MinRes boss Chris Ellison booted after tax probe

The board-ordered investigation found mining billionaire Chris Ellison had at times failed to act with integrity and financial benefits flowed from Mineral Resources to parties, including his daughter. Shares drop more than 8 per cent.

Mineral Resources boss Chris Ellison is being kicked out of the company he founded after a damning investigation into his role in a tax evasion scheme and other dubious business dealings. Picture: Colin Murty

Mineral Resources managing director Chris Ellison is being shown the door at the company he founded after a damning investigation into his role in a tax evasion scheme and other dubious business dealings, but at least one big investor wants him to stay.

A board-ordered investigation found the mining billionaire had at times failed to act with integrity and that financial benefits had flowed from MinRes to related parties, including his daughter.

The board found Mr Ellison also ordered company employees to work on his boat and properties as well to manage his personal finances.

Perth-headquartered MinRes said Mr Ellison would remain managing director pending an orderly leadership transition in the next 12-18 months. MinRes shares tumbled 9.6 per cent or $3.91 to $36.70 on the news, wiping almost $770m from the company’s value and more than $88m from the mining magnate’s almost 11.5 per cent stake.

L1 Capital’s Rafi Lamm led calls for Mr Ellison to stay at the helm for longer. Macquarie said an external successor was required given the holes in the company’s corporate governance.

Mr Ellison is back in Perth after an extended stay overseas. It is understood that as recently as last week he was telling investors he intended to ride out the tax and other scandals.

However, it remains unclear how long Mr Ellison and other board members can survive given the extent of the governance issues exposed by the investigation and with the ASX and Australian Investment and Securities Commission already on the case.

Chairman James McClements, who has been on the board since 2015, intends to depart next year after presiding over governance failures laid bare in an investigation carried out by Herbert Smith Freehills over the past two years.

In regard to the tax evasion scheme, the board pointed to an attempted cover up of dealings with Far East Equipment Holdings Limited (FEEHL), British Virgin Islands-registered company linked to Mr Ellison.

“It has recently come to light that a number of company emails relating to FEEHL were deleted in 2019. The board has concluded that this was an attempt to avoid information regarding FEEHL becoming public,” it told the ASX on Monday.

“These actions were taken at around the time that Mr Ellison commenced the process of self-disclosing to the Australian Tax Office, and before the ultimate voluntary disclosure and settlement with the ATO.”

Mr Ellison will incur board-imposed financial penalties of $8.8m, and loss of remuneration of up to $9.6m, amid the corporate governance and reputational crisis engulfing the company.

Mr Ellison apologised for his actions and said he accepted the board’s punishment and leadership succession plan.

“I am deeply sorry for the events that have occurred and the impact they have had on MinRes’ reputation. I apologise to the rest of the board and to our people, who expect and deserve better from me,” he said.

“I acknowledge that I made mistakes, some of which were driven by my wish to keep private certain events that cause me great personal embarrassment. I am committed to the leadership succession that the board has announced, and I will work tirelessly to win back the confidence of investors and our whole MinRes team.”

It took a whistleblower to alert the board to Mr Ellison’s settlement with the Australian Taxation Office over a scheme that involved buying and selling mining machinery through a company registered in the British Virgin Islands.

Mr McClements condemned Mr Ellison’s actions and said that “with the interests of shareholders absolutely front and centre” there had to be a change of leadership.

“There can be no doubt that the actions, decisions and behaviours of Mr Ellison have been profoundly disappointing and require sanction and penalty,” he said.

L1 Capital said there was widespread support among big investors for Mr Ellison to stay at the helm in the medium term. L1 with 6.54 per cent is the largest shareholder in MinRes behind Mr Ellison, who owns about 11.5 per cent of the stock.

“L1 Capital is supportive of Chris Ellison remaining as CEO with a more appropriate corporate governance structure in place,” Mr Lamm, the investment fund’s joint managing director, said.

“We have engaged with many large MinRes shareholders in recent days and we understand there is widespread shareholder support for Chris remaining as CEO over the medium term given his track record of delivering enormous shareholder value over many years.”

Australian Super, which sold down part of what was a significant holding as the scandal broke, said much more work was needed to lift governance standards at MinRes.

‘The independent review into MinRes outlined a series of clear and very disappointing governance failings at the company,” an AustralianSuper spokesman said.

‘The fund supports the board’s initial response to these failings, in particular the establishment of an independent ethics and governance committee and its scope to further consider the independent review’s findings.”

Australian Council of Superannuation Investors stewardship boss Ed John said the board should engage with ASIC on the findings.

“The board’s announcement raises serious concerns about the use of company resources for personal benefit, deleting of company emails and related party transactions,” Mr John said.

A major focus of the investigation was Mr Ellison’s settlement with the ATO, where he sought undertakings details would not be passed on to ASIC or the federal police.

MinRes said its investigation found that between 2003 and 2014, Mr Ellison had an interest in FEEHL, which in 2003 and 2004 sold mining equipment to Crushing Services International.

Crushing Service was one of the private companies that formed MinRes when it listed on the ASX in 2006 but a liability to FEEHL was not disclosed in the prospectus, or at any other time, as a related party liability. MinRes then two payments totalling $3.79m to FEEHL in 2006 and 2008 to pay for the mining equipment.

Mr Ellison eventually made a voluntary disclosure to the ATO of income that he had earned from FEEHL, and in May 2023 paid the ATO $3.93m in unpaid taxes, including interest and administrative penalties.

Min Res said the ATO has not issued any amended assessments to MinRes with respect to depreciation claims made on assets acquired from FEEHL.

The board also confirmed that financial benefits had been provided to other parties linked to Mr Ellison, including rent on industrial property he part owned and rent relief that flowed through a company owned by his daughter Kristy Lee Craker.

The board said Mr Ellison had disclosed these matters but “failed to appreciate the importance of transparent and timely disclosure of matters that could give rise to a potential or actual conflict of interest”.

The board concluded that Mr Ellison had used company resources for his personal benefit. This included directing employees to work on his boat and properties; directing an employee to manage his personal finances; and using the company to procure goods and services for his private use.

However, the said it was satisfied that the use of MinRes resources and assets in this way has not caused material financial detriment to the company.

Originally published as MinRes boss Chris Ellison booted after tax probe