Howard wants One.Tel duo to repay bonus

Australian junior telco One.Tel collapsed last week

In this story: ASIC raids homes, seizes documents PBL, News angry at losses Questions being asked about involvement RELATED SITES

By CNN's Geoff Hiscock, Asia business editor

SYDNEY, Australia (CNN) -- Australian prime minister John Howard has called on the founders of failed Australian telco One.Tel to pay back about $7.5 million in bonuses they received last year.

Howard said Monday there was a "very strong moral obligation" on Jodee Rich and Brad Keeling, the former co-chief executives of One.Tel, to pay the money back.

"They should pick up the tab, not the Australian taxpayer," Howard said.

During a press conference on Monday, Howard said the Australian government would bring in legislation to recover bonuses from company executives in future company collapses along the lines of One.Tel.

He said it was the size of the bonuses paid to Rich and Keeling last year that "sticks in the craw".

The spectacular collapse last week of One.Tel, Australia's fourth largest telco by customer base, prompted Australian corporate regulators to question Rich, Keeling and other directors late last week.

ASIC raids homes, seizes documents

The Australian Securities and Investments Commission seized documents from their homes and the One.Tel office last Friday and is looking at whether the company made false or misleading statements about its finances.

After burning through more than $500 million in shareholders' funds, One.Tel collapsed into insolvency last Wednesday with debts of more than $93 million. It is now being run by administrators.

The administrators will report to creditors on Tuesday about its financial state and prospects for either maintaining or selling its operations.

Optus and Telstra both sell capacity to One.Tel and are among its biggest creditors

Australia's two biggest telcos, Telstra and Optus, both sell excess capacity on their fixed and mobile networks to One.Tel and, along with network builder Lucent Technologies, are owed the most money by the company.

Telstra and Optus are both seeking to sign up One.Tel subscribers.

PBL, News angry at losses

One.Tel's failure came despite Australia's two largest media companies, Publishing and Broadcasting Ltd and News Ltd, pumping $460 million into the company. They were about to put in more money before due diligence revealed it was in deep trouble.

Joint administrator Steve Sherman said last week the company had an initial cash shortfall of more than $156 million.

Rich and Keeling were removed on May 17 from the One.Tel board by the company's key shareholders, PBL and News.

PBL chairman James Packer and News Ltd chairman Lachlan Murdoch said in a joint statement to the Australian Stock Exchange on May 30 that they had been "profoundly misled" about One.Tel's true financial position.

Packer is the son of Australia's richest man, Kerry Packer, while Murdoch is the son of News Corp chairman Rupert Murdoch. Both were on the board of One.Tel.

Packer and Murdoch said that "like all shareholders we are angry" and they would pursue all remedies available to them.

Questions being asked about involvement

But Australian corporate and legal circles say questions inevitably are being asked about when and how much they knew of One.Tel's financial affairs, given that they were on the board.

PBL and News between them hold a 41 percent stake in One.Tel while co-founders Rich and Keeling hold 36 percent.

As late as last month, Rich said the company was on track to have about $38 million in cash in the bank by June 30.

One.Tel
Publishing and Broadcasting
News Ltd

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