Amcor legal storm continues

AMCOR has made sensational new allegations against a few of the five former executives whose resignations in 2004 triggered raids on their homes and offices and led ultimately to the packaging company alerting authorities about its involvement in a cartel with rival Visy Industries.

Amcor is suing Trevor Barnes and Craig Holihan, who managed Service Containers Pty Ltd and Australian Corrugated Box (ACB), claiming they negotiated deals to sell the businesses on terms that were "uncommercial and detrimental to the interests of Amcor".

It alleges that Mr Barnes, one of the so-called Amcor Five who left in 2004, improperly used his position to gain an advantage for someone other than Amcor and so breached his fiduciary duties in the sales of Service Containers in February 2002 and ACB in June 2003.

It claims Mr Holihan also improperly used his position and secretly benefited from the acquisition of ACB. Amcor's allegations implicated the former head of its fibre-box packaging business, Jim Hodgson, in the transactions.

Mr Barnes formerly headed Amcor's NSW operations, and reported to Mr Hodgson. Mr Holihan reported to Mr Barnes and was general manager of Amcor's NSW corrugated packaging business until he quit in July 2003. He now owns and manages ACB.

Service Containers was sold in 2002 to Ian Hottes, an Amcor manager who reported to Mr Barnes. He died in August 2004.

Court documents indicate that Mr Holihan, Mr Barnes and Mr Hodgson dispute Amcor's allegations, although they have not yet filed formal defences.

Justice Robert Osborne has ordered all parties to a formal mediation on Wednesday.

Neither Amcor nor the former employees would comment on the allegations before then.

Mr Hodgson was made redundant in October 2004 but a few weeks later, Amcor obtained an order from the Federal Court allowing it to raid the East Malvern offices of a consultancy set up by four former executives — Mr Barnes, Christopher Bayley, Ian Sangster and Albert Mihelic.

The executives had planned to join forces with Mr Hodgson and advise industry rival Carter Holt Harvey.

The raids elicited thousands of electronic documents, including confidential Amcor pricing and customer lists as well as six CDs of taped conversations, some featuring Mr Hodgson.

The CDs implicated Amcor in an illegal price-fixing ring with rival Richard Pratt's Visy Industries. Amcor gave the CDs to the Australian Competition and Consumer Commission and secured immunity.

On Friday, Justice Peter Heerey in the Federal Court made damning findings against Mr Pratt and two of his former senior executives, Harry Debney and Rod Carroll, saying they deliberately concealed the worst cartel to come before Australian courts since collusion was banned in the 1970s.

But while the cartel matter has been settled, Amcor's nasty legal tussle with its former executives continues.

Soon after Mr Hodgson was dumped in 2004, he launched Supreme Court action alleging Amcor had wrongfully dismissed him. He claimed Amcor had required him to participate in "systematic and organised collusive conduct" in breach of the Trade Practices Act.

Amcor hit back, alleging Mr Hodgson breached his fiduciary duties.

But in dramatic developments this year, the court learned the company has been investigating deals linked to the Amcor Five based on information it seized during the 2004 raids.

According to an affidavit sworn in June by Amcor's chief legal counsel, Julie McPherson, the company commissioned lawyers at Coors Chambers Westgarth in August 2005 to examine certain transactions supervised by the former executives, including the sales of Service Containers and ACB. Ms McPherson described the sale terms as "surprising".

Amcor claims Service Containers was sold for $81,650 plus stock and adjustments, on generous terms for the buyer, and that the buyer did not pay goodwill yet the business was "reasonably expected to generate substantial profits after the sale".

It also claims ACB was sold to Mr Holihan on generous terms — for $1 million, when the book value was $13 million.

Ms McPherson in her affidavit noted that among the 60,000 items seized in 2004 were draft versions of a letter from Trevor Barnes to a Sydney-based accountant. The drafts appear to date to September 2004.

According to her affidavit, the drafts indicated that at September 2004, Mr Hodgson, Mr Barnes, Mr Holihan, Mr Bayley, Mr Sangster and Mr Mihelic ended up as joint owners of ACB; and that Mr Hottes' widow plus Mr Bayley, Mr Barnes, Mr Sangster and Mr Hodgson owned Service Containers.

Amcor so far has not filed any claim against Mr Bayley, Mr Sangster or Mr Mihelic, nor is it taking any action against Marlene Hottes.

The affidavit described parts of a conversation in May 2006 between Mr Holihan and Amcor Australasia's managing director, Lou Lachal, in which Mr Holihan said that he and Mr Barnes had jointly owned ACB all along.

According to Ms McPherson, Mr Holihan also told Mr Lachal that, before the sale of ACB was finalised in mid-2003, Mr Barnes told him that others would become shareholders and Mr Holihan's stake would be cut to 20 per cent. This dilution apparently never happened.

Ms McPherson said Mr Lachal subsequently met Mr Barnes at Tullamarine airport "and during that discussion, Mr Barnes made a statement to the effect that Mr Barnes owns 50 per cent of the ACB business".

"Having regard to the statements of Mr Holihan and Mr Barnes to Mr Lachal, I am concerned that Mr Barnes may have improperly obtained an interest in the ACB business at the time of its sale," Ms McPherson said in her affidavit.

Amcor initially indicated to the court that it planned to sue the former executives in NSW, but on September 3 it initiated a claim in Victoria against Mr Barnes and Mr Holihan.

On October 22 and 23, Amcor asked Justice Osborne to join the Barnes/Holihan case with the Hodgson case. Lawyers for Mr Barnes and Mr Holihan objected, saying the case should be heard in NSW, where the businesses were based and where many potential witnesses live.

Justice Osborne has reserved his decision, but he ordered a court-appointed mediator to report on the outcome of the mediation by Friday.