James Hardie Executives Fined In Asbestos Fund Case

James Hardie Executives Handed Penalties In Asbestos Compensation Fund Case
The Australian Securities and Investment Commission (ASIC) reported this week that the New South Wales Supreme Court on Thursday ruled that it will impose penalties against seven former directors and three executives of James Hardie Industries Limited. James Hardie is a manufacturer of Fiber Cement Siding and Backerboard. The court said the former Australian listed entity (JHIL) breached the Corporations Act in 2001 when making statements about the adequacy of asbestos compensation funding. The court also ruled James Hardie Industries NV (JHINV, based in the Netherlands) breached its continuous disclosure obligation in 2003.

James Hardie was one of Australia’s largest manufacturers of asbestos building products, and was alleged to have known the dangers of asbestos for decades.
The current proceedings came about as a result of ASIC’s investigation of matters identified by the Special Commission of Inquiry into the Medical Research and Compensation Foundation. James Hardie established the foundation, which was intended to compensate families who lost loved ones to asbestos disease, in 2001. The inquiry into the MRCF was established in 2004, and the commission found that James Hardie industries deliberately underfunded the victims’ compensation fund

According to a report by Nonee Walsh of ABC News, who has been following the story since 2003, James Hardie has spent about $25 million so far fighting the ASIC’s case, while asbestos victims and their families have been simultaneously negotiating for new funding for the foundation. Payments to the new asbestos compensation foundation are currently suspended.

Walsh also noted that Australia has one of the highest rates of asbestos disease in the world, including asbestos-caused lung cancer, mesothelioma. In 2003, when the sale of all asbestos products was finally banned in Australia, the National Occupational Health and Safety Commission went on record as saying there is no known safe level of asbestos exposure.

The only known cause of mesothelioma is asbestos exposure, and there is currently no known cure. Mesothelioma most often affects the lining of the chest cavity and lungs, but also may affect the lining of the abdomen or, more rarely, the heart. Asbestos exposure also causes a variety of other diseases, including asbestos, a severe scarring of the lungs.

It is estimated that the levels of asbestos disease will not peak in Australia until 2020, when it is expected that there will be 13,000 cases of mesothelioma and up to 40,000 cases of other asbestos-related lung cancer and disease.

The New South Wales Supreme Court imposed financial penalties totaling $750,000, and said the company directors and executives named in the case will be barred from serving other boards of directors for between 5 and 15 years.

According to the ASIC, the James Hardie decision underlines the responsibility of companies to assess and check the veracity of statements make to the market. ASIC Chairman Tony D’Aloisio said, “The decision is another important step in improving corporate governance in Australia and that improvement will add confidence to the integrity of our markets.”

The matter will return to the Court on August 27, at which time the Court will make orders reflecting the penalties. The defendants will then have 28 days to appeal the findings.