Lachlan Murdoch’s $13.3m payout

21st Century Fox and News Corp shareholders will have to pay $A13.3 million as their share of a $A40 million settlement to stop their new co-chairman, Lachlan Murdoch, from being sued for breach of director’s duties at the failed One.Tel. It’s almost exactly a year since News Corp agreed to pay $US139 million to settle an unrelated damages claim that directors harmed shareholders by letting Rupert Murdoch as chairman use the company as “his personal fiefdom”.

Some background to the latest payout: In 2005, the then compliance director of the Australian Securities & Investments Commission, Jan Redfern, was questioned over documents which showed her staff believed that neither James Packer nor Lachlan Murdoch had a good understanding for what directors were required to do, with a suggestion she herself was “keen” to bring actions against Lachlan and James for breach of directors’ duties. She denied this. Instead ASIC pursued One.Tel executives including CEO Jodee Rich with assistance from PBL and News Corp. The action settled this week was brought by the One.Tel liquidator.

Transcript of questioning by David Williams SC (for Jodee Rich) of Jan Redfern of ASIC in the NSW Supreme Court on November 24 2004.

Q: You examined that memorandum carefully, didn’t you?

A: It’s likely I read it,

Q:  You knew it recorded Mr Pembroke’s advice as to possible causes of action against directors of One.TeI?

A:  Yes.

Q:  And you saw that Mr Pembroke had identified two possible causes of action against the directors of One.TeI, didn’t you?

A:  Yes.

Q:  And both actions were causes of action to be brought possibly under section 180 of the Corporations Act, weren’t they?

A:  Yes.

Q:  And Mr Pembroke wasn’t recommending any other causes of action, was he, at that time?

A:  No.

Q:  And be wasn’t identifying any other causes of action against the directors of One.Tel at that time, was he?

A:  No, but that was his view of it. I mean – anyway.

Q:  You read Mr Pembroke’s – you read of Mr Pembroke’s views and you yourself read the Connor report or consolidation report of 3 October?

A:  Yes, I did.

Q:  You read that before you’d left for Noose, hadn’t you?

A:  No. I don’t believe so.

Q:  CouId the witness be shown MFI#2.122.-8/2 at Page 2.122.

HIS HONOUR:  I think you’ve got it.

THE WITNESS: Could you repeat that Mr WilIiams?

MR WILLIAMS: At page 122. At around this time

Q: That is, about October of 200l –  ASIC expanded its investigation so as to consider potential breach of directors’ duties claims against the non-executive directors of One.Tel, didn’t it?

A:  I can’t recall.

Q:  Would you turn to page 2.150. with the heading directors duties, James Packer.

A:  Yes.

Q:  The authors of the consolidation report had expressed the view that Mr Packer didn’t seem to have a good understanding of directors’ duties, hadn’t they?

A:  Yes

Q:  And had expressed the view that he didn’t have a good understanding of what the role of a director entails nor what directors’ duties are?

A:  Yes.

Q:  And the authors of the report had raised the question whether Mr Packer was suitable to be a director at that time?

A:  Can you just refer me to where–

Q:  Under the heading “Conclusion” in the middle of the page?

A. Yes.

Q:  Members of the One.Tel team were reporting to you at the time that they were of the view that all directors had been negligent, weren’t they?

A. I’d have to read the report again to sort of – I just can’t – I can’t recall.

Q:  Perhaps I can show you another document. Could I have another bundle marked for identification, your Honour?

HIS HONOUR: Yes.

MFI #68.

MR WILLIAMS: It is described on the binder as “defendants’ cross-examination bundle number 6, documents produced by ASIC on 3 November 2004”.

.RIC24NOV P-2851

HIS HONOUR: This is not part of the MFI# 8 series, is it?

MR WILLIAMS: No, it is a different one, your Honour.

MFI #68 DOCUMENT DESCRIBED AS ‘DEFENDANTS’ CROSS-EXAMINATION BUNDLE NUMBER 6, DOCUMENTS PRODUCED BY ASIC ON 3/11/2004

MR WILLIAMS: Would you turn to page 155. Do you see that’s an email from Mr Howell to you dated 13 October

MR WILLIAMS: Would you turn to page 155. Do you see that’s an email from Mr Howell to you dated 13 October 2001?

A. Yes.

Q: You received that and read it on your return from Noosa, didn’t you?

A. Yes.

Q: And Mr Howell reported to you that in his view, Mr Murdoch’s interview had just confirmed his view that all directors were negligent?

A. Yes.

Q: And Mr Howell reported to you that Mr Pembroke agreed with his view about that matter?

A: Sorry, I’m not sure whether – where it says that.

Q: It says it under the heading “Privileged” in another version that we’ve been given.

A. Oh, okay. I don’t know.

Q: I’ll have to find the other version for you. In any event, it accords with your recollection, doesn’t it?

A. No, I can’t recall that one way or the other, a conversation – what Mr Howell reported to me.

Q: Would you turn to MFI# 36, please.

A. Yes.

Q: Would you turn to page 268. I don’t suggest that you received this email, Ms Redfern, but you see that it is – I’m sorry, there is a CC to yourself halfway down the page in respect of the email from Ms Rees to Mr Ryan; do you see that?

A. Yes.

Q: There was an issue that you had as to whether ASIC had received everything that should have received from PBL at the time, wasn’t there?

A. Yes.

Q: Do you see in the email from Mr Staples to Mr Ryan, Mr Staples says that makes reference to putting to the Packer camp a list of documents that ASIC says should be but weren’t provided under the notices?

A. Yes.

Q: And then he says: There may or may not be something in this, but I know Jan is keen given JP.

QBeing Mr James Packer?
A. Yes.

Q:  Certainly will be a defendant in any civil proceedings and we’re still trying to flush out his level of knowledge.

A. Yes.

Q: As at October of 2001, ASIC –  withdrawn. As at October of 2001 you had decided that you wanted to bring civil penalty proceedings against some or all of the directors of One.Tel for breeches of section 180 of the Corporations Law or Act?

A. No.

Q: Didn’t you?

A. No. It was one of the options and we needed to explore that option to put provision – put the position to the Commission.

Q:You received from Mr Pembroke of senior counsel an advice dated 31 October 2001, didn’t you?

A. I’m just not sure whether I received it.

Q. You’ll find it at page 269 ofMFl# 36. [11:26]

A. Yes.

Q. Do you see that Mr Pembroke says he presently has in mind two courses of action, subject to the [11:26] accounting and corporate governance advice we receive?

A. What paragraph?

Q). At paragraph I.

A. Yes.

Q. He says in paragraph 3 that both courses of action are based upon section 181 of the Corporations Act or law.

A. Yes.

HIS HONOUR: That’s 180

Q). Those were the causes of action that were being focussed on in October of 200I, weren’t they?

A) Not the only causes of action.

Q). Mr Pembroke wasn’t suggesting any other causes of action at that time, was he?

A) No, but that was because Mr Pembroke had a particular view that wasn’t necessarily —-.

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