A commission of inquiry in Australia has found that James Hardie Industries, a company that made building products containing asbestos until 1987, deliberately underfunded a victims' compensation fund when it undertook a corporate restructuring that limited its asbestos liabilities.
In his report Commissioner David Jackson QC wrote: "The notion that the holding company would make the cheapest provision thought ‘marketable' in respect of those liabilities so that it could go off to pursue other more lucrative interests insulated from those liabilities is singularly unattractive. Why should the victims and the public bear the cost not provided for?"
In February 2001 the company provided $A292m (£116m; $208; €170m) to a non-profit trust, the Medical Research and Compensation Foundation, stating that it had "sufficient funds" to cover future liabilities relating to asbestos. In October 2001 the company moved its head office to the Netherlands, leaving two small subsidiaries as the sole assets exposed to legal action in Australia.
After the release of the Jackson report last week the New South Wales premier, Bob Carr, launched a scathing attack on the company's actions. "Commissioner Jackson's report found that Hardie's senior managers systematically and deliberately misled the actuaries, misled the board, misled the foundation, misled the stock exchange, misled the Supreme Court and misled victims and unions—every one of whom were assured that the foundation was fully funded," he told parliament.
Mr Jackson estimated that on current projections the foundation's coffers will be exhausted in 2007 and that total liabilities would be a minimum of $A1.5bn. "If a lump sum were to be set aside to make more certain that those liabilities could be paid, it would be much higher," he warned.
Conservative estimates adopted by the inquiry are that a minimum of 4374 claims relating to mesothelioma will eventually be made, as well as an uncalculated number of "third wave" claims from renovators and other people exposed to building products containing asbestos.
Late in the inquiry process Hardie proposed providing additional funds, subject to restricting the ability of claimants to go to court. Although Mr Jackson cautiously suggested that Hardie's proposed scheme "might be a starting point," the Australian Council of Trade Unions (ACTU) rejected the proposal as unjustly seeking to cap compensation.
Instead the council's secretary, Greg Combet, has proposed that Hardie provide an annual payment of about $A70m to the foundation to meet liabilities. Mr Carr has backed the council, warning Hardie that the governments of Queensland, Victoria, and South Australia will join a boycott of its products if the company doesn't "come to the table and negotiate with victims and the ACTU."
Hardie has not yet responded to the report, and the Australian Securities and Investments Commission has started an investigation into possible breaches of corporation law by the company's directors and managers.
After the release of the Jackson report Prime Minister John Howard, who is campaigning for re-election on 9 October, has agreed to give to victims' groups the $78 000 in political donations that Hardie has contributed to the Liberal party. Report of the Special Commission of Inquiry Into the Medical Research and Compensation Foundation is available at www.cabinet.nsw.gov.au/publications.html