Court freezes HIH directors' assets

SYDNEY, Australia (CNN) -- Directors of HIH Insurance have had their assets frozen and travel restricted as regulators investigate the multi-billion dollar collapse of Australia's second-largest insurer.

The Australian Securities and Investment Commission (ASIC) told the News South Wales Supreme Court on Thursday it believed three directors- - chief executive Ray Williams, Rodney Adler and Dominic Fodera -- had breached Australian Corporation law in their duties as directors.

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ASIC also asked the court to order the three directors to pay compensation for the collapse and to bar the three men from managing any other companies.

The court accepted undertakings from the three men not to dispose of any assets, including real property, shares and money. Williams has already surrendered his passport, while Fodera agreed not to travel without providing seven days notice.

Adler however told the Sydney Morning Herald newspaper that he refused to surrender his passport on a point of principle.

'Knowing breach' of investment policy alleged

ASIC alleges the three directors had breached the Corporations Law over a payment of $5.1 million (Australian $10 million) by HIH to a Rodney Adler controlled company which "knowingly breached" the company's investment procedures.

The ASIC also said the three directors failed to act in the best interests of the corporation or to exercise their powers with a degree of "care and diligence".

The HIH collapse, which is shaping as one of the biggest financial debacles in Australian corporate history, will also be the subject of a judicial inquiry.

HIH filed for provisional liquidation in March this year with debts of over $1 billion.

The ASIC case continues next Thursday.