DRAFT speech for Japan asbestos conference

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					                       James Hardie – US Multinational

                                    versus

       Construction Forestry Mining Energy Union of Australia (CFMEU),
           Australian Trade Union Movement, asbestos victims and
Trades Union International of Workers in the Building, Wood, Building Materials
                          and Allied Industry (UITBB)


         Speech delivered by Andrew Ferguson, NSW State Secretary
                 Construction Forestry Mining Energy Union

                          Global Asbestos Conference

                                 Tokyo, Japan

                               November 2004

  Special thanks to Australia Legal Firms Slater & Gordon and Taylor & Scott
                for background material for this presentation.
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Introduction

I speak on behalf of the Construction Forestry Mining Energy Union of Australia (CFMEU) and the Trades
Union International of Workers in the Building, Wood, Building Materials and Allied Industry (UITBB).


The CFMEU is a union with considerable industrial and political influence in Australia with over 130,000
members organised in key sectors of the Australian economy. We are a union that makes not just declarations
of policy and protest, but one with the capacity to implement those policies with effective and militant strike
action, mass rallies and community campaigns.


The building unions in Australia in the 1970s took strike action and banned building products that contained
asbestos being used in new construction. It was not until two decades later that governments in Australia were
forced to respond and prohibit the use of asbestos in the building and construction industry. However, prior to
trade union bans, many Australian workers in mining, shipyards, asbestos manufacturing, power stations and in
the building trade were exposed to asbestos. Also since the 1970s more workers were exposed in non-union
sectors of Australian industry.


Asbestos Disease conditions


Mesothelioma is a cancer caused by the inhalation of asbestos. It is commo nly a disease that occurs in the
lining of the lung. It causes extreme pain and breathlessness. The lung is effectively crushed by tumour. It is
inevitably fatal usually within about 9 – 12 months of diagnosis. There are limited treatment options and no
cure for mesothelioma.


Apart from mesothelioma, asbestos is also implicated in other malignancies, particularly lung cancer. It is also
the cause of chronic severely disabling respiratory diseases known as asbestosis and asbestos related pleural
disease. There are no treatments and no cure for these non- malignant conditions.


Extent of the problem


Australia had the highest per capita use of asbestos in the world from the 1950s until the 1970s. About every
third domestic dwelling constructed in Australia before 1982 is thought to contain asbestos, most usually in the
form of asbestos cement sheet, commonly knows as fibro.
Asbestos was used in fibro until about the mid1980s.


Australia has the highest per capita incidence of mesothelioma in the world. The first reported case of
mesothelioma in Australia occurred in 1962. The incidence of mesothelioma has been increasing since 1962.

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So far more than 7,500 individuals have been reported as dying from mesothelioma in Australia. It is now
contracted by more than 500 Australians per year.


It is expected that up to 18,000 Australians are likely to die from the condition by 2020. The peak of
mesothelioma incidence is not expected until about 2010 – 2015, reflecting its most widespread use in the
1970s. The time from first exposure to the onset of mesothelioma averages about 37 years.


Historical figures suggest that for each diagnosed case of mesothelioma there are as many cases of lung cancer
and non- malignant asbestos related disease.


Asbestos was only finally banned by government in Australian workplaces from 1 January 2004.


James Hardie’s role in Australia’s asbestos problem


James Hardie was Australia’s largest manufacturer of asbestos containing products. Hardie manufactured
asbestos containing products throughout the 20th century until the mid-1980s.


Hardie manufactured asbestos containing insulation products, fibro, pipes and friction materials, particularly
brake and clutch linings.


From 1937, the Hardie Group was structured so that subsidiary entities, particularly James Hardie and Coy Pty
Ltd (Coy) and Hardie-Ferodo, later knows as Jsekarb Pty Ltd, were the manufacturers and suppliers of the
asbestos products.


Coy was the principal source of income for the listed James Hardie Industries Limited (JHIL) until the mid-
1990s. Throughout the period, JHIL exercised substantial control over the operations of Coy.
Hardie had a dominant market position, particularly in fibro, throughout the period. In some states, namely, SA
and WA, Hardie was the only manufacturer of fibro.




Hardie’s knowledge of health risks


James Hardie knew of the dangers of asbestos from at least the 1930s.


Employees of Hardie brought concerns to the management of the company concerning the dangers of asbestos,
both to emp loyees and product users, from at least the 1950s.


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Company documents describe a policy of employing an older workforce, knowing that those workers would
likely die of causes other than asbestos related illness, before asbestos related illnesses developed.


No warnings or directions were placed on Hardie asbestos products until 1978. No general warning regarding
the dangers of asbestos has ever been given by the company to the community.


The betrayal of victims of asbestos – by James Hardie


Between 1995 and 2000, JHIL executives sought to separate the Hardie Group’s operating assets from its
asbestos liabilities.


Through assets transfers, the imposition of ‘management fees’ and dividend payments, Coy was stripped of
assets while it retained the bulk of Hardie’s asbestos liabilities.


The assets built by Coy, from the manufacture and sale of asbestos containing products over fifty years, were
placed with JHIL or one of its other wholly owned subsidiaries, and beyond the legal reach of the creditors of
Coy, including asbestos victims.


In current dollar terms more than $2 billion was transferred from Coy to JHIL between 1969 and 2001.


2001


In February 2001, James Hardie established the Medical Research and Compensation Foundation (MRCF).
Coy and Jsekarb were separated from JHIL and the MRCF assumed responsibility for them and their asbestos
liabilities. The MRCF was established with $293 million in total funds. The bulk of the funds represented the
residual assets of Coy that had not been stripped.


    a) Immediately prior to their separation from the Hardie Group, Coy and Jsekarb indemnified JHIL for any
        asbestos liabilities and agreed not to sue in relation to the asset stripping that had previously taken place.


    b) Hardie CEO, Peter Macdonald stated that the trust was fully funded, and would be able to meet all
        legitimate future claims.


In October 2001, James Hardie gained NSW Supreme Court approval for a Scheme of Arrangement. This saw
the establishment of a new Netherlands-based parent company, James Hardie Industries NV (JHI NV), and the
transfer of $1.9 billion from JHIL to JHINV.


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    a) James Hardie solicitors assured Justice Kim Santow that Australian asbestos creditors would suffer no
        prejudice, due to a lifeline of party paid shares, held by JHIL in the new holding company.


    b) While JHIL (the former parent company, now a JHI NV subsidiary) would remain in Australia, it could
        call on up to $1.9 billion if needed to meet the claims of creditors.


    c) The Netherlands is a country with whom Australia does not have a treaty in respect of the enforcement
        of a civil judgement obtained in Australia. The Netherlands domicile serves no other purpose given
        that the majority of Hardie shareholders continue to reside in Australia and the majority of its revenues
        are generated in the USA. Tax advantages said to flow from a Dutch domicile, evaporated before the
        transaction was completed.




In March 2003, James Hardie separated JHIL from the Hardie Group (creating the ABN 60 Foundation), and
cancelled the partly paid shares.


   a) JHIL indemnified the Netherlands parent, JHI NV, against any claims arising from or connected with
       past asbestos liabilities.


   b) Hardie did not alert the Supreme Court, the NSW Government or ASX about the share cancellation.


   c) By cancelling the partly paid shares, the lifeline for creditors of JHIL, including the MRCF and asbestos
       claimants was severed.
The Government Special Commission of Inquiry into the MRCF


In late 2003 the MRCF announced that it was drastically under funded and unlikely to be able to meet cla ims,
beyond several years. The Construction Forestry Mining Energy Union (CFMEU) and the Australian
Manufacturing Workers Union (AMWU) demanded a Government Inquiry into the underfunding. In response
to these concerns, the NSW Government agreed to establish a Special Commission of Inquiry, headed by Mr.
David Jackson QC.


The Terms of Reference of the Special Commission were:


   a) The current financial position of the Medical Research and Compensation Foundation (“the MRCF”),
       and whether it is likely to meet its future asbestos related liabilities in the medium to long term;




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   b) The circumstances in which MRCF was separated from the James Hardie Group and whether this may
       have resulted in or contributed to a possible insufficiency of assets to meet its future asbestos related
       liabilities;


   c) The circumstances in which any corporate reconstruction or asset transfers occurred within or in relation
       to the James Hardie Group prior to the separation of MRCF from the James Hardie Group to the extent
       that this may have affected the ability of MRCF to meet its current and future asbestos related liabilities;
       and


   d) The adequacy of current arrangements available to MRCF under the Corporations Act to assist MRCF
       to manage its liabilities, and whether reform is desirable to those arrangements to assist MRCF to
       manage its obligations to current and future claimants.


The Commission commenced in March 2004. It sat for 53 days, 340 exhibits were tendered, and over 4,000
pages of transcript produced. Thousands of pages of submissions were filled with the Commission by parties
authorised to appear. The CFMEU, AMWU and the Australian trade union movement were represented at the
Inquiry. Commissioner Jackson submitted his report to the NSW Government in September 2004.




What was disclosed in the Commission of Inquiry


A central objective of Hardie’s ‘separation and restructure’ strategy was to place the assets of James Hardie
beyond the reach of asbestos victims.


Peter Shafron (Hardie’s General Counsel) sought to control and minimise the actuarial estimate of James
Hardie’s asbestos liabilities. The integrity of the actuarial estimate was critical to whether the MRCF would be
adequately funded. Shafron withheld information from Trowbridge Deloitte actuaries that, if analysed, would
have increased their estimate. He withheld information from the directors who were set to manage the MRCF.
The withheld information undermined the reliability of the estimate provided.


The earnings rate adapted for a cashflow analysis for the MRCF, critical to the assessment of the future
liquidity of the fund, was determined by identifying the rate necessary to ensure that model would appear fully
funded, rather than a rate that was appropriate for the task.




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Peter Macdonald (CEO), Greg Baxter (VP Corporate Affairs), and Steve Ashe (VP Public Affairs)
implemented a ‘communications strategy’, in relation to the creation of the MRCF, in which the fears of key
stakeholders, including the NSW Government, were allayed by misleading statements.


Council assisting the Inquiry submitted that:


   a) The uncont entious evidence suggested something close to a culture within senior James Hardie
       management of saying whatever suits the occasion, at least where asbestos is concerned;




   b) Mr Shafron and Mr Macdonald were, respectively, recklessly indifferent to the suitability of the
       Trowbridge actuarial report on one hand and on the cash flow model on the other. Permitting others to
       rely on those documents in connection with the establishment of the MRCF was, in those circumstances,
       dishonest;


   c) Mr Macdonald’s behaviour as a witness was so unsatisfactory that no finding could be based on his
       evidence save where corroborated or inherently plausible.


   d) To say that JHINV treated the plight of victims of James Hardie asbestos with disdain was an
       understatement. It was not merely unwilling to use JHINV funds to alleviate their plight. It embarked
       upon a course of doing all it could to ensure that even legitimate claims made in the interests of asbestos
       victims by MRCF, Amaba or Amaca, would go unsatisfied.


The separation of JHIL from the Hardie Group was a necessary part of the overall strategy of isolating the
company from its asbestos legacy. The cancellation of partly paid shares, was considered by James Hardie
executives, including Macdonald and Shafron, before the application before Santow J of the Supreme Court of
NSW but not disclosed to His Honour despite His Honour’s clear and express concern for the interests of
JHIL’s creditors including asbestos victims.


Counsel assisting the Inquiry submitted that the failure of JHIL to disclose these matters was a breach of the
company’s duty of disclosure to the court.


In October 2004 the MRCF announced that it had insufficient funds to pay future victims and the Foundation
would need to be wound up with victims left without compensation.




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Hardie’s “Offer” of reduced payments for victims

Only 14 July 2004, James Hardie released a company statement on “funding future asbestos claims”. James
Hardie indicated a willingness to recommend that shareholders approve the provision of additional funding to
enable an ‘effective statutory scheme’ to be established to compensate all future claimants for asbestos-related
injuries caused by former James Hardie subsidiary companies. The Australian trade union movement rejected
this proposal demanding unconditional payment of full compensation to all victims.


In response to the James Hardie proposal, the Construction Forestry Mining Energy Union (CFMEU)
encouraged building workers across Australia to not use any James Hardie building products on building sites
until James Hardie agreed to pay full compensation to all future and existing victims. On many building sites,
building contractors ceased using these building products.


In the largest state of Australia, New South Wales (NSW), following representation from the CFMEU and
asbestos victims, municipal councils across Sydney decided to also ban the use of James Hardie products on the
maintenance of municipal projects and on new local government building projects.


On 1 November 2004 following a presentation by the CFMEU and asbestos victims, 400 delegates attended the
Annual Local Government Conference representing all municipal counc ils in NSW unanimously endorsed the
boycott campaign. The union movement also called on state governments (solid democratic) across Australia
to join the ban with all agreeing that if James Hardie did not pay all victims full compensation they would also
boycott their products on all state government sites ie maintenance and construction of new schools, hospitals,
road works, bridges etc. Governments supported the ban because the protest campaign of the Australian trade
union movement and the asbestos victims won overwhelming community support.


On 10 September 2004 the Construction Forestry Mining Energy Union (CFMEU) with asbestos victims, the
NSW Greens and the AMWU occupied the head office of James Hardie in Sydney and refused to leave until
the company agreed to enter into negotiations with the Australian Council of Trade Unions (ACTU) and the
asbestos victims. This picket was supported by the NSW Greens and the AMWU.


On 15 September 2004 an estimated 50,000 CFMEU members took strike action against James Hardie with
20,000 marching in Sydney, Melbourne and Brisbane demanding justice. Every major building site in their
cities stopped work in solidarity with the victims.


5,000 workers picketed a shareholders meeting in Sydney. Unfortunately, the neo-conservative Howard
Government of Australia refused to support the campaign.



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On 15 October 2004 James Hardie finally agreed to enter negotiations with the ACTU and representatives of
the asbestos victims.
It is estimated that the liability to existing and future asbestos victims is over $2 billion.

The Australian trade union movement is calling upon the international union movement to boycott James
Hardie building products and to protest against this multinational until there is an unconditional surrender. The
Construction Forestry Mining Energy Union of Australia (CFMEU), other progressive trade unions in Australia
and the Trades Union International of Workers in the Building, Wood, Building Materials and Allied Industry
(UITBB) is leading this boycott campaign.

A UITBB affiliate, the Confederacion Nacional de Sindicato de la Construccion Maderas, Materiales de la
Edificacion (National Confederation of Unions from the Construction, Forestry and Building Materials) in
Chile in November 2004 protest action against James Hardie in Chile.
We are co-ordinating further international protest action. We call upon all trade unions and asbestos victims
support groups to join our international campaign for justice.

Finally, I advis e that on 5 October 2004 100 activists of the Construction Forestry Mining Energy Union
(CFMEU) attended a picket outside the Canadian High Commission in Australia. The CFMEU condemns the
government of Canada which for mining and exporting asbestos.

This union picket was addressed by John Sutton who is the national Secretary of the Construction Forestry
Mining Energy Union (Construction and General Division) and the President of the Trades Union International
of Workers in the Building, Wood, Building Materials and Allied Industry (UITBB).

At this rally John Sutton said “Canada is one of the few countries that still mines asbestos and is one of the
world’s largest exporters of the white asbestos or chrysotile. Whereas most European countries and Australia
have banned the use of all forms of asbestos because of their deadly impact on human health, the Canadian
Government has actively blocked the listing of white asbestos in the major international toxic substances
convention.

This stance is particularly abhorrent, when you consider that most of Canada’s white asbestos is being exported
to developing countries. The Rotterdam Convention, which the Canadian Government has been undermining,
assists developing countries to prevent shipments of toxic materials from first world countries being dumped on
their markets.

With 100,000 people dying every year worldwide from asbestos-related diseases, the Canadian Government
needs to seriously reconsider its politics on asbestos production and export and move quickly to ratify the
Rotterdam Convention”.
The CFMEU and UITBB is planning further protest action against the Canadian Government until this country
ceases to mine and export its asbestos.
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