Buffett's Gen Re faces HIH court row
June 8, 2006
HIH liquidator Tony McGrath looks set for a major court battle with Warren Buffett's General Reinsurance following
the breakdown of discussions over some $400 million in claims.
Copyright 2006 News Limited
But Mr McGrath is believed to be close to a settlement with several firms in connection with the FAI/HIH cases, including
accountants Arthur Andersen.
The breakdown of negotiations with Gen Re and reinsurance broker Guy Carpenter was confirmed in a NSW Supreme Court
Judge Carolyn Simpson yesterday granted Mr McGrath another three months to file statements of claim against several
companies in connection the overstatement of FAI's 1998 accounts.
The decision comes amid expectations creditors of the collapsed HIH group will get their first 5c in the dollar payout
within the next few weeks.
It also comes more than five years after HIH collapsed in March 2001 with an estimated
deficiency of $5.3 billion.
Mr McGrath this year told creditors of each of the eight failed FAI and HIH insurance
companies they could expect to receive anywhere from around 5 per cent to more than 50 per cent of their monies owed.
Yesterday's extension of time involves seven different statements of claim issued by McGrath.
These are in connection with financial reinsurance deals that allowed FAI to report a pre-tax loss of $50 million as a
profit of $8.6 million in September 1998.
The company was taken over in early 1999 by HIH for $300 million -- a figure struck on the basis of the overstated accounts.
Mr McGrath, who is liquidator of the HIH and FAI companies, issued statements of claim against Gen Re and Guy Carpenter
Mr McGrath has never publicly stated how much he is seeking from the companies, but the total figure is
thought to be as high as $400 million.
He is believed to be in negotiations with accountant Arthur Andersen and other parties over a possible claims settlement.
In court yesterday, Justice Simpson said Mr McGrath wanted extra time for negotiations with defendants who had received
statements of claim.
But she noted these did not include Gen Re or British insurance brokerage Guy Carpenter. The two companies strongly
opposed to Mr McGrath's extension application.
The statement of claim by Mr McGrath was revealed by Mr Buffett in accounts of his company, Berkshire Hathway, in 2004. An
attempt at negotiations between the companies and Mr McGrath are thought to have broken down months ago, with the parties
objecting to the amount sought by the liquidator.
Justice Simpson noted yesterday that the two companies were "no longer engaged in active negotiation" with Mr McGrath
and "do not wish to re-engage".
She said she understood their desire to "bring some certainty and finality to their position" but this was outweighed by
the interests of many other parties.
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