The Australian Securities and Investments Commission has started legal action against a $580 million ASX-listed company plus its directors and executives.
Queensland coal producer Terracom Ltd (ASX: TER), managing director Daniel McCarthy, chief commercial officer Nathan Boom, former chair Wallace King, and former director Craig Ransley are all facing civil action in the federal court for allegedly breaching whistleblower laws.
The Terracom share price is currently down 1.32% in early afternoon trading on Wednesday after dropping more than 5% in the morning.
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Terracom allegedly trashed whistleblower's reputation, psychological state
The allegations concern the company's treatment of a whistleblower back in 2020.
"ASIC alleges that TerraCom and its senior company employees engaged in conduct that harmed a whistleblower who revealed the alleged falsification of coal quality certificates," stated the corporate regulator.
Terracom posted two announcements to the ASX on 14 February 2020 and 3 April 2020 and published an open letter to shareholders in major newspapers on 12 March 2020.
Those memos refuted the whistleblower's claims and stated the company had an independent enquiry completed.
"ASIC alleges that Mr McCarthy, Mr Boom (who was chief financial officer at the relevant time), Mr King and Mr Ransley, who were all members of TerraCom's disclosure committee, failed to take reasonable steps to ensure statements to the ASX were not false or misleading," stated ASIC.
"ASIC also alleges that, by allowing the false or misleading statements to be published, TerraCom, Mr McCarthy, Mr Boom and Mr Ransley engaged in conduct that caused detriment to the whistleblower's reputation, earning capacity and psychological and emotional state."
ASIC will be suing for declarations of contravention, financial penalties, disqualification orders, and recovery of legal costs.
Terracom, through an announcement to the ASX on Wednesday, acknowledged the court case.
"The company has lawyers engaged and will vigorously defend the proceedings."
First time ASIC sues for whistleblower law breaches
ASIC deputy chair Sarah Court called the legal action against Terracom historically "significant".
"It is the first time ASIC has taken action for alleged breaches of the whistleblower provisions," she said.
"Whistleblowers perform a vital role in identifying and calling out corporate misconduct. We take any indication that companies are engaging in conduct that harms or deters whistleblowers very seriously."
Back in August 2021, Terracom started legal action in the federal court to stop ASIC from reviewing the independent report compiled by PricewaterhouseCoopers more than a year earlier. The document had been seized during a search warrant executed at Terracom's offices in March that year.
Last September, the full federal court ordered the company to release the report with court-approved redactions.
