re: the australin article ASIC sues Chemeq
By David King
December 24, 2004
THE corporate regulator has launched legal action against biotechnology company Chemeq, accusing it of withholding key financial and trading information from the market.
The Australian Securities & Investment Commission lodged documents in the Federal Court in Perth yesterday alleging four major breaches of the Australian Stock Exchange's continuous disclosure requirements.
ASIC indicated it would pursue a financial penalty, which could amount to millions of dollars.
The action is another blow for Chemeq, coming one week after chief financial officer Ian Purdy and a non-executive director, Paul Grujic, quit the company.
Shares in Chemeq have collapsed in the past year as it attempted to start production of antimicrobial products to prevent disease in the poultry and pig industries.
The stock was suspended at $1.24 - down from $5.47 at the start of the year - ahead of the ASIC announcement.
The four key allegations against Chemeq are:
* It failed to inform the market about cost overruns in building and commissioning its chemical plant at Rockingham, Western Australia.
* It failed to reveal that purchase orders it received from South Africa were subject to a sunset clause.
* It failed to accurately inform the market about its capital requirements.
* It failed to inform the market that a US patent had been granted for its antimicrobial product.
If the allegations are proved, Chemeq could face fines of up to $200,000 for each breach that took place before July 1, 2004. Breaches alleged to have occurred after that date have a maximum penalty of $1 million.
Chemeq issued a statement yesterday denying all the allegations. Company chairman and biggest shareholder Graham Melrose was not available for comment.
Lawyer Ben Luscombe of Mallesons Stephen Jaques, speaking on behalf of Chemeq, said it had met all its disclosure requirements.
"There are seven specific contraventions that have been alleged, and they relate to four separate issues," he said. "Each of the allegations is specifically denied and Chemeq will vigorously oppose the ASIC applications. Chemeq believes that at all times it complied with its continous disclosure obligations."
Mr Luscombe said Chemeq had informed the market about the increasing costs of the construction at its plant in late 2002, and throughout 2003.
He said allegations about the sunset clause in the South African contract were surprising. "This is a $1 million purchase order. We don't accept that it's material."
Mr Luscombe said Chemeq denied it had not informed the market about its funding requirements.
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