Mineral Resources' MD Ellison to step down after probe on tax evasion

Mineral Resources said on Monday its billionaire founder Chris Ellison would exit the Perth-based mining services firm within 18 months after an internal probe found he used company resources for his personal benefit and evaded taxes. 

The board's investigation found Ellison, who led MinRes through its initial public offering in 2006 and remains its biggest shareholder, engaged in widespread misconduct including failing to properly disclose revenue from his overseas entities to the Australian Taxation Office. 

The scandal has wiped about 20 per cent from its share price since Oct. 21 and underscores the investment risk of having a company operating under the shadow of a single dominant corporate figure. 

 

"I acknowledge that I made mistakes, some of which were driven by my wish to keep private certain events that cause me great personal embarrassment," Ellison said in a statement. He could not be reached immediately for further comment. 

MinRes shares fell as much as 10.1 per cent on Monday as analysts criticised the lack of obvious successor to Ellison and the drawn-out timeline of his replacement. Shares were last trading 9 per cent lower at 0454 GMT. 

"While we appreciate there's financial penalties, strengthening corporate governance and a timeline for chair and MD transition, the slow pace of change will likely weigh on the stock, in our view," Citi analysts said in a note as they downgraded the stock to "sell" from "neutral" and slashed their price target. 

Ellison, who will remain as managing director until a successor is found, has been fined A$8.8 million ($5.81 million) by the firm. He will also forfeit his salary and other incentives of up to A$9.6 million. 

Chairman James McClements, who has been in the role since May 2015, will also leave in the next year as part of the firm's broader plans to restore its battered reputation. 

Pension fund HESTA, a shareholder in MinRes, said "governance failures that allow inappropriate behaviour by management can pose a material financial risk to the long-term value of our members' investments." 

HESTA said it had been engaging with MinRes and welcomed the board taking steps to address governance issues, including the CEO transition and imposing material financial consequences as "this will help restore investor confidence and trust." The internal probe found the company had made payments of A$3.8 million to an offshore entity owned by Ellison for various mining equipment, with the mining boss not having declared the transactions and income after the firm's IPO. 

The board also revealed the company had been paying rent for properties which belonged to the billionaire, along with rent-related benefits to the founder's daughter. He also directed company employees to work on his boat and properties and manage his personal finances. 

"There can be no doubt that the actions, decisions and behaviours of Mr Ellison have been profoundly disappointing and require sanction and penalty," McClements said.

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