KEY POINTS:
If Brierley Investments' former executives Dan O'Brien and Greg Terry aren't even a little spooked, they're most certainly built from BHP Steel.
As it happens, the big trouble they've found themselves in this week is over James Hardie asbestos.
O'Brien and Terry were board directors of James Hardie
in 2001 before Brierley offloaded its 20 per stake in the company but now these two and some other big Australian boardroom names are fighting for their corporate reputations.
Just 24 hours before it could no longer prosecute Hardie directors, the Australian Securities and Investments Commission (ASIC) launched a lawsuit against the entire board of the company serving in 2001.
ASIC, it seems, has belatedly bought into public disgust over James Hardie's bogus attempt to sidestep paying asbestos compensation.
Already former Hardie director Peter Willcox has resigned as chairman of the CSIRO; Rupert Murdoch's head of corporate affairs in Australia, Greg Baxter, has gone to ground (Baxter was corporate affairs boss at James Hardie at the time); and current Hardie chair Meredith Hellicar could lose her board seats at insurance group AMP, Southern Cross Airports Group and Amalgamated Holdings.
While Baxter is not part of the ASIC investigation, the regulator wants a ban on all seven of the board directors of Hardie in 2001 because of their involvement in setting up a foundation that year to handle James Hardie asbestos compensation.
ASIC's lawsuit centres on three issues: A James Hardie media release in 2001, expressly approved by the board, said the charitable foundation would be "fully funded" for compensation claims, just before the company moved its corporate headquarters to the Netherlands. As it turned out, the foundation's initial assets of A$293 million ($330 million) are now considered to be at least A$1.3 billion short. Before that became public, however, the company had already gone Dutch. ASIC contends directors knew or ought to have known the statement was false.
Another ASIC allegation about the company engaging in misleading conduct and failure to disclose was over documentation sent to shareholders before they voted to move the company's head office to the Netherlands. The third point related to a surreptitious cancellation of an issue of partly paid shares which might have seen A$1.9 billion from the newly formed Dutch company go to Australian asbestos sufferers.
Hardie started out in the asbestos business in 1917 and continued right through to 1987, despite knowing as early as 1957 about the dangers of inhaling asbestos dust. It's now estimated 9000 people have died in Australia from mesothelioma and another 20,000 deaths are predicted by 2020. During the Jackson Special Commission of Inquiry in 2005 it was estimated that James Hardie was responsible for half these deaths.
But the three directors still on the James Hardie board - Hellicar, former Brambles finance director Michael Brown, who also has directorships with Wattyl and Repco, and San Francisco banker Michael Gillfillan, made a joint statement defending their actions. "We are very confident that we properly discharged our duties as directors of JHIL and, assuming the proceedings go ahead, that our actions will be vindicated by the Supreme Court."
ASIC also has its sights aimed on three former James Hardie executives who designed the massively underfunded compensation scheme - disgraced former chief executive Peter McDonald, former in-house counsel Peter Shafron and former chief financial officer Phillip Morley. Indeed, the most serious allegations are against Macdonald, who is accused of breaching his responsibilities to act in good faith when making misleading statements that the compensation fund would meet all future claims.
However, Peter Shafron appears to be ready to fight ASIC's charges, making a statement through his Sydney lawyer: "As three years has elapsed since the special commission of inquiry commenced, Mr Shafron is keen to address the allegations and clear his professional reputation."
ASIC wants the Supreme Court to ban all three executives from any corporate management roles and is also considering criminal charges.
Ironically, James Hardie shareholders voted on Wednesday in the Netherlands in favour of a new compensation fund worth up to A$4 billion over the next 40 years. All very messy really, but ASIC wants to set a precedent for company directors thinking of similar misdemeanours.
