Wembley Builder May Face Lawsuits

The builder of the U.K.’s new national stadium continues to fly through flak, with international newswires reporting that it may face “class action” lawsuits for misleading investors.

Slater & Gordon and Maurice Blackburn Cashman, two of Australia’s leading commercial law firms, have both been contacted by current and former shareholders who want an investigation into whether Multiplex stalled over revealing the full extent of the cost blowouts on its showcase Wembley Stadium project.

The investors are looking to recoup losses they suffered on Multiplex shares after a current affairs show on Australian television said the company had flagged potential losses on the Australian $1.2 billion (US$907 million) Wembley project well before telling the international stock markets.

“The question is what Multiplex management knew and when. Allegations raised publicly suggest that, at the very least, Multiplex has some explaining to do,” said a statement from Lisa Nichols, a partner at Canberra-based Slater & Gordon.

“A massive amount of capital had been raised in the period complained about. How many of those investors allege that they were misled is an unknown,” said Bernard Murphy, senior principal with Maurice Blackburn Cashman.

He said any case would focus on those who bought shares relying on statements made by Multiplex and or the company’s failure to disclose the huge costs and delays at Wembley.

Slater & Gordon’s Web site claims it has a “brief chronology” that suggests Multiplex may have had information about the problems at Wembley long before making that information public.

The group is already being investigated by the Australian Securities and Investments Commission.

As a high-profile flagship enterprise, Multiplex’s building of the new English national stadium rates somewhere alongside the Titanic. From the outset, a few politicians and even more business analysts questioned whether the Australian company should have been awarded the contract in the first place.

Six months after taking out £400 million (US$710 million) worth of loans to finance the building of Wembley, MPs called for Multiplex – which has come under close scrutiny for some of its business dealings – to satisfy the National Audit Office of its financial integrity.

Some ministers failed to back the project after hearing a report on it by city troubleshooter David James, who expressed “serious concerns” over how Wembley National Stadiums Ltd (WNSL) chose the Australian developer.

Former Wembley consultant David Hudson told members of parliament the bidding process had been unfair and criticised WNSL for not setting a realistic budget; even WNSL finance director Roger Maslin conceded the bidding process hadn’t been “transparent.”

At the end of May, amid fears that the Wembley losses may be so bad they’d cause the company to go under, Multiplex shares were suspended on the Sydney stock exchange in order to give it time to assess the true extent of the financial damage.

In the four previous months, Multiplex stock had fallen from a little more than Australian $6 to around $2. Until the news of the lawsuits was published, they’d recovered to $3.27.

Having owned up that it will drop around £45 million (US$81.79 million) on the Wembley project, the company issued two further profit warnings on the back of the news that the losses will be even higher. It blamed spiraling costs on soaring steel prices and expensive legal disputes with contractors.

— John Gammon