Compensation funding agreement reached for Australian asbestos victims

Saturday, December 3, 2005

James Hardie Industries has signed a final agreement designed to ensure that compensation will be received by victims who suffer health consequences due to their exposure to the company’s asbestos products. The deal, signed on Thursday, is expected to cost the company $4.5 billion over the next 40 years, and James Hardie is obligated to pay 35 per cent of its free cash flow during each of those years to fund a compensation trust.

The Australian corporate watchdog ASIC (Australian Securities and Investments Commission) is gaining ground on James Hardie Industries corporate members. It is understood that the company’s agreement with the NSW Government will not provide Hardie directors and executives with the immunities from civil prosecution sought by the company. The possible charges for the members range as high as jail terms of up to five years.

According to The Weekend Australian, a source said, “this arrangement suited ASIC because rather than channelling its efforts into cases that could provide compensation, it can concentrate on alleged offences that could result in criminal prosecution or banning officers from holding directorships or management positions.”

NSW Special Commissioner David Jackson QC said that former Hardie chief executive Peter Macdonald engaged in misleading or deceptive conduct when he told the stock exchange that the asbestos compensation trust Hardie set up in 2001 with $293 million would be “fully funded”. At around the same time, James Hardie share holders voted for the relocation of its corporate base from Australia to the Netherlands.

Another alleged issue is a controversial $1.9 billion share cancellation, which a NSW MP said attracted ASIC to look at the activities of Hardie chairwoman Meredith Hellicar.

The ASIC task force plan to collect and analyse documents and interview witnesses into at least the middle of next year. Until then, any possible new charges are unlikely.