The
NAB and the New Public Relations Program
The stance of principled detachment of the Bracks Government’s principal
spokespersons regarding NAB activities stands in juxtaposition with the
Bracks Government’s involvement with the NAB’s activities to recover its
reputation. The significant loss by NAB’s currency dealers, exposed in
late 2003, was merely the latest of a long series of costly errors of poor
strategy, managerial incompetence and lax governance standards.
The deceit of the dealing room brought an unprecedented response from the
typically somnolent Australian Prudential Regulation Authority, leading to
intervention and circumscription of NAB’s banking activity, and the
issuance of a report highlighting the bank’s dysfunctional culture
(Australian Prudential Regulation Authority, 2004).
In
mid-2004, under new management, NAB initiated a number of public relations
programs to seek to recover its reputation. The sponsorship of the
Melbourne Commonwealth Games was the initial key plank of an ongoing
public relations exercise of substantial proportions.
NAB is Melbourne-based and integral to the Melbourne business
establishment. How could Premier Bracks not be impressed by NAB’s
civic-mindedness? Thus, in September 2004, Bracks appeared in public with
John Stewart, the NAB’s Chief Executive, evidently grateful for the NAB’s
sponsorship of the Games, itself a public relations exercise for the
Victorian Government but a perennial loss-making event
[reproduced from the
Courier-Mail,
10 September 2004]
A
month later in October, Bracks appeared in public again with NAB
management (Graeme Kraehe, Chairman, and CEO Stewart) when opening the
NAB’s new offices in the Docklands, a joint public relations exercise for
Bank and Government.
[reproduced from the
Australian,
14 October 2004]
The NAB website then claimed:
More than just a building, the new development will play an important
role in the National’s cultural change program, bringing together 3500
employees from across Melbourne under the one roof to work more
effectively and collaboratively to serve the needs of customers.
It’s much more that just real estate, it’s a statement about the new
National and its culture. It helps to embed some of our key corporate
principles including being open and honest, teamwork and collaboration,
speed and simplicity and efficient execution of our promises.
A
Premier with a sense of propriety, and properly advised by
politically-attuned advisers, might be led to consider the potential
compromises to integrity of the governmental apparatus by appearing at
public relations activities of the NAB.
In
April 2005, the NAB became the principal sponsor of the National Press
Club. Here is the NAB’s version of the event (National Australia Bank,
2005):
National Australia Bank Chief Executive, John Stewart, said the role of
Principal Sponsor enabled the National to demonstrate in a concrete way
its support for the development of active, informed community discussion
as the basis for policy-making. Mr Stewart said the Bank would work with
the National Press Club to expand such activity wherever suitable
opportunities arose. "Good journalism is an essential element of good
governance in both the political and corporate arenas," he said.
Presumably, the NAB would be aware of the public relations value-for-money
to be derived from the sponsorship, as reflected in the National Press
Club’s own view of the institution’s potential leverage (National Press
Club, n.d.):
For people who shape Australian society, the National Press Club is
Australia’s most recognised vehicle, an icon chosen for major statements
and for initiating change. Whether the issue of the day is political,
economic, corporate, diplomatic, military or societal, the National
Press Club plays a significant role in Australian Society. Companies
that share this stage and image have distinct advantages over their
competitors.
The National Press Club is an icon institution that reaches the
influencers and decision makers of Australia; be they Federal or State
Parliamentarians, political advisors, Government Heads of Departments,
diplomatic community, academia, legal and other professions, journalists
including the Federal Parliamentary Press Gallery or just thinking
Australians many of whom are leaders in their own communities.
The NAB’s Press Club sponsorship had an immediate payoff when the federal
Treasurer (the Minister presiding over banking regulation) delivered his
budget speech in May 2005 (Costello, 2005):
Ladies and gentlemen welcome to the Great Hall of Parliament House in
Canberra, and today as many of you have already heard, we welcome you to
the first National Australia Bank address. The National Australia Bank
has become the Club’s principal sponsor taking over that role from
Telstra who have had a long and productive period as our principal
supporter for 12 years, and they will remain a major supporter in a
different role which you will hear more about later in the year. But
there could hardly be a better way to start a new relationship like this
than welcoming back the Treasurer the day after the Budget, his tenth,
please welcome Peter Costello.
The NAB has more recently acquired sponsorship of the pre-season
competition of the Australian Football League, Victoria’s iconic sporting
code.
In
retrospect, the NAB’s strategic emphasis on public relations, especially
in the State of Victoria, appears to have involved resources well spent.
The
Regulators, the Law and Bank Malpractice
The response of the authorities to Ms Walter’s complaints and requests for
assistance provides a window into the regulatory infrastructure that
formally mediates the banking sector. One observes a labyrinth of
obfuscation and inaction. There is not merely an unwillingness to assist;
there is a positive lack of sympathy for the complainants, and a positive
inclination to be unhelpful.
The attitude of the authorities can be further gleaned from responses (or
non-response) to a dossier that I sent to ASIC, the ACCC and the
Australian Prudential Regulation Authority in April 2004. The dossier
documented eight cases of seeming victimisation by the National Australia
Bank, including the Walter case, and concluded with a series of questions
arising from these cases that deserved answers (Jones, 2004a).
In
terms of the letter of the law, it appears that the appropriate ‘port of
call’ for complainants is to the Australian Securities and Investments
Commission (although note the caveat below), since July 1998 the home of
unconconscionable conduct against consumers of financial services (section
12 of the ASIC Act).19
But ASIC does not act according to its recently enhanced formal
responsibilities. Regardless of the intentions of particular staff
members, the entrenched priorities of ASIC (at best) are towards capital
markets participants. In reply upon receipt of my dossier, a senior
staffer claimed (Tanzer, 2004)
To date [June 2004] we have not relied upon the unconscionable conduct
provisions in any proceedings involving credit.
That is, ASIC has been given authority to act on business to business
unconscionable conduct and has failed to act on this new authority. There
is no evidence that the unconscionability provisions have been raised from
their repose in the ensuing period since June 2004.
Other organisations, when fielding complaints, do not as a rule direct
these complainants to ASIC (see below), which would indicate that they
know that there is no point. ASIC, at least, does give the odd bank victim
the time of day. However, in the Walter case, ASIC specifically
misrepresented the formal powers that it was in the process of acquiring,
denying capacity to assist.
The ACCC tells the complainants to go away. To Ms Walter directly, the
ACCC spokesperson implied that Ms Walter’s case was potentially
actionable, but that it did not fall within a representative striking
category that have lead to the ACCC allocating scarce resources to its
examination and potential pursuit. In a belated reply to this author’s
2004 dossier sent to the ACCC20,
the spokesperson responded, with specific reference to the Walter case (Ridgway,
2005):
Withdrawal of support of a marginal business by the bank was harsh but
is unlikely to have been unconscionable in breach of 51AC. Also in 1998
the loans totally $1.38 million exceeded the 51AC threshold (which has
since increased to $3 million). …
19
See
fn. 18 and associated text.
20
The
dossier and covering letter, addressed to Chairman Graeme Samuel on 6
April 2004, was mislaid within the ACCC. The Ridgway (2005) response
followed my follow-up reminder to John Martin,
ACCC Small Business Commissioner, in January 2005 (Jones, 2005a).
The Walters represented themselves in court in an attempt to have
the agreements set aside for unconscionable conduct alleging a position of
special disadvantage. In [NAB v Walter 16 February 2004] the court found
that ‘They were, and are, intelligent, resourceful and experienced
business people who had access to independent professional legal,
financial and business advice in entering transactions designed to advance
their own interests [EJ: incorrect and misleading]. The allegation of
unconscionable conduct based on the unconscientious exploitation of
special disability or special disadvantage, or any other basis, is not
made out.’
The response from the ACCC to me thus differs from its response to Ms
Walter. This time, the Walter case is claimed to have failed the
unconscionability provisions, and on two counts. To compound the opinion
that there is nothing in the Walter case to merit the ACCC’s sympathy, the
ACCC spokesperson reproduced the slovenly judgment from the main Walter
court case.
The ACCC spokesperson reinforced the specific comments on Walter with
general comments on the need to allow ‘tough business practices or hard
bargaining’ within the bailiwick of section 51AC (Ridgway, 2005):
I would note that, in general, the factors in section 51AC allow the
court to consider whether the conduct of the stronger party was
necessary to protect that party’s legitimate business interests (refer
to section 51AC (3) and (4) (b)). So, for example, certain conduct, or a
course of conduct, might be detrimental to the interests of the small
business concerned, however if it is referable to the stronger party’s
legitimate business interests, this may indicate that the conduct is
less likely to contravene section 51AC.
A
cursory examination of sections 51AC (3) and (4) (b) of the Trade
Practices Act (and their replication within the ASIC Act) will highlight
that the ACCC spokesperson has conveniently ignored the context and
inverted the intent of the phrase ‘the protection of the legitimate
interests’ in lists of factors which the Court ‘may have regard to’ in
determining whether conduct has been unconscionable.
This vignette provides a window into the hurdles faced by bank victims
when seeking assistance from the ACCC.21
The thrust of my correspondence with the ACCC is that the evidence points
to
systemic
malpractice against small businesses and their guarantors within the
banking system (Jones, 2005a). The thrust of the ACCC spokesperson’s
response (Ridgway, 2005) is that there was no cause for action by the ACCC
on any of the cases discussed in my dossier and that the relevant sections
of the Trade Practices Act were functioning as appropriate.22
21
It
may be that the ACCC’s negativity regarding unconscionability provisions
reflects an internalisation of its failure of advocacy over Berbatis. The
ACCC initiated a case in 1998 concerning a shopping centre landlord-tenant
dispute over negotiation of a lease renewal. The case involved the usual
structural imbalance of power associated with shopping centre
landlord-tenant relations, but also the strategic leverage by the
landlords (Berbatis) of that structural power with the imposition of
unsavoury conditions on the tenants. This case provided a readily
recognisable instance of ‘hard bargaining’ at work. The case was decided
in favour of the ACCC in the Federal Court in 2000, but overturned on
appeal in 2001
(Berbatis
Holdings v ACCC, 2001), the Appeal Court decision being upheld by the High
Court in 2003 (Australian Competition & Consumer Commission v Berbatis
Holdings, 2003). The case was necessarily fought under section 51AA, which
requires a ‘special disability’, a condition that the overturning courts
decided was not available to the tenants. However, the sympathy of the
judges in the higher courts towards the preeminence of the ‘commercial
reality’ of hard bargaining highlighted a prescient threat to the
prospects of success in unconscionability litigation even under the
stronger section 51AC legislated in 1998.
22
The
ACCC spokesperson placed the cases in my dossier into three categories –
cases that did not involve unconscionable conduct; cases that may have
involved unconscionable conduct but that nevertheless occurred before the
relevant sections of the Trade Practices Act were legislated; and cases
that possibly involved fraud and therefore were appropriately addressed
not to the ACCC but to the criminal authorities. The ACCC spokesperson may
not know that the police will generally decline to act on allegations of
bank criminality; indeed, the police can often be induced to act at a
bank’s behest in pursuing the bank victim on a charge trumped up by the
bank. My reply to the ACCC spokesperson noted (Jones, 2007): ‘The
convenient by-product of such classification is that there is nothing in
my dossier that warrants any action, or indeed any thought, from the ACCC.
Indeed, your letter bears all the hallmarks of a ‘Yes Minister’ response.’
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History of Banking Fraud:
The Coming Battle
