HIH was about power and money. James Hardie is that and more. People are dying, and the reputation of corporate Australia and the lawyers and other professionals who validate the system is at stake. If a mixture of greed and oversight led to the demise of HIH, a darker explanation lies at the heart of James Hardie's predicament with the Medical Research and Compensation Foundation.

While victims of James Hardie's asbestos products succumb to the most agonising of deaths - as the cancer mesothelioma crushes their lungs, invades their nerve endings, creeps through their bodies and slowly suffocates them - the cream of Australia's lawyers, accountants and other "independent experts" have their reputations on the line - Allens Arthur Robinson, PricewaterhouseCoopers, Trowbridge Deloitte, Access Economics, Phillips Fox, to name just a few. The issue of independence and the integrity of leading company directors are under scrutiny.

From this point forward, every time a corporate lawyer, actuary or accountant signs off on their "independent" advice for a large fee, they will think of James Hardie. Yesterday, as Hardie's stock price continued to founder and its corporate credibility turned to ever-finer particles of dust, it was sticking to its forlorn claim that "nothing has changed".

Nonsense. Everything has changed for this blue-chip building products company in recent months, whatever its executives, PR people and lawyers are still brazen enough to contend. A NSW government special commission of inquiry into the MRCF concluded its hearings this week after two months of remarkable evidence and now awaits a report from commissioner David Jackson, which is due in August.

On Wednesday, counsel for the commission John Sheahan handed down his issues paper. It contained damning allegations. James Hardie and its executives, he suggested, should be further investigated as to whether they deliberately devised a scheme to protect Hardie from asbestos victims claims. Exactly what Hardie so stridently denies.

Further, a host of Hardie's top managers, directors and lawyers are to be investigated over possible breaches of a slather of corporate laws and for deceptive and misleading conduct. What Sheahan left out of his report was more telling. The words "this part is the subject of the commissioner's non-publication order of..." pops up again and again. The commission is clearly loath to open up via Sheahan's report, yet grave recommendations and charges may well be in the pipeline.

How did it get to this? Although the dangers of asbestos were known as far back as the 1930s, Hardie continued to manufacture asbestos products until the mid-'80s. While rival manufacturer CSR capitulated to legal and public pressure in the '90s and opted to meet victims' claims as they arose, Hardie pursued a different route.

In early 2001, it hived off its asbestos liabilities into a foundation, the MRCF. Hardie funded the MRCF with $293 million.

However, in the past three years these asbestos liabilities ballooned by more than $1 billion, leaving the MRCF with a funding shortfall of $800 million.

Meanwhile, James Hardie and its lawyers Allens, through a bewilderingly complex series of corporate transactions, shifted the Hardie head office to the Netherlands and then claimed the company had no lingering exposure to the problem. It bamboozled the media and the stock market in the process.

Hardie's stock price rallied towards $8 a couple of months ago as its executives, PRs and investors relations people pushed the story hard that Hardie was legally watertight, immune to any claims that might pierce the corporate veil.

The relationship between James Hardie and Allens goes back 100 years. Many a corporate lawyer has exchanged employment between the two. The two principal Hardie executives involved in Project Green - to separate Hardie from asbestos - were ex-Allens: Peter Shafron and Peter Cameron.

Allens partners David Robb and Roy Williams were also intimately involved.

The inquiry heard that when the plan was hatched to build an unbridgeable gap between the riches of the Hardie empire and its asbestos cancer victims, Allens was central to the task. Another leading firm, Phillips Fox, and its partner Michael Gill, were also engaged.

But who was Allens' client? There were at least three of them - James Hardie & Coy (now known as Amaca), James Hardie Industries Ltd (now known as ABN60) and a new entity, James Hardie Industries NV.

The latter is now the principal company, its head office based in the Netherlands, purportedly for tax reasons.

One of these companies, however, was more of a client than the others. The plan, exposed in the commission of inquiry, was to strip the assets of the main operating company, Amaca, and put them in the holding company, ABN60, then to strip ABN60 and put the assets into another company set up in the Netherlands to receive the funds.

Why the Netherlands? Tax. To pay less tax in Australia, is the official line from Hardie. Another reason given was to align more closely the group's business activities with the locus of its principal shareholding.

At the time of the transfer of assets to the Netherlands, there was no tax advantage accruing. Moreover, the move caused local shareholders to incur a "capital gains tax event". Any pre-CGT stock lost its tax-free status effective October 19, 2001.

For all the damage Hardie's asbestos products will have inflicted on the Australian economy, let alone the human misery, the company pays relatively little tax to the Australian Government. As for the argument of alignment of markets, Hardie's real growth market is in the US, where management has been very successful in expanding in its asbestos replacement product, fibre cement (still, 90 per cent of shareholders are Australian). Sales growth in the Netherlands is a poor joke. A filing to the US Securities and Exchange Commission tells the story. To paraphrase, the Netherlands is considered to have laws making the return of assets to a transferee company especially difficult.

Coincidentally, neither is there any civil law treaty in force between Australia and the Netherlands.

After Amaca had been stripped and separated from the Hardie group in 2001, the process was repeated with ABN60's assets being stripped and placed in a Netherlands company, JHINV. A key strategic element of the plan was to ensure that the Amaca separation happened before JHINV became the holding company. That way, even if future victims dropped like flies, nothing could be pinned on JHINV. The deal required that the traditional Hardie companies, which had amassed the wealth of the group over 100 years, be gouged of most of their assets.

Proper and independent legal representation might have protected these companies and left them in a position to meet their present and future creditors. As the commission heard in evidence, their directors (according to Hardie) failed to ask the right questions about funding and asbestos claims estimates. The MRCF, into which Amaca was tipped, failed to ask the right questions, Hardie maintains.

The plan was concocted in the '90s. It was first known as Project Chelsea, later as Project Green. During the '90s, steps were taken to reduce the capital base of the main operating company, Amaca, by means of management fees and special dividends to the holding company. In order to permit this to occur, a major restructuring (played right down to the press and the public) was undertaken. This involved the sale of trade mark and intellectual property rights of Amaca. Hundreds of millions of dollars were drained from the balance sheet.

The next step, which required the co-operation of Allens and other advisers, was the separation of Amaca from the Hardie group in 2001. This saw the devolution of the main operating company of Hardie into a trust which was promoted by Hardie as a beneficent trust whose intention was to deal compassionately with asbestos victims. We now know that the trust was underfunded.

To effect its plan, Hardie needed a plausible basis for funding. It sought the services of top-rated actuarial firm Trowbridge. The Trowbridge report contained several unsustainable assumptions.

For instance, it assumed the average cost to Hardie of a mesothelioma suit was $135,000. Hardie's own records showed the figure to be $255,000 at the time. It assumed Hardie would never have more than 20 per cent of asbestos claims in Australia, although for years it had shared roughly 50 per cent of the claims. It assumed that after another 20 years, people would magically stop getting mesothelioma, although it knew that even in 2001, people were still getting exposed to Hardie asbestos, and the latency period sometimes lasts up to 50 years.

Hardie got the result it wanted from Trowbridge. A blind eye was still turned, even though Allens partner Roy Williams wrote to Hardie setting out the defects in detail. In early 2001, Hardie sought to attach a claim to legal privilege to the Trowbridge report. Allens co-operated. Then Hardie brought aboard a group of "clean-skin" directors to the trust, using the Trowbridge report as evidence that the trust could manage all future claims.

When told by Hardie that the incoming directors would be denied access to Trowbridge for "tactical reasons and control", Allens co-operated. The commission heard that Robb made presentations to the incoming Amaca directors on February 13, 2001, allegedly knowing the directors were not in the picture on liabilities, knowing that Amaca did not have proper and independent legal representation.

Allens drafted all relevant documents for the transaction, including a deed of covenant and indemnity to be executed by Amaca in favour of ABN60. It provided for Amaca to indemnify ABN60 from any asbestos liability. At the eleventh hour, the deed was widened to preclude Amaca from seeking recovery of any of the dividends and management fees that Hardie had stripped.

By this time Allens knew that its client Amaca had no officer who knew of the asset-strips or was in any position to assess them or the prudence of executing the deed of company indemnity. According to evidence before the commission, Allens knew that nobody else was advising Amaca and it knew that the lawyer appointed to represent the personal interests of the directors had no knowledge of the transactions.

Had Amaca had proper independent representation and its directors the requisite information to see to creditors' interests, things might have been different.

The result was that asbestos victims were deprived of their legitimate entitlements to compensation while Hardie executives amassed tens of millions of dollars through their stock and options and bonus packages. Their lawyers reaped high fees.

But it wasn't over yet. The goring of Amaca was to be followed by the stripping of ABN60 two years later - its assets bound for JHINV.

JHINV had been issued shares in exchange for the assets that had been stripped from ABN60 and sent to the Netherlands company. Those shares were partly paid. The balance owing on the shares was a debt owed by JHINV to ABN60. If called on, they were worth $1.9billion.

Hardie, again represented by Allens, came before Justice Kim Santow of the Supreme Court of NSW in October 2001. The existence of the partly paid shares was pivotal to the court giving approval for the transfer of ANB60s assets to JHINV. Counsel was instructed to assure the court that the shares would protect the solvency of ABN60 and its ability to meet the legitimate claims of asbestos victims.

Eighteen months later, the same law firm which proffered the assurance to the judge was accused in the commission of assisting in the stripping of the $1.9 billion entitlement of ABN60 for a song. The court was not alerted.

As commissioner Jackson works on his final report, James Hardie executives, directors, lawyers and other advisers will pore over their professional indemnity insurance policies and consider their defences for prospective legal action, which most observers now believe is only a matter of time.

Meanwhile, the victims of asbestos and their families can only hope that decisive action is taken by government to ensure that their common law entitlements to compensation are preserved.