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Fines set for execs of Australian building materials firm in asbestos fund case

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An Australian court has set penalties for a group of former directors of building materials company James Hardie Industries Ltd. — now ABN60 Pty. Ltd. — bringing to an end a long-running court case over the company misleading investors about its asbestos compensation fund.

The ruling Monday by the New South Wales Court of Appeal in Sydney comes after the High Court of Australia's decision in May upholding an appeal by the Australian Securities & Investments Commission. That High Court ruling held that there had been a breach of directors and officers duties in the company's 2001 press release indicating the asbestos compensation fund was fully funded to address any claims against it in connection with its products.

When it was created, the MRCF was funded with 293 million Australian dollars ($305.8 million) to pay asbestos claims. The fund was later found to face a sizable shortfall, however, and James Hardie and the New South Wales government eventually reached a settlement on the creation of a AU$3.40 billion ($3.55 billion) 40-year compensation package for asbestos disease claimants.

ASIC initiated civil action in 2007 in the Supreme Court of New South Wales against the parent company — now Dublin-based James Hardie Industries P.L.C. — ABN60 and a group of present or former executives or directors of James Hardie Group in connection with the claims about the funding of the Medical Research & Compensation Foundation.

In its May ruling, the High Court of Australia returned the case to the New South Wales Court of Appeal for reconsideration of penalties, costs and other matters. On Monday the Court of Appeal reduced the penalties assessed against the company's former Australian directors to AU$25,000 ($26,093) each from the original AU$30,000 ($31,311) penalty. Two former U.S.-based James Hardie directors each face AU$20,000 ($20,874) in penalties.

The Court of Appeal upheld a AU$75,000 ($78,278) penalty against the company's former secretary and general counsel.

The court also imposed bans of various lengths on the former directors from serving on corporate boards.

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