James Hardie Directors Lose Charges of Securities Violations in Connection with Statements Regarding

Not a good week for James Hardie. This week the news is that it will not fund an expected shortfall of cash in its asbestos trust, and its officers and the company lost on charges of misleading investors regarding the adequacy of its funding of its asbestos trust.

The World Today – Thursday, 23 April , 2009 12:10:00 states the following:

Reporter: Sue Lannin PETER CAVE: In a landmark ruling a court has found that former James Hardie executives broke the Corporations Act when they claimed that a trust set up to compensate victims of asbestos-related diseases had adequate funding. The New South Wales Supreme Court has ruled that 10 company officials including the former chief executive engaged in both misleading and deceptive conduct. But not all of the civil charges brought by the corporate regulator, the Australian Securities and Investments Commission, were proven. And in a separate twist the company says it faces a shortfall in its compensation because of the global financial crisis. Finance reporter Sue Lannin was in the court. She joins me now. Sue exactly what did the judge find?

SUE LANNIN: Well Peter the judge found that former executives and directors of James Hardie did breach sections of the company law basically by making false and misleading statements. Now that’s in relation to the setting up of a fund in 2001 to compensate victims of asbestos-related diseases. In statements to the stock market and in press releases, the judge, in a press release, the judge said that the claim that that fund had adequate funding was false and misleading.Now some of those defendants include the former chief executive Peter Macdonald, former company secretary Peter Shafron and former chairwoman Meredith Hellicar. The main issue is that they’ve made false statements to the market or they did not disclose information to the market that there wasn’t enough money in the trust fund. And also the judge found that Peter Macdonald the former chief executive made false statements to investors as part of a roadshow in Europe in 2002. As some background, James Hardie moved its corporate headquarters to the Netherlands in 2001. It set up a compensation fund. Another compensation fund had to be set up in a landmark agreement in 2004.Now some of those charges were proven, as we said, but some haven’t. In relation to the roadshow, the judge found that Macdonald did make some false statements but some of the statements were not found to be false, or ASIC failed to prove its case.

PETER CAVE: Was there any reaction when the various parties emerged from the court?

SUE LANNIN: Well this has been a partial win for ASIC. I mean it’s failed in previous prosecutions of high-profile cases. But even though it was a mixed victory the parties for asbestos victims who were there say it is a win. Karen Banton, the widow of asbestos campaigner Bernie Banton, said she felt vindicated. And Tanya Segelov, a lawyer for asbestos victims said it was a victory.

TANYA SEGELOV: I think it is significant. This is the first time any person connected with James Hardie has been held to have engaged in unlawful conduct. And while ASIC didn’t succeed on all its claims, we have a finding that former directors, former executives, the former company and the current company were engaged in misleading and deceptive conduct and were in breach of the Corporations Act.

PETER CAVE: Tanya Segelov there. When will the penalties be handed down?

SUE LANNIN: Well that’s still a date to be set by the judge but it will be later this year and certainly lawyers for the defendants will be arguing their case. Now there’s also a, the judge said that, made a judgement that the board in 2001 did approve a press release that contained false and misleading statements in regards to the adequacy of the compensation fund so the judge is still to rule on that.He also, as I said, has to rule on what the penalties will be. Now the former company officials and directors face fines of up to $200,000 and they could also be disqualified from running a company. But several of those former directors are still running companies, including Meredith Hellicar, the former chairwoman. She’s currently a director of AMP.

PETER CAVE: Thank you Sue Lannin, just back from the court.

#AsbestosTrusts #MassTortIssues

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About Kirk

Since becoming a lawyer in 1983, Kirk’s over 30 years of practice have focused on advising a wide range of corporations, associations, and individuals (as both plaintiffs and defendants) on both tort and commercial law issues centered around “mass torts.”

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