However, Morris was recovering from a nervous breakdown after receiving a death threat from a co-worker. The stress had led to the collapse of his marriage. There was also the complication of a deed of release he’d signed weeks earlier, which prevented him disparaging CBA. By that stage the bank knew he was a whistleblower and had been glad to see the back of him.
Sitting in the room, having absorbed the testimony of Morris and the others, I was dumbstruck. One hundred and one thoughts swirled around my brain, including how my bosses would react when I briefed them. I knew if I didn’t get the story right, not only would Jeff Morris be in trouble, but the newspapers would be sued by the country’s biggest and most powerful corporate giant.
It was a controversial time at Fairfax. Weeks earlier I’d been served with a subpoena from Gina Rinehart’s Hancock Prospecting company requesting my contacts, in relation to the unauthorised biography I’d written about her the previous year. I was faced with every journalist’s worst nightmare: comply with a court order to hand over documents and sources that I had promised would be kept confidential, or face a jail sentence for contempt of court. The fact that Rinehart was also the biggest shareholder in Fairfax added to the stress. And now here I was, in a stifling room, ready to do battle with CBA, with Rinehart already breathing down my neck.
Wacka suggested if the story stacked up it should come out before Federal Parliament resumed on 3 June. That way he could grill ASIC at a senate estimates committee hearing scheduled for that week. I decided the best day to run it would be Saturday 1 June, assuming I could get all my ducks in a row.
With the clock ticking, I asked a colleague at The Age, Chris Vedelago, to help investigate the story and the many allegations I’d heard. Chris was a gun commercial property writer who was keen to move into investigative journalism full time. He jumped at this opportunity.
Chris and I went line by line through the various versions of the documents CBA had sent to the Blanches and compared them to the Blanches’ original documents. Sure enough, they were alarmingly different in significant ways. We looked at Jan’s allegations and checked her passport against the timeline she’d given me, which proved she had been out of the country, as she’d said, when she supposedly signed documents.
We spoke to other victims, who corroborated everything we’d been told. We triple-checked Morris’s story, as well as everyone’s confidentiality agreements and deeds of settlements. The last thing we wanted to do was to create any more anxiety for everyone – these people had been through enough already. Morris asked us to leave out the personal ordeal he’d been through, including his nervous breakdown and his separation from his wife. We made sure that in the story he criticised only ASIC, not CBA, to ensure he didn’t breach his deed of release. Merilyn spoke on behalf of her parents. Jan managed to keep to her letter of settlement with the bank by commenting only on her personal experience, leaving us to do the rest.
In the course of our investigations, we found that at least six other CBA financial planners around the country had been banned by ASIC, including Ricky Gillespie, who’d received a lifetime ban for forging his clients’ signatures.
On 28 May, Chris and I decided it was time to lay our cards on the table and let CBA know what we had, including documents, emails and the testimonies of a whistleblower and victims. Four days out from our intended 1 June publication date, we sent CBA three pages of detailed questions, including queries about the operations and culture of Commonwealth Financial Planning, its handling of the Nguyen affair, and whether bank staff engaged in a cover-up or withheld information about potential criminal acts from ASIC or the police.
CBA’s reply was short and terse, and failed to answer any of our questions. Instead it rolled out the same old ‘bad apple’ excuse banks had used countless times before: ‘Don Nguyen was employed as a financial planner in Commonwealth Financial Planning from October 2003 until his resignation in July 2009. In 2008, following complaints from [his] clients to the Commonwealth Bank and to Australian Securities and Investments Commission (ASIC), we became concerned about the advice provided by Mr Nguyen. Those concerns were investigated and saw Mr Nguyen suspended from duty. Mr Nguyen subsequently resigned whilst under investigation.’ The bank reiterated its commitment to compensating the ‘small number’ of clients who it said ‘still’ had unresolved claims and encouraged ‘dissatisfied’ clients to contact the Financial Ombudsman Service.
Meanwhile our story was legalled, edited and re-edited. I was instructed by one of the paper’s editors to call the media person at CBA to let him know the article was going on page one and ask them if they wanted to add anything else to their brief statement. The bank declined.
The article duly appeared on page one of the 1 June edition of the Sydney Morning Herald and The Age under the headline ‘Profit above all else: how CBA lost savings and hid its tracks’.
I woke up at 6 am to the sound of my phone pinging as emails started to flood in from current and former CBA staff, along with victims of CBA and other banks. By the end of the day, Chris and I had received hundreds of emails, documents and leads. We were overwhelmed by the response.
We already had a corker of a follow-up story for the following week, featuring Joe Hockey’s mother-in-law, as well as the grilling of ASIC in the Senate by Wacka, but the responses we received immediately gave us enough material to write a bank story every day for weeks.
The story of Joe Hockey’s mother-in-law was symptomatic of so many that were reported to us. It came to us via Glenn Burge, a senior Fairfax executive, who was friends with the future treasurer’s brother-in-law Tim Babbage. Burge had been asked to help Babbage’s mother, Patricia Babbage, who had been ripped off by a CBA planner and complained. Unaware of her political connections, the bank had given her a low-ball compensation payout at a time when she was fighting bowel cancer.
Patricia Babbage’s planner, Chris Baker (who was later banned for five years by ASIC), had put her life savings into high-risk products and wiped out much of her wealth. By June 2009 her retirement savings had fallen from $200,000 to $92,000. Burge gave me a copy of the correspondence with the bank, which showed Burge had managed to increase her compensation payment from $43,286 to $67,092 by telling them who he was and where he worked. It was still far less than she had lost, but she was too ill to keep fighting, so she accepted.
When the story appeared in the Sydney Morning Herald on 5 June 2013 with the headline ‘Hockey’s mother-in-law stung by rogue financial planners’, the bank went into meltdown. A senior media spin doctor, who is still at the bank, rang me and screamed down the phone. I put the call on loudspeaker so that Chris Vedelago could listen in and respond to some of the rants and threats.
After the barrage of abuse, the PR had a go at Jeff Morris, who he described as ‘unreliable and unstable’, saying Morris had a ‘history’ and the bank had a thick file on him. He said that if we knew what he knew we wouldn’t listen to anything Morris said. Chris belted back: ‘All right, send it to us.’
Realising we weren’t buying his smear, the spin doctor hung up.
The first week of June was frenetic, as was the rest of the month. The newspaper articles Chris and I had written exposing the wrongdoings at CBA sparked massive public outrage and condemnation of the bank’s behaviour. The same day the scandal around Joe Hockey’s mother-in-law broke, ASIC was scheduled to appear in front of the Senate Estimates Committee in Canberra, a regular event where regulators front parliament to answer questions. A line of ASIC commissioners and media flacks filed into the chamber, including ASIC deputy chairman Peter Kell. After a quick opening speech by Kell on matters ASIC had been dealing with, Wacka launched straight into questions about the financial planning scandal.3
Wacka: On 30 October 2008 bank staff or whistleblowers, call them what you like, tipped off ASIC about alleged wrongdoings in the Commonwealth Financial Planning and sent a four-page fax. I believe in that fax it said there was some urgency in ASIC securing the files as
they were being cleaned up. Are you familiar with this case?
Kell: Yes. I am happy to give you a brief outline of the matters.
Wacka: Are you familiar with the fact that on 30 October 2008 you received a fax —
Kell: I am not going to comment on these issues. I would like to take the opportunity to outline what we have achieved here. It is a very significant outcome for —
Wacka: We will get to that. I only have 10 minutes. Why did it take ASIC 16 months to follow up on that fax and numerous emails from the whistleblowers and to act in relation to the Commonwealth Financial Planning files?
Kell: I am not going to comment on the exact time that was involved in —
Wacka: I can give you the exact time, if you like —
Kell: Can I respond to your question, please?
Wacka: Yes.
Kell: . . . What we achieved here was an enforceable undertaking that completely changed the way the Commonwealth Financial Planning operated . . . It has set a new benchmark for raising the standard of financial advice and has meant tens of millions of dollars in compensation for hundreds of investors.
Wacka: I disagree with you because it took you 16 months to actually act on this. When Jeff Morris, the whistleblower, in frustration went actually around to ASIC . . . that staff member said, ‘If you had not come in today, this would not have landed on my desk and nothing would have happened,’ . . . and ‘I can tell you that the report you sent in has been bouncing around here for months and months and months and nobody else knew what to do with it.’ The point I am making, Mr Kell, is that you were told of wrongdoings and 16 months later when the whistleblower actually went to your office then you acted . . .
Kell: As I just mentioned a minute ago, we have obtained tens of millions of dollars for hundreds of investors. You disagree that this is a good outcome. We will have to disagree on that . . .
Kell’s tone was dismissive and defensive, and he dodged far too many questions from both Wacka and other senators. The series of articles on ASIC’s failure to respond to the whistleblower hadn’t been missed by the committee, particularly by Labor Senator Doug Cameron, who at the time was sitting in his office watching the interchange. In outrage he stormed into the hearing and in a thick Scottish accent demanded that Kell stop demurring:
Mr Kell, you do not seem to take a breath when you are answering a question, and it really is quite annoying, I must say. You can answer these questions much more quickly. I am not telling you how to answer the questions. But I watched your responses to Senator Williams. Please do not do that to me. This is a very serious issue for ASIC. It is a serious issue for the government. All of the senators are concerned about it. Do not take me on a waltz around the merry-go-round.
Days later, on 20 June, Kell achieved a rare feat – he united the Nationals (Wacka), Greens (Christine Milne), and Labor (Cameron) to co-sponsor an inquiry into the performance of ASIC by the Senate Economics References Committee. That date will go down as a landmark moment. The ensuing Senate inquiry into ASIC and CBA would change the course of history and become the first brick in the wall for a royal commission into banking and the financial services sector.
Chapter 7
‘Banking Bad’
Out of the newspapers and onto TV
A SCANDAL LIKE THE Don Nguyen cover-up, which had a big bank as its villain, an inspiring whistleblower, a regulator that had failed, and victims Australians could relate to was a powerful combination. It built a momentum that was unstoppable. Tip-offs flooded in and the stories kept coming.
CBA had navigated its way relatively unscathed through the Storm Financial scandal. It had even weathered complaints about Bankwest when that subsidiary had foreclosed on more than one thousand small-business customers and farmers who had commercial loans valued at $8.2 billion.1 Bankwest had been acquired by CBA in October 2008 after its parent, the British HBOS Insurance and Investment Group, had collapsed, leaving UK taxpayers to fund a £17 billion bank bail-out. It was the first big deal stitched up by future CBA boss Ian Narev and at $2.1 billion, which was half Bankwest’s pre-GFC valuation, it was seen as cheap. The purchase had been approved by the ACCC (well after Allan Fels had left), and received the blessing of the Reserve Bank, APRA and the Rudd government, something that would have been difficult to achieve if it hadn’t been seen as the bail-out of a failing bank.
It also put Narev in the box seat to become the Commonwealth Bank’s CEO in 2011, when Norris retired. Narev had joined CBA in 2007 at the request of fellow New Zealander Ralph Norris, who had appointed him to run CBA’s mergers and acquisitions division. Narev was the first non-banker to run CBA: he had a background in law and management consultancy and had been a child actor in his youth. He had a keen intellect and set targets which he made sure were met. Emotion didn’t come into his decisions.
Shortly after the merger, the bank initiated an internal review of Bankwest’s loan book. The GFC was driving down property values and slowing the economy, and the recommendation of the review was to reduce the bank’s exposure to commercial property loans by $1.8 billion. Properties were revalued and any loans that were deemed impaired or high risk were terminated. CBA was brutal.
Its actions triggered a series of parliamentary inquiries, spearheaded by Wacka Williams, who had received a number of complaints from business owners and farmers who had been foreclosed despite never missing a payment. The first, in March 2012, was a Senate Economics References Committee inquiry into post-GFC banking. It received more than 150 submissions from Bankwest customers, which told stories of a bank that engineered defaults. CBA and Narev denied the allegations, but they lingered.
CBA saw such stories as a minor irritation. Its typical response was to admit nothing and deny wrongdoing, as it had done with all the other scandals. But now, as the financial planning stories raised by Morris and Wacka Williams started to gain traction, and the Senate inquiry into ASIC was underway, CBA went on the offensive. Narev, his dapper chief legal counsel David Cohen, and one of the bank’s spin doctors, who still works at the bank, demanded a meeting with a senior editor on the Sydney Morning Herald and The Age. The editor later told me that the CBA executives had accused me of being unprofessional and attempting to threaten a former manager of Nguyen’s to speak up – or else. The executives told the editor CBA would pull advertising whenever a bank story was written.
Meanwhile, CBA executives and spin doctors were briefing journalists on other papers in an attempt to disparage and diminish my stories. A business commentator at The Australian wrote: ‘Parliamentary scrutiny of regulators is by definition a good thing but this inquiry smacks of nothing more than grandstanding.’ It went on: ‘As the problems in question occurred in 2009, all the financial-planning staff involved at the CBA has gone, the management has changed and ASIC has an entirely new commission. The central character in the investigation, Don Nguyen, has gone and ASIC has helped his former clients recover about $23 million out of $36 million. That is not a bad recovery . . . Once again, the question worth asking is what is to be gained from this inquiry, given all that has changed since.’2
From that point on I was told I had to send draft copies of my stories to the editor for review, along with any questions and responses from CBA, a move designed to pressure me to stop writing about the bank. I duly sent in my drafts. To the editor’s credit, he never changed anything in the copy, but he had swallowed the same spin: it happened in the past, compensation has been made, move on. It was pressure I didn’t need.
In the face of what was going on, I decided to ask Marian Wilkinson, one of the country’s best investigative reporters, who worked at ABC’s Four Corners, whether the flagship program would be interested in doing a story about the CBA scandals.
I told Wilkinson there were numerous people willing to speak publicly, including the whistleblower. I felt the story needed to be given more attention than it was getting. She encouraged me to do it and organised a meeting with the executive producer of Four
Corners, Sue Spencer. Spencer took a big risk in deciding to go ahead. I had never done TV before, but she saw the potential of the story and had the courage to back it – and me.
In February 2014, I took leave from the Sydney Morning Herald and The Age and went to work for Four Corners in Sydney for the next seven weeks. It was a steep learning curve, but I was determined not to squander the opportunity.
‘Banking Bad’ aired on 5 May 2014.3 I watched the program nervously in the hotel room I had been camping in. My husband had flown to Sydney to share the moment with me, and I can still remember my heart almost stopping with excitement and trepidation when 8.30 pm came and host Kerry O’Brien introduced the story.
It was a forty-five-minute exposé of the human cost of conflicted remuneration and the brutal behaviour of CBA. It attracted one of Four Corners’ biggest audiences of the year, with more than one million viewers tuning in. Many cried as they watched Merilyn Swan sifting through documents on the floor of her home in an attempt to help her aging parents. They saw Jan Braund talk about the ordeal she had been put through, and admired the bravery of Jeff Morris as he took on the bank and the regulator.
Then there was Teghan Couper, the beautiful daughter of scaffolder Noel Stevens, who told the story of how her father had spent the last six months of his life fighting for justice after CBA rejected his life insurance policy two days before Christmas. Stevens had worked hard all his life but had few savings. What he did have was a water-tight life insurance policy with Westpac, a policy which he had held for seven years, which was worth almost $300,000 and was guaranteed to pay him out if he ever got sick. But in late 2010, a teller at his local CBA branch called him and asked him to see a financial planner. When Stevens went in, the financial planner advised him to switch his policy to CommInsure and he agreed. It was a win for the bank – it scored a new policy holder and an annual premium of $1,482, the teller pocketed a referral fee of $444.60, and the planner received an $815 kickback plus an ongoing annual commission. But it was a disaster for Stevens.
Banking Bad Page 10
