THE Australian Securities and Investments Commission has made a landmark decision to take legal action against Andrew Scott, Brian Healey as well as other current and former directors of Centro and Centro Retail Trust.
ASIC has launched civil penalty proceedings against the directors in Centro and CER, seeking to disqualify the directors from managing corporations. In addition, the regulator has also asked the Federal Court to impose monetary penalties on them.
ASIC alleges that the former directors breached their duties namely:
· Brian Healey, former chairman and non-executive director
· Andrew Scott, former CEO
· Samuel Kavourakis, former non-executive director;
· Peter Graham Goldie, former non-executive director;
· Louis Peter Wilkinson, former non-executive director; and
· Romano George Nenna, former CFO.
In addition, ASIC is also taking action against Paul Cooper, the current chairman who took over from Healey and James Hall, a non-executive director.
The regulator said the action relates to the responsibility of company directors and chief financial officers to take reasonable steps to ensure that information disclosed is accurate and not misleading.
ASIC alleges the financial reports of the Centro and CER for the year ended June 30 2007 did not comply with the relevant accounting standards and regulations.
It further said the accounts did not give a true and fair view of the financial position and performance of the entities because they failed to classify, or failed to correctly classify, a significant amount of interest-bearing liabilities of the relevant entities as current liabilitie.
ASIC said Centro did not correctly classify $1.51 billion of interest-bearing liabilities as current in addition to the $1.09 billion already classified as current.
And CER did not correctly classify $598.29 million of interest-bearing liabilities as current.
ASIC alleges that these directors and officer failed to discharge their duties with due care and diligence in approving the financial reports and it said these reports contained material misstatements.
ASIC also contends that these directors and the officer knew that the entities had very significant short term interest bearing liabilities, and should have known that these liabilities were incorrectly classified in the 2007 financial reports.
ASIC said this is the first case brought before the Court where the requirement that a listed entity’s CEO and CFO declare in writing that the financial reports comply with the accounting standards.
Legal experts said this test case will be watched closely by investors and their lawyers Maurice Blackburn and Slater & Gordon, who have launched a $1 billion class action against Centro and CER.
Centro has already attempted to share the responsibility over its debt debacle by applying to the Federal Court in May this year to counter claim against its auditors PricewaterhouseCoopers.
A month later, PWC resigned as auditors of Centro and had previously reportedly tried to distance itself from the debacle by claiming it was launching its own investigation into Centro’s accounts after the property group revised debt classification three times.
Centro and CER are currently in mediation with the investors of the class action in an attempt to settle the matter out of court.
Experts told Australian Property Journal that if the corporate regulator is successfully, it will make it easier for investors to sue Centro because it removes a major hurdle for them. The investors are claiming Centro engaged in misleading and deceptive conduct.
Meanwhile the first hearing is schedule on November 20.
Australian Property Journal
