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When HIH acquired Cotesworth Group Limited in 1998, it was required to provide LCs to guarantee the obligations of Cotesworth syndicates. To do so, CIC pledged between US$108,000,000 and US$129,000,000 for the issuance of LCs between 1998 and 2000. Under the Insurance Act (1973), an insurer was subject to minimum solvency conditions requiring that CIC's assets at all times exceed the amount of its liabilities by US$2,000,000. In accounting for CIC's obligations, Defendant overstated the assets of CIC by including the US$129,000,000 LC in his solvency calculations, declaring a surplus of US$17,139,000 instead of the US$111,861,000 deficit it should have declared, allowing CIC to meet minimum solvency requirements that it could not have otherwise have met.

Defendant was charged with the misrepresentation of CIC assets on the "Quarterly Statement of Assets and Liabilities" and "Certificate of Reporting Approach and Compliance". After being convicted, Supreme Court of New South Wales, McClellan, CJ at CL, sentenced Defendant to six months imprisonment.

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