Jodee Rich woke up this morning “knowing how lucky I am to live in a country where an individual can climb a v big mountain and win against Govt and Big Biz,” he said on Twitter. Then he got on his bike and went back to work.
Although the ASIC judgment has been hanging over Rich’s head “like a sword of Damocles”, as one of his friends told me yesterday, he has not been sitting around waiting for it to fall. An early adopter of new technology, in early 2007 he started a new business, a social media networking tool called Peoplebrowsr, which started invoicing clients two months ago.
For Rich, however, the One.Tel issue does not end with yesterday’s judgement. In his capacity as a One.Tel shareholder (with 40% of the shares) he has filed, but not served, a lawsuit in the NSW Supreme Court against News Corp, PBL, One.Tel, Freehills and Ernst and Young. In it, he is seeking the payment of the $132 million that PBL and News had originally committed for the rights issue, plus interest and damages.
In the judgement, Justice Austin says that “a fundraising of $132 million accompanied by continuing support by the major shareholders would probably have been enough to address the company’s cash requirement until November 2001, by which time, according to the business plans, the company’s businesses would have been generating more healthy group cash flow. The withdrawal of that support, and the abandonment of the rights issue, may well have ensured that the company could not survive.” This part of the verdict will give that lawsuit some impetus.
In addition, Jodee said yesterday that in June 2001, his father had been telephoned by Stan Howard, brother of the PM, with a request to settle the case, which he believed had been made at the behest of Kerry Packer. Both Howards yesterday denied this.
But it was a big day, with half of Sydney turning up to hear Justice Robert Austin deliver his long-awaited judgment. Journalists, lawyers and hangers on packed the court to hear the verdict on one of Sydney’s longest-running and most complex commercial trials.
As befitting a judge who had just written a 3100-page judgement, Justice Austin was brisk, delivering a few words of housekeeping before coming to the point.
I find that ASIC failed to prove any facet of its pleaded case against either defendant,” he said. There was a long, long pause, as everyone in the courtroom held their breath, waiting for the qualifier. After two long seconds, we exhaled, staring at each other. “Was that it? Jodee has won and ASIC has lost every single point? That’s it?
In just 16 words, Justice Austin brought to an end a case involving almost $40 million in legal costs, 232 hearing days, 16,642 pages of transcript and 4384 pages of written submissions. To say that everyone in the courtroom was stunned would be an understatement.
As the room cleared, Rich and his wife, Maxine, embraced, both with tears in their eyes. One.Tel collapsed in May 2001, and ASIC started civil proceedings against Rich and his fellow directors Mark Silbermann, Brad Keeling and John Greaves in December of that year. Eight years is a very long time to live with a court case, and many people had advised Rich and Silbermann to do what Keeling and Greaves subsequently did; settling with the regulator, paying a fine, moving on with their lives. But Rich always wanted to fight the case, no matter what the cost.
And the cost has been extremely high. At the beginning of her career, Maxine Rich had been a very successful corporate lawyer at Freehills, working with David Gonski and the late Kim Santow. Post-children, she was appointed to the prestigious Takeovers Panel and served as a director on several public company boards, but once Jodee was charged she chose to step down and support the family. However, Maxine soon become the cornerstone of his legal team, giving crucial early advice and going with him to court. In the past few years, however, she has stepped away to resume her professional career. Jodee has stayed his usual irrepressible self, but the case has taken its toll; he has aged.
James Packer, of course, has also suffered. Packer and Lachlan Murdoch, both non-executive directors of One.Tel, first approved the $132 million rights issue and then changed their minds, claiming they were “profoundly misled”. PBL and News Ltd together lost about $1 billion when the telecommunications company went under. Rupert Murdoch has said publicly that he had been part of the decision-making, that it had been a mistake, and the company was moving on. For the Packers, however, One.Tel proved to be yet another weapon in the ongoing psychological war between father and son over the only thing that appeared to count in that relationship — money.
According to Paul Barry’s book, Kerry, despite being extremely sick at the time, used the collapse of One.Tel to come back to the office, telling people he was “back in charge”. In the fallout, James got divorced, turned to Scientology, lost his way. Meanwhile, there was much speculation in corporate circles about the reasoning behind charging some of the directors of One.Tel and not those with the surnames Packer and Murdoch.
During the court hearing, in 2004, Rich’s barrister, David Williams SC, cross-examined ASIC’s head of enforcement, Jan Redfern, about this.
Q. You took the view in late 2001, didn’t you, that it would potentially damage the ASIC case against the other directors if Messrs Packer and Murdoch were added as defendants? A. I took the view that we didn’t have sufficient to warrant commencing proceedings against them.
Q. You took the view that joining them as defendants would damage the case against the other directors, didn’t you? A. We were seeking disqualification proceedings and the issue was that we were saying as part of our case that the executive directors had misled or not informed the board about a whole number of things.
Q. You perceived that joining those directors - that is, Messrs Packer and Murdoch - would undermine that case, didn’t you? A. The issue is that our case would really have undermined any possibility of a disqualification order against the other directors, against the directors you’re talking about, Mr Packer or Mr Murdoch. If you’re arguing they were misled, it is hard to then argue they should be disqualified.
Q. You had taken the view that they had been acting negligently, hadn’t you — that is, Messrs Packer and Murdoch? A. We’d taken the view they should have done more to discover the true position, certainly.
Q. And that that constituted a breach of their duties under section 180 of the Corporations Act or Law, didn’t you? A. Yes, there was certainly that possibility.
Q. That was the view that you had at the time, wasn’t it? A. Our view was that they could have done more to uncover the truth.
Today’s newspapers have exhaustively covered the judge’s opinion about the conduct of Packer and Murdoch as witnesses. But his findings about long-term Packer loyalist Geoff Kleemann have gone unremarked. Kleemann, the PBL CFO, was ordered by Kerry to keep a close eye on One.Tel’s finances and as such, his evidence was crucial. He is now a non-executive director on the board of Asciano.
The judge found that “there were five topics on which I found his evidence problematic. I agree with the defendants that the cumulative effect of these matters is that it is necessary to treat Mr Kleemann’s evidence with caution and circumspection as to matters touching on the interests of PBL and CPH (Consolidated Press Holdings)”.
One of those areas was “his extraordinary claim to be unable to remember events in the period from 17 May (2001) onwards. He said in cross-examination that he had “strong recollections up to 8 May”, but “barely any recollection of anything to do with One.Tel thereafter”… He seemed to me to be seeking to avoid a situation in which he would have to give the court a personal opinion held by him that was at variance with the revised PBL/CPH view.”
So there are no winners from yesterday’s judgement, apart from the lawyers. We taxpayers have lost about $40 million, the Riches (and to a lesser extent, the Silbermanns) have lost eight years of their lives, and many, many reputations have been damaged. The two chairmen of ASIC who had carriage of the case, David Knott and Jeff Lucy, have since moved on. Who will now put their hand up and say they were responsible for making this mistake?