|
|
|
| Thursday 15
February 2007
|
|
07-35 |
ASIC
COMMENCES PROCEEDINGS RELATING TO JAMES HARDIE
The Australian Securities and Investments Commission (ASIC) has commenced civil penalty
proceedings in relation to James Hardie, including against a number of former and current directors
and former executives.
The proceedings arise from ASIC’s investigation of matters identified by the Special
Commission of Inquiry into the Medical Research and Compensation Foundation.
ASIC’s investigation into possible criminal actions continues.
ASIC has filed civil penalty proceedings in the Supreme Court of New South Wales relating to
disclosures by James Hardie Industries Limited (JHIL*) in respect to the adequacy of the funding of
the Medical Research and Compensation Foundation (MRCF).
In commencing these proceedings, ASIC is seeking to address alleged breaches by certain former and
current corporate entities in the James Hardie group, and by certain former executives and certain
former and current directors.
ASIC Chairman Jeffrey Lucy said it was ASIC’s objective, in taking these proceedings, to
reinforce the standards of corporate behaviour that are vitally important in ensuring public
confidence in Australia’s corporate sector and capital markets.
‘While the new compensation arrangements were very much welcomed, they do not diminish the need for
those responsible for the breaches we have identified to be held to account for their actions,’ he
said.
ASIC’s proceedings seek declarations that a number of former and current directors and former
executives failed to act with requisite care and diligence. The regulator is asking the court to
consider banning individuals from acting as a company director and imposing fines.
The action also seeks declarations that the companies, JHIL and James Hardie Industries NV (JHINV),
made misleading statements and contravened continuous disclosure requirements. ASIC further alleges
that JHINV failed to act with requisite care and diligence in relation to its then-subsidiary JHIL.
ASIC has no desire to, nor does it believe it likely that its legal proceedings in relation to JHIL
and JHINV will, adversely impact the new compensation arrangements agreed by shareholders of JHINV
last week. However, should it emerge that any aspect of the action in relation to JHIL does
adversely impact the compensation arrangements, the regulator will consider amending this aspect of
the proceedings.
The civil penalty actions allege various breaches of duties under the Corporations Act 2001,
including:
| |
1. |
|
JHIL’s ASX announcement of 16 February 2001 and related press conference
statements in relation to the establishment of the MRCF. ASIC alleges these
communications were misleading. |
| |
| |
2. |
|
The failure to disclose the existence of the Deed of Covenant and Indemnity between
the MRCF and JHIL, which created, amongst other things, an ongoing asbestos-related liability of JHIL. |
| |
| |
3. |
|
The Information Memorandum (IM) for the 2001 Scheme of Arrangement that
proposed a restructure of the James Hardie group. The restructure had the effect of
JHIL (the then-ASX-listed company) becoming a subsidiary of JHINV, a Netherlands
company. ASIC alleges the IM was misleading in failing to disclose pertinent
information relating to the meeting of JHIL’s future liabilities. |
| |
| |
4. |
|
A series of presentations by a senior executive to institutional investors in 2002.
ASIC contends these presentations contained misleading information about the adequacy of
the funding of the MRCF and the James Hardie group’s asbestos liabilities. |
| |
| |
5. |
|
The cancellation of the partly paid shares in JHIL, which were held by JHINV and
represented as having been issued for the purpose of JHIL meeting any future
liabilities. ASIC alleges that JHINV failed to act with the requisite care and diligence
in requesting JHIL to cancel these shares. ASIC also alleges that JHINV failed to
disclose certain important information to the ASX regarding the cancellation. ASIC
has also sought orders that JHINV execute a deed of indemnity up to a maximum of
$1.9 billion, or such amount as JHIL or its directors consider is necessary to ensure
that JHIL remains solvent. However, if the conditions precedent to the Final Funding
Agreement (referred to in the JHINV’s announcement to the ASX dated 1 December
2005) are satisfied, ASIC will not pursue the claim of indemnity against JHINV. |
ASIC is suing a number of corporate entities and a range of current and former directors and former
executives it alleges breached the Corporations Act through involvement with these matters. More
specific details, including the names of the defendants to the actions, are outlined at Attachment
1.
Mr Lucy said ASIC’s James Hardie investigation was a thorough examination of the company’s
corporate governance and decision-making processes. It has been supported by specific funding
provided by the Federal Government.
ASIC’s investigation commenced in late 2004 following the report of the Special
Commission.
The investigation, which continues, has involved a complex corporate structure, it has spanned
three countries (the United States, the United Kingdom and Australia) and it has involved
about 348 billion documents, 72 examinations and the issuing of 284 notices to obtain
evidence.
The Special Commission of Inquiry into the MRCF was established on 27 February 2004 and reported in
September 2004. Commissioner Jackson QC raised serious issues about corporate governance and
disclosure and raised particular concerns about potential breaches of the Corporations Act. ASIC
also considered possible avenues for compensation in respect to those potential breaches. ASIC then
commenced its investigation, which had regard to the Jackson Report and was facilitated by the
James Hardie (Investigations and Proceedings) Act, which was passed by the Commonwealth in December
2004.
NOTE: *This entity (JHIL) is now called ABN 60 Pty Ltd.
For
further information contact:
Angela Friend
ASIC Media
Unit
Telephone: 03 9280 3338
Mobile: 0412 058 800
James Hardie Investigation: Attachment 1
Orders Sought:
| |
|
|
|
|
JHIL
|
|
•
|
|
Declarations of breach |
|
|
•
|
|
Costs |
|
|
|
|
|
JHINV
|
|
•
|
|
Declarations of breach |
|
|
•
|
|
Pecuniary penalty (Max: $200,000 per breach) |
|
|
•
|
|
Mandatory injunction and indemnity* |
|
|
•
|
|
Costs |
|
|
|
|
|
Macdonald
|
|
•
|
|
Declarations of breach |
|
|
•
|
|
Pecuniary penalty (Max: $200,000 per breach) |
|
|
•
|
|
Disqualification |
|
|
•
|
|
Costs |
|
|
|
|
|
Shafron
|
|
•
|
|
Declarations of breach |
|
|
•
|
|
Pecuniary penalty (Max: $200,000 per breach) |
|
|
•
|
|
Disqualification |
|
|
•
|
|
Costs |
|
|
|
|
|
Morley
|
|
•
|
|
Declarations of breach |
|
|
•
|
|
Pecuniary penalty (Max: $200,000 per breach) |
|
|
•
|
|
Disqualification |
|
|
•
|
|
Costs |
|
|
|
|
|
Brown
|
|
•
|
|
Declarations of breach |
Hellicar
|
|
•
|
|
Pecuniary penalty (Max: $200,000 per breach) |
Wilcox
|
|
•
|
|
Disqualification |
Terry
|
|
•
|
|
Costs |
O’Brien |
|
|
|
|
Gillfillan |
|
|
|
|
Koffel |
|
|
|
|
NOTE: * The claim seeks a mandatory injunction that JHINV execute a deed of indemnity in favour of
JHIL+ for an indemnity up to a maximum of $1.9 billion, or such amount as JHIL or its directors
consider is necessary to ensure that JHIL remains solvent. If the conditions precedent to the Final
Funding Agreement (referred to in the JHINV’s announcement to the ASX dated 1 December 2005) are
satisfied, ASIC will not pursue the claim of indemnity.
+: This entity (JHIL) is now called ABN 60 Pty Ltd.
