By Jimmy Hardy (no relation) in the June 30 sealed section
It’s no wonder James Hardie directors acknowledged for the first time in the 2004 annual report that the company may face legal action of its handling of asbestos liabilities.
The company has, for the first time, accurately read attitudes towards it and concluded in the annual report, released on Monday, that “it may incur material costs” from lawsuits which could follow the Jackson Special Inquiry. This is something of a turnaround in approach from as recently as mid-May when it said it did not foresee “any material costs in the future related to asbestos litigation.”
Wednesday saw an issues paper released (List of Issues) by David Jackson QC, the Special Commissioner inquiring into how James Hardie handled its asbestos liabilities. The paper makes clear the direction of the Inquiry’s final report, due in September, and there is ample evidence that the activities of Hardie will be put under intense scrutiny.
And even though this is only an issues paper, and not a final report, the direction of thinking for the Inquiry is indicated in the 26 page document. And Hardie and its senior management, board and advisers will be the prime targets.
The issues paper has numerous sections blacked out by a special order of the Commissioner. These seem to be related to whether the commission will make any recommendations.
The possibility of whether contravention of the Corporations Act is looked at in many sections. Those who will be examined include James Hardie directors, CEO, Peter Macdonald, other executives and advisers to the company.
The Commission will look at a number of issues such as the Current position of MRCF (the trust set up by Hardie in 2001 to house the asbestos obligations with $293 million in capital), the 2001 Trowbridge actuaries report and the reason for differences between that one and another report in 2003, the way the company and its asbestos obligations were separated, the way the public relations side of the separation was handled, the 2001 restructure of Hardie, cancellation in March 2003 of the $1.9 billion worth of partly paid shares without disclosure and the future management of liabilities of the Foundation.
But perhaps the most intriguing development in the report is the weight given in the issues paper to examine the transactions between 1995 and 1998 between James Hardie Co Pty Ltd and its parent in numerous areas. These include dividend payments, dividend payments versus the financial state of James Hardie and Co, the transfer of its trade marks, core assets, lease deals, the transfer of plant and equipment, management fees and the transfer of James Hardie and Co’s technology.
This was described under a sub-heading “Minimisation of assets held by James Hardie and Co” and indicates that the long lead up to the company’s 2001 restructure, setting up the foundation and move of domicile to the Netherlands, will be examined intently.
Much of this happened under a differing board and a different CEO, Dr Keith Barton. While the current board, chairman and CEO, Mr Peter Macdonald have taken the brunt of publicity, the weight given to investigating the period between 1995 and 1998 indicates there could be a feeling that the whole idea of separating James Hardie from its asbestos liabilities started much, much earlier than 2001.
Meanwhile, earlier today the company said it was not the subject of an ASIC investigation into its handling of asbestos liabilities.
“There’s no formal ASIC investigation related to this,”James Hardie spokeswoman Julie Sheather said today, while an ASIC spokeswoman would not confirm or deny whether the commission was looking into James Hardie, except to say “We’re continuing to monitor the situation”. They were commenting on a story in The Australian newspaper today which reported that ASIC had begun conducting inquiries into James Hardie, citing sources that said the corporate watchdog had not ruled out moving to a full, statutory investigation.