Wal King rejects ASIC case that he should have read a critical TerraCom report on coal quality

The former TerraCom non-executive chairman has told a court he only recently fully read a critical PwC report on alleged coal quality rigging at the listed miner and his role was at ‘arms length from the process’.

Wal King in the Federal Court in Sydney on Tuesday. He is being sued by ASIC over allegations he knew coal quality results were being rigged at TerraCom. Picture: Jane Dempster/The Australian

Construction industry legend Wal King has told a court he “forensically” read a report about rigged coal quality results at TerraCom just a few days ago, five years after he and other directors authorised public statements that exonerated the company of wrongdoing.

Mr King was the non-executive chair of TerraCom from May 2017 to March 2021, and on Tuesday appeared in the Federal Court to defend allegations made by the Australian Securities and Investments Commission that he along with four other executives allowed false or misleading statements to be published on the ASX in February and April 2020.

Managing director Daniel McCarthy, chief commercial officer Nathan Boom and ex-director Craig Ransley are also defending the court case, brought by ASIC in 2023.

Mr King rejected suggestions by ASIC’s barrister that a reasonable director in his position should have read the report completed by PwC in 2019, appearing relaxed and confident in Sydney.

The report identified 12 out of 14 coal shipments sampled had inconsistencies in TerraCom’s favour. Market updates claimed the miner was innocent of wrongdoing.

“I looked at the PwC report in 2022. I forensically read it about several days ago. That’s the first time I sat down and studied it. It draws some interesting observations,” he said.

TerraCom operates the Blair Athol coal mine in Queensland.

He read the report for the first time in 2023, before being compulsorily interviewed by ASIC.

“I didn’t have to verify or proof every email. As non-executive chairman I was at arms length from the process,” he said.

He also told the court he had the “necessary assurances” from former TerraCom director Philip Forrest that there was no wrongdoing committed by TerraCom.

“(He) was appointed by me with the authority and accountability to produce a report which he did and there were numerous discussions along the way from (August to December 2019). Nothing found any wrongdoing,” he said.

“My state of mind was that there was no wrongdoing.”

Under cross examination by ASIC’s Michael Borsky KC, Mr King told the court he did not read or look at the PwC report in 2019, 2020 or 2021.

He told Mr Forrest “if anything of merit or substance comes to light I want to know immediately”.

Earlier, Mr Forrest told the court the PwC report did not prove the allegations made by whistleblower Justin Williams in 2019 who brought alleged coal test rigging to light.

Even after a market announcement was made by TerraCom’s coal testing partner ALS in February 2020, which said it had conducted an investigation into the allegations and discovered a number of certificates were amended “without proper justification”, Mr Forrest told the court on Tuesday “the PwC report was essentially an exoneration”.

Mr King also said TerraCom tried to keep the PwC report suppressed because of “wild west lawsuits that were floating around at that time”, launched by Mr Williams.

The court heard that TerraCom benefitted by about $1.4m in 2019 from adjusted coal quality reports.

Mr McCarthy and Mr Boom were specifically exonerated by the PwC report, Mr King said, and further Mr Forrest told him “there was no wrongdoing indicated in the report”.

Mr King read the ALS announcement, too.

“I said ‘well, so what’,” he told the court, after also reading in the media on the same day that the Australian Federal Police found no evidence of wrongdoing.

In light of the ALS announcement, Mr Borsky asked Mr King if a reasonable chair or director would have taken steps to ascertain if TerraCom was involved in the coal analysis doctoring.

Mr King responded: “I didn’t live in a vacuum”.

He said none of the other directors or TerraCom’s lawyers at Ashurst reported any concerns to him.

Auditor EY examined the PwC report with a group of TerraCom’s lawyers and also signed off on the miner’s accounts, in about 2020, the court heard.

Mr King rejected Mr Borsky’s suggestion that it was unreasonable to authorise an announcement (this was not published by the ASX, but it was released as an open letter in newspapers including The Australian) in March and April without reading the PwC report.

Closing submissions in the trial are due to start this week.