to publicly release APRA's investigation report, he said.

© 2007 Sydney Morning Herald

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