ASIC defeated in long running One.Tel battle

The corporate watchdog is at least $20 million out of pocket after losing a landmark case against the founder of One.Tel, which collapsed in late 2001 owing companies led by the Murdoch and Packer families about $1 billion.

Eight years after the Australian Securities and Investments Commission (ASIC) launched the legal action, the NSW Supreme Court on Wednesday comprehensively dismissed its allegations.

"I have reached the conclusion that ASIC has failed to prove any aspect of its pleaded case against either defendant," Justice Robert Austin said.

In one of the largest civil cases seen in NSW, ASIC alleged One.Tel founder Jodee Rich and the telco's finance director Mark Silbermann had failed to meet their duty of care in the months leading to the company's collapse in May 2001.

Mr Rich and Mr Silberman have escaped a corporate ban and compensation payments to creditors of about $92 million.

ASIC now faces the likelihood of costs being awarded against it, potentially lifting its losses on the case by another $15 million, although it is still to decide whether to appeal the 3,105-page judgement.

In the document, published digitally, Justice Robert Austin also dropped another bombshell saying said the telco would likely have survived if a proposed $132 million rights issue had been able to go ahead.

Speaking outside the court after the judgement, a delighted Mr Rich said the last eight years had been tough on him and his family.

"I am so happy with the result," he said, with wife Maxine by his side.

"I feel that it will give the One.Tel creditors the facts and the data that they need now to see closure on this matter as well."

But the victory did not vindicate anyone's actions in the lead-up to the collapse of One.Tel, Mr Rich said.

"I don't think we can ever be vindicated of what happened to One.Tel," he said.

"I think that it was an extraordinary tragedy and so many people lost their jobs," he said.

"The company that we spent six years building, was so successful, was in one sense so easily put into liquidation by some very strange things that went on."

Justice Austin found ASIC's case had a "superficial appeal, but time and again they were shown to be unpersuasive when the underlying financial detail was investigated".

ASIC chairman Tony D'Aloisio said in a statement the dismissal of the case "provided important guidance to ASIC on how to run similar matters in the future".

Justice Austin also expressed concern in his judgement with the recollections of Lachlan Murdoch, son of News Corp chief Rupert Murdoch, and Kerry Packer's son James Packer, although he did not find against the credit of their evidence.

During nine days of oral evidence, James Packer said he could not recall or remember details 1,951 times.

Lachlan Murdoch responded in a similar fashion on 881 occasions during his time in court, although Justice Austin said he was further removed from the operations of One.Tel.

"The extent of his (Mr Packer's) inability to recollect relevant events, both generally and in particular relating to the period from 18 to 28 May (2001), weakened his evidence," Justic Austin found.

"Likewise there were some difficulties with the evidence of Mr Murdoch [Junior], relating to his very poor recollection of events, but no adverse conclusion was drawn as to credit."

In fighting ASIC's allegations Mr Rich and Mr Silbermann had argued that One.Tel would have survived if a $132 million rights issue had gone ahead in 2001.

Justice Austin appeared to agree, saying that the fundraising, along with continuing support from major shareholders, would probably have been enough to see One.Tel survive to November 2001, "by which time, according to the business plans, the company's businesses would have been generating more healthy group cash flow".

One.Tel shareholders Publishing and Broadcasting Ltd (PBL) and News jointly decided not to underwrite the fundraising on the grounds that it was not enough to cover One.Tel's debts.

James Packer and Lachlan Murdoch later alleged that they had been profoundly misled about One.Tel's financial position. News said on Wednesday the failure of ASIC's case "in no way invalidates the legitimate concerns we had at the time".

Mr Rich hit out at Mr Packer and Mr Murdoch.

"Hopefully, this will put to bed once and for all the ridiculous statement that they made about being profoundly misled," he said.

Justice Austin's findings are likely to have implications for a damages suit currently before the NSW Supreme Court against PBL, News and other parties, relating to One.Tel's collapse.

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