THREE former directors of GIO Insurance have been fined and suspended from managing companies after breaching their duties in the lead-up to a controversial takeover by AMP in 1999.

 

The court orders come one year after a judge found that Geoffrey Vines, Francis Robertson and Timothy Fox failed to act with reasonable care and due diligence on numerous occasions as they prepared GIO's response to AMP's bid launched in late 1998.

 

Mr Fox, 59, was also found to have acted dishonestly, in the ruling last August, following legal action taken against the three directors by the Australian Securities and Investments Commission.

 

NSW Supreme Court Justice Robert Austin yesterday ordered that Mr Vines, 57, be disqualified from managing a company for three years and pay pecuniary penalties of $100,000.

 

Mr Robertson, 65, is also disqualified from company management for three years and faces $50,000 in pecuniary penalties.

 

The disqualification period for both Mr Fox and Mr Vines is backdated to July 1, 2004, bringing the expiry date to June 30 next year.

 

Mr Fox is disqualified for 12 years, with $220,000 in pecuniary penalties.

 

He must also pay compensation to GIO for the Australian dollar equivalent of $US143,750 at the exchange rate on June 3, 1999.

 

Justice Austin said the orders should deter other executives from failing to act with due diligence.

 

"Orders reflecting the seriousness of such failures should have a suitable deterrent effect," he said.

 

"My view is that the objective of general deterrence requires the combination of a disqualification order and a pecuniary penalty order."

 

The three directors were also ordered to pay ASIC's costs of bringing the legal action against them.

ASIC chairman Jeffrey Lucy said the orders emphasised the very serious consequences for company directors and officers who fail to carry out their duties.

 

GIO had recommended that its shareholders reject AMP's takeover offer of $5.36 per share based on forecasts that it would make a substantial profit in 1998-99.

 

However, GIO ended up making a massive loss and missing its profit target by almost $1 billion due to problems in its reinsurance division.

 

Its shares dived, enabling AMP to take over the part of GIO it did not already own for just $2.75 a share.

 

Justice Austin's ruling last August related to the part of GIO's profit forecast that dealt with the reinsurance division.

 

He found that Mr Vines, Mr Fox and Mr Robertson did not properly inform the relevant people about potential problems for the reinsurance division following a devastating hurricane in the United States.

 

At the time, Mr Vines was chief financial officer of the GIO Group, while Mr Fox replaced Mr Robertson as executive director of GIO Insurance in November 1998.

 

The controversy had already led to a successful class action that awarded more than 22,000 GIO shareholders damages totalling $97 million on the grounds that they had been misled