||Issue No. 227||02 July 2004|
A Place To Call Home
Interview: Power and the Passion
Unions: Tackling the Heavy Hitters
Industrial: Seeing the Forest For The Wood
Housing: Home Truths
International: Boycott Busters
Economics: Ideology and Free Trade
History: Long Shadow of a Forgotten Man
Review: Chewing the Fat
Poetry: Dear John
The Locker Room
Macdonald Ponders Asbestos Blue
CEO and Californian resident, Peter Macdonald, had good reason to reassess that position as he flew out of Sydney, this month, after five gruelling days before the Jackson Inquiry.
The inquiry, launched by NSW Premier Bob Carr, was the result of constant lobbying and badgering by unionists incensed that Hardies appeared to have dudded thousands of lung disease sufferers, courtesy of, what Bastian called "an act of corporate bastardry".
They demanded to know how Hardies, a major producer of asbestos products for half a century, had relocated to the Netherlands and told Australian sufferers that, when it came to compensation, they could "go Dutch" as well.
The AMWU highlighted the restructure that left all Hardies liabilities with a grossly under-funded corporate creation, the Medical Research and Compensation Foundation. Bastian told key Carr government ministers MRCF would come up $800 short million of compensation requirements, minimum.
But it wasn't until two things became clear that Carr stunned the business community by announcing a formal inquiry. Bastian's figures appeared, if anything, conservative while Macdonald remained adamant the parent company had "no moral or legal obligations" to dying Australians.
Irrespective of what Jackson reports in September, demands for corporate law reform will surely follow testimony that ripped the veil off how the big end of town operates.
The Inquiry learned that ...
- in the late 1990s, James Hardie directors considered a number of options that would allow them to separate the operating entity from obligations to compensate suffers of asbestos-related diseases
- much legal advice warned of the dangers of any strategy requiring court approval
- the board, in 2001, opted to set up a trust to house AMABA and AMACA, the entities representing its asbestos manufacturing operations
- when Hardies decided, months later, to become James Hardie Industries NV of the Netherlands for tax and legal purposes, the move required Supreme Court approval
- the company assured the Court the creation of a new Dutch entity would not disadvantage anyone owed money by the Australian operation
- Hardies backed this by saying asbestos victims would have the right to call on partly-paid shares with a 2001 value of $1.9 billion
- In March, 2003, directors cancelled those shares at a "private" board meeting. Shareholders were not told and nor were astesbos victims, unions, the general public or the NSW Supreme Court
- the company's own lawyer warned, in a draft opinion, that this cancellation might mean the Supreme Court had been misled
- a former Hardies legal adviser, Wayne Attrill, testified that senior executives knew a press release saying MRCF would be adequately funded was dodgy but authorised it anyway. Attrill said the worry was based on actuarial advice in James Hardies' possession
- Macdonald "hit the roof", according to Attrill, when he learned the company's "retained experts", Trowbridge Deloittes, had posted "gory numbers" about asbestos disease rates on its own website
- the restructure was preceded by a major public relations offensive that used former ALP power broker, Stephen Loosley, amongst others to try and quiet political and public concerns
- James Hardie tried to limit restructure information to the business press where advisers felt "moral" issues would not carry as much weight
- MRCF will fall either $800 million or $1.1 billion, short of being able to compensate Australian asbestos victims and their families, according to separate actuarial figures supplied by Trowbridge Deloittes and KPMG.
Counsel assisting, John Sheahan, this week flagged the possibility of corporate law reform that could make corporate groups responsible for the liabilities of their subsidiaries.
Sheahan has also suggested James Hardie will have to answer a number of allegations about the legality of its actions, arising from the evidence.
The shortfall being investigated by the Jackson Inquiry relates to product liability rather than workers compensation that James Hardie was insured against.
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