Asbestos firm misled investors about its ability to compensate victims

Published by rudy Date posted on September 29, 2008

SYDNEY, Australia – The former directors of building materials giant James Hardie Industries NV misled investors about their ability to compensate victims of its asbestos products, an Australian court was told Monday in the opening of a civil trial against the embattled company.

The Australian Securities and Investments Commission is suing 10 former James Hardie officials, who each face maximum fines of 200,000 Australian dollars ($166,000) and a disqualification from managing a corporation.

James Hardie agreed last year to pay A$4 billion ($3.3 billion) to an asbestos compensation fund over the next 40 years, ending months of negotiations with unions and asbestos support groups.

But the ASIC claims James Hardie and its executives “failed to act with requisite care and diligence” when they told investors that the company’s asbestos compensation plan was fully funded when it was actually short more than 1 billion Australian dollars ($830 million).

ASIC’s attorney, Tony Bannon, told New South Wales Supreme Court on Monday that the company issued a statement in 2001 to the Australian Securities Exchange announcing the formation of its Medical Research and Compensation Fund, in which it claimed the foundation had “sufficient funds to meet all legitimate compensation claims.”

Bannon said the “unequivocal statement” came despite advice to the company that estimating the cost of future compensation liabilities was “fraught with difficulties.”

Around 20 members of the Asbestos Disease Foundation of Australia were in court for the trial’s opening Monday, including Karen Banton, the widow of asbestos campaigner and former James Hardie employee Bernie Banton who died last year at the age of 61 after a long battle with lung disease.

Banton contracted asbestosis after working for a James Hardie subsidiary from 1968 to 1974. Workers at the factory were known as “snowmen” because they were regularly coated with the white asbestos powder that the company made into fire-repellant wallboard and other products.

The former machine operator launched his campaign against James  ardie—once Australia’s largest asbestos maker—in 2001 after the company shifted its headquarters from Sydney to the Netherlands. The company said the move was for tax reasons; critics said it was designed to avoid a slew of asbestos-related lawsuits.

The ASIC has called 58 witnesses for the trial, which is expected to last several months. – AP – GMANews.TV

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