Larry Marshall, the chief executive of the multi-billion-dollar CSIRO and one of the nation’s highest-paid public servants, is being sued by a group of angry investors over the collapse of a technology company of which he was managing director.
Shareholders in failed laser technology company Arasor claim Dr Marshall was a central figure in the company’s collapse, alleging he and other directors engaged in misleading and deceptive conduct, as well as serious breaches of the Corporations and ASIC acts in relation to the company’s financial reports and a disastrous $81 million float.
Industry Minister Ian Macfarlane touted Dr Marshall’s significant private sector experience as a major reason for hiring him to drive a newly business-minded CSIRO. Dr Marshall has been serving as the agency’s chief executive since January.
The CSIRO receives just over $5 billion in funds from taxpayers and the private sector over the forward estimates period. According to its most recent annual report, the chief executive of the scientific research agency stands to earn up $800,000 in salary, superannuation and bonuses.
Dr Marshall, a former technology entrepreneur and physicist, was a managing director and executive director of the China-based Arasor, a company that sought to promote laser technology in television and telecommunications.
He was also previously head of a series of other start-up technology companies, as well as managing director of technology venture capital firm Southern Cross Venture Partners.
Dr Marshall has taken over CSIRO at a difficult time, amid ongoing threats by staff of industrial action following $115 million in funding cuts and a pay dispute with management as the agency tries to reposition itself towards a model better suited to deal with the private sector.
Dr Marshall has made much of his private sector success, recently giving a talk at the Asia Pacific Creative Innovation conference, entitled Navigating the Valley of Death and Getting from Zero to IPO.
Arasor listed on the ASX in late 2006, with three separate capital raisings between the initial public offering and August 2007, worth a total of $81m. Despite initial investor interest in the laser technology, Arasor ended up being a financial disaster, with the company delisting in 2011 and going into liquidation shortly after.
In an ongoing claim before the Federal Court, it is alleged Dr Marshall, former Arasor executive chairman Simon Cao and other directors produced highly misleading prospectuses and financial reports prior to the three capital raisings.
It is claimed the documents hid Arasor’s disastrous profit outlook and falsely claimed the company was on track to millions of dollars in profit.
The group of shareholders, known as Caason Investments, also alleges that Arasor directors misled investors in the financial reports and prospectuses about tens of millions of dollars in contracts supposedly guaranteed by Indian and Chinese buyers for the lasers that, in reality, were not completed or never existed.
At its reported financial peak, at the end of 2007, Arasor reported revenue of $117m and claimed it was due to make a profit by the end of that year. In that year the company claimed Arasor’s revenue “had increased by 295 per cent” and this would be largely derived from the sale of its products to Indian and Chinese telecommunications companies.
However, the 2008 half-yearly report found that revenue for the half-year period had fallen to $10m, and bad and doubtful debts had risen to $50m. By the end of 2008, $53m had been written off in respect of the sales of wireless products to India. Dr Marshall was also allegedly one of three members of Arasor’s audit committee, which was responsible for ensuring the company’s financial reports were “legally compliant, consistent with committee members’ information and knowledge and suitable for shareholder needs”.
When asked whether Dr Marshall had previously declared the lawsuit, which has been running since October 2012, a CSIRO spokesman said the chief executive “had declared material interests in accordance with the SIR Act” but did not say whether this occurred before or after the interview process for the role.
“CSIRO is aware of the proceedings that relate to events before Dr Marshall was appointed chief executive of CSIRO … As the case is before the Federal Court we are unable to comment further at this time,” the spokesman said.
A spokesman for Mr Macfarlane told The Australian Dr Marshall “completed the required disclosure process for government appointment” but did not say when the disclosure was made. “It would be inappropriate to comment on a matter before the court,” the spokesman said.
At the time of his appointment in October last year Mr Macfarlane lauded Dr Marshall as “a scientist who brings significant commercial experience to this role”. “In particular, his experience in Silicon Valley, R&D development and the commercialisation of products and ideas will be valuable in ensuring CSIRO rightfully claims its place at the centre of Australian industry policy, building new links between business and research organisations,” he said.