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The shameful legacy of James Hardie

Garry Nye and John Boyd Reid came from the polar extremes of Sydney's social strata. The pair never met. But they did have at least one common interest.

Nye was a hard man - tall, powerfully built and with a vaguely menacing air. He had a criminal record as long as his extensively tattooed arm, beginning with an armed robbery conviction in 1972.

Reid was born into one of Australia's richest families, grew up in the cosseted world of Sydney's eastern suburbs, attended Melbourne's blue blood Scotch College and took a law degree before going to work and eventually becoming chairman of the family-controlled business, James Hardie.

In 1991, Nye was charged with the murder of a notorious underworld figure, Roy Thurgar, outside a Randwick laundromat, in one of the most controversial and incompetent cases ever put before a NSW court.

After 18 months behind bars awaiting trial, the jury took just 20 minutes to acquit him. It was a police fit-up.

Years later, the trial judge, Justice James Wood, in his role as a royal commissioner on police corruption, described the police case as a ''complete load of rubbish'' and verbally lashed the officer in charge of the investigation.


Determined to pursue justice, after decades of being on the other side of the law, Nye eventually launched civil action against the Crown for malicious prosecution in a case that tweaked the interest of the National Crime Authority. But he never made it to court.

In 2001, as Hardie directors were putting the finishing touches to a grand plan to flee the country, he was diagnosed with mesothelioma. Within months, the once muscular frame had withered away, his wasted body writhing in pain as he gasped for air while sipping tea at the laminex table in the tiny kitchen at his son's outer western suburbs home.

''I once stripped out the insulation on a ship refit, years ago. It's the only time I can think of having any exposure to asbestos,'' he told me shortly before his death.

Nye was just one of an estimated 55,000 Australians who will have died as a result of their exposure to asbestos by 2020, innocent victims of a man-made and utterly avoidable plague. No one has ever been held to account for the epidemic, which has yet to peak, despite clear evidence, since 1935, of the poisonous effects of the ''miracle fibre of the 20th century''.

This week, the High Court of Australia ruled that seven directors of James Hardie Industries - the nation's largest producer of asbestos until it ceased using using the material in 1987 - had breached their duties as directors in 2001, when they shifted the company to the Netherlands and abandoned their victims.

The court found the directors, including the former chairman Meredith Hellicar, were guilty of making misleading statements with their promise that they had formed a ''fully funded'' body to meet all future compensation claims.

Within three years, the compensation fund cupboard was empty, short by an estimated $1.5 billion.

Hellicar, who these days makes a living as a corporate mentor, offering advice on ''how to turn a disruptive event into an opportunity'', was strangely silent this week.

But in the years following the furore that erupted in 2004 when the funding shortfall became apparent, she maintained the ludicrous argument that the flight to the Netherlands was prompted not to evade the company's compensation obligations but to take advantage of a lower tax regime.

It was a good argument. For James Hardie had faced persistent accusations it was a serial tax evader, claims that John Boyd Reid was forced to address in one of his last outings as chairman at the 1993 annual meeting.

''Like many other companies, we undertook a number of investments whose object was to enhance profits,'' he said. ''While they were also intended to be as tax-efficient as possible, they were not designed to evade taxes, as some commentators seem to infer.''

Reid, usually described as a ''well known philanthropist and benefactor'', is now 81. Last year he was made an honorary fellow of the University of Sydney for his long association with the Australian Graduate School of Management. He retired as the chairman of James Hardie in 1996 and, so, played no part in the board meetings that concocted the plan to run from the human tragedy his company helped create.

But it is believed he still has a large stake in Hardie. Just how large is difficult to determine, given it is held through various trusts and nominee companies. And the man who chaired that fateful 2001 board meeting, the now deceased Alan McGregor, was married to a Reid family member.

The last of four generations of Reids to run the company, John Boyd Reid, first became concerned about the lethal effects of asbestos shortly after he joined Hardie in 1966, firing off a missive to the personnel manager.

He was to learn that the company was well acquainted with the growing body of research that identified asbestos as a killer, and had been aware since 1935. Despite warnings from senior managers in the following years, and mounting claims for compensation, asbestos dust at the company's Camellia factory in Sydney often was recorded at eight times the then acceptable level.

It wasn't until 1979 that the company placed health warnings on its products. Although it had been experimenting with other fibres for 40 years, it continued using asbestos fibre until 1987, more than half a century after it first became aware of the health risks.

None of these issues was raised in the battles that have been waged in the Supreme Court, Appeal Court and the High Court since 2007.

The commentary since, particularly in the business pages, has homed in on the ''onerous responsibilities'' faced by company directors as a result of legislation that makes directors personally liable for their decisions.

The scale of the human tragedy and its devastating personal cost have been almost completely ignored.

One of the most fascinating documents to emerge in the decade-long legal battle, beginning with the Jackson inquiry in 2004, was a strategy paper commissioned by the since disgraced chief executive Peter Macdonald from spin doctors Gavin Anderson and Hawker Britton.

Realising the potentially explosive nature of the shift to the Netherlands, they concocted a plan to nullify the press and take the story off the front pages on the day of the announcement. It was devilishly simple: use the business media. It even identified favourite businesses columnists who would toe the line.

It worked a treat. Only one negative story appeared, by Ben Hills in The Sydney Morning Herald entitled ''Asbestos money 'not enough.' ''