The Australian Securities and Investment Commission this week announced it intended bringing civil charges against the enitre 2007 board and a former Chief Financial Officer of various entities withing the Centro Properties Group and Centro Retail Group.

This is the first case brought where the requirement that a listed entity's CEO and CFO declare in writing to the company directors that the financial reports comply with the accounting standards will be an issue before the Court.

Crikey notes that the decision to proceed with civil action 'will have sent a collective shiver down the spines of many Australian boardrooms'.

Centro was the first collapse related to the global financial crisis - other Australian collapses noted by Crikey include MFS, Allco, ABC Learning Centres, Babcock & Brown, Timbercorp and Great Southern Plantations - and it suggests ASIC 'have simply not gotten to the others yet'.

ASIC is seeking declarations that the directors and an officer breached their duties owed to entities within Centro. The defendents to the action are:

Individual Position Brian Healey Former Chairman and non-executive director Andrew Thomas Scott Former CEO and Managing Director Samuel Kavourakis Former non-executive director James William Hall Non-executive director Paul Ashley Cooper Non-executive director Peter Graham Goldie Former non-executive director Louis Peter Wilkinson Former non-executive director Romano George Nenna Former Chief Financial Officer

ASIC is seeking orders to disqualify the directors and officer from managing corporations and will ask the Court to impose pecuniary penalties on them.

It alleges that these directors and officer failed to discharge their duties with due care and diligence in approving the financial reports for Centro Properties Ltd, Centro Property Trust and Centro Retail Trust for the year ended 30 June 2007.

ASIC contends that these financial reports contained material misstatements, specifically, a significant amount of interest-bearing liabilities of each of the relevant entities were wrongly classified as non-current liabilities, rather than current liabilities. This resulted in the relevant entities not complying with the applicable accounting standard.

Further, it contends these directors and the officer knew that the entities had very significant short term interest bearing liabilities, and should have known that these liabilities were incorrectly classified in the 2007 financial reports.

Press reports in Australia suggest that Maurice Blackburn, a legal firm acting for agrieved shareholders is actively considering launching a suit against Centro's auditor, Pricewaterhouse Coopers. The ASIC's statement of claim against the directors notes that a PwC partner, Stephen Cougle, told the audit committee of the Centro board on 5 September 2007 that ''he could give comfort that PricewaterhouseCoopers had signed off the full accounts, including the remuneration report''.

Legal firms Slater & Gordon and Maurice Blackburn filed their suits in the Federal Court in 2008 and in May 2009 Centro filed a cross-claim against PwC.

Further Reading

ASIC Media Release

Crikey: Centro charges put heat on Directors Club

Business Day: Centro auditor may be next in line for ASIC