Australia shocked by corporate gravy train after £1.9bn crash

An extraordinary tale of corporate largesse in the run-up to Australia's biggest company collapse is gripping the nation as the chief protagonist in the sorry saga is grilled before a royal commission.

The commission was set up to investigate the 5.3bn Australian dollar (£1.9bn) crash of HIH Insurance group in March last year. Nearly 100 witnesses have come and gone in the past eight months; last week it was the turn of Ray Williams, HIH's founder and former chief executive, to take the stand.

To say that Mr Williams is reviled in Australia would be an under-statement of massive proportions. Many investors had their life savings in HIH, the country's largest insurer, and some were left millions of dollars out of pocket when it went into voluntary liquidation. Thousands of policyholders were left in the lurch and many lost their homes.

The evidence given by Mr Williams, 65, over the past 10 days has done nothing to improve his popularity ratings. In particular, his admissions of spectacular munificence towards executives and employees – relayed nightly on the television bulletins – has had Australians choking on their cocoa. One commentator said it was reminiscent of the last days of Pompeii.

The recipients of Mr Williams' generosity with his investors' money were numerous. There was Rodney Adler, who received a A$480,000-a-year consultancy fee, a seat on the HIH board and a A$3.7m termination payment from his insurance company, FAI, which HIH took over for A$300m in 1998.

There was Rita Young, Mr Williams' secretary, who was paid a salary of A$105,000 and – after moving to Queensland's Gold Coast – was flown to Sydney each week and put up at the five-star Hotel Intercontinental. Ms Young ran up A$123,000 on a corporate American Express card, including a A$13,577 bill from the Peninsula Hotel in Bangkok.

There was Frank Holland, an old friend given an interest-free unsecured loan of A$486,000 that was not repaid for seven years – an omission that did not prevent him being presented with a A$1,600 box of Alfred Dunhill cigars.

And there was Colin Richardson, a corporate adviser given round-the-world air tickets for himself, his wife, his four children and their nanny to compensate him for an "awful" Christmas when he had to work.

Much of this beneficence was dispensed during 2000, when HIH was disappearing into a financial black hole. That was the year when Mr Williams' wife, Rita, spent A$38,000 on first-class air tickets. It was the year when Mr Williams – whose executive bathroom featured marble fittings, a spa and gold taps – splashed out A$9,000 on three restaurant dinners.

In January 2001, HIH bought a dozen A$10,000 gold watches for employees with 15 years' service. The same day, staff were instructed to stop paying insurance claims because the company was running out of money.

Interrogated day after day by Wayne Martin, QC, counsel appearing for the commission, Mr Williams has displayed neither remorse nor embarrassment. The only time he appeared flustered was when he was confronted by a former HIH policyholder brought along by a commercial television station.

A silver-haired, immaculately turned-out man, Mr Williams admitted to errors of judgement but said they were made in good faith. His own life savings were tied to HIH's future and he had never sold a single HIH share. He defended the corporate gravy train, saying it was important to motivate staff.

He blamed the company's demise on FAI – which HIH took over without undertaking due diligence, only to discover gaping holes in its finances – and on problems in HIH's British and US businesses. The wholly owned UK branch was closed in 1999 and claims absorbed by another company in the group.

Mr Williams, who founded HIH 30 years ago, enjoyed a millionaire's lifestyle, moving into a waterfront home in an exclusive Sydney suburb. A devout Christian, he built a private chapel at a Mediterranean-style mansion that he bought at Lake Macquarie, north of Sydney.

A philanthropist who donated millions of dollars to medical research, he is also a fitness fanatic and workaholic who claimed to need only four hours of sleep and employed personal trainers for staff.

He ran his company on patronage, treating pet employees like favourite sons. Apart from Ms Young, however, there were no favourite daughters. No woman ever sat on the HIH board, and no women reached the rank of senior executive. Female employees were banned from wearing trousers.

Mr Williams, who will finish giving evidence today, was asked by Mr Martin about a A$700 tip that he gave a Queensland restaurant in May 2000. Did he consider the interests of shareholders and policyholders when he was deciding how much to leave? "Yes, certainly," Mr Williams replied. In the public seats, someone snorted with disbelief.