Three former GIO directors have been penalised over their conduct during the course of AMP’s 1998–99 takeover bid for GIO Australia.

ASIC commenced civil proceedings on 20 June 2001 against the three former officers of
GIO Insurance, Messrs Vines, Robertson and Fox.

On 23 August 2005, the Supreme Court of New South
Wales found that the defendants had breached their duty to act with
reasonable care and diligence on certain occasions and that Mr Fox had
breached his duty to act honestly.

GIO 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 plummeted, enabling AMP to take over the part of GIO it did not already own for just $2.75 per share. More than 22,000 GIO shareholders
were subsequently paid damages totalling $97 million on the grounds that they had been misled.

In his judgment, his Honour Justice Austin highlighted:

…the fundamental importance of senior
executives providing their boards with all information they have that
is material to the board’s decisions, under our system of corporate
governance, especially having regard to the special context provided by
the process of responding to a hostile takeover bid.

His Honour Justice Austin made the following orders:

• Mr Vines was disqualified for a ‘notional’
  period of 3 years until 30 June 2007, a pecuniary penalty of $100,000
  was imposed and he was ordered to pay 22% of ASIC’s costs
• Mr Robertson was disqualified for a
  ‘notional’ period of 3 years until 30 June 2007, a pecuniary penalty of
  $50,000 was imposed and he was ordered to pay 28% of ASIC’s costs
• Mr Fox was disqualified for a ‘notional’
  period of 12 years until 30 June 2016, a pecuniary penalty of $220,000
  was imposed and he was ordered to pay a third of ASIC’s costs.

The judge took into account a number of factors and
formed a view that the notional periods for disqualification were to
commence on 1 July 2004.

Mr Fox was also ordered to pay compensation for the
Australian dollar equivalent of US$143,750 (at an exchange rate
applicable on 3 June 1999).

ASIC was ordered to pay costs of Messrs Vines and
Robertson incidental to the allegations ASIC made of dishonesty and
improper use of position against them that were withdrawn in October
2003.