This article is from the Australian Property Journal archive
AUSTRALIA’S corporate regulator is seeking to disqualify and ban Centro Properties Group’s former directors as well as fine them a total of at least $380,000 for breaching their directors’ duties.
In June this year the Federal Court’s Justice Middleton set a new precedence in corporate governance in Australia when he found the former eight directors of breaching their duties as directors, when they misclassified $1.1 billion of short term debt, did not disclose a $US1.75 billion of debt in 2007, which resulted in the group’s share price plunging.
Centro did not reveal that it had understated short term debt liabilities by about $3 billion, until 2008.
Yesterday the Australian Securities and Investments Commission asked the Court to ban the eight executives and singled out former CEO Andrew Scott as one of the top executives, which it believes should suffer the greatest penalty because it claimed Scott was ”closer, wider and deeper” in the group.
ASIC wants Scott to be banned for up to three years and to fine $100,000, along with former CFO Romano Nenna, despite him providing ASIC with a crucial early victory in the case when he amended his defense to admit to the claims made ASIC in May this year.
ASIC is seeking lower penalties for the other six execs including chairman Brian Healey, non-executive director Samuel Kavourakis; non-executive director James William Hall; non-executive director Paul Cooper; non-executive director; non-executive director Peter Goldie; non-executive director Louis Wilkinson.
It has asked the Court to ban them for between six and 18 months and to fine them at least $30,000 and up to $60,000.
Although any financial penalties against the directors will not come out of their own pockets as it is covered by Centro’s indemnity policy.
Counsel for ASIC, Mark Derham QC, said weight must be given to the seriousness of breaching their duties as directors and the loss of confidence and damage caused to the property sector should also be considered.
“It’s not just a mere technical oversight. It had a major effect on the market,” he said.
ASIC also asked Justice Middleton to disregard the defense’s argument that the media coverage of this case has already caused enough suffering for the directors.
Meanwhile Nenna took the stand for the first time, since amending his defense and told the court he recalled telling Centro’s accounting manager, Paul Belcher in September 2007, before the accounts were finalised, that there was a mistake in the short-term liabilities.
And he thought he gave Belcher ”a very clear instruction” to correct the error, however he had failed to check whether Belcher made the correction.
Nenna said he felt ”shock and disbelief” and had a ”sickening feeling” as he realised he would have to explain the problem to the board.
In June Justice Middleton reject the defense’s argument that ASIC’s corporate governance was an unrealistic expectation on directors’ duties and would put too much burden on them.
“I do not consider this requirement overburdens a director, or as argued before me, was cause the boardrooms of Australia to empty overnight.
“Directors are generally well remunerated and hold positions of prestige, and the office of director will continue to attract competent, diligence [sic] and intelligent people.
“A director is an essential component of corporate governance. Each director is placed at the apex of the structure of direction and management of the company. The higher the office that is held by a person, the greater the responsibility that falls upon him or her. The role of a director is significant as their actions may have a profound effect on the community, and not just shareholders, employees and creditors,” the Judge said.
The hearing will continue today and Justice Middleton will adjourn and make his decision.
Australian Property Journal
