CHAIR OF AUSTRALIA'S CENTRO REJECTS WATCHDOG'S CLAIMS

Centro Properties Group chairman Paul Cooper rejects breach of duty claims made in landmark legal action launched by the corporate watchdog and says he does not intend to step down.

The Australian Securities and Investments Commission (ASIC) launched on Wednesday action against eight directors and executives of the Centro Properties (CNP) (ASX:CNP) and Centro Retail Group (CER) over alleged failings in accounts.

The current and former directors and executives of Australia's second biggest shopping centre owner, which became one of the first casualties of the global credit crunch, now face fines of A$200,000 (US$185,020) each.

They also each face disqualification from managing a corporation over allegedly breaching duty of care and a misstatement of about A$2.1 billion of debt in 2007.

Centro securities plunged more than 99 per cent from the end of 2007 after it revealed it was having trouble refinancing A$1.3 billion of debt and then said in January its current debt might be higher than it thought.

Centro's dramatic loss of value sparked legal actions from aggrieved shareholders over the property group's continuous disclosure obligations.

Now ASIC has launched proceedings in the Federal Court in Melbourne, with a first hearing slated for November 20.

ASIC's action names former chairman Brian Healey, former chief executive Andrew Scott, former chief financial officer Romano Nenna, and five current or former non-executive directors.

It also names Mr Cooper and independent director Jim Hall - who both deny the claims.

"We reject the claims and intend to vigorously defend any actions brought against us," the pair said in a statement.

"We do not intend to stand down from our current positions on the Centro Boards because we do not believe it is in the interests of shareholders.

"A sustainable future for Centro requires stability and certainty, together with continuing corporate simplification.

"The recently separated and renewed CNP and CER boards currently benefit from the experience and corporate memory that we as the two remaining incumbent non-executive directors are in the position to provide.

"In addition, the boards are currently undertaking a search for a new global chief executive officer."

It is the first case brought where a written declaration by a listed entity's chief executive and chief financial officer to directors over the financial accounts' compliance with accounting standards will be an issue before the court.

ASIC alleges they failed to exercise due care and diligence in approving the financial reports for Centro Properties Ltd, Centro Property Trust and Centro Retail Trust for the year ended June 30, 2007.

And the watchdog will ask the court to disqualify them from managing a corporation and impose fines, ASIC said in a statement on Wednesday.

ASIC's allegations surround material misstatements for about A$2.1 billion in interest-bearing liabilities allegedly wrongly classified as non-current liabilities instead of current liabilities.

The 2007 balance sheets of Centro Properties Ltd and Centro Property Trust did not correctly classify A$1.514 billion of interest-bearing liabilities as current in addition to the A$1.096 billion already classified as current, ASIC said.

Centro Retail Trust's 2007 balance sheet did not correctly classify A$598.3 million of interest-bearing liabilities as current.

ASIC alleges they should have known that these liabilities were incorrectly classified in the 2007 financial reports.

Centro Properties Group almost collapsed under its debt during the financial crisis, and in August reported a A$3.54 billion annual net loss after property revaluations smashed its bottom line.

Centro Retail Group reported a A$2.68 billion annual net loss for the same period.

Last year, Centro Properties Group was operating week by week as it struggled to negotiate debt extensions of a few weeks, or months, at a time.

The company reduced its debt by A$2.4 billion to A$17.3 billion in the six months to June 30, 2009.

Centro Properties shares closed down three cents, or 7.89 per cent, at 35 cents while Centro Retail was down 0.5 cents, or 2.44 per cent, at 20 cents.

Australian Institute of Company Directors spokesman Steve Burrell declined to comment on the case, but said all company directors and boards have a responsibility at law to take care and be diligent in their decision-making.

Other high profile casualties of the global credit crunch include Allco Finance, Babcock & Brown and ABC Learning.

(AAP) bl

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