Australia’s corporate regulator has launched a civil suit against building materials giant James Hardie Industries NV for allegedly misleading investors about the cost of compensating victims of its asbestos products.
James Hardie agreed this month to pay 4 billion Australian dollars, or $3.1 billion, to an asbestos compensation fund over the next 40 years, ending months of negotiations with unions and asbestos support groups.
Nevertheless, the Australian Security and Investments Commission filed a civil suit against James Hardie and several senior executives in the New South Wales state Supreme Court last week.
The ASIC claims James Hardie and its executives “failed to act with requisite care and diligence” when they told investors in 2001 that the company’s asbestos compensation plan was fully funded when it was short A$1.3 billion ($1 billion).
Chairwoman Meredith Hellicar, former Chief Executive Peter Macdonald and former Chief Financial Officer Peter Shafron are among the 10 former and current James Hardie officials named in the suit.
They face possible penalties of up to A$200,000, or $157,000, for each breach of Australia’s corporations law and disqualification from managing a corporation.
In a statement to the Australian Stock Exchange, ASIC Chairman Jeffrey Lucy said James Hardie should be commended for its new compensation plan, but its executives should not escape punishment.
“While the new compensation agreements are very much welcomed, they do not diminish the need for those responsible for the breaches we have identified to be held to account for their actions,” Lucy said.
James Hardie said it had established a special committee of company directors not named in the ASIC suit to monitor the legal proceedings. The company also has provisions to grant legal indemnities to directors and executives involved in the ASIC case.
“The company is not in a position to comment any further at this time,” it said in a statement.
The ASIC said it did not expect the civil case to affect James Hardies’ ability to meet its liabilities under the new compensation plan, but said it would consider amending its case if there were an adverse impact.
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