Aust. watchdog sues One.Tel directors


One.Tel had about 1 million customers before its collapse

By CNN's Geoff Hiscock
Asia business editor

SYDNEY, Australia (CNN) -- Australia's corporate regulator said Wednesday it has begun civil action against four former directors of the failed telco, One.Tel.

The four include its high-profile former joint managing directors, Jodee Rich and Bradley Keeling.

The Australian Securities and Investments Commission said it was also seeking compensation of up to $26 million (Aust. $50 million) from the defendants for loss of value in One.Tel.

The junior telco, which at one time was the fourth largest phone service provider in Australia by subscriber numbers, collapsed in late May this year with debts of at least $300 million.

Its directors included James Packer and Lachlan Murdoch, the sons of media tycoons Kerry Packer and Rupert Murdoch.

Tycoons 'profoundly misled'

One.Tel's spectacular demise angered and embarrassed James Packer and Lachlan Murdoch, who said they had been "profoundly misled" about the true state of the company's finances.

Their two companies, Publishing & Broadcasting Ltd (PBL) and News Ltd, between them invested about $460 million in One.Tel's development and held a stake of 41 percent.

ASIC chairman David Knott said late Wednesday that the commission had begun proceedings in the Supreme Court of New South Wales against Rich, Keeling, former finance director Mark Silbermann and former chairman John Greaves.

ASIC alleges that Rich, Keeling and Silbermann breached their duties as company officers because they had information or access to information regarding the financial condition of One.Tel that was withheld from the board and the market.

ASIC alleges that the fourth defendant, Greaves, breached his duty to exercise care and diligence as company chairman.

Rich, Keeling removed in May

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ASIC said that evidence available to it indicates that One.Tel's true financial position was not known to Packer, Murdoch and three other directors until shortly before an administrator was appointed on May 29.

Rich and Keeling were removed as co-chief executive officers and board members on May 17, when News and PBL moved to take control of the company.

Separately, One.Tel liquidator Ferrier Hodgson said Wednesday it had begun issuing summonses to the company's directors, ahead of public examinations likely to take place next March.

Ferrier Hodgson's Peter Walker, who is the joint liquidator, said the examinations were independent of ASIC's activity.

"The liquidator has had summonses issued through the Federal Court of Australia for the examination of all Australian directors of the company, including former directors, a number of key employees and a significant number of third parties," Walker said.

Likely return of 30-35 cents in dollar

He also said the return to One.Tel's unsecured creditors would be in the range 30 to 35 cents in the dollar, with an initial dividend likely to be paid in the first quarter of 2002.

Walker said a $624 million (Aust. $1.2 billion) claim against One.Tel by Lucent Technologies over the failure to proceed with the development of a GSM mobile network had been settled.

"Negotiations between the liquidators, Lucent and its receiver have resulted in Lucent firstly releasing One.Tel from all claims, and secondly, in Lucent acquiring an option to purchase the spectrum licenses owned by One.Tel," he said.

One.Tel bought the wireless spectrum at an auction last year for about $270 million. It also entered into a deal with Lucent to build a new mobile network in Australia's five biggest cities -- Sydney, Melbourne, Brisbane, Adelaide and Perth.

ASIC's compensation claim of between $15.6 million and $26 million is for the eight weeks from March 30 to May 29.

It says One.Tel was allowed to trade during this period because of what it alleges is the failure of the defendants to properly discharge their responsibilities.

ASIC said its compensation claim excluded a further $26 million liability incurred over the period, as this was covered by the settlement with Lucent.

In June, ASIC won court-enforceable undertakings from Rich, his wife Maxine, Keeling and Silbermann that they would not dispose of assets for at least the following three months.