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NSW court rules against former Hardie execs -

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NSW court rules against former Hardie execs

The World Today - Thursday, 23 April , 2009 12:10:00

Reporter: Sue Lannin

PETER CAVE: In a landmark ruling a court has found that former James Hardie executives broke the
Corporations Act when they claimed that a trust set up to compensate victims of asbestos-related
diseases had adequate funding. The New South Wales Supreme Court has ruled that 10 company
officials including the former chief executive engaged in both misleading and deceptive conduct.

But not all of the civil charges brought by the corporate regulator, the Australian Securities and
Investments Commission, were proven.

And in a separate twist the company says it faces a shortfall in its compensation because of the
global financial crisis.

Finance reporter Sue Lannin was in the court. She joins me now. Sue exactly what did the judge
find?

SUE LANNIN: Well Peter the judge found that former executives and directors of James Hardie did
breach sections of the company law basically by making false and misleading statements. Now that's
in relation to the setting up of a fund in 2001 to compensate victims of asbestos-related diseases.
In statements to the stock market and in press releases, the judge, in a press release, the judge
said that the claim that that fund had adequate funding was false and misleading.

Now some of those defendants include the former chief executive Peter Macdonald, former company
secretary Peter Shafron and former chairwoman Meredith Hellicar. The main issue is that they've
made false statements to the market or they did not disclose information to the market that there
wasn't enough money in the trust fund. And also the judge found that Peter Macdonald the former
chief executive made false statements to investors as part of a roadshow in Europe in 2002.

As some background, James Hardie moved its corporate headquarters to the Netherlands in 2001. It
set up a compensation fund. Another compensation fund had to be set up in a landmark agreement in
2004.

Now some of those charges were proven, as we said, but some haven't. In relation to the roadshow,
the judge found that Macdonald did make some false statements but some of the statements were not
found to be false, or ASIC failed to prove its case.

PETER CAVE: Was there any reaction when the various parties emerged from the court?

SUE LANNIN: Well this has been a partial win for ASIC. I mean it's failed in previous prosecutions
of high-profile cases. But even though it was a mixed victory the parties for asbestos victims who
were there say it is a win. Karen Banton, the widow of asbestos campaigner Bernie Banton, said she
felt vindicated. And Tanya Segelov, a lawyer for asbestos victims said it was a victory.

TANYA SEGELOV: I think it is significant. This is the first time any person connected with James
Hardie has been held to have engaged in unlawful conduct. And while ASIC didn't succeed on all its
claims, we have a finding that former directors, former executives, the former company and the
current company were engaged in misleading and deceptive conduct and were in breach of the
Corporations Act.

PETER CAVE: Tanya Segelov there. When will the penalties be handed down?

SUE LANNIN: Well that's still a date to be set by the judge but it will be later this year and
certainly lawyers for the defendants will be arguing their case.

Now there's also a, the judge said that, made a judgement that the board in 2001 did approve a
press release that contained false and misleading statements in regards to the adequacy of the
compensation fund so the judge is still to rule on that.

He also, as I said, has to rule on what the penalties will be. Now the former company officials and
directors face fines of up to $200,000 and they could also be disqualified from running a company.
But several of those former directors are still running companies, including Meredith Hellicar, the
former chairwoman. She's currently a director of AMP.

PETER CAVE: Thank you Sue Lannin, just back from the court.