Bank Fraud Exposed - Money out of YOUR Pocket!

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As tragic and unjust as bank fraud is and the number of people who have suffered at the hands of corrupt banking institutions and a corrupt government, the stakes are still higher and will affect even more Australians causing even more suffering. The bank frauds that have been an endemic plague for nearly a generation or more have been directed at small businesses and family farmers so that corporations and the corporate state can obtain total control of the people. Too many family farmers would make difficult the corporatization of the food and fiber industry. Before the Australian government can take control of water. food and fiber they must whittle down the number of privately held farms and businesses. Bank Fraud has been their weapon of choice against free enterprise and freedom. Tested on Australians, the project can be readily expanded to the rest of the world."

The body of evidence that concerned citizens have accumulated in the past 20 years regarding the massive criminal corruption, collusion, and cover-up of scams run by mainstream banks in Australia can now expose much of the “whole story”. We can show how bank officers perjured (12) themselves in court cases and to the Parliamentary Banking Inquiry in an effort to pervert the course of justice and cover up motives and actions in fraudulently marketing un-hedged “Swiss Franc” loans. We can show how government officials have violated their oaths of office, betrayed their sworn duty to Australians, and broke the laws they were supposed to uphold. These laws do not have a statute of limitations and it can be shown that many bank and government officials are guilty of felonies and misdemeanors. It can be shown that many lawyers, solicitors, barristers, judges, and justices have become accessories after the fact to systemic bank fraud. This has continued until the present in  many forms.

Senator McLean quoted Dr Henry Stalder, a director of the Swiss Banking Corporation, who stated, “senior Australian bank officers who manipulated Australian business people and farmers into Swiss foreign bank loans between 1984 and 1986 are little more than criminals and should be in gaol”. Hansard Senate 11 December 1990 page 5468 

“...nobody in his right mind, after being told that the possible loss was unlimited, that the necessary implementation of safeguards would be limited in their effect and would require continuous attention, which the Bank refused to provide, would contemplate making the borrowing.” Justice Andrew Rogers comment on Foreign Currency Loans in the Mehta v CBA Judgment27/6/1990

In a scheme to circumvent Reserve Bank restrictions and increase bank profits by avoiding hundreds of millions of dollars in Australian tax (16), most major Australian banks decided to sell unhedged foreign currency loans (FCL’s) to small business people and farmers. They nominally utilised their overseas branches in tax havens (such as Singapore) to absorb profits, and variously attributed expenses as tax deductions(16) to their Australian branches.

Once loans were brought onshore the banks wrote off the inflated “bad debts” at Australian tax rates rather than the much lower tax haven rates, further increasing bank profits at taxpayers expense (16).

This tax issue was raised with the Australian Tax Office (16), which then made an arrangement with the banks that recovered little of the lost revenue and incurred no penalties (16). Obviously, despite the findings of the Australian Senate Inquiry, preferential treatment IS given to big business in Australia.

The Banks knew the Australian dollar had a long history of falling in relation to the Swiss Franc (CHF). To sell Unhedged Foreign Currency Loans (FCL’s) in Swiss Francs (CHF) most major Australian Banks deceptively marketed these as “cheap loans” (3) to unsophisticated borrowers (18). While borrowers received Australian dollars ($A), they were contracted to paying both interest and capital in a foreign currency with exchange rates set by the banks. These unhedged loans were inherently defective in that they were sold without any safeguards (7) to unsophisticated borrowers (1) many of whom knew nothing of hedging, could not afford domestic interest rates, the cost of hedging, nor exchange losses, and who lacked the knowledge and resources to manage such a product.

Bank solicitors and some judges wrongly referred to FCL’s as “a gamble”. Unlike gamblers borrowers unknowingly took an unlimited risk and stood to lose much more than their investment. Banks found that if potential borrowers were told of these risks they refused to take the loans (5)

Termed by banks “super profit” products, these loans doubled borrowers’ exposure and when brought onshore, in the 1990’s, banks charged penalty rates of 22% or more, on then greatly inflated debts.

Bank documents show that, in their eagerness for profit, the banks deliberately targeted unsophisticated borrowers (1) for unhedged Foreign Currency Loans (FCL’s) in Swiss Francs (CHF). The Banks deceptively marketed these as “cheap loans” (3) to unsophisticated borrowers. Banks knew that if borrowers were told the full facts borrowers would reject the loans (5). Bank documents (4) show that the real risks and ramifications of taking a Foreign Currency Loan were inadequately explained to farmers, small businessmen and their partners. Banks gave scant consideration to ethical issues or the reliance that unsophisticated borrowers placed upon their banks advice. Nor did they consider their own lack of expertise and facilities (2) to economically safeguard their borrowers to ensure their debts did not explode if the currency dropped suddenly.

Hedging was not available to all borrowers (11), nor was it economically viable for many borrowers and it was actively discouraged (6) by the banks so they could sell their product. In many cases mortgage documents were signed in their homes by the partners without either explanation or witness.

Withholding tax was a government charge on interest paid to overseas lenders. The banks told FCL customers they had to pay a 10% interest withholding tax (12) (IWT or WHT) on their foreign currency interest. In most cases the bank told the borrowers the tax was to be paid to the bank for forwarding to the tax office. Section 261 of the Act prohibited the collection of such a tax on most FCLs. Bank documents (13) clearly show the banks knew withholding tax should not be charged on these loans.

The amount involved with this tax was hundreds of millions of dollars.  Much of the money paid by borrowers as “tax” appears to have gone into bank profits (14).  Neither the banks nor the Australian Tax Office  (ATO) can provided evidence that this unlawful tax was ever passed on to the government, and the tax office seems strangely uninterested in investigating the issue. To be reimbursed what is rightfully theirs borrowers are required to engage in further expensive court action.

“Hedging” refers to measures used to restrict or partially restrict losses from foreign currency exchange rate fluctuations by reverting to $A or more active management using other currencies. The banks knew the importance of hedging (20) but discouraged it (6). As weaker currencies have a higher interest rate, fully hedged FCL’s cost more than a domestic loan and thus hedging negated any purported benefit as it increased the cost beyond many borrowers’ capacity to pay. Knowledge of this by borrowers would result in loan rejection (5) and thus the banks would not earn “super profits”.

Many banks had neither obligations nor facilities to provide immediate hedging, stop loss mechanisms for all borrowers (11) and bringing the loans onshore. Prior to 1986 currencies in the Commonwealth Bank of Australia could usually only be changed at the end of 6 or 12 month period (11). With the $A dropping overnight this measure was ineffective. 

At the Banking Inquiry banks complained that borrowers did not hedge their loans (6). The banks actually discouraged borrowers from hedging by:

1. Advising borrowers not to hedge (6)

2. Telling borrowers that their loan would be on shore if the dollar dropped 5% (6)

3. Telling borrowers they could not afford to hedge (6)

4. Providing inadequate or no information on exchange risks and need for hedging (6)

5. Not providing hedging facilities for all borrowers (6)

Far too late in 1986, long after the Australian dollar had fallen, the banks created facilities for hedging on short notice and they then urged (threatened) borrowers to use those facilities. The banks then charged captive clients their own exchange rates adding hidden margins (15). Banks admit that borrowers using these facilities generally fared worse than those who did nothing at all (21) compounding the damage the banks had caused.

Our Parliamentary and legal systems have serious flaws that are manipulated, by the banks:

1. Special laws exist to favour banks over people e.g. laws allowing tax deductibility of legal expenses and creation of huge (imaginary) shadow debt provisions. When it was revealed that banks had breached section 261 this section was repealed by politicians 18-12-1996.

2. Access to our legal system is heavily dependent upon having large sums of money. The huge costs of legal action favoured the banks, i.e. exhausting litigant's funds invariably won the case.

3. The adversary system uses untrained passive judges who often appear more interested in legal argument than facts. Witness and vital documentary evidence is often not understood (20) or is ignored when in conflict with bank interests.

4. The political and legal systems require huge financial support and depend upon each other. This arrangement is designed to protect the wealthy establishments that support and lobby politicians.

5. Judges often accept bank evidence such as loose-leaf diaries and unsigned statements and statements made under duress by career officers (8) as well as documents fabricated by bank solicitors (14).

6. Banks used the “privileged documents” and “commercial in confidence” provisions to avoid discovering documents to litigants. They thwart and manipulate the legal system to avoid justice.

Large collections of evidence have been referred to both Liberal and Labour politicians and their banking Inquires. The evidence before the Martin Inquiry unambiguously revealed statutory breaches. Thanks to millions of dollars of bank donations (22) neither party has made any real effort to pursue the corruption within the banking system. Government bodies responsible for investigations claim they are denied resources to properly investigate banks.

Unbeknown to borrowers, banks fraudulently charged secret commissions on foreign exchange transactions through point taking and lending margins (15).

Bank dealers had planned objectives, career appraisals and bonuses dependant upon created profit. These schemes encouraged dealers to condone devious practices, which disadvantaged borrowers (15).

As an example in the ANZ bank, officers admitted (15) it was common practice to apply carded rates of exchange (carded rates are heavily loaded in the banks favour) on foreign currency borrowers transactions whereas spot rates of exchange should have been utilised. This was also highlighted in the “Westpac Letters” (15) where dealers decided not only rates, but which borrowers would win or lose.

Perjury refers to knowingly swearing falsely under oath. Penalty 5 years jail. 

It was absolutely necessary for banks to market Foreign currency loans so that they could create super profits by tax avoidance, unlawful withholding tax and point taking. It was not in the banks’ interests to make borrowers aware of the horrendous risks of FCL’s.

Evidence given by bank witnesses is sometimes obviously deliberately false and misleading and sometimes this is remarked upon by the presiding judge (8). However we are unaware of bank officers being charged with and found guilty of perjury.

A technique invoked during the banking enquiry involved a bank hiring a solicitor (8) to say that the bank had instructed him to state that “hedging was available at any time”. This statement blatantly contradicted bank documents (11), other bank witnesses (11), and the evidence of borrowers. Yet the Banking Inquiry’s report faithfully asserted that “hedging was available at any time.

Bank officers routinely swore before courts that complete discovery had been provided to borrowers when this was not so, in some case documents of their own authorship were missing.

Fraud refers to the deliberate use of deceit by one party to gain. Fraud is a criminal offence (14). If fraud is committed in the process, or preparation of a loan document, that document is void as against the borrower ie. the banks' borrowers do not have to repay their loans. There is no statute of limitation when fraud has taken place. Borrowers can still sue their banks for restitution - if they have the funds. However, we are unaware of a case yet to be run against a bank on this basis – many aspects of the Unhedged Foreign Currency Loans Scams appear fraudulent:

1.        It was absolutely necessary for banks to market Foreign Currency Loans so that they could create super profits by tax avoidance, unlawful withholding tax and point taking. It follows that information concerning risks was likely deliberately withheld from borrowers (4)

2.        There has been no evidence presented that banks actually loaned borrowers a foreign currency.  If they purported to borrow or lend a currency, but did not actually do so, that may constitute fraud (9).

3.        Banks unlawfully purporting to collect Withholding Tax from borrowers and pocketing the proceeds is fraud (14).

4.        The taking of secret commissions (15) by fiddling the exchange rate without the borrowers’ knowledge appears fraudulent.

5.        The repeated failure of banks to completely discover documents to litigants should constitute fraud against the court. Often different borrowers were provided with different versions of the same documents, many went into court missing thousands of pages.

6.        In the case of Williams v the Commonwealth Bank Australia the CBA solicitor constructed a statement (14) falsely purporting to be that of an ex-bank officer, signed it himself and tendered it to the court. The fraud was eventually uncovered but neither the bank nor the solicitor was charged.

References

Westpac Internal Memo Warning of Foreign Currency Volatility and Risk

Clive Alexander Affidavit about Fraudulent Practices by Westpac Bank

Here Is How ANZ Handled the Withholding Tax Issue

ANZ Bommakanti to Ries