The Australian Securities and Investment Commission has stunned the market by launching legal action against eight former and current executives and directors of real estate giant Centro Properties, alleging the company’s financial reports for 2006-07 were misleading.
Executives named in the action include former chief executive Andrew Scott, former Centro chairman Brian Healey, former chief financial officer Romano Nenna and current Centro directors James Hall and Paul Cooper.
ASIC alleges these executives “failed to discharge their duties with due care and diligence” in approving the financial reports for Centro Properties Ltd, Centro Property Trust and Centro Retail Trust for the year ended 30 June 2007.
ASIC alleges the financial reports of the Centro Properties Limited, Centro Property Trust and the Centro Retail Trust for 2006-07 did not comply with the relevant accounting standards and regulations and did not give a “true and fair” view of the financial position and performance of the companies.
The corporate watchdog claims the company incorrectly classified short-term current liabilities (that is, debt that needs to be repaid within 12 months) and non-current or long-term debt (that needs to be repaid over a period longer than 12 months).
In the case of Centro Properties Limited and Centro Property Trust, more than $1.5 billion on the their respective balance sheets as at 30 June 2007 was incorrectly classified as non-current debt. In relation to Centro Retail Trust, its balance sheet as at 30 June 2007 did not correctly classify AUS$598,292,097 of interest-bearing liabilities as current.
“ASIC is seeking orders to disqualify the directors and officer from managing corporations and will ask the Court to impose pecuniary penalties on them,” the watchdog said in a statement.
The case will be the first brought under new rules that require a listed company’s CEO and CFO to declare in writing to directors that the financial reports comply with the accounting standards.
The first hearing of the matter will be on 20 November 2009.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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