ASIC takes Queensland coal producer to court alleging company ‘harmed’ whistleblower

For the second time in two days Australia’s corporate watchdog has launched first-of-its-kind legal proceedings, with its latest target being a Queensland coal producer alleged to have ‘harmed’ a whistleblower’s reputation and psychological health.

Announced today, the Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings against TerraCom (ASX: TER), its managing director Daniel McCarthy and other executive staff regarding their alleged treatment of a whistleblower.

The case revolves around whistleblower allegations made by a former employee that TerraCom - the operator of the Blair Athol coal mine in Clermont, Queensland - had been involved in the falsification of coal quality results.

It comes one day after ASIC launched a groundbreaking greenwashing case against Mercer Superannuation, alleging the fund made misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.

Like the Mercer case, ASIC deputy chair Sarah Court said this whistleblower action was a first for the watchdog.

“This is a significant case because it is the first time ASIC has taken action for alleged breaches of the whistleblower provisions,” Court said.

“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.

“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.”

The action, which also names TerraCom chief commercial officer Nathan Boom, former chair Wallace King and former director and deputy chair Craig Ransley, concerns two ASX announcements made by the firm and an open letter published by the Australian Financial Review and The Australian which denied the whistleblower’s allegations. These statements followed an independent investigation which also dismissed the whistleblower allegations.

Further, ASIC alleges that McCarthy, Boom, King and Ransley - all members of TerraCom’s disclosure committee - failed to take reasonable steps to ensure statements to the ASX were not false or misleading.

The watchdog also alleges that by allowing the false or misleading statements to be published, TerraCom, McCarthy, Boom and Ransley engaged in conduct that ‘caused detriment to the whistleblower’s reputation, earning capacity and psychological and emotional state’.

“ASIC alleges that Mr McCarthy, Mr Boom, Mr King and Mr Ransley failed to take reasonable steps upon receipt of the independent investigator’s report into the issues raised by the whistleblower, in breach of their duty to exercise reasonable care and skill in the discharge of their duties as directors and officers of TerraCom,” ASIC said.

The watchdog is seeking declarations of contravention, pecuniary penalties, disqualification orders and costs.

In a short statement, TerraCom said it had engaged lawyers and would ‘vigorously defend the proceedings’.

Shares in TER are down 1.72 per cent to $0.74 per share at 12.33pm AEDT.