article 23 october 2009

Centro staff may sue over big lossesFont Size: Decrease Increase Print Page: Print Bridget Carter | October 23, 2009
Article from: The Australian
FORMER employees of Centro Properties Group are believed to be considering legal action against the shopping centre owner after the corporate watchdog moved this week to ban eight of its former and present executives and directors.

Past and present staff of the battered company are understood to have sustained losses of about $265 million on their shares in Centro between December 2007, when the company ran into trouble, and May last year.

One source said a group of as many as 30 staff were in early discussions about "taking the company on" over the losses, alleging Centro directors and executives misrepresented its financial position.

"A lot were hurt badly," a former Centro staff member said yesterday. "Some lost their houses."

The Australian Securities and Investments Commission on Wednesday launched civil proceedings in the Federal Court of Australia against eight former and current executives and directors of Centro.

Among them are a number of high-profile names in the corporate arena, such as former David Jones chief Peter Wilkinson and Centro's former chairman Brian Healy, former chief executive Andrew Scott, and present chairman Paul Cooper.

The eight face indefinite bans from corporate positions and fines of up to $200,000, each with ASIC alleging the 2006-07 financial accounts contained "material misstatements' about its debt and claims that more than $2 billion worth of loans were incorrectly classified as being due in more than 12 months' time.

Before Centro's near collapse in December 2007, the company had spruiked margin loans to senior staff and heavily promoted the benefits of the stock to employees. But the company's market capitalisation, which exceeded $8bn in May 2007, is now little more than $325m on the back of the company's near collapse almost two years ago.

Margin loans were called in when Centro's share price plummeted 76 per cent on December 17.

Some former staff had joined existing class actions headed by legal firms Slater & Gordon and Maurice Blackburn.

But these actions are closed to new parties wanting to be involved and some former staff are clubbing together to discuss other legal options.

The legal firms are acting on behalf of about 5500 clients who held shares in the company between 2007 and last year, and are seeking more than $1bn in compensation.

Some staff who recently left the company said it was only now they felt in a position to become part of the action.

One former employee who suffered heavy losses in Centro shares said they were investigating their options because they were not clear as to whether they qualified for the class action.

Martin Hyde, a senior associate at Maurice Blackburn, and Slater & Gordon partner James Higgins said while they had not specifically heard of the group moving to take action, they had heard of former Centro employees wanting to join the class actions against the shopping centre owner.

"People weren't able to get jobs ... and finding a future career has been tough," Mr Higgins said with respect to those who left when the company was on the verge of collapse after December 2007.

Centro's remuneration model was built on low base wages and a relatively generous share plan.

The company's 2007 annual report shows 531 employees took part in the Centro Employee Security Plan and Loan Scheme with 27.8million Centro securities issued.

When Centro's share price reached its height of $10, on paper the employees had $278m worth of company securities under the plan.

But in May last year, they were worth only $13m.

Centro had earlier said the company did not provide or facilitate the margin loans and would not comment further on the case yesterday.

http://www.theaustralian.news.com.au/business/story/0,28124,26247182-643,00.html