Key early investors in Andrew "Twiggy" Forrest's Fortescue Metals Group have accused the mining magnate of wielding too much influence over the board of the company.
In the latest attack on corporate governance at the nation's third biggest iron ore exporter, the Manhattan fund that helped turn Fortescue into a company worth tens of billions of dollars has accused Mr Forrest of being "prone to severe exaggeration" and claimed his personality "dominated" boardroom decisions over expansion and how much debt to take on.
The comments from Leucadia National principals Ian Cumming and Joseph Steinberg were sent to shareholders of the fund during the past three weeks, as part of a valedictory letter by the pair before they handed over control of their business.
Leucadia invested $400 million in Fortescue in July 2006 and were instrumental in the company's share price increasing 13-fold in less than two years.
"Andrew was persuasive, though at times prone to severe exaggeration. Notwithstanding, we became convinced that this was a very attractive opportunity and a risk worth taking," the Leucadia directors wrote to shareholders last month.
But Leucadia and Fortescue famously fell into legal dispute in 2010 over whether Fortescue could dilute a lucrative royalty note held by Leucadia. The dispute came as Fortescue sought to raise money to expand its business, and prompted Leucadia to take court action and begin its departure from Fortescue's share register.
The dispute also came as Mr Forrest was engineering his departure from the chief executive role at Fortescue. This culminated in June 2011 when he became chairman, while retaining the biggest stake in the company.
"To our dismay, we had a falling out with Andrew. His personality dominated the FMG board and the other directors were more inclined to follow his lead as to the appropriate amount of equity, debt, leverage and the rate at which to expand, as opposed to our more conservative views," the Leucadia principals wrote.
Fortescue's highly leveraged business model sparked a short-lived debt crisis in September 2012 when the iron ore price slumped below $US90 a tonne.
The crisis was resolved with a debt renegotiation under which the company took on even more debt, but over a longer period of time. Under that renegotiation, Fortescue paid $685.16 million to Leucadia to settle the dispute.
Leucadia's comments are not the first time Mr Forrest's influence over the Fortescue board has been questioned; the Australian Shareholders Association complained in 2011 that Mr Forrest's move to become chairman created an "unacceptable concentration of power" that undermined the Fortescue board's independence. "It's a long way removed from what would be considered best practice corporate governance, or what people would expect from a top 100 ASX-listed company," ASA spokesman Les Goldmann said in June 2011.
Mr Forrest swatted away the comments in 2011 by noting that corporate governance experts do not create wealth for other Australians.
He could not be reached for a response to Leucadia's recent claim that he dominated the board.
Former Fortescue director Ian Burston - who served on the board between 2008 and 2011 - said the Fortescue board operated well during his time with the company and delivered a "marvellous company".
"Twiggy always spoke his mind very eloquently and pursued the point that he believed was right fairly relentlessly, and by his very nature he demanded attention and respect, but whether you would call that domination from a kindly or unkindly aspect is really just a personal view," he said.
Despite its criticisms, the Leucadia principals acknowledged their investment in Fortescue was one of their most profitable.
"Our six-year adventure with Andrew Forrest and FMG was rockier than the Aussie outback, but turned out to be the most financially rewarding. From start to finish Leucadia made $2.3 billion."
Fortescue will report its June quarter results on Tuesday, and is expected to confirm that full-year iron ore production was between 80 million and 82 million tonnes over the 12 months to June 30.