Sunday 31st of May 2020

and no one is going to prison...


The Australian Competition and Consumer Commission (ACCC) has formally laid criminal cartel charges against the ANZ, Citigroup, Deutsche Bank and six senior executives.

Those charged include ANZ's global head of treasury, Rick Moscati, and Citigroup's former country head for Australia, Stephen Roberts.

The charges relate to the sale of $2.5 billion ANZ shares to institutional investors in August 2015.

The sale was organised and underwritten by Citigroup, Deutsche Bank and third big global bank JP Morgan to boost ANZ's balance sheet in accordance with demands from the bank regulator APRA.

JP Morgan has not been charged.

Apart from Mr Moscati and Mr Roberts, those charged include Citigroup's current managing director John McLean and global head of foreign exchange trading Itay Tuchman as well as Deutsche Bank's former Australian chief executive Michael Ormaechea and Michael Richardson, who has also left the bank.

The three banks all strenuously deny the allegations and say they will vigorously defend themselves and their employees.

In an earlier statement Citi said there was no precedent for the action and there had been no guidance notes issued by the ACCC to the banks over their underwriting activities.


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Picture at top by Gus Leonisky


The Australian Competition and Consumer Commission has charged ANZ Bank, Citigroup and Deutsche Bank with criminal cartel offences following an investigation

Senior executives John McLean, Itay Tuchman and Stephen Roberts of Citigroup, Michael Ormaechea and Michael Richardson formerly of Deutsche Bank, and Rick Moscati of ANZ have also been charged with criminal offences.


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fiddling with obscure financial instruments...


At age 77, suffering from diabetes and a host of other ailments, he became inmate 50444-054 — and for nine-and-a-half months until mid-2003, his registered address shifted from upscale Manhattan to a federal penitentiary in Rochester Minnesota.

Up to that point, Alfred Taubman was a jet-setting real estate and shopping mall tycoon who threw lavish parties and schmoozed with the likes of Donald Trump and Henry Kissinger after carving out a reputation as a ruthless but brilliant marketer.

He was best known, however, as the flamboyant force behind art house Sotheby's which, over the course of 20 years, he transformed from an ailing and stuffy institution into the world's premier auction house. And it was Sotheby's that would prove to be his undoing.

Taubman scored a stint in the big house for something that only recently has become a criminal offence in Australia. He was convicted of being party to a criminal cartel after Sotheby's and arch rival Christie's conspired to rig prices in the rarefied world of high end art.

But the tale of how he landed there is likely to send a chill into the murky world of Australian banking, after criminal charges were laid against six high-powered executives and three major banks in the past fortnight.

Prison garb and white collars

In the legal world, it is called "the flip" or "the rollover". And it has become the primary tool in anti-trust and cartel investigations globally.

It works like this: whoever comes clean first is granted immunity. As each participant is targeted, the urge to break ranks and avoid a jail sentence becomes a powerful motivating force.

There is no dispute that Christie's and Sotheby's colluded in the mid-1990s, in the wake of a global recession, to up their commission rates. How it came about and who ultimately was responsible are still contested.

The crux of the case, however, was that Christie's, which had been overtaken by Sotheby's in terms of sales, made the first approach.

After years of plodding investigation, imagine the delight of authorities when Christie's senior executive handed over a trove of documents about his dealings with his opposite number at Sotheby's, Diana Brooks.

Despite being the instigator, Christie's secured an amnesty. Under intense pressure, Brooks then grassed Taubman, her once great mentor, claiming she was acting under orders, an accusation he denied.

While she was too involved in the scam to secure immunity, Brooks at least got to spend her time at home with an ankle bracelet while Taubman went down. No-one at Christie's, meanwhile, ever saw the inside of a prison.

Singing ANZ's tune

Collusion and cartels are notoriously difficult to prove, particularly in hugely technical areas such as investment banking and trading in obscure financial instruments.


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diluting the sauce?...

Former JP Morgan Australia boss Robert Priestley has resigned from the ASX and Future Fund boards amid a court case into alleged cartel activity during an ANZ capital raising that JP Morgan was involved with.

The Commonwealth Director of Public Prosecutions launched criminal proceedings earlier this month against ANZ, Citigroup and Deutsche Bank, as well as six senior executives or former executives of those institutions, following an investigation by the Australian Competition and Consumer Commission (ACCC).

The case concerns a $2.5 billion capital raising by ANZ in August, underwritten by investment banks JP Morgan, Deutsche Bank and Citi.

Around a third of the shares to be sold in the capital raising were not taken up by institutional investors, leaving the three underwriters holding a total of around $800 million worth of ANZ shares.

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designed to fail?...


The Royal Commission established to look into misconduct by the banks has failed, particularly with the small business sector, writes Dr Evan Jones.

(Versions of this article were sent to three mainstream media outlets. There was no response.)

PRIME MINISTER Malcolm Turnbull announced the establishment of a Banking Royal Commission on 29 November 2017. Turnbull reversed his Government’s opposition after pressure from backbenchers, the Opposition and the public.

The Commission was established on 14 December. The Terms of Reference were a motley collection of admirable and potentially limiting or diverting items. Its preamble was a shocker of government self-delusion — a system “most stable”, “systemically strong”, “internationally recognised”, “world’s best”, and so on.

That and the ridiculous brevity of the Commission’s mandate looked like a Clayton’s Commission in the making. Thus the title of my series on the backdrop to the Royal Commission hearings.

The Commission’s early hearings were a surprise. There has been assertive questioning of the banking sector’s cosseted and overpaid leaders. The A.M.P. has come crashing down. Banking involvement in the corrupt franchise sector has been a revelation.

But much of the supposed shock horror exposures have already received good coverage in myriad Parliamentary inquiries and ongoing Fairfax media stories.

Beginning 21 May, the Banking Royal Commission devoted a cursory two weeks to small business lending. Cursory, because this sector has been long under the radar.

The ASBFEO Ombudsman, Kate Carnell, has expressed dismay at the brief period allocated to small business and she’s right.

Having been the regular recipient of bank victim accounts since 2000, I am atypically familiar with the banks’ modus operandi regarding its small business (and family farmer) borrowers. It is perennially ugly. I can attest that it is a sector rife with malpractice, indeed criminality.

An event with more than a whiff of malignity was the takedown of close to a thousand Bankwest commercial property borrowers after the CBA purchased Bankwest from HBOS on 19 December 2008.

Curious, then, that Counsel Assisting, Michael Hodge, should open the small business session declaiming that the foreclosed customers got the story wrong regarding the CBA’s motivation for this takedown.

The key alleged claims were that the CBA’s ultimate purchase price could be reduced by default and foreclosure of select Bankwest borrowers (“clawback”) and/or that a desired enhancement of the bank’s tier one capital adequacy ratio could similarly be achieved by such foreclosures.

Mr Hodge noted that these ulterior motives

"... allow the convenience of avoiding grappling with the risk presented by a particular borrower or industry… They therefore avoid asking how a bank might or might not legitimately respond to its perception of increased risk in respect of a particular loan or lending in a particular industry."

This characterisation could have been written by the bank itself.

The Hodge presentation was readily picked up by the Australian Financial Review and painted as the unvarnished truth and the last word.

Mr Hodge’s summary of the supposed claims is inadequate, indeed inaccurate.

Bankwest victims were forced to make inferences from the fragmentary information publicly available. Two Parliamentary inquiries (Post-GFC BankingImpairment of Customer Loans) were impeded for having no access to the documentation. A Royal Commission is supposed to get to the bottom of things.


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sleeping with confidence...

12 months' notice and a 2.7 mil gold watch...

Westpac's chief executive Brian Hartzer will step down in the wake of allegations the bank committed 23 million breaches of Australia's anti-money laundering laws.

Key points:
  • Mr Hartzer will depart the bank next week with a full year's $2.7 million salary, but with his unvested bonuses not paid
  • Amongst the bank's alleged breaches is a failure to adequately monitor the accounts of a convicted child sex offender who was regularly sending money to the Philippines
  • Westpac chair Lindsay Maxsted will also leave the bank in the first half of next year, while current chief financial officer Peter King takes over as acting CEO


Mr Hartzer will depart the bank on December 2, but has been given 12 months' notice and will be paid his full $2.7 million salary for the period.

However, his so-far unvested short and long-term bonuses will not be paid and he will not be eligible for any future bonuses.

Westpac was sued by the financial intelligence agency AUSTRAC, which last week applied to the Federal Court to issue fines against the bank.

Each breach could attract a civil penalty between $17 million and $21 million.

Mr Hartzer's abrupt departure follows pressure from all quarters in the wake of AUSTRAC's decision to pursue charges over the bank's deficient oversight of its anti-money laundering and terrorism financing obligations.


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