The Parties and the election. The return of the Morrison federal government is a disaster for all bank victims. Labor, with Shadow Minister for Financial Services Clare O’Neil at the helm, readily absorbed the essential story re small business and farmer victims at its regional forums. Evan Jones
[nb. This article is 7000 words in length].
These were geared up precisely to give previously invisible victims a voice. A summary of Labor’s findings was submitted in response (sub no. 979) to the Royal Commission’s Interim Report. This brief report by itself puts the expensive Royal Commission to shame.
Labor’s response (impossible to find on the web) to Hayne’s Final Report recommendations was stronger than the government’s, but its framework took Hayne’s channelled recommendations as the central focus from which to proceed. For example, Labor has yet to confront the profound uselessness of the regulators (Hayne criticises them but offers no solutions) – that dysfunctional arena needing more than homilies or simply throwing more money at the miscreants.
Beyond Hayne’s narrow boundaries, Labor was offering, if elected to office, a free legal advice service, litigation assistance and a bank victim compensation package. These offerings were inadequately thought through and patchy in scale, but at least they acknowledge (invisible to Hayne) that the legal and judicial arenas remain hopelessly prejudiced against the facilitation of just outcomes to victims.
Disappointingly, it is instructive that Labor, with a large-scale policy agenda offered to voters, did not have as integral in that agenda the tackling of the corruption in the banking sector and in the bodies on the bank teat.
And no doubt Labor in office would have faced pressure to water down or reneg on its promises. There is the ever-present powerful bank lobby, as Labor is also a recipient of banking sector donations.
Some bank victims remained cynical regarding the strength of Labor’s commitment and voted for minor Parties on 18 May. But myriad bank victims saw a Labor victory as the best hope for their cause.
With the Coalition, the mob that denied a Royal Commission 26 times, there is nothing substantive on offer. This is a decidedly pro-bank coalition. Queensland Senator Barry O’Sullivan, renegade on banking matters, was declared persona non grata after he refused Prime Minister Turnbull’s demand that he back down on his pressure for a Royal Commission. O’Sullivan was subsequently deposed from his winnable second place on the Queensland LNP Senate ticket. He will be gone by July.
Investors sense a difference. The Sun-Herald reports:
'The shock Federal election result was bery good news for the bank sector. It has already reacted, with a sharp rise in the share prices of all four of the big four banks, as well as Macquarie and regional banks.'
The Coalition has previously introduced a range of pragmatic measures, mostly to divert from the pressure to establish a banking Royal Commission. Perhaps the only measure of significance is the establishment of the Australian Small Business and Family Enterprise Ombudsman in early 2016.
No doubt the government presumed that the appointment of Liberal Party functionary Kate Carnell would keep the edifice under control, but Carnell quickly proved her independence in her role as Ombudsman. She has been an outspoken champion of SMEs, with genuine concern for their adverse experiences. However, it has no formal powers for prosecutorial action and its brief is broad. SME bank victims have been given support and publicity from ASBFEO but in general they have to look elsewhere for hopes of ultimate relief.
The gigantic lacunae in the Royal Commission coverage
Bank business borrower victims also lost their bet on the Royal Commission. The Hayne Royal Commission did a sterling job in sidelining investigation into the banking activities of the banks (save for cursory treatment of retail banking). As the FSRC webpage notes up front, 61% of the 10,323 submissions referred to banking matters. This striking marginalisation could hardly have been an accident. This crucial arena is now totally off the media radar.
The Royal Commission honed in on finance sector malpractice in the ‘wealth management’ areas. But the media (Fairfax, in particular, with its long term exposure of CBA corruption) had already covered much of this domain. It was thus natural for the media to complement the Royal Commission fixation on the fees for no service re financial advice. This arena continues to be drawn on for its ‘shock horror’ effect. But, sorry, there is a raft of bank victims whose losses are vastly more significant than those (including the dead) who paid fees for no service.
Criticism of Hayne has come from an unlikely source. Finance academic Kevin Davis has recently published an article in an academic outlet that discounts the significance of the Hayne Royal Commission (‘The Hayne Royal Commission and financial sector misbehaviour: Lasting change or temporary fix?’, Economic & Labour Relations Review, 30(2), June 2019). Davis lets Hayne partly off the hook in attributing his failings to the Commission’s Terms of References and the short hearings time span. However Davis highlights that Hayne has made recommendations to improve sectoral governance but without advice on how to implement and enforce those recommendations. More fundamentally, Davis notes that Hayne has not addressed fundamental structural failings in the system (hence the ‘temporary fix’). Davis’ claims are apt, and his status in mainstream circles adds a respectable voice to the criticism.
The Hayne bandwagon treated the SME/farmer arenas not merely cursorily, but with disdain. I have summarised that story here. The mere 10 pages devoted to small business (Vol. 1, Ch.2.5) is not merely derisory, it is puerile. It is an embarrassment. And nobody in authority or in the media has pointed this out. (The Davis commentary also ignores the banking credit domain.)
In particular, white-washing the CBA takedown of Bankwest borrowers
Most fundamentally, we have to keep returning to the Royal Commission’s risible treatment of the many hundreds of commercial Bankwest borrowers foreclosed by the CBA after it purchased Bankwest from HBOS in December 2008 (FSRC Interim Report, Ch.5; FSRC Final Report, Vol.1, p.117).
The RC dealt with this affair in Round 3, beginning 21 May 2018. The hearings transcripts are here. I covered this issue briefly at the time, here, and provided extensive background in a 4-part series in 2012, here.
Counsel Assisting Hodge led the charge from the opening moment of the Round (highly suspicious in itself). His script might very well have been written by the CBA itself. Hodge concludes his claim that the foreclosed borrowers were deservedly dead meat thus (p.2013):
‘MR HODGE: Thank you, Commissioner. In summary, we have not seen any primary evidence from primary sources that support these ulterior motive theories, and their logic appears to be premised on misconceptions of the facts to which we have referred. For that reason, they will not be pursued as part of the case studies. Can we add one final observation: there is a hidden bias in these types of theories which is that they create a distraction from the substantive questions that are worthy of consideration. They 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, and in what circumstances such conduct might be unconscionable or below community standards. And the view that we have formed is that if we do not ask the right questions, then we cannot hope to assist you to arrive at the right answers.’
This is an over-the-top defamatory insult to the foreclosed borrowers – entirely gratuitous. What is going on here? We evidently can’t accuse Hodge himself of a ‘misconception of the facts’ given that he hasn’t bothered to check any. In particular, there was no universal drubbing of commercial property values. The CBA merely called in corrupt valuations from dodgy valuers or simply defaulted borrowers without cause.
This cleansing of the massive CBA takedown constitutes a ‘fix’ in the strategic sense. It is a conspiracy against the victims. Where is the paper trail of the CBA’s top brass’ decision process regarding interest in purchasing Bankwest, the negotiations and offer, and foreshadowed and subsequent default and foreclosure of the borrowers? The forensic investigation and publishing of such documentation is what Royal Commissions are established to perform.
Imagine if the Royal Commission into Institutional Responses to Child Sexual Abuse had replicated the Catholic Church’s line regarding the experience of the latter’s victims. All hell would have broken loose.
But no. Nobody (save the victims) queried the Commission's extraordinary cosiness with the CBA, or its soft shoe treatment of the CBA’s then Group General Counsel David Cohen. The Australian Financial Review even revelled in it (my condemnation of the AFR’s partisanry is here).
There was already a taste of the CBA’s lobbying power. The Bankwest victims lobbied for a parliamentary inquiry into their case. They got one, but the terms of reference were changed. Thus the Senate Economics Committee’s 2012‘Post-GFC Banking Inquiry’. The victim’s experience was diluted, diverted, transformed and ultimately negated by the imposed CBA agenda that the borrowers went under water because of the GFC – built into the inquiry’s title. The GFC brought down HBOS, Bankwest’s then owner. The GFC did not bring down the Bankwest borrowers. Who in government and in the Senate caved in and/or directed this pre-emptive strike in CBA’s interests? Labor was then in power, by the way, and Liberal Senator David Bushby chaired the Committee.
Having been thus marginalised, the Bankwest victims lobbied for another parliamentary inquiry. They got it (with the help of Philip Ruddock), this time called the Impairment of Customer Loans Inquiry. It should have been titled ‘Impairment of Bankwest Customer Loans’, but beggars can’t be choosers. Weighted down with all the useless hearings (compulsory) involving witnesses representing all the guilty parties (bank, valuers, regulators), that inquiry was diverted as well, if less dishonestly. More Bankwest victims were heard, ultimately to no avail.
Hence the Bankwest victims’ pressure for a Royal Commission – the Real McCoy. But optimism has been dashed again, this time more profoundly.
Hayne the Commissioner and his conservative background
One would have thought that Kenneth Hayne would have taken the opportunity to conclude his career in a blaze of glory – to decide to culminate his conservative judicial record with a courageous exposé, eminently deserved, of the banking and financial establishment. But no.
On his way to the bench, Hayne acted for commercial interests. In that domain, a pernicious judgment for which Hayne contributed to the majority was that of Gleeson CJ, in ACCC v Berbatis HCA 18, 2003. The parties are a shopping centre landlord and a tenant under family duress (taken up by the ACCC). Gleeson opined:
‘A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests.’
With that and the rest of the judgment, one wonders what moral universe the majority inhabit where ‘good conscience’ can be so defined. Does this imply that the duty not to be neglectful of self interest legally trumps not merely good conscience (as understood in common parlance) but also the laws of unconscionable conduct? The legal status quo enables a right to plunder that is unlikely to subside any time soon.
One notes in passing that the landlord / tenant relationship has been an arena of appalling abuse by landlords of tenants, the latter facing a profound structural disadvantage. Berbatis reinforces the sector’s ‘best practice’. This history is the reason why some State governments established the first Small Business Commissioners in an attempt to partially offset the imbalance of power and of legal rights. The court’s blinkers conveniently allows an ignoring of context.
I discuss the Berbatis judgment in a little more detail here. Its relevance to the bank lender – SME/farmer borrower is of course obvious.
A notable moral blemish in Hayne’s sterling career that he might have wanted to transcend was his active involvement in the High Court 4 to 3 decision of August 2004 in Ahmed Ali al-Kateb. In that case a stateless Palestinian refugee in indefinite detention, without charge, was proving impossible to deport, and the High Court established a highly contentious precedent that split the court (Gleeson CJ, Gummow J and Kirby J dissenting). Hayne’s epic contribution, as a decisive part of the majority, served to authorise and entrench the legality of ‘indefinite detention’ within the Australian judicial system. Forget fanciful jurisprudential notions of fundamental rights or fairness, and forget the realm of judicial power as a pathway for the protection of such rights in cases where parliament has otherwise decreed.
There was also Hayne’s opinion in the very complex Hindmarsh Island bridge case, in Kartinyeri v Commonwealth, HCA 22. 1998. Legal scholar George Williams (who acted for Kartinyeri) has a useful summary, especially for the layperson, here.
The Howard government overrode an impasse in the controversy surrounding the construction of a bridge with the legislation of the Hindmarsh Island Bridge Act 1997 (Cth) which expressly denied the local indigenous community protection afforded under the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth). The Kartinyeri plaintiffs argued that the ‘Bridge Act’ was unconstitutional, that the Act (quoting Williams): ‘could not be passed under the races power [section 51(xxvi) of the Constitution, amended after the 1967 referendum] because that power extends only to laws for the benefit of a particular race and cannot be used to impose a detriment on the people of a race’.
The majority determined that what the parliament passed it could also take away – ‘the power which supports a valid Act supports an Act repealing it’. Hayne (with Gummow J) went further. They argued that ‘the power could be used, as in this case, to withdraw a benefit previously granted to Aboriginal people (and thus to impose a disadvantage)’. International treaties regarding human rights (the relevance of which was argued by the dissenting Kirby J) were ignored, and the lack of a Bill of Rights in Australia was permissive. Thus did the Hindmarsh Island gets it bridge to the mainland.
A Constitutional Law academic friend notes:
The bottom line is that the race power s51(xxvi) is and always has been flawed. We are the only democratic system with a race power that authorises race discrimination Thanks to judges of the High Court appointed post the Mason era (judges like Hayne), our jurisprudence has evolved in ways that say 51(xxvi) can support special laws passed that are to the detriment of any particular race. An unsavoury precedent. It reads down agreed treaty prohibitions and laws on race discrimination while clearing the way for a rights wind back by simply passing new legislation. So much for any constitutional guarantees express or implied. The parliament can do what it wants including the passage of legislation that wind back benefits, abolishes rights and ignores accepted international standards. The deft ability of the likes of Hayne to work the noble lie of legalism, at the altar of parliamentary sovereignty, has arguably helped to entrench this trajectory.
Hayne’s one foray into banking litigation, occurring on the High Court, is also not a good look. He rejects NAB victim Matt Norman’s appeal on the basis that the Normans owed the bank money, so they had an obligation to pay it back – failing to examine the Normans’ experience or to take the opportunity to open the can of worms that is the bank/borrower contractual relationship. I have previously dealt with this affair in the context of the AFR’s woeful championing of the Hayne/Hodge trashing of Bankwest victims at the Commission.
The Hayne Royal Commission as wet dishrag
In general, the mainstream media, feeding on the hubbub, generally missed the paltry results of the Hayne performance. The Commission’s fat reports were inflated with hot air.
‘Two numbers tell the same story. One is zero and the other is 19 billion. The first is the number of prosecutions recommended by the Hayne royal commission. The second is the amount invested in a record day for bank stocks following the release of its report.
‘One is like the other: craven, predictable and depressing. The report is eviscerating, as were the hearings. Its recommendations are conservative, as was its commissioner. Those $19 billion are the gap between what punishment the market thought the banks deserved and what they got. The gap is the scale of the reform that did not happen.’
Quite. The implications of Hayne’s complicity are enormous. At the least, the status and integrity of the Royal Commission as the ultimate unimpeachable vehicle to root out wrongdoing has been besmirched.
There were those in the banks and on the government front bench who saw a Royal Commission established under their control as the least worst means of subduing the tide of protest from below. Their foresight proved correct.
From the viewpoint of the bank victims, the Hayne report is a disaster. This report has – explicitly in the CBA Bankwest case and de facto elsewhere – legitimised banking unconscionability and fraud against borrowers.
The victims’ plight is now worse than if the Royal Commission had never been established. Their victimhood has now been legitimised de facto. The only consolation for the victims’ cause in the Commission’s existence is the gross anomalies thrown up in the exposures and the Commission’s inconsistent treatment of them (for example, the CBA takeover of Bankwest compared to the ANZ takeover of Landmark).
The banks riding high again, as witnessed by ongoing denial of victim claims
The banks know what has transpired. They are having to shell out half a billion here, a billion there, on malpractice in the “wealth management” arena. This is manageable. But they are declining, across the board, to make concessions to SME/farmer victim and select mortgagor demands for acknowledged wrongdoing and for compensation. A big ask, as there are over three decades of such victims, many with big sums involved.
Submissions by this long list of people are the ones that the Commission’s staffers strategically ignored.
A very very small handful of SME/farmer and property investment victims have been promised compensation – the nature and status of the concessions to date remains unknown. Bank ‘customer advocate’ staff continue to waste victims’ time and energy.
The massive CBA Bankwest borrower takedown remains a verboten subject. That the CBA under Matt Comyn promises more of the same is reflected most of all in the appointment of David Cohen as Deputy CEO in late 2018. Cohen, as then Group General Counsel, is a central figure in the Bankwest borrowers’ takedown, and the singular figure in dissembling before numerous inquiries as to the CBA’s motivations and actions in the takedown.
Bizarrely, CEO Matt Comyn simultaneously wants to regain customer trust by reclaiming the bank’s character when it was publicly owned. Is this guy off with the fairies? Has he consulted David Murray, who led the eradication of public service from the CBA’s culture?
Beyond the Bankwest disaster, Tasmanian CBA victim Suzi Burge (also here) continues to be treated shockingly by the bank that defrauded her, in combination with a corrupt Apple-isle legal and judicial establishment and a useless and complicit FOS. Matt Comyn could start his trust-building exercise by a deep apology and a generous compensation package to her.
NAB victim Paul Buckman is representative of continuity at that bank under new management. Buckman and his partner ran a Gippsland instrument calibration firm contracting to the oil industry and others. Their accountant (with a gambling addiction) forged multiple signatures and made off with considerable business monetary reserves. The fraudster was found guilty and imprisoned. The NAB sent in the receivers and shut down the business, although it had legal culpability for glibly processing the sizeable cash cheques (suspicions anyone?) with forged signatures.
Buckman has persistently sought acknowledgement of the NAB’s guilt, boning up on legal precedent, to no avail. The NAB’s most recent ‘go away’ letter, 8 May 2019, reads thus:
‘I acknowledge you have experienced difficult times over the last 20 years relating to this. I am sorry that this continues to cause you stress and unhappiness. I address each of your concerns below.
‘Basstech fraud: NAB has taken your concerns very seriously and conducted a review of these issues. Since they occurred almost 20 years ago, we have been unable to locate any documents on our systems relating to your concerns. We have also reviewed the information you have provided but it does not support the issues you have raised. In the circumstances, NAB declines your request for compensation.’
More broadly, the twenty or so NAB victims (assisted by victim advocate Peter Brandson) that were supposed to get a sympathetic hearing via the mediation of Jeff Kennett – a comprehensive failure – remain in limbo.
Westpac has kept its own sins relatively under the radar compared to those of the CBA and NAB, which relative lack of publicity has helped that these sins remain unacknowledged and thus uncompensated. Bizarrely,
Westpac is investing considerable resources in its Customer Advocate section, headed by Adrian Ahern and Carolyn McCann, but to date nothing of substance appears to have been forthcoming for the victims.
Notable are the cases of Westpac victims farmer Colin Uebergang and developer Patrick Hayes. Both of these cases are distinguished by their criminal dimensions.
Uebergang’s story is briefly told in his pamphlet titled Banking Criminality of June 2018. Westpac was broke in 1990 and undercapitalised, given the combined impact of massive losses from 1980s intemperate lending and the pressures of Basel I for increased capital adequacy ratios introduced in 1988. Westpac, like other banks (definitely including the ANZ) decided to go after some large-scale borrowers (especially farmers with juicy assets) to help save its skin.
Westpac impaired Uebergang’s profitable operations (involving organic wheat and ti-tree oil) as bad and doubtful and then sent in corrupt receivers in 1991, the latter proceeding to destroy its operations and plunder what was left. With Uebergang gaining successful stalling operations in court, a conspiracy of Westpac, the receiver and customer Uncle Toby arranged in 1993 to have Uebergang indicted on a trumped-up charge, The associate receiver was heard to have stated in 1993: ‘It was recommended to the bank to place criminal charges on Uebergang, as this would stop him from surfacing again’. Thus a fraudulent default under CEO Stuart Fowler was extended in its criminality under CEO Bob Joss. Uebergang was gaoled by Boyce J for two years in late 1997. Westpac’s amenable law firm in the operation was the Brisbane establishment firm Feez Ruthning (known to its detractors as Fees Ruthless). His sentence was overturned unanimously on appeal five months later. Westpac consistently denied document discovery (with assistance by Queensland police who conveniently lost relevant material) and has done so to this day.
Developer Patrick Hayes was seeking accommodation for a commercial development and was introduced to Westpac in early 2007. He was forced by Westpac business bankers to form a joint venture with Mario Girardo (also here), a person he discovered some years later to have long been engaged in criminal activities with Westpac staff since 2003.
Westpac bank managers had been handing over fraudulent loans to Girardo for dodgy deals since 2004, even given Girardo’s previous unsavoury record (NAB and ANZ were also at certain periods involved in comparable scams, essentially the same personnel moving between banks). Girardo was belatedly taken down and bankrupted by Westpac but Hayes was pursued for the sins of Girardo and his insider crew, covering up Girardo’s defaults with Hayes’ assets.
Hayes’ project was foreclosed in March 2008 and Westpac sued for possession in 2009. The Queensland Supreme Court in the person of Lyons J decided against him in November 2014 after a hearing for which Hayes was absent due to an extreme medical condition. As with the experience of Uebergang, Hayes was denied document discovery, tolerated by the court, assisted by perjury by Westpac law firm solicitors (Allens, Gadens, Minter Ellisons) denying the existence of certain documents (said documents have since been obtained by Hayes).
These crimes were initiated while the squeaky-clean ex-bureaucrat David Morgan was CEO and perpetuated under the equally squeaky-clean CEO Gail Kelly. More on the sordid details associated with this case is available on Shane Dowling’s Kangaroo Court site, highlighting that (in 2014) CEO Kelly and Board Chairman Lindsay Maxsted were apprised of the fraud against Westpac (a fact that the bank denied between 2010-17).
Hayes has recently received word from Customer Advocate lawyer Adrian Ahern that Westpac is not going to take seriously his claim for compensation, unless he has yet more information to disclose. He has indeed, as Hayes is a walking encyclopaedia on his case and its context. But current Westpac senior management would already be well apprised of the nature and extent of the fraud and the culpability of particular Westpac lending managers and associates who continue to be protected by the bank.
Westpac is facing not merely a hefty payout to Hayes for both monetary and significant non-monetary losses incurred, but the fallout from the fact that the bank had failed to report such corrupt activities in its perennial breach reports to the authorities, as well as the failure to report such to the police. Heads should roll.
At Westpac’s AGM, 8 December 2017, held just after the government announced the establishment of a Royal Commission, Hartzer claimed:
‘“Banks have been a political football for too long. That’s why we have now accepted the need for a royal commission to create certainty and confidence in our banking system,” Mr Hartzer said. Mr Hartzer conceded the inquiry might find "issues" in the industry, but he hoped it would also show the bank was acting to resolve past problems, and investing in customer service.’
Westpac victims would certainly like to see Mr Hartzer’s ‘hope’ fulfilled. As Westpac’s CEO since February 2015, Brian Hartzer inherited the dirty linen, but why should he want to wear it? (The same question goes for the current CEOs of all banks.)
Then there are the regulators
ASIC, AFCA (the FOS replacement) and APRA continue with their standard practice of inaction, albeit the rhetoric promising assertive action has been enhanced.
Regarding ASIC, NAB victim Paul Buckman presumed that ASIC’s new broom under Chairman James Shipton and Deputy Chair Daniel Crennan might be more receptive to his complaints than had ASIC under previous administration.
After the loss of his business, Buckman naturally sought ASIC’s assistance. The persistent Buckman received multiple letters from ASIC telling him to go away. For example, this one dated 31 March 2003:
‘The matters you raise in your complaint appear to concern to (sic) the bank in question, and the banking industry as a whole. [Quite] The issue is, however, not a matter ASIC is able to effectively pursue as securities and financial product regulator. [Incorrect]
This is a representative ASIC response to all bank victims. Further responses to Buckman and comparable responses to other complainants are reproduced in my Business to business unconscionability – ASIC missing in action, October 2010.
A new broom at ASIC? On the contrary. Buckman received an email from ASIC, 6 May, advising that:
‘ASIC has previously considered your concerns about National Australia Bank Limited. We have written to you on numerous occasions and outlined ASIC’s position, and there is little we can add to our previous correspondence.
‘For the reasons outlined in our previous correspondence and otherwise advised, we confirm ASIC will not respond to any further correspondence or enquiries from you in relation to substantially similar concerns.’
ASIC presumed the independence of the receivers (joke) and their right to destroy the business to the benefit of its major creditor.
In an April 2003 response to the federal Treasury (to whom Buckman had complained), ASIC wrote:
‘Although Mr Buckman and others might find the situation the company was placed in unpalatable, his complaint does not identify any misconduct by the Receive and Manager. Equally, while Buckman finds NAB’s behaviour offensive, it does not offend against the Corporations Act 2001, and so there can be no possibility of ASIC intervening in this matter.’
Evidently, ASIC declined to delve too deeply into the lengthy Chapter 5 of the Corporations Act which deals with the obligations of liquidators, nor did it consider whether the Corporations Act was in urgent need of amendment. The Coalition government did recently legislate increased penalties for white collar crime, under the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018, passed on 18 February 2019. Much resources went into the development of this Bill but I frankly doubt that it will make any difference regarding fraud against bank borrowers because nobody in authority recognises such a crime. I canvassed this prospect in a submission to the consultation process preceding the Bill’s final formulation.
Behind ASIC’s ongoing refusal to respond positively to SME complainants and to act is ASIC’s ongoing refusal to acknowledge the import of s12CB & s12CC of the ASIC Act regarding ‘business to business unconscionability’, following the Act’s amendment in August 2001, operative March 2002. Forget the Corporations Act – what about ASIC’s own Act? ASIC both simultaneously (publicly) denies its obligations and (privately) admits them but claims that it’s all in the too-hard basket – an intolerable stance that I outline in my letter to ASIC chairman Shipton in early April 2019.
The new omnibus ombudsman service AFCA has yet to prove itself on SME matters. A media release in May disclosed that in the six months of its operation, AFCA had received 35,000 complaints from retail customers and small businesses. Phew! AFCA has its work cut out (what proportion of this total is from small businesses?), highlighting implicitly that the banks have weathered the Royal Commission surprisingly well!
There is the ongoing matter of a Westpac victim who had two investment properties for her retirement. By a fraudulent impairment, with corrupt property (de)valuations from January 2013 in tow (done without the victim’s knowledge and never forwarded), she was forced to sell one property quickly and under value; then, by a fraudulent default, had her second property appropriated and sold under value (dodgy real estate agent assisting). The full proceeds of the sales were retained by Westpac in both cases.
The borrower attempted to refinance with a willing lender (ANZ) in late 2012 but was promised then denied bank statements necessary to facilitate the refinancing. Westpac’s default action began at this time. It is remarkable how many times I’ve heard about a bank setting out to destroy a borrower (involving considerable use of resources) rather than let that borrower move smoothly to another lender. Few pundits who consider themselves expert on bank culture have countenanced the pervasive dimension of non-rationality that resides in that sector.
This person’s loans were initially taken out in the mid-2000s when the borrower was resident in Singapore, and they were denominated in Singapore dollars. Westpac Singapore was then assertively pushing SGD loans to expatriates – an activity staggering in its insouciance given Westpac’s disastrous foray into foreign current loans in the early 1980s and its criminal pursuit of FCL borrowers in the courts and cover-up of its responsibility in pushing such toxic loans. Westpac devoted the 1990s to expensive public relations exercises to exorcise the stench. And here is Westpac at it again, offshore, with regulatory (especially APRA) indifference.
This victim took her complaint to the then Financial Ombudsman Service, which determined that it was outside its ‘jurisdiction’ (letter, 15 June 2015) on the grounds that the loan was originally taken out in Singapore. But the bank is Westpac (incorporated in Australia and holding an Australian banking license), Westpac Singapore has no independent legal status, the loans had by then been converted to AUD with the victim’s return to Australia and it was Westpac HO that was brutally foreclosing her. The victim outlined these and other decisive details only to have FOS, via its legal counsel, ignore the substance and re-iterate crudely and brutally that is decision on jurisdiction stands. Outside FOS’ jurisdiction? The claim was a front. FOS merely used the excuse provided by Westpac itself to deny the borrower a hearing and subsequent justice.
FOS later relented and in August 2015 offered to serve as mediator for a conference between the borrower and Westpac. Westpac refused to participate. In May 2017, Westpac CEO Brian Hartzer and ‘Secured Recoveries’ officer Donna Stevens (who oversaw the fraudulent foreclosure and sale under value of the second property) were apprised of the bank’s then failure to right its past sins (an ongoing breach of the Code of Banking Practice). Westpac replied (under Stevens’ name) with a concoction of untruths, following which relevant bank personnel had to be again corrected of their serious misunderstandings.
By late 2017, the victim was in the hands of Westpac’s Customer Advocate Office, from which followed (under the name of senior review manager Sabina Rojas) another dense pack of lies, with the victim having to outline the true historical record yet again. The victim’s 21 December email noted accurately that ‘… your Customer Advocate Group is nothing but an extension of your legal department, designed to wear down customers that have disputes against the bank’. Which (as above) it remains to this day.
Through all this, Westpac continued to demand the repayment of a substantial debt that had been concocted both by dramatic incompetence and malevolence, enhanced with the usual discretionary penalty interest rates and fees.
With AFCA replacing FOS, the victim has taken the case to AFCA (where, by coincidence, the aforesaid Donna Stevens is now apparently employed). However, AFCA has been stuffing around, replicating the FOS charade in claiming that it has to seek Westpac’s opinion on the jurisdiction issue. This is a ludicrous diversion and abdication of the organisation’s authority.
AFCA’s boss David Locke has a background in the NGO sector. I would surmise that he has not confronted at close range the depth of criminality that reigns in the Australian finance sector. I emailed Locke a letter on 8 April to that effect (and didn’t receive a courtesy response). The essence of that letter deserves quoting at length:
‘If AFCA is to do its job effectively, its personnel must confront that bank corruption is not a matter of rotten apples, misadventure, accounting mishaps in complex organisations, etc. (as misleadingly argued by bank CEOs in parliamentary hearings or before the FSRC).
‘Corruption is entrenched in the system … It is an integral component of the banking sector's modus operandi. It may be difficult for outsiders, properly brought up decent individuals … to be able to comprehend such criminality and its extent, and to confront that such a thing is possible in our society formally administered under ‘the rule of law’. But the sound administration of justice is an illusion, and the media is happy to cooperate in the reproduction of that illusion. …
‘FOS and subsequently AFCA have instituted a bureaucratic process that appears to treat the contending parties (bank and customer) as equals, as in a sporting contest. However, the very essence of EDR [External Dispute Resolution] in its conception and institutionalisation constitutes an acknowledgement that the contending parties are not equal – far from it.
‘EDR, by its nature, is formally supposed to offset the asymmetry of power of bank against its customer. A priori, then, the bank has a case to answer. The vast number of complaints that come into EDR bodies are a tangible reflection of the abuse of that asymmetry of power.
‘Worse, as noted above, the banks, taking advantage of the comprehensive deregulation of the financial sector in the 1980s, have instituted a matrix of corrupt practices that regularly moves into criminality, using to full effect the intrinsic capacity for abuse that is embedded in the asymmetric banking contracts with their customers.’
AFCA is presently on trial, and long time bank victims are worn out and disgusted with dealing with complicit organisations that are formally designed to deliver them a modicum of justice.
It is noteworthy that AFCA Chair Helen Coonan has recently criticised harshly the banks (‘"arrogant indifference" to risk and "appalling" treatment of customers’) – the criticism generated by the massive number of complaints to the new authority: The report also has Coonan claiming that:
‘"black-letter law" arguments, even if legally sound and well-articulated, would not succeed if they delivered fundamentally unfair outcomes for consumers.’
Coonan is married to an ex-Supreme Court judge who has seen such ‘black-letter law’ at close hand. Some of his judgments were for the bank victim, but his sympathetic judgments ran strictly contrary to the general anti-victim stance of his peers. Coonan’s claim promises false hopes, as the law remains fundamentally a vehicle for the delivery of ‘fundamentally unfair outcomes for consumers’. The comments on the Sydney Morning Herald 1 June article that reports Coonan’s speech are appropriately overflowing with cynicism.
At least the new AFCA team has made one positive step. It has dispensed with the services of senior ombudsman Philip Field, operative this coming July. Many victims have experienced a closing down of their complaints via Field in service to the bank lender, some of whom have insisted to AFCA that it can’t be taken seriously until Field has been removed from their team.
A 2012 Post-GFC Banking Inquiry hearing as singularly instructive
A very strong flavour of the nature of the beast can be found at the first day of the hearings of the Post-GFC Banking Inquiry on 8 August 2012, The transcript is here. On a single day we hear from (among others):
Senior Treasury officials Jim Murphy and Ian Beckett who claim that bank malpractice is outside of their bailiwick (strange, as the federal Treasury is the umbrella for the entire financial system and its regulation, save for the ‘independent’ RBA), and that the court system is the right place for aggrieved bank customers to pursue their grievances.
Steven Munchenberg, then CEO of the Australian Bankers’ Association, reproducing the ABA’s mantra, cross my heart, that the banks do everything they can to nurture ailing business borrowers to save them from failure and foreclosure.
Senior ASIC officials Peter Kell and Michael Saadat bat away every SME/farmer victim story thrown at them by the Senators. Senators Eggleston and Williams raise Bankwest, but ASIC sees nothing remotely unconscionable there. Senator Williams, atypically pugnacious, brings up other brutal foreclosure accounts that victims have entrusted to him. Ditto. ASIC also casts doubt on its jurisdiction on these matters, ignoring as per usual its responsibility for unconscionable conduct (ss12), as outlined above.
Sean Butler, ex-Bankwest borrower and CBA victim. Butler’s testimony should have been an early wake-up call. The foreclosure of Butler is so transparently fraudulent that all regulators and pollies alike should have been, as a matter of priority, extrapolating regarding the large-scale Bankwest borrower takedown and its implications. A video of Butler’s presentation is available here. The background to Butler’s experience is available here.
Butler’s case is a lay down misere for an accurate designation of him as victim of fraud by both Bankwest and by Taylor Woodings, the receiver installed by Bankwest. And with significant implications for a comparable designation of the hundreds of other foreclosed Bankwest borrowers. To its credit, the ASBFEO used its authority to instigate an independent consultancy on the Taylor Woodings receivership. Albeit with a two-year delay, and with Taylor Woodings’ (now LTI Consulting) partial non-cooperation and misrepresentation, that consultancy has just delivered a decision that supports Butler’s stance – the receiver consciously denied Butler a best value sale of his profitable resort assets.
Denise Brailey, expert on low-doc and no-doc loans. Brailey outlines the large scale and systemised character of a scam targeting ‘asset rich income poor’ individuals. Brailey also highlights her attempts to get ASIC involved and ASIC’s ongoing indifference to her disclosures backed up by voluminous paperwork. In response to Senator Cameron’s suggestion that it is ‘the role of ASIC providing support for litigation and test cases’ Brailey disagrees: ‘ASIC will not enforce the law. It has decriminalised that which Parliament deemed criminal activity.’ Quite. Brailey claimed that a Royal Commission was essential to investigate the criminal paper trail. The Report of this Post-GFC Banking Inquiry discussed Brailey’s concerns but ultimately plumped to hand these ‘serious allegations’ to ASIC itself to investigate.
Six and a half years later, nothing has changed from the material and opinions divulged during this one-day hearing – the regulatory impasse has enhanced the suffering of victims.
Post cut-rate Royal Commission and post-election with the likelihood of more of the same political indifference, it would be an understatement to note that decades worth of SME and farmer bank victims (and still invisible victims of low-doc mortgage scams) have no faith whatsoever in ‘the system’. It has been a real education into how ‘the system’ works – something never taught in schools or, indeed, even remotely alluded to in universities should one be privileged to pass through an institution of ‘higher learning’.
Making a bank victim guilty
I am reminded of the two-series documentary Making a Murderer. Two people incarcerated for a murder they didn’t commit (not exceptional in the US ‘justice’ system). One incarcerated for the rest of his life, this after having been previously imprisoned then released for a wrongful conviction. The second, the first victim’s nephew, a mentally impaired teenager subject to an induced confession, is imprisoned for the bulk of his life.
The entire system of the state of Wisconsin – police, prosecutors, judiciary, the governmental apparatus – is guilty of perpetrating and covering up the crime against this twosome, committed to keeping this crime in effect in perpetuity. The full federal court of appeal in Chicago (over-riding three of its own judges who saw through the crime) has endorsed the continuing confinement of the nephew. The Supreme Court has declined to examine the case.
Where does one go when the entire system, under the rubric of ‘the rule of law’, has been corrupted root and branch?
This is the state of play in the Australian banking sector at this moment.