Mining fight over: Wal King, Craig Ransley, Danny McCarthy and Nathan Boom vindicated in ASIC case

A mining scandal that engulfed listed company TerraCom has come to an end with a Federal Court judge rejecting ASIC’s case against the company’s four directors entirely.

Construction industry heavyweight Wal King has walked away scotch free from a court case after ASIC lost in its bid to prove TerraCom knew coal quality results were being rigged to get better prices. Picture: Jane Dempster

Construction industry legend Wal King and other former and current directors of listed miner TerraCom have been cleared of allegations they misled the market about a whistleblower’s claims the company was rigging coal quality results.

Federal Court judge Ian Jackman delivered his verdict in the blockbuster case brought by the Australian Securities and Investments Commission just one week after the trial wrapped up.

Justice Jackman rejected all of ASIC’s case against Mr King, along with former director Craig Ransley and TerraCom’s current CEO Danny McCarthy and CFO Nathan Boom.

He also sided with Mr King’s view he did not have to read a key report about allegations TerraCom was rigging coal quality results before ticking off public statements that exonerated the company of wrongdoing.

ASIC chair Joe Longo. The regulator has lost its court fight against TerraCom. Picture: Paul Jeffers

“None of the other directors or executives ever suggested to Mr King that the PwC report required consideration or raised concerns,” Justice Jackman said.

“On 27 February 2020, Mr King attended a meeting with TerraCom’s auditors, who then had a separate meeting with (their lawyers) Ashurst for 1–1½ hours for the purpose of going through the PwC report, before returning and confirming that EY had no issue with the PwC report and would provide a clean half-yearly report the following day, which is what occurred,” he said.

“Accordingly, I reject ASIC’s submission against Mr King for not reading the PwC report.”

In a statement, ASIC said “it will consider the judgment carefully and has 28 days to lodge any appeal to the Full Court of the Federal Court, should it decide to do so”.

TerraCom acknowledged the decision in a short statement on the ASX on Friday afternoon.

ASIC claimed the four men misled the market when they signed off on three public statements in February and April 2020, including two shared by the ASX, that stated TerraCom was “exonerated” of all claims made by whistleblower Justin Williams that the company was falsely changing coal quality certificates in its favour to boost profits.

The first part of ASIC’s case was that the company was not actually exonerated of those allegations, because an independent report produced by PricewaterhouseCoopers revealed 12 out of 14 coal shipments sampled had inconsistencies in TerraCom’s favour.

TerraCom founder Craig Ransley. Picture: Hollie Adams

But ultimately, Justice Jackman found that the first February announcement related solely to Mr Williams’ allegation that TerraCom was involved in a scheme relating to the fake analysis of coal samples.

“Accordingly, the February announcement said nothing about the rejection of ‘all of’ the allegations made by Mr Williams,” he said.

“I regard it as reasonable for the ordinary reader of the February announcement to infer that TerraCom and its Disclosure Committee had regard to, or took into account, the independent investigation in its denial of the allegations, in describing the allegations as false and in expressing the belief of TerraCom and its directors that the allegations were totally unfounded.”

Justice Jackman also rejected ASIC’s claim that TerraCom in an April announcement made out to the market that PwC found the allegations were unfounded and that neither the CEO nor the CFO had done anything wrong.

He said the claims in the announcement are “confined to the allegations against the CEO and the CFO”.

“It does not extend to all of Mr Williams’ allegations,” he said.

As well, Justice Jackman denied ASIC’s allegation that TerraCom’s announcements were misleading because they omitted to inform readers about some possible adverse findings against it — such as the shipment analysis of coal quality results completed by PwC favouring TerraCom.

TerraCom CEO Danny McCarthy.

ASIC also claimed that Mr King, Mr Ransley, Mr McCarthy and Mr Boom also breached their directors duties by failing to act with care and diligence.

The regulator claimed following announcements by ALS — the listed company that tested TerraCom’s coal — in February and April, which revealed it had conducted an investigation into the allegations and discovered a number of certificates were amended “without proper justification”, inquiries should have been made of ALS.

TerraCom should have asked ALS if TerraCom employees were involved, ASIC alleged.

But Justice Jackman rejected that allegation, and said “it is clear that there were a number of lines of communication between TerraCom and ALS in relation to this matter”.

“One of the more extraordinary features of ASIC’s case … is that ASIC contends that Mr McCarthy and Mr Boom should themselves have made the inquiries which ASIC submits the defendants should have made, despite the fact that Mr McCarthy and Mr Boom were the subject of the allegations made by Mr Williams which were investigated by PwC,” he said.

“They were plainly in a position of conflict.”

TerraCom shares closed down 0.4c at 8.2c.

Originally published as Mining fight over: Wal King, Craig Ransley, Danny McCarthy and Nathan Boom vindicated in ASIC case