James Hardie Condemned!
After more than six months of Government hearings, the verdict of David Jackson QC on the behaviour of James Hardie Industries, formerly the largest manufacturer of asbestos products in Australia, upheld allegations made by Australian asbestos victims' groups and trade unions. When the 1,000 page document was published on September 21, 2004, the extent of the company's double dealings was revealed. Far from being an act of charity, the establishment of Hardie's Medical Research and Compensation Foundation (MRCF) was a financial manoeuvre designed to ring-fence the company's asbestos liabilities prior to the company relocating to the Netherlands.1 The A$239 million allocated to compensate Australian asbestos victims under the MRCF scheme was woefully inadequate and will run out by the first half of 2007. Jackson said:
The A$239 million set aside was based on false information provided by an actuarial report commissioned by James Hardie and its true value should be between A$1.5 billion and A$2.24 billion.2
The company and its executives deliberately misled shareholders by reporting in 2001 that a sufficient sum had been set aside to compensate victims; corporate media releases to the Australia Stock Exchange were also misleading and breached the Australian Corporations Law as they constituted a false inducement to buy a security.3
Criminal charges could follow after Jackson ruled that James Hardie Chief Executive Peter Macdonald and Chief Financial Officer Peter Shafron had breached their executive duties and knowingly issued misleading and deceptive statements to the stock exchange, shareholders, asbestos victims and the public. Having characterized one of Macdonald's statements as false in material particulars and materially misleading, Commissioner Jackson found it difficult to accept much of Macdonald's evidence:
A particularly unattractive feature was his (Macdonald's) unwillingness to accept personal responsibility for matters in which he was obviously personally engaged.4
The US Securities and Exchange Commission takes a dim view of illegal behaviour by company executives; allegations of illegal acts and any potential impacts on the financial statements, require public companies listed on the New York Stock Exchange, as Hardie is, to conduct an independent internal inquiry into accusations such as those against Macdonald. James Hardie makes 75% of its sales in the United States. Greg Combet, Secretary of the Australian Council of Trade Unions, demanded Macdonald be removed from his position; Combet called the relocation of Hardie's assets from Australia to the Netherlands: one of the most disgusting corporate acts I have ever seen.
A series of protests were held throughout Australia during the week beginning September 13 to coincide with information meetings for James Hardie's Australian shareholders;5 the majority of the company's shares are owned by Australian institutions. Dutch shareholders of James Hardie Industries NV who attended the Annual General Meeting (AGM) in Amsterdam on Friday, September 17, 2004 were left in no doubt about the strength of feeling generated by the company's disregard for its victims. On Friday morning, Australian representatives of asbestos victims' groups and trade unionists were joined at a high-profile protest outside the Marriatt Hotel by scores of Dutch, Scottish and English asbestos victims, family members, trade unionists, legal representatives and politicians. The President of the International Federation of Building and Woodworkers (IFBWW), Roel de Vries, took his place on the picket line saying:
The IFBWW stands in solidarity with the Australian trade union movement in pursuit of justice for victims of asbestos disease. The IFBWW will protest in Amsterdam, condemn the actions of the company and demand that it does not escape its liabilities.
Robert Vojakovic, the President of the Asbestos Diseases Society of Australia (ADSA) and a long-term critic of James Hardie and its tame MCRF, flew to Holland from Western Australia to attend the protest and the AGM.
|Robert Vojakovic joins protesters on the picket line.|
Expressing his gratitude for the warm welcome received by the Australian delegation from their international brothers and sisters, he said: If James Hardie gets away with this attempt to escape its asbestos liabilities, then other firms will surely follow suit. Leaving Holland on September 19, Robert was back in Sydney by September 21 to comment on the release of the Special Commission of Inquiry's report; he said:
This ruling is a resounding success and offers hope for Hardie's Australian asbestos victims. The ruling has addressed issues of improper practice and corporate ethics and will, hopefully, dissuade other corporations from attempting to evade their responsibilities.
Jackson's findings mark a turning point in the history of James Hardie. The ADSA hopes that the company will look seriously into its shameful conduct and fulfil its obligation to asbestos victims and meet its responsibilities to shareholders.
Upon the release of Jackson's report, New South Wales (NSW) Premier Bob Carr affirmed the Government's intention to make Hardie pay up and threatened to boycott Hardie building products; NSW government purchases account for 8.1% of Hardie sales.
September 22, 2004
1 In 2001, having received overwhelming support from its shareholders, James Hardie Industries Ltd. was transformed into James Hardie Industries NV, a Netherlands-based company. The fact that there was no treaty between Australia and the Netherlands which would allow Australian asbestos victims to bring compensation claims before Dutch courts may have been a factor in the company's decision.
2 MacKinnon M. Update: James Hardie Misled Investors on Asbestos-Inquiry. Sept. 21, 2004. Dow Jones Newswire, website: http://sg.biz.yahoo.com/040921/15/3n98y.html
3 Executives face criminal charges. Sept. 21, 2004. website: news.com.au
4 Inquiry critical of Hardie bosses. Sept. 21, 2004. website: news.com.au
5 On September 15, there were protest marches and rallies in Sydney, Melbourne, Brisbane, and Adelaide and a series of workplace meetings in Tasmania.