evan jones submission to the engineered defaults inquiry at australia's parliament!

Parliamentary Joint Committee on Corporations and Financial Services

Inquiry

The impairment of customer loans

Submission

(Dr) Evan Jones

Department of Political Economy, University of Sydney, retired.

24 July 2015

Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and

no body to be kicked?

Attributed to Edward, Baron Thurlow, British Lord Chancellor 1778-92

1. Introduction

This submission has a limited scope. I have made multiple lengthy submissions to previous

cognate inquiries, most recently to the Senate Economics Committee Post-GFC Banking Inquiry

(2012) and the same Committee’s Performance of ASIC Inquiry (2013).

The main object of this submission is to provide a background and context for the claimed events

that led to the establishment of this inquiry and its particular terms of reference, and a context for

the specific evidence provided by bank victims in their submissions.

This inquiry has been mounted with particular interest in an alleged process of constructive

default by securities devaluation – pervasive following the CBA takeover of BankWest in late

2008.

But this means to ‘constructive default’ is one of many. That there is a wide range of possibilities

developed by banks to readily dispose of SME/farmer borrowers should not detract from the

salience of investigation into one particular means.

Rather, the existence of a range of means for pursuit of a common objective confers greater

credibility on the claims made by victims of mass security devaluation – claims that, taken in

isolation, may appear to the ‘innocent bystander’ to be somewhat frivolous.

Other means of ‘constructive default’ include:

The impairment of customer loansSubmission 83

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• changing unilaterally the terms of the contract;

• verbal commitments by bank officers that are not kept;

• changing the terms of facilities, especially bill facilities, upon rollover;

• imposing less than optimal facilities in the first place, which prove to be dysfunctional;

• tying all facilities to the borrower’s overdraft, repayable at call, and thus a means to

comprehensive default;

• claiming as additional security further assets of the borrower or related parties (especially

guarantees for the latter) that have no contractual basis;

• the siphoning off of funds from borrower accounts;

• the discretionary imposition of fees on the borrower;

• the imposition of unwarranted ‘consultant’ investigations into the borrower’s business,

both at borrower expense and calculated to downgrade the borrower’s business prospects;

• the discretionary imposition of usurious ‘penalty’ interest rates;

• the abuse of farm debt mediation procedures, trapping the farm borrower into inevitable

default and foreclosure;

• predatory lending (often accompanied by inaccurate or forged documentation), involving

a built-in likelihood of borrower failure;

• the ready default of a customer with no pretext whatsoever.

Recognition of the wide range of means by which banks have engaged in ‘constructive default’

highlight that the practice is not a one-off or occasional affair (the CBA takeover of BankWest)

but is deeply entrenched in the banking sector’s modus operandi.

2. The importance of this inquiry

This inquiry is of the utmost importance.

The so-called ‘Post-GFC Banking Inquiry’ was established following pressure from the

multitude of BankWest victims that ensued immediately from the CBA takeover of BankWest

from HBOS. The public hearings heard from selective victims, and the Committee and its

Secretariat received multiple submissions from BankWest victims.

In view of this evidence and these submissions, the representatives of senior management of the

CBA and BankWest transparently dissembled to the Senate Committee members (I was present

at the hearings), thus being in contempt of the Committee’s sanctity.

In spite of this background, the report that arose from this inquiry gave a prosaic coverage of the

plight of the BankWest victims and bypassed the root causes of their victimisation – in effect,

giving equal credibility to the CBA/BankWest’s claims and adopting a sanguine (but utterly

unrealistic) view of how aggrieved borrowers might achieve justice.


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No attention was paid to the terms on which the CBA bought BankWest, and the implications for

its capital weightings, and the possible impact that these terms and implications had on CBA

management’s decision to immediately clean out the BankWest loan book.

These details have effectively been treated as commercial-in-confidence, although the takeover

was supported by the authorities (including, in my opinion, a corrupted approval from the

ACCC) as being in the public interest. Given that the authorities had conferred on the CBA the

status of a ‘para-state’ organisation, engaging in the takeover for the broader public benefit

(inhibiting destabilisation of the banking sector), the authorities had and have a responsibility to

ensure that any failure to serve the public purpose (as has occurred) be remedied to the benefit of

the victims. Any proven malpractice by the CBA following its takeover of BankWest of

necessity implicates the then authorities who approved that takeover.

In the meantime, BankWest victims get picked off one by one by the bank foreclosure industry,

legitimised by the courts. Only has come out of the court process alive, and that

from a judgement atypical given precedents (see below), and, moreover, only with a settlement

that, by construction, remains confidential and thus of no utility for the broader public purpose

whatsoever.

Shameful.

The report of the Senate Economics Committee’s ASIC inquiry similarly totally ignored the

issue of bank malpractice against SMEs and family farmers, and ASIC’s complicity in that

malpractice. Admittedly, ASIC’s complicity in the ongoing corruption within the financial

advisory sector demanded attention, but ASIC’s incompetence and complicity ranges beyond

that sub-sector.

Will this current inquiry, atypically and belatedly, get to the heart of the matter? The victims

would sincerely hope so.

It is no small irony that the small business and family farmer communities are perennially held

up as symbolising the root stock of the ‘’free’ and ‘enterprising’ Australian economy. As long as

governments continue to leave bank malpractice against these communities unchecked (not to

mention the predation from other corporate sectors), this symbolism will continue to not only

lack substance but will be contemptibly hollow.

I concluded my submission to the Senate Economics Committee’s ASIC inquiry with the

following:

The carnage wrought by major banks on small business and the family farm sectors in

this country has been widespread and persistent. Thriving or sustainable businesses,

product of risk-taking initiative, have been destroyed or stolen. Family homes have been

stolen. Couples, once independent, have become dependent on the parsimonious goodwill


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of social services. Family relationships have been destroyed or imperilled. The mental

and/or physical health of the victims has suffered, sometimes resulting in premature

death.

Recent exposure, rare, of instances of farming foreclosures on the commercial media highlight

that the carnage continues apace. I have also had emails recently from several CBA and

BankWest victims, with overnight foreclosure threatened, which highlight that CBA and

BankWest management continue unrepentant. They act as if they have the regulatory system and

the political class in their pocket.

3. The practices queried are not fanciful inventions of sore losers but are real

The claimed practices that have found their way into the terms of reference of this inquiry are not

fanciful inventions of sore losers from the cut and thrust of commercial rivalry.

The practices are real, and they are entrenched. Their extent is hidden by the poor exposure by

the media.

In particular, the character and implications of the CBA/BankWest foreclosures ought to be self-

evident. Many hundreds of BankWest borrowers were defaulted en masse, and by similar means.

The scale of the action provides prima facie evidence that something was amiss. Specific details

provided by individual defaulted BankWest borrowers in their submissions to the Post-GFC

Banking inquiry supplement the evidence and confirm one’s a priori inference. It was a scam,

and on a large scale.

In particular, the default and foreclosure of , their experiences

much publicised, are so demonstrably criminal that bells should have been ringing with the

regulators.

The police should have been sent in. All documents relevant to the takeover and to the mass

takedown should have been subpoenaed.

Instead, CBA and BankWest senior management representatives were treated deferentially at the

Post-GFC Banking inquiry hearings as if the central concern was the mysteries of the origins of

the GFC itself, the causes and possible perpetrators being too diffuse and too remote to elicit any

imperative for ready redress and punitive responses.

By default, the victims are thrown into an environment which treats their complaints in isolation

and out of context, as in the ‘sore loser’ category. Notably the court system, which, regardless of

the evidence, is heralded as an exemplary arena of non-partisanry. On the contrary.

Thus v BankWest, NSWSC 1219, 19 August 2014, opines:


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There is no logical or rational reason why SGOL [Secured Global Opportunity Limited] or the Bank for that matter would act to impair the value of their own security.

Quite. These is seemingly no logical or rational reason why these practices are pursued. But they

are, and they are not merely perennial but apparently an integral dimension of the foreclosure

process against SMEs and farmers. The judiciary chooses to remain ignorant of how banks

operate.

There is, however, a plausible explanation (or two) for the phenomenon of sale under value. Sale

under value arbitrarily manufactures a residual debt of the foreclosed borrower, and thus

facilitates pursuing bankruptcy of the aggrieved borrower, and preventing counter legal action by

the latter and appropriating all of their assets in the bargain. On some occasions, sale under value

is merely a means of handing over attractive assets at bargain price to one’s mates. The bank

then diddles the tax payer by claiming a tax deduction for manufactured bad debt losses.

4. Other examples of comparable default and foreclosure processes

Some other examples of comparable default and foreclosure processes beyond the

CBA/BankWest 2008-09 phenomenon are offered here.

This section is reproduced from an unpublished document by and Evan Jones,

‘Shadow Ledgers and the Default Process in the Australian Banking Sector’, April 2010.

Supportive documentation is referenced in accompanying footnotes.

The default process can be utilised as a vehicle for sale ‘under value’ of a borrower’s (or third

party guarantor’s) assets – a perennial practice.

In the NAB foreclosure of the ,1 a 1996 registered

valuer valuation put the expected value of the childcare complex (subject to completion of an

addition) at over $2 million. After foreclosure, the obtained a contract of sale for $1.7

million which the receivers, acting for the NAB, refused to accept. The NAB sold the complex

by closed tender for $1,180,000 in 2000.

In the case of a mid-1990s Commonwealth Bank foreclosure of businesses owned by

,2 the CBA sold the borrower’s assets for between $720-730,000, yet had

obtained a registered valuer’s appraisal which placed value on the business of $10.8 million.3

With NAB credit, and induced by a corrupt lending manager, the (company

) bought a strawberry farm outside Toowoomba in 1984 and were defaulted a year

1 The story is summarised in Evan Jones, ‘The Banks and Small Business Borrowers: case studies of adversity’, Working Papers, Political Economy Department, Economics & Political Science, University of Sydney, April 2004, p.11. 2 Medical Practitioner created and operated three emergency medical centres attached to hospitals in Cairns, Brisbane and Sydney. 3 Report of , FINH, 22 December 2003.


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later.4 Successive valuations were corruptly dramatically inflated for purposes of the banking

hierarchy approving the loan, and give no indication of the worth of the property. The 2-acre

property was sold in 1989 for $165,000. The sale price was significantly under value – not for

farming purposes, but for the ensuing close subdivision as the property was brought within the

expanding Toowoomba boundaries.5

The NAB foreclosed on the restaurant/brewery family business (company ) at

Albury Wodonga in 2000, established at an approximate cost of $3.5 million. In 1998 the NAB

placed a market value (for lending purposes) on the assets of $2.5 million. With the business not

performing up to expectations, the NAB revalued the security down to $2 million

approximately 12 months later, recording that this lower figure was arrived at on a ‘fire sale’

basis. Subsequently the NAB’s appointed receiver/manager, , sold the land

and improvements and restaurant infrastructure in March 2001 for $1,061,000.6 7

The NAB foreclosed on the brickworks (company ) at Bundaberg

in 1999. The brickworks and related properties were sold in March 2000 for $3.132 million.8 9 It

appears that the brickworks itself, on a 13.67 hectare site, comprised a mere $400,000 of that

aggregated sale figure. Yet the 1996-97 financial accounts (the last audited accounts) have

‘property, plant and equipment’ of the brickworks valued at just under $27.5 million. WBB

assets included a high quality clay pit that provided a ‘comparative advantage’ for WBB bricks.

The lender can also facilitate sale under value by arbitrarily devaluing its customer securities

prior to sale and providing a veneer of legitimacy to the ultimate sale. Of course, security

valuation involves an element of discretion, subject to variation according to market conditions,

but some devaluation cases lack rational explanation.

In the 1998 NAB foreclosure of the Queensland grazing property,10 NAB

records indicate an initial 1992 market value for lending purposes on its sole broadacre security

at $2,000,000. In the space of four years from 1996, the bank decreased the market value to

4 The t story is summarised in Jones, op. cit., p.18. 5 The property sold under value was purchased by a party knowledgeable of the dispute. 6 The receiver declined to attempt the best outcome for the by selling the complex as an ongoing business. The brewery equipment, costing $750,000, was discarded. An NAB file note, dated 18 January 2001, records discussion between a bank officer and a principal as to the implications of sale of the assets at $1.5 million. The note acknowledges that sale at this price would result in a net surplus to the account. 7 The purchaser at auction subsequently leased the property to another party (on 10-year terms for $1 million), who in turn exchanged the lease for one on a Queensland grazing property. The purchaser’s lease sum was not significantly different to the price paid at auction. The sale price has allowed another party to henceforth enjoy rental income on a property in which he has no capital invested. 8 , NAB solicitors, to , 4 April 2000. 9 The was purchased by a consortium of individuals intimately associated with the brickworks itself, the ownership devolving to the firm’s solicitor and one of the brickwork’s regional agents. 10 The story is summarised in Jones, op. cit., p.12.


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$1,750,000, then to $1,500,000, to $1,400,000, to $1,260,000, then to $850,000, eventually

selling its security for $770,000 after claiming $30,000 for selling costs.11

The process can further be used to appropriate and hive off part of sale proceeds. In the

case, the bulk of the (under value) sale proceeds were not conveyed to the accounts.

Given that equipment assets were sold at net $704,000,12 an amount of only $34,452.26,

representing roughly 5% of those proceeds, appears on the borrower’s shadow ledger record

(labeled ‘Receiver’s Distribution’).13 14

Driving a former customer into bankruptcy prevents that customer from taking legal action

against the lender (for the critical subsequent 3-year period). Following the NAB’s sale of the

property in September 1989, the served a writ against the bank (and the

former owner) on 22 December. Immediately in the New Year, on 17 January, the NAB

petitioned for bankruptcy of the , which was successful and which vitiated the

writ. Bankruptcy status can be readily pursued if the customer is left with a residual

debt after sale and realisation of assets. Sale of assets under value (or recording of less than sale

value) is a ready vehicle for ensuring that a residual debt appears on the shadow ledger record.15

The operation is wholly under the control of the bank. The receiver/manager, regardless of who

instigated the appointment, works in conjunction with the bank and not the customer. The bank’s

leverage is ironically enhanced because the courts hold to the risible fiction that the

receiver/manager is an agent of the borrower while acknowledging de facto mortgagee control

(c/f v CBA, QCA 241, 19 July 1996; NAB v FCA 244, 12 March 2002).

Any discretionary or unconscionable process undertaken by the receiver/manager will be

supported or condoned by the bank, yet held to be the ultimate responsibility of the borrower.

5. The background, context and analysis

i. The long history of bank malpractice and official indifference

11 The valuations for $1.5 million (December 1997), $1.26 million (July 2000) and $850,000 (March 2001) were performed by . Discovered NAB document (annotated D1-48, dated 14 April 1998) provides strong evidence that the devaluation process was contrived. The finance newsletter The Sheet, dated 18 February 2008, included a segment titled ‘Property valuers pressured into inflating prices’. The author noted: ‘Full valuation property valuers are routinely pressured by lenders to inflate the value of the property to aid in the bank approving the loan. … , CEO of , agrees “Yes there are, of course”, when asked if any of his valuers are pressured. “Valuers are pressured quite routinely”.’ An inference that the reverse process occurs when a bank wishes to realise on a customer’s assets is not implausible. 12 Letters from receiver to CBA personnel, dated 7 August, 2 October & 16 October 1996. 13 Ref: , Bills Matured Account, page 12, date of issue 1 May 1999. 14 ‘The ‘shadow ledger’ was a parallel accounting record system established by (at least) the CBA and the NAB following default of a customer, and on which all post-default income and expenses (including any discretionary charges imposed by the bank) for the customer were registered. Shadow ledger account statements were withheld from the customer, leaving the latter in complete ignorance of the state of their ‘indebtedness’. 15 See n.6 regarding the sale of the family brewery/restaurant.


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The plausibility of the practices pursued by the CBA/BankWest post-GFC is enhanced when one

confronts the long history of bank malpractice discernible from the 1980s, following

comprehensive and uncritical deregulation of the finance sector.

The NAB’s corrupt treatment of

(dating from 1984) is Exhibit A for the new regime.

The CBA’s corrupt treatment of

(dating from 1985), and this while the CBA was publically-owned, is Exhibit B for the new

regime.

System-wide, indicative of the new regime is the foreign currency loan debacle – originated in

intemperance and hubris, driven by incompetence, and culminating in the universal attribution of

blame for the calamity to the victims.

Democrat Senator Paul McLean (spokesperson for small business) became the accidental focal

point for bank victim complaints. For his pains he was vilified by Senators from all three major

Parties, and driven out of Parliament. Shoot the messenger.

I made a submission to the Post-GFC Banking inquiry. Almost 11,000 words in length, its object

was to provide a background to the CBA mass takedown of BankWest borrowers – to highlight

that this particular action was hardly a curiosity to be explained away but rather was consistent

with a decades-long history of CBA malpractice against its customers.

I was duly informed by the Senate Economics Committee Secretariat (15 May 2012) that:

Due to the numerous adverse reflections and serious accusations it contained, the

Committee does not wish to make your submission public at this stage. Your submission

will be listed as ‘confidential’ on the Committee's webpage and the secretariat will not be

providing your submission to anyone on request.

‘Adverse reflections and serious accusations’ indeed. The inquiry wouldn’t have been instigated

if there had not been adverse reflections and serious accusations to be aired. Was this to be

another investigation (as was the 1991 Martin banking inquiry) that was set up strategically to

head off criticisms of the sector’s failings at the pass? The dilution of the inquiry’s terms of

reference points to this likelihood.

Thus my submission to the Post-GFC banking inquiry was held in camera (designated no.10),

my name was withheld, and the contents of my submission ignored. Many of my multiple

submissions to Parliamentary inquiries have suffered the same fate. Shoot the messenger.

Honourable Members and Senators will continue to have their energies diverted into ephemeral

inquiries on non-ephemeral subjects of significant social import because governments of all

colours steadfastly refused to learn from the past.


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ii. From banker to money lender

Respected commentators on the evolution of the financial sector post-deregulation have failed to

highlight a transformation of its character. The banks have become money lenders, with adverse

implications for professionalism and integrity – attributes implicitly associated with the label of

‘banker’.

Terms of Reference 1 f., g. & i. presuppose the commitment of the bank lender to cooperation

and collaboration for long term mutual benefit. That is an erroneous supposition.

Customary SME/farmer lending is on the basis of security over customer assets, perennially

including the family home and all moneys personal guarantees. (Thus default and foreclosure has

calamitous consequences.)

On such terms, the bank saves resources by declining to invest in adequate bank officer numbers,

in bank officer training, and in ongoing productive collaboration. These are expensive

commitments, preferably avoided. Add the development of the convention by which lending

officer remuneration and status are linked to the size of the loan book, and there is an inbuilt

tendency to neglect the long term prospects of the customer.

The CBA, then under worked to dismantle and abolish the Commonwealth

Development Bank, the specialist SME/farmer subsidiary, precisely because it did not generate

‘commercial’ returns on capital.

Profit mass and return on capital (preferably 15% plus) is the name of the game; customer

success is an optional extra.

iii. The banking sector is structurally unsuited to cater to SME/farmer needs

It is important to acknowledge that the current dominant banks, ‘allfinanz’ in their breadth of

interests, have their origins as specialist trading banks. That is, they were institutions with a

niche role – gathering short term deposits and issuing short term loans (the overdraft).

Although these banks’ scope has evolved from specialist to comprehensive, their cultures have

not evolved commensurately. They have never learned the art of successful medium to long term

lending, crucial for the SME/farmer sectors (the farmer sector in particular, with its dramatic

instability of conditions).

Facilities offered to (imposed on) the SME/farmer sectors remain mostly short term (bank

liabilities remain mostly short term). The bill facility, in particular, was introduced in the 1970s –

supposedly to give the borrower more flexibility and more control. On the contrary. The typical

SME/farmer borrower remains ill-informed on the character of the bill facility. Banks use this

ignorance to manipulate customer bill facilities to their own advantage.


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As I have argued elsewhere, the typical range of facilities available to the SME/farmer sectors

are not fit for purpose. This problem, of course, is structurally determined, requiring complex

solutions and with inevitable state involvement.

The problem in 1930s Britain was labelled ‘the Macmillan gap’, which subsequently acquired

the status of a generic label. Pragmatic and partial means were developed to offset the ‘gap’ in

the ensuing years, especially early Post-World War II. Financial deregulation has swept these

means away in many countries, in Australia comprehensively – courtesy of the bible of the

deregulators, the 1981 Campbell Report, driven by ideology and vested interests.

The ‘Macmillan gap’ (including the ‘sexy’ end typically labelled ‘venture capital’) remains

entrenched in Australia.

iv. Bank malpractice and its collaborators

Bank malpractice depends for its success on unconscionability across cognate sectors – the legal

profession, valuers, receivers, some real estate agents. Indeed, the lack of integrity in the banking

sector fosters the lack of integrity in these cognate sectors, not least because of the bank funding

drip. The more do these ‘professions’ depend upon their income from banking sources, the more

does an absence of integrity germinate and thrive.

The 2010 Senate Economics Committee Inquiry into Liquidators and Administrators examined

one of these professions, but its report appears to have been ‘water of a duck’s back’.

Bank victims are caught in this cesspool of corruption. And nobody cares.

v. Bank malpractice and the courts

Senator Paul McLean’s honourable Senatorial foes opined that the most suitable location for the

resolution of bank-customer disputes was the courts. Ditto Treasury Deputy Secretary

at the Senate Economics Committee’s Post-GFC Banking inquiry hearings, Canberra, 8

August 2012. Ditto ASIC in its formulaic replies to bank victims, replies in which its staff note

that ASIC wants nothing to do with them.

All these proselytisers for the magnificent competence and impartiality of the court system are

quite wrong. To be kind, one would have to infer that few to none among them have cared to

examine samples of bank litigation.

Court transcripts, of course, are not publically available.

Moreover, perennially judgements themselves are not publically available – even in the age of

State and Federal Court websites and of Austlii. The Trial hearing judgements against the

(FCA Qld G65 of 1986, 29 September 1988) and (as below) are in this

category. Ditto the summary judgement awarded against the (QSC 7759 of 2000, 22


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March 2001). I would argue that the non-availability of these judgements, all three appalling, is

not an oversight.

At worst, some judges appear to be complicit with bank malpractice in deciding for the bank in

litigation. Perhaps sometimes subconsciously – after all, a not inconsiderable numbers of judges

have been elevated to the bench after acting for banks. That, after all, is where the money is. The

judge presiding over recent litigation between BankWest and a high profile CBA/BankWest

victim had himself previously acted as energetic counsel for the very same Commonwealth

Bank. In his latter day incarnation, he gave judgement for the bank.

Worse, some bank litigation judgements are so manifestly unsavoury that one infers that the

complicity would have to be conscious. The absence of a register for judicial pecuniary interests

facilitates potential complicity of this nature.

At best, the judiciary appears to be poorly educated. Legal education is steeped in the law of

contract under common law, and the judiciary appears to be attracted to it as to a religion. The

borrower had borrowed funds from the bank lender; the borrower owes those funds, plus interest

and fees, to the bank lender, end of story. Summary judgement awarded to the bank, costs

awarded against the borrower.

An early representative of this mindset is from v CBA, NSWSC 1544/89, 19

April 1989. But a contemporary and exceedingly relevant Exhibit A for this comfortable

mentality is the judgement of BankWest v , NSWSC 456, 2 May 2012.

Fortunately for , and rarely, the NSW Court of Appeal overturned the Trial

judgement ( v BankWest, NSWCA 71, 11 April 2013). Said the three judges, the bank

has a case to answer. And thus followed BankWest’s settlement with , the bank declining

to expose its dirty laundry to the public gaze of hundreds of other contemporary BankWest

victims.

had earlier applied the same rote learning in a summary judgement for the same

bank, the CBA, in CBA v , NSWSC 41, 31 January 2012.

Few judges bother to augment their impoverished tertiary training with some self-education

regarding the nature of the bank – SME/farmer borrower relationship. Such a relationship is

complex but, above all, it is fundamentally asymmetric. The power and discretion of the lender

over the borrower is significant.

I have tried, as a layman, to outline some elements of this asymmetric relationship in a March

2009 submission to the Senate Standing Committee on Legal and Constitutional Affairs’ inquiry

into Australia’s Judicial System. That submission was held in camera and its contents ignored.


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Given that the legal profession regulates itself, any enlightened reform in the near future in the

domain under discussion is a dim prospect. But it is imperative that the profound flaw in this

supposed bedrock of justice be acknowledged by the authorities.

vi. Regulatory capture

My 7,000 word submission to the Senate Economics Committee ASIC inquiry (no.295,

publically accessible) emphasised the scale and depth of regulatory inaction.

ASIC has possessed a legislative mandate to act against business to business unconscionable

conduct since 2002 (s12 of the ASIC Act). Not only has ASIC never utilised this section in

action against a bank predator against SMEs/farmers, ASIC has consistently claimed to victims

that it has no such legislated power.

ASIC excels in complicity with bank predation through conscientious inaction. Worse, the

Financial Ombudsman Service excels in complicity with bank predation through conscious

collaboration. FOS is criminally complicit with bank predation.

As noted above, the report of the ASIC inquiry ignored the dimension of bank malpractice

against SMEs/farmers. This meant a conscientious neglect of my and comparable submissions on

this dimension, in spite of the substantive evidence from victims in this dimension, including

evidence regarding ASIC’s wilful complicity in bank malpractice by its inaction.

vii. The Corporations Act, etc., and ultimate responsibility for malpractice

Terms of Reference 2 d. states: “the adequacy of the legal obligations on lenders and external

administrators (including s420A of the Corporations Act 2001) to obtain fair market value for

the forced sale of property”.

Clearly, the situation remains transparently inadequate. What little law exists, as in s420A, is

honoured in the breach. Receivers do the banks’ bidding, and appropriate more than ‘a little on

the side’ at their own discretion. ASIC is conscientiously asleep on the job, giving the green light

to receiver/liquidator predation.

The Commonwealth Criminal Code Act 1995 is currently 384 pages long. The component

devoted to corporate crime (parts 2.4 (s12) and 2.5 (s13)) is a mere 6 pages long. Therein, the

burden of proof of corporate crime is set at an impossibly high bar. These pages are a window-

dressing insertion of no substantive import.

The Commonwealth Criminal Code Act has been ‘blown up’ recently with amendments formally

designed to combat ‘terrorism’. Measures to combat corporate terrorism are non-existent because

the phenomenon is not recognised in respectable circles.


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The Corporations Act currently sits at over 2800 pages. Remarkably, there appears to be almost

no coverage in all those pages of corporate fraud. Save for the extensive Chapter 5 (incorporating

s420) that covers ‘External Administration’.

The Act covers company officer fraud against the company itself, but it does not recognise

company / company officer fraud against the company’s clients.

As noted above, and as elaborated in my submission to the ASIC inquiry, regulatory action

against business to business unconscionable conduct is mandated in the ASIC Act. This section

was copied from the comparable provision in the then Trade Practices Act (s51AC), in turn a

product of 1998 legislation arising from the 1997 Finding a Balance Parliamentary inquiry

report. As also noted above, the section remains under wraps, unused.

Thus there is relevant legislation that is unused, ignored. But there remains a cavernous hole with

respect to the pursuit of corporate crime, as evidenced by the vacuum in the Corporations Act.

Significant conceptual hurdles have long hampered progress in honing in on ‘corporate criminal

liability’. The pragmatic granting of joint stock corporations the status of a person at law has

accorded them massive privileges but without commensurate obligations. As legal academic

Eilis Ferran notes simply: “A company is a legal person but it can only act through natural

persons, hence the need for rules governing the attribution to companies of the acts and states of

mind of individuals.” Thus the pursuit of ‘the directing mind and will’, with meagre long term

results.

As a non-lawyer, I cannot grasp the nuances of the long philosophical contortions on this matter,

But I can readily recognise the adverse implications for the lack of an adequate solution.

In Canada, and to a lesser extent in Great Britain, judgements and legal analysis have recently

facilitated some progress in this domain. Not so in Australia, where there resides a near vacuum

on the issue (in spite of the Esso Longford gas explosion disaster and the CSR and James Hardie

asbestos saga).

In the meantime, bank senior management remain totally immune to the crimes perpetrated by

the companies over which they preside. Where does the buck stop? The hierarchy of

remunerations is evidently structured under the presumption that those at the top are most

responsible for the ‘successes’ (i.e. profit-wise) of the company. Are then those at the top not

most responsible for the company’s moral failures?

Some bank crimes against SME/farmer borrowers appear to originate at the top. Many bank

crimes against such clients originate (whether through initial incompetence, hubris or malintent)

under the initiative of individual lending officers. But the latter are perennially condoned

‘upstairs’ and given the full weight of the bank’s resources. I am not aware of a single instance to

the contrary.


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Even criminal conspiracies involving bank officers as part of a larger consortium are ultimately

endorsed by senior management with the victims pursued by the full force of the bank’s

resources – vide the (CBA, Victoria), the scam

(NAB, NSW), and the scam involving a couple of individuals (one always inside a bank) and

involving one , gaoled for property financing scams (the personnel moving

between several banks, latterly Westpac, Queensland).

has been a victim of the scam, with the court handing the NAB

her family home (NAB v NSWSC 911, 17 August 2011). A hapless minor

Queensland property developer is currently being pursued by Westpac for a scam perpetrated by

others.

The appropriation of responsibility by the bank as corporate entity for all failures and

unconscionable or fraudulent actions by individual bank officers ( as

exemplar), regardless of seniority, is on full display when the bank litigates against the borrower

for a breakdown of the ‘relationship’ attributable to the bank itself.

This is the state of play at the moment. It has been this way for 30 years. Criminality is

entrenched across the banking sector. Senior management holds responsibility for this

criminality? When are they going to be made accountable and pursued, personally, for these

crimes?

The viability of the small business and family farmer sectors in Australia depends upon

governments and the relevant federal bureaucracies and regulators belatedly confronting the

character of the crisis and taking steps to ameliorate it.


evan jones submission to the engineered defaults inquiry at australia's parliament!

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