Australia's corporate regulator has been accused of failing to properly investigate a "bankrupt" coal mine whose troubles are threatening the security of Western Australia's biggest electricity system
Griffin Coal, which operates near Collie about 180 kilometres south of Perth, was pushed into receivership in September amid mounting losses and debts that totalled almost $1.5 billion.
In state parliament this week, Liberal MP Steve Thomas lashed out at the Australian Securities and Investments Commission (ASIC) over what he said was the watchdog's failure to probe Griffin.
The criticism was backed by Clean Energy Finance director Tim Buckley, who said it was inexplicable that ASIC had applied so little scrutiny to the company despite an abundance of obvious red flags.
Griffin's collapse three months ago has cast a pall over WA's energy security heading into summer, which is forecast to be hotter than normal for much of the state's south.
The mine supplies coal to one of the state's biggest power stations, the privately owned Bluewaters plant that typically generates about 15 per cent of the electricity used in WA's main grid.
Before it was placed in receivership, Griffin and its corporate owners had repeatedly failed to lodge their financial accounts as required by federal law.
Griffin also failed to have at least one resident Australian director, which is an obligation under the Corporations Act.
'Insolvent' mine not probed
While the failures by both Griffin and its lender and operator Oceania Resources were prosecuted by ASIC, Dr Thomas and Mr Buckley said the actions of the regulator fell woefully short.
Mr Buckley noted Griffin had struggled to pay its debts as and when they fell due, including to the Australian Taxation Office, indicating the miner was materially insolvent.
He said the company's failure to meet basic requirements of the Corporations Act and the grave concerns about Oceania raised by its auditor were further red flags.
Then there was what he called the bizarre deal that allowed Griffin's biggest lender — giant Indian bank ICICI — to provide a $US60 million loan to the miner through Oceania.
Despite being owed $1.1 billion by Griffin, ICICI subordinated its own claim over the mine by channelling the money through Oceania, the Australian subsidiary of Indian conglomerate Sindhu Trade Links.
For Mr Buckley, it beggared belief ASIC had not sought to hold Griffin and its owners to account, especially given the mine's importance to WA's energy security.
"The structure is entirely unsustainable," Mr Buckley said.
"It's been unsustainable from the day it was set up. It's been haemorrhaging cash. It's insolvent and only continues at the forbearance of the bank.
"Ultimately, it's just a disaster waiting to happen and Blind Freddy could tell that is the case.
"You would think ASIC would have slightly more understanding of financial rigour than what they clearly are showing."
Oversight 'not good enough'
Dr Thomas, who represents the South West region covering Collie in the Upper House, said failure by regulators to provide oversight of Griffin went as far back as 2010, when Indian interests bought the mine from former tycoon Ric Stowe's fallen business empire.
He suggested the Foreign Investment Review Board (FIRB) — which vets the suitability of foreign buyers of Australian assets above a certain threshold – had not properly run the rule over the original purchase.
An inability or unwillingness by ASIC to take a harder line on Griffin since then had only added to the problems, he said.
ASIC declined to be drawn on the comments, while FIRB did not respond to queries.
"What on earth is the Australian Securities and Investments Commission and the Foreign Investment Review Board doing," Dr Thomas said in parliament this week.
"I am not sure that FIRB actually knows what it is doing.
"I have some concerns that the Australian Securities Investment Commission is not much better, because the people of Collie deserve better.
"They deserve to know the business structure of the company that is employing hundreds of local people."
Cinzia Donald, a partner at Perth-based Lavan specialising in commercial litigation and regulatory law, said ASIC had sought to wind up companies for "patterns of behaviour" like those on display at Griffin.
Ms Donald suggested it was possible the watchdog may have been more fully investigating Griffin and its ownership structure before it collapsed.
Others 'wound up' for similar
However, she said the agency's secretive nature meant it was impossible for the public or anyone owed money by Griffin to know.
"There have been instances where ASIC has seen a pattern of conduct that has raised their level of concern with similar examples of scenarios as we've seen with Griffin," Ms Donald said.
"If we look at those types of examples there are certainly situations where ASIC has historically seen this pattern of conduct as a basis for intervention at a very serious level.
"It's unclear as to why ASIC didn't choose to take that step in this case."
In the past 18 months, both Griffin and Oceania have been fined several thousand dollars for failing to lodge financial accounts on time, while Griffin has also been convicted of failing to have a resident Australia director.
Despite this, records registered with ASIC show neither company currently has a resident Australian director.
Ms Donald said the financial reporting and director requirements were in place to ensure companies and those ultimately responsible for them could be held accountable.
In the absence of meeting those requirements, she said it was harder for regulators such as ASIC to properly protect the community.
"Every day, ASIC is prosecuting directors and companies in relation to breaches," she said.
"What's interesting in this case is there does seem to be a longer-term pattern of this conduct."
Fears for workers, families
According to Dr Thomas, an indifference by ASIC to the plight of Griffin and the way it was being run was letting down the hundreds of workers at the mine as well as the community that relied on their employment.
He said deferring the problem to ICICI was unacceptable.
"It is simply not good enough," Dr Thomas said.
"If ASIC and the Foreign Investment Review Board do not step up, I fear for the future of those workers and the Collie community.
"It is about time we saw some real honest examination of what is going on at Griffin."
Mr Buckley agreed, saying the burden of regulatory failure almost invariably fell on those who could least afford to bear it, such as the workers, their families and the small businesses that often supplied bigger firms.
He predicted more of the same unless ASIC was properly empowered and given the resources to go after badly run companies.
"ASIC is a toothless tiger when it's contrasted with regulatory leaders like the SEC [Securities and Investments Commission] in America," Mr Buckley said.
"When the SEC tells corporates or financial institutions to jump they do because they know the SEC has the full brunt of the American government behind them.
"ASIC has a track record that makes no-one fearful of them."
