Supreme Court slams Hardie, bans directors
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The Supreme Court of New South Wales has delivered significant findings of penalty in the civil action brought by ASIC against various former executives and directors of asbestos manufacturer, James Hardie. The civil action related to a press release approved by the James Hardie board in February 2001 which wrongfully claimed that an asbestos trust setup to compensate victims was “fully funded” and “provided certainty for both claimants and shareholders”. It was later determined that the Trust established by Hardie was underfunded by $1.8 billion. The harshest penalty was handed to former chief executive, Peter Macdonald, who was banned from serving as a director for 15 years and fined $350,000. The disqualification was close to ASIC’s request of a 16-year ban (MacDonald’s counsel had earlier argued that a five to seven year prohibition was appropriate). When he departed from James Hardie in 2004, Macdonald received an $8.24 million termination payment, which in light of the recent decision of the NSW Supreme Court, represents a low watermark for corporate governance in this country. Ultimately, Macdonald’s fine amounted to less than five percent of his final payment from Hardie. Other James Hardie executives to receive civil penalties included former general counsel, Peter Shafran ($75,000 fine and seven-year ban) and former chief financial officer, Philip Morley ($35,000 fine and five year ban). Justice Ian Gzell also imposed significant fines for the non-executive directors of James Hardie who were found to have breached section 180(1) of the Corporations Act (the duty to act with due care and diligence) when they approved the infamous press release in February 2001. The former directors, including former chairwoman Meredith Hellicar, along with Michael Brown, Michael Gillfillan, Martin Koffel, Dan O’Brien, Greg Terry and Peter Willcox, received fines of $30,000 each and have been disqualified from acting as company directors for five years. ASIC had been seeking a five year disqualification and fines of between $120,000 and $130,000. Despite glowing character references, Justice Gzell imposed a significant penalty on the non-executive directors after being especially critical of Hellicar in his early finding, stating that she was “a most unsatisfactory witness” and that “there was a dogmatism in [Hellicar’s] testimony that I do not accept. She was proved to be inaccurate on a number (of) occasions.” ASIC had earlier argued that the breached committed by Hardie directors were “a culmination of planning over a long period” and “one of the most significant decisions in the company’s history.” The disqualifications and judgment effectively end the corporate careers of the Hardie directors. Hellicar had already resigned from the blue-chip boards of AMP and Amalgamated Holdings, while Willcox departed the Telstra board earlier this year. The disqualifications and fines will do little to appease asbestos victims, with James Hardie stating in May that due to the global financial downturn and tax debts associated with its relocation to the Netherlands, it would be unable to make a contribution to the asbestos compensation fund during 2009/10 and would have difficulties in making promised compensation payments over the coming three years. Such pessimism appears to have been short-lived however, or perhaps convenient. On Tuesday, James Hardie shares rose 22% (its biggest spike in forty years) after the company released positive profit figures and CEO, Louis Gries, stated that the US residential construction slump was “nearing the bottom”. |
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11 Comments
The legal lessons of this judgement seem to focus on being careful with media release spin - tell the market the truth!
I would like to believe that an even more important lesson is the need for corporate citizens to behave in a manner that is socially reponsible, not just pretend to do so through misleading media releases. Directors have moral responsibilities that go beyond statutes.
It’s a worry that that the actual reason for judgement had to be based on a misleading media release rather than the unconscionable policies adopted by Hardie which no doubt met the test of shareholder interests.
When you think about the monstrosity of their crime, I think the directors of Hardie’s got off fairly lightly. Had they got away with their lies, there would be many families left bereft after the death of a family member as a result of their exposure to asbestos. Fortunately there was a considerable fuss made by unions, the ACTU and law firms which resulted eventually in government action, and the outcome of these court cases now. What if there had been no unions, and no ACTU?
Having watched a number of people die from mesothelioma over recent years, I for one believe that these people got off far too lightly. Mesothelioma turns a sufferer’s lungs to the equivalent consistency of cement wrapped tightly in cling film. To watch someone fight and panic for every single breath, every single day until they die is as harrowing an experience which has never truly left me. These directors should be made to sit with a victim of this disease and themselves, experience the true horror of what mesothelioma does. A pathetic slap on the wrists.
If only the statutes relating to confiscation of the benefits of crime applied here. These directors have, for years, been totally and consistently deceitful, yet they retain their pay. A drug dealer or a burgler would be liable to lose the assets which he/she accrued during their period of criminality.
White collar law again beats the kind of law which applies to the majority of Australians.
White collar crime gets white collar time. I.E nothing but a financial punishment. This decision does not go far enough.
“Slams”?
“Significant”?
These people were willing to lie about a fund established because a company - finally - was required to compensate victims of one of its products.
They got off with a slap on the wrist.
And they weren’t even in court.
People who defraud CentreLink of a few grand cop worse than this.
ASIC, again, seems incapable of achieving anything truly significant in court.
Why would anyone think that Australia is class society when this is the quality of justice?
Sickening.
In absolute terms whilst the penalties appear to be substantial, it would appear that the penalties being applied for gross misrepresentation are not relative to the crime. These people are disgusting and are a blot on the landscape. In the particular case of Meredith Hellicar, advocates for women as having higher levels of integrity and compassion need to take a deep breath.
The penalty for their misdemeanours should be a multiple of their director’s fees and retirement benefits, and in these particular cases reinstatement of debtors’ prisons would not be inappropriate.
ASIC again shows itself to be a toothless tiger aided and abetted by gutless politicians with snouts in the trough (either currently or prospectively) who will not give the corporate watchdog sufficient capacity to apply penalties that hurt, rather than these relative pinpricks for people with hides thicker than a rhinoceros.
This evening while listening to ABC’s PM via an interview with Matt Peacock, it was revealed, that if the directors hadn’t been accused of misleading the stock exchange, there’d have been no case. This action was a civil suit, not a criminal one, therfore, there’s no real satisfaction for present sufferers or those who’ll contract these horrific diseases in the future. To date, after all these years, not one person from James Hardie has faced criminal charges pertaining to the misery and death of so many people, perhaps 20,000 and up. I agree with Karen Banton, that the fines were not high enough? She is pleased with the verdict pertaining to the years they’ll be prohibited from being directors. I’d prefer life myself!
Matt Peacock had a program on ABC Radio in 1977 called Background Briefing. He did a series of programs about the types of asbestos, when it was introduced into Australia, the dangers, the bosses, the unions, and sadly too few victims - they died or were dying and too ill when Matt did the programs - sadly, too many have died since. He’s responsible for informing me and many others about this horrific and deadly stuff. It was revealed, that the dangers had been known for at least 30 years, but bosses, govts etc had all lied to us. I owe him a big debt for his program, of which the transcripts were compiled in a book called, ‘Asbestos - Work as a Health Hazard’. I still have it-it was published in 1978.
Anyone who’s interested in home renovation should research thoroughly before they commence; should know all materials that were used in the property, and if asbestos is present should abide by the law and have them removed by experienced specialists - one exposure to the particles is enough to cause illness and death 20 - 30 yrs later. Under no circumstances should children be anywhere near the site during removal. Too many young adults have died, and sadly could die in future due to their exposure as a child - even hugging their parent while they’re wearing clothes with asbestos fibres on them. The fibres are very fine and could be almost invisible to the naked eye. Women have contracted diseases in the past, just because they laundered their husband’s work clothes.
A pity the bastards couldn’t have also been sentenced to hundreds of hours of community service, tending to the physical needs of those in the terminal stages of this hideous disease.
LIZ45: Matt Peacock should get a top gong on 1st Jan. I too read his book in 1978 and banged on about asbestos to hardware store workers (who cut A/C sheets for customers, without face masks) and Whyalla shipyard workers.
Capitalism is incorrigible. Hold up a milk bar and you’ll be jailed. Kill thousands and you can keep your millions.
FRANK - I agree with you - he should receive public recognition for his work for over 30 years. Matt has a book released next month? It’s title is “Death of a Company”? or close to that. The programs he did in 1977 were just great. His interviews were with many of the main players, including a couple of people who were very ill. He commented, that he was shocked by the numbers of workers at Witternoon who’d died or were dying- very sad. I had no idea, nor of the dangers to cut the stuff - it’s OK if it’s painted or sealed in some way, but the cuttingcan be deadly. In fact, when I was an advocate for a young woman in public housing with little kids. I had to really get’ stroppy’ to get the holes fixed in the house walls, and the property re-painted before she moved in with her new baby?
If I was a mechanic and didn’t fix the brakes in a car(which incidently used to have asbestos lining? do they still?) which resulted in the deaths of a family, couldn’t I be charged with contributory manslaughter or ‘recklessness causing death’ or something similar? How come these bastards have never been called to account for the numbers of deaths, when they knew of the dangers? It’s disgraceful. Govt Ministers in too many states also were culpable - they knew too, as did the Navy? It’s worse to lie to the stock exchange than to kill a young adult who’ll never live long enough to raise their kids?