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PM - ASIC launches formal investigation into James Hardie
[This is the print version of story http://www.abc.net.au/pm/content/2004/s1204949.htm]
PM - Wednesday, 22 September , 2004 18:21:31
Reporter: Karen Percy
MARK COLVIN: The fallout continues for building products
firm, James Hardie, after the release of yesterday's damning report into its
asbestos liabilities.
The Australian Securities and Investments Commission has launched a formal investigation of the company's Chief Executive, Peter Macdonald, and other possible breaches of the corporations law by officers and directors of the company.
The company has yet to fully respond to the findings of Commissioner David Jackson, whose five-month probe of the Hardie compensation scheme determined that the company knew it was under funded when it shifted its corporate headquarters to the Netherlands in 2001.
In political reaction, the Federal Government isn't yet promising any changes to the Corporations Act, while the Federal Treasurer, Peter Costello, has revealed that the Liberal Party won't be returning political donations from James Hardie.
Karen Percy reports.
KAREN PERCY: After watching the Special Commission of Inquiry over the past five months, and waiting for its findings, the Australian Securities and Investments Commission has finally moved on James Hardie.
Chairman Jeffrey Lucy.
JEFFREY LUCY: Our investigation will include the conduct of certain directors and officers of the James Hardie group of companies and associated parties, and market disclosures made by the companies and individuals.
KAREN PERCY: Key among those to be scrutinised by the securities regulator is Hardie's Chief Executive, Peter Macdonald.
Commissioner David Jackson believes the Hardie's boss might have contravened three separate sections of the Corporations Act during February of 2001, because of Mr Macdonald's comments in a media release claiming that the Medical Research and Compensation Foundation was fully funded.
When it was established, the foundation had just under $300-million worth of assets to pay out asbestos claimants.
ASIC is also likely to investigate the actions of current Chief Financial Officer, Peter Shafron, who was the company's leading in-house legal adviser at the time the foundation was established.
The inquiry's report was critical of Mr Shafron and Mr Macdonald for failing to give the foundation's incoming directors the most up-to-date data relating to the company's asbestos liabilities.
Foundation Chairman, Sir Llew Edwards, who was among those to push for the inquiry, told ABC Radio in Brisbane he was pleased with the outcome.
LLEW EDWARDS: They now have an obligation, now it's been put to them, and I'm delighted to hear recently the new Chair of Hardie's, Meredith Hellicar, saying that they would make substantial additional funds available to the foundation for the payment of compensation.
KAREN PERCY: James Hardie has proposed a new statutory scheme for victims, which would cut legal fees and limit payouts.
Union and victims groups have made it very clear they'd prefer the foundation to continue its work with additional funding from James Hardie.
The foundation's directors are prepared to continue, but Sir Llew Edwards says the current system needs to be improved.
LLEW EDWARDS: This is not only a union membership problem. This is a society problem, and we should all be out there, first of all, making certain that people know how to handle asbestos, which is in hundreds of thousands of homes in Australia, but as long as it's not disturbed, it's not a danger. And secondly, we should be trying to find a scheme, which we have done for the last four years, and we have been credited this within the Jackson report – leading the way to try to find a palatable scheme.
KAREN PERCY: And that's the real issue for the future, finding a way to effectively compensate victims, but not drive the company into the ground.
Associate Professor Peta Spender, from the Australian National University, has looked at the international asbestos experience and made a submission to the inquiry.
PETA SPENDER: What they've been doing in the US and to a lesser extent in the UK, is working on insolvency procedures to try and achieve a balance between the rights of the long-tail claimants in tort and the other stakeholders in the company, particularly people like the employees, shareholders and so on.
So what they've got to do is balance that. At the moment in Australia we've got insolvency procedures that don't quite work, because often they're a bit too short term.
KAREN PERCY: She says while there have been no specific findings on what to do if companies with long term liabilities go bust, the report is likely to prompt some real debate on these issues, especially on the concept of limited liability where companies can remove themselves from their subsidiaries, and the lifting of the so-called corporate veil.
Associate Professor Spender.
PETA SPENDER: And it's the first time I've ever seen it really seriously come up as a political question about whether we should preserve the corporate veil to the extent that James Hardie attempted to do in this case, or whether it's so important to business efficiency that the corporate veil be maintained.
KAREN PERCY: So far the Federal Government doesn't seem to have a clear response.
Here's the Prime Minister, John Howard, with Jon Faine on ABC Local Radio in Melbourne this morning.
JOHN HOWARD: Our view is that the full rigour of the existing law should be applied. If there has been criminal behaviour that should be prosecuted. If there have been other breaches of the Corporations Act that should be prosecuted.
JOHN FAINE: If this has highlighted gaps in the Corporations Act?
JOHN HOWARD: Well if it does, and I haven't had time and nor has the Treasurer in the hours that have gone by to make a proper assessment of that. We will obviously get some advice. If there are changes to the law that are needed, those changes will be made.
KAREN PERCY: But Treasurer Peter Costello isn't so sure.
PETER COSTELLO: In terms of the corporations law, I haven't read the full report, but I received a letter from Bob Carr, who said that the Commission did not conclude that there was any need to amend the corporations law, ie. that the current corporations law is capable of handling this.
KAREN PERCY: But in fact, while making no specific recommendations about what changes should be made, Commissioner David Jackson says the current legislation is inadequate.
And the Australian Council of Trade Unions says reform must come.
Secretary Greg Combet.
GREG COMBET: We would like to see the next government of Australia reforming the corporations law in order to make sure that nothing like this can happen again, where we've got thousands of people suffering and who will suffer in the years to come, but faced with this sort of restructuring, you know, added to their physical injury is the turmoil and torment and worry of trying to make sure that their families are compensated.
KAREN PERCY: Greg Combet also demanded that the Liberal and National parties return to victims some $78,000 worth of political donations from James Hardie.
Treasurer Peter Costello said today that would not be happening. The Liberal Party, though, has made no decision, a spokesman saying James Hardie is still under investigation.
The union group is hoping for better luck when it starts negotiating with James Hardie for more compensation money. Those talks could start later this week.
MARK COLVIN: Karen Percy.
The Australian Securities and Investments Commission has launched a formal investigation of the company's Chief Executive, Peter Macdonald, and other possible breaches of the corporations law by officers and directors of the company.
The company has yet to fully respond to the findings of Commissioner David Jackson, whose five-month probe of the Hardie compensation scheme determined that the company knew it was under funded when it shifted its corporate headquarters to the Netherlands in 2001.
In political reaction, the Federal Government isn't yet promising any changes to the Corporations Act, while the Federal Treasurer, Peter Costello, has revealed that the Liberal Party won't be returning political donations from James Hardie.
Karen Percy reports.
KAREN PERCY: After watching the Special Commission of Inquiry over the past five months, and waiting for its findings, the Australian Securities and Investments Commission has finally moved on James Hardie.
Chairman Jeffrey Lucy.
JEFFREY LUCY: Our investigation will include the conduct of certain directors and officers of the James Hardie group of companies and associated parties, and market disclosures made by the companies and individuals.
KAREN PERCY: Key among those to be scrutinised by the securities regulator is Hardie's Chief Executive, Peter Macdonald.
Commissioner David Jackson believes the Hardie's boss might have contravened three separate sections of the Corporations Act during February of 2001, because of Mr Macdonald's comments in a media release claiming that the Medical Research and Compensation Foundation was fully funded.
When it was established, the foundation had just under $300-million worth of assets to pay out asbestos claimants.
ASIC is also likely to investigate the actions of current Chief Financial Officer, Peter Shafron, who was the company's leading in-house legal adviser at the time the foundation was established.
The inquiry's report was critical of Mr Shafron and Mr Macdonald for failing to give the foundation's incoming directors the most up-to-date data relating to the company's asbestos liabilities.
Foundation Chairman, Sir Llew Edwards, who was among those to push for the inquiry, told ABC Radio in Brisbane he was pleased with the outcome.
LLEW EDWARDS: They now have an obligation, now it's been put to them, and I'm delighted to hear recently the new Chair of Hardie's, Meredith Hellicar, saying that they would make substantial additional funds available to the foundation for the payment of compensation.
KAREN PERCY: James Hardie has proposed a new statutory scheme for victims, which would cut legal fees and limit payouts.
Union and victims groups have made it very clear they'd prefer the foundation to continue its work with additional funding from James Hardie.
The foundation's directors are prepared to continue, but Sir Llew Edwards says the current system needs to be improved.
LLEW EDWARDS: This is not only a union membership problem. This is a society problem, and we should all be out there, first of all, making certain that people know how to handle asbestos, which is in hundreds of thousands of homes in Australia, but as long as it's not disturbed, it's not a danger. And secondly, we should be trying to find a scheme, which we have done for the last four years, and we have been credited this within the Jackson report – leading the way to try to find a palatable scheme.
KAREN PERCY: And that's the real issue for the future, finding a way to effectively compensate victims, but not drive the company into the ground.
Associate Professor Peta Spender, from the Australian National University, has looked at the international asbestos experience and made a submission to the inquiry.
PETA SPENDER: What they've been doing in the US and to a lesser extent in the UK, is working on insolvency procedures to try and achieve a balance between the rights of the long-tail claimants in tort and the other stakeholders in the company, particularly people like the employees, shareholders and so on.
So what they've got to do is balance that. At the moment in Australia we've got insolvency procedures that don't quite work, because often they're a bit too short term.
KAREN PERCY: She says while there have been no specific findings on what to do if companies with long term liabilities go bust, the report is likely to prompt some real debate on these issues, especially on the concept of limited liability where companies can remove themselves from their subsidiaries, and the lifting of the so-called corporate veil.
Associate Professor Spender.
PETA SPENDER: And it's the first time I've ever seen it really seriously come up as a political question about whether we should preserve the corporate veil to the extent that James Hardie attempted to do in this case, or whether it's so important to business efficiency that the corporate veil be maintained.
KAREN PERCY: So far the Federal Government doesn't seem to have a clear response.
Here's the Prime Minister, John Howard, with Jon Faine on ABC Local Radio in Melbourne this morning.
JOHN HOWARD: Our view is that the full rigour of the existing law should be applied. If there has been criminal behaviour that should be prosecuted. If there have been other breaches of the Corporations Act that should be prosecuted.
JOHN FAINE: If this has highlighted gaps in the Corporations Act?
JOHN HOWARD: Well if it does, and I haven't had time and nor has the Treasurer in the hours that have gone by to make a proper assessment of that. We will obviously get some advice. If there are changes to the law that are needed, those changes will be made.
KAREN PERCY: But Treasurer Peter Costello isn't so sure.
PETER COSTELLO: In terms of the corporations law, I haven't read the full report, but I received a letter from Bob Carr, who said that the Commission did not conclude that there was any need to amend the corporations law, ie. that the current corporations law is capable of handling this.
KAREN PERCY: But in fact, while making no specific recommendations about what changes should be made, Commissioner David Jackson says the current legislation is inadequate.
And the Australian Council of Trade Unions says reform must come.
Secretary Greg Combet.
GREG COMBET: We would like to see the next government of Australia reforming the corporations law in order to make sure that nothing like this can happen again, where we've got thousands of people suffering and who will suffer in the years to come, but faced with this sort of restructuring, you know, added to their physical injury is the turmoil and torment and worry of trying to make sure that their families are compensated.
KAREN PERCY: Greg Combet also demanded that the Liberal and National parties return to victims some $78,000 worth of political donations from James Hardie.
Treasurer Peter Costello said today that would not be happening. The Liberal Party, though, has made no decision, a spokesman saying James Hardie is still under investigation.
The union group is hoping for better luck when it starts negotiating with James Hardie for more compensation money. Those talks could start later this week.
MARK COLVIN: Karen Percy.
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