Hanson to fight $200m 'sand pirate' allegations

The construction and building materials company Hanson yesterday denied stealing sand from the bottom of San Francisco Bay after being landed with a $200m lawsuit from the state of California.

The Californian Attorney General, Bill Lockyer, has dubbed the company a "sand pirate" and filed a suit on Friday claiming that Hanson has underreported the amount of sand taken from the Bay. Mr Lockyer also claims that the company distorted prices to avoid making royalty payments running into "tens of millions of dollars" and has defrauded the state by mining outside areas it was given a lease for.

Hanson, run by Alan Murray, its chief executive, said yesterday it would fight the suit.

"Hanson will defend itself against the complaint," a spokesman for the company said yesterday. "Hanson will contend that the Attorney General is adopting a stance that is inconsistent with standard mineral royalty procedures. Consequently, Hanson does not believe that there are adequate grounds to support the allegations made or the amount of damages being sought."

The state of California leases sandbanks in San Francisco Bay, near the former Alcatraz prison, to Hanson and other mining companies, which dredge sand and sell it to builders. Hanson extracts about 2 million tons of sand from the Bay each year. "These sand pirates enriched themselves by stealing from the state and ripping off taxpayers," Mr Lockyer said in a statement yesterday. "This isn't ordinary dirt we're talking about. Most construction projects couldn't be completed without sand."

Two American subsidiaries of Hanson, Tidewater and Olin Jones Sand & Co, which it bought in 1999, are also named in the suit. Mr Lockyer alleges that the Hanson businesses sold sand to affiliates for a token price, which was used to calculate royalty payments, before selling it on the open market at a higher rate.

Hanson is also accused of stripping out the transportation and unloading fees it charged customers from the prices it reported to the state in order to minimise its royalty payments.

It is also claimed that Hanson knew of the improper activities when it bought the US businesses in 1999 and carried on its improper activities after the purchases were completed. David Taylor, an analyst at Teather & Greenwood, yesterday said the case could involve up to £60m of sand and said the news was not good for the company. But he said Hanson, which has a market capitalisation of around £3bn, could easily weather the case, which is likely to be settled out of court.

Hanson yesterday said California was an important market for the company and that it believes it is "fulfilling its obligations to the state". Shares in Hanson yesterday closed up 2.5p at 406.25p.