Australian recycling company Carbon Polymers under investigation

ERJ staff report (TP)

Sydney − Australia's largest tire-recycling company has abandoned thousands of tires at its depots around the country and is now under investigation by the NSW Environment Protection Authority (EPA), reported Linton Besser and Alex McDonald for ABC News.

Carbon Polymers Ltd, which is about to change names and depart the tire-recycling business altogether, is run by Andrew Howard, a former derivatives trader and associate of Ron Medich, who is facing charges in relation to the murder of his business partner, Michael McGurk. Howard had also previously worked for McGurk.

Carbon Polymers is listed on the Australian Securities Exchange (ASX), which means its shares can be traded and it must continuously update shareholders as to changes which materially affect the value of the company.

But company insiders have told the ABC that the regular breakdown of machinery, the failure to pay bills and even the closure of the company's facilities in Perth, Adelaide and Sydney were never disclosed to the market.

Neil Sayer, the company's former operations manager in Adelaide, said the company did not process a single tire in the nine months he was there, but this fact was never disclosed to investors.

The EPA undertook a site inspection several weeks ago at the company's headquarters at the Sydney suburb of Smithfield, which has since been abandoned.

Steve Beaman, the EPA's director of waste and resource recovery, confirmed that Carbon Polymers was in the State Government's sights.

"The EPA is currently investigating Carbon Polymers," he said.

"We take the allegations concerning Carbon Polymers very seriously and do not want to jeopardise our investigations by commenting any further at this stage."

In the past three years, the company has raised A$9m (€6.3m) – much of it from ordinary investors who were won over by its promise of rapid growth and the prospect of A$20m (€13.9m) profit by 2016.

In October 2011 Carbon Polymers announced it had won a major contract to supply thousands of tonnes of processed rubber to VicRoads for use in bitumen.

But this deal – like others – fell apart after the company could not supply a sufficiently high-quality product. This too was never disclosed to the ASX.

The most recent financial report published by the company forecast an expected loss in 2013 of A$2.8m (€1.9m). The court-ordered payment is roughly equivalent to 20 percent of the company's results.

The ABC has seen multiple complaints to the corporate watchdog, the Australian Securities and Investments Commission (ASIC), and to the ASX, which allege a pattern of governance failures at the company.

At least two such complaints were filed by former employees and directors of the company who had seen the operation from the inside.

Despite this, ASIC's investigators have declined to take up the matter. Andre Khoury, a spokesman for ASIC, said he could not discuss ASIC's inquiries into the company.

On multiple occasions, the ASX has suspended trading in the company after its auditors raised concerns about whether the company could pay its bills.

ASX spokesman Matthew Gibbs said the ASX has "no investigative powers to fine companies" and was limited to the regulation of continuous disclosure and the veracity of statements to the market.

Medich has been a top-20 shareholder in Carbon Polymers, and was a central player in a 2010 restructure which saw Howard elevated to the position of managing director.

When asked to describe his relationship with Medich, Howard said in an email to the ABC that: "Medich was an investor in the company prior to my involvement with it."

He also defended the conduct of the company, denying that material events were not disclosed.

The company is part-way through a merger with Bluenergy Group Ltd, which undertakes construction work.

Medich has been committed to stand trial for allegedly masterminding McGurk's assassination over a business dispute. He has pleaded not guilty.

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