HARDIE'S VICTIMS DUPED

Elisabeth Sexton, smh

September 30, 2008

AN OVERFLOWING public gallery greeted yesterday's opening of a Supreme Court trial, which sufferers of asbestos diseases hope will bring James Hardie to account and which the corporate regulator expects to define how much openness the law expects of company directors.

Beginning a civil case against 10 former executives and directors of James Hardie, the Australian Securities and Investments Commission said it would prove there was no basis for unqualified statements in 2001 that a new trust had enough money to compensate for all asbestos diseases caused by the company's products.

Three years later it had emerged that the $293 million James Hardie had left in the trust was about $1.5 billion short. After a public furore, including a special commission of inquiry, the company set up a new scheme.

The commission wants Justice Ian Gzell to ban the 10 former executives and directors from company directorship and to impose fines of up to $200,000.

About 30 supporters of asbestos disease sufferers attended the hearing, including a tearful Karen Banton, the widow of the prominent asbestos campaigner Bernie Banton.

Ms Banton said she was "very thankful" the company had set up a new compensation scheme last year "but now it's time for these people to be accountable for trying to mislead many people, including the shareholders and asbestos sufferers".

The commission's barrister, Tony Bannon, SC, said "misleading and deficient" public statements by James Hardie were intended to ensure the company could proceed unimpeded with a corporate restructure between 2001 and 2003.

"A key objective of the restructuring was to protect the vast majority of its assets from asbestos liability claims," Mr Bannon said.

When the restructure began in February 2001, a company press release said the "fully funded" trust provided "certainty" for claimants and shareholders.

Senior executives knew these unequivocal statements could not be supported, Mr Bannon said.

The non-executive directors had a duty to ensure there was a "clear and supportable basis" for the statements.

The case "brings into sharp focus" the role of non-executive directors in evaluating "significant public assurances", he said.

Wayne Attrill, a former in-house lawyer at Hardie now working in Ireland, gave evidence that when he saw a final draft of the February 2001 press release he went "immediately with misgivings" to Hardie's then head of corporate affairs, Greg Baxter.

Cross-examined by Bret Walker, SC, for Hardie's former general counsel Peter Shafron, Mr Attrill said that a week before the press release was issued he gave Hardie's external actuarial adviser, Karl Marshall from Trowbridge Consulting, data on asbestos claims up to December 2000.

Six months later Mr Attrill was at a meeting where Mr Marshall said Trowbridge's estimate of the amount needed for compensation was now higher because the firm had not received accurate claims data in February.

"If in your understanding of that meeting on 6 August 2001 that was a reference to the kind of information you had supplied back on 8 February 2001, that was simply wrong of Mr Marshall to say that, wasn't it?" Mr Walker asked.

"Yes," Mr Attrill replied.