Western Australian mining magnate Chris Ellison will step down from the company he founded nearly two decades ago over alleged tax evasion, which the company says has damaged its reputation and confidence in its leadership.
Mineral Resources’ board has ordered Mr. Ellison to pay $8.8 million in financial penalties and decided not to pay nearly $10 million in planned executive compensation.
In October, the Nine Newspapers reported on allegations of tax evasion involving a company in the British Virgin Islands (BVI) – an area where companies do not pay income tax.
In response, Mineral Resources’ board of directors hired international law firm Herbert Smith Freehills to investigate the matter.
In a statement released today, the company revealed that the investigation found that Mr Ellison had failed to disclose that he had a financial interest in any of the BVI companies from which a Mineral Resources subsidiary bought almost $4 million worth of mining equipment in the early 2000s .
“There can be no doubt that Mr. Ellison’s actions, decisions and conduct have been deeply disappointing and require sanctions and penalties,” said James McClements, chairman of Mineral Resources.
But the statement added that Mr Ellison voluntarily disclosed the BVI company’s income to the Australian Taxation Office in 2021.
And in May 2023, the ATO paid almost $4 million in unpaid taxes.
Efforts were already underway to find a successor for Mr. Ellison, but the company has decided to accelerate the process with a new managing director in place within the next 12 to 18 months.
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Research shows that financial benefits were not disclosed
Herbert Smith Freehills was also asked to investigate other financial matters involving Mr Ellison.
It found that company funds had also been used for the benefit of entities in which Mr Ellison’s daughter had an interest, without the knowledge of Mineral Resources.
“From time to time, financial benefits have been provided to related parties of Mr. Ellison,” the company statement said.
“Including…rent relief provided to entities in which Mr. Ellison’s daughter has an interest.”
Ellison apologizes
Mr Ellison said he accepted the board’s decision and deeply regretted his actions.
“I acknowledge that I have made mistakes, some of which were caused by my desire to keep private certain events that cause me great personal embarrassment,” Mr. Ellison said in the company’s statement.
In an earlier statement to MinRes shareholders, Mr. Ellison admitted that he operated foreign entities and failed to disclose income from these ventures.
But he said the matter has now been settled and all outstanding taxes, penalties and interest have now been paid to the ATO.
Company sets up ethics committee
The tax scandal is expected to have long-term implications for how Mineral Resources operates going forward.
It announced that it will establish an independent ethics and governance committee to ensure transparency on future business transactions.
In its statement today, the company said the new committee would continue some of its investigative work by “reviewing related party transactions involving Mr. Ellison.”
It also revealed further changes in the company’s leadership.
Chairman James McClements will also leave the company on or before the next annual general meeting.
That decision is not related to the investigation into Mr. Ellison, but the company said it was appropriate to expedite this process for an orderly leadership transition.
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