Bank Fraud in Australia Is a Systemic Tool of the New World Order
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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."
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Bank Fraud in Australia Is Systemic
THE UNIVERSITY OF SYDNEY
28 February 2007
Dear Mr Ridgway
This letter is in response to the letter under your name of 8 April 2005, which in turn was a response to my letter to John Martin, Small Business Commissioner, of the 13 January 2005. My letter to Martin was a consequence of not receiving any response to my dossier and covering letter addressed to ACCC Chairman Graeme Samuel on 6 April 2004. The silence on my part following your April 2005 letter reflected a demanding workload rather than agreement with and an acceptance of the substance of your response. Retirement from teaching has now allowed me to return to the issue.
My April 2004 dossier summarised eight cases of adverse experience of (all but one) small business/farming customers with the National Australia Bank. (I note in passing that your 8 April letter, presumably on behalf of Commissioner John Martin, dealt with the dossier but did not respond to the broader issue raised in my Martin letter of the parlous state of legal and regulatory protection for small business in Australia.)
Your letter contained a response involving both detailed treatment of each of the eight cases and broad generalisations. The response to the cases could be characterised as falling into a number of categories – the cases did not involve unconscionable conduct; the cases (potentially) involved unconscionable conduct, but occurred before s.51AC (or even s.51AA) had been legislated; the cases involved (potential) fraud but the appropriate jurisdiction in such cases is criminal rather than civil.
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.
There is the curious comment ‘In each case where the ACCC declined to pursue an unconscionable conduct action it did so because it was assessed that the conduct did not amount to unconscionable conduct’. I am unaware that the ACCC has actively considered the application of the unconscionable conduct provisions to banks; one could count action by the TPC/ACCC against banks on the fingers of one hand. The correspondence between complainants and the ACCC that I have cited indicate that the ACCC has declined to involve itself in the substance of the complainant’s case as a prelude to advising them to take the matters into their own hands.
The classification of cases into non-actionable categories is complemented by a variety of generalizations, two of which I proceed to query below.
Banking malpractice not merely existent but a systemic problem for small business
Representative is a paragraph in response to the issue of ‘cumulative conduct by one party’ (page 2). The paragraph points to variations in detail across different complainants, and the varying location in time of the complaints. These concerns might be relevant to a class action (whether there is a difference in banking that differs qualitatively from tobacco cases that renders litigation in one industry more readily successful than in the other is a moot point). But this issue is not the one that I brought up. To quote my 6 May 2004 letter ‘The merit of treating these individual cases collectively is that interpretation of the sources of these conflicts is more naturally confronted as a systemic problem, rather than the failings of a particular small business.’
In raising the concern about variations of detail and in time your letter diverts from the prospect of malpractice amongst bank lenders, the NAB in particular, as a systemic problem.
In my view, bank malpractice against small business problems is systemic; it is therefore a problem to be treated systemically by the authorities. My view is shared by my collaborator in these matters, Brisbane-based retired NAB branch manager and longtime banking malpractice consultant John Salmon.
In your noting that my eight cases ‘span a period of 17 years’, there is the implicit notion that these are sporadic affairs, even if they were to be taken seriously. On the contrary, they are the tip of the iceberg; and only the three score and ten years allocated to one’s time on earth delimit the time and energy available for a lone individual with no resources to document the extent of the iceberg.
I point you to the foreign currency loan saga of the 1980s, certainly one of the great financial sector scandals in Australian history. What started out as greed mixed with incompetence in a new environment of deregulation led three of our four major banks (Westpac, the CBA and the ANZ) into corrupt practices as they attempted to displace entire responsibility on hapless small business borrowers. Here was transparent evidence of a systemic problem in banking practices, ably documented in the minutiae by contemporary journalists but, alas, ignored by experts and deflected by officialdom. The deflection of the foreign currency loan scandal by officialdom is an important story in itself, but elaboration on that theme would detract from the emphasis here.
The common variety bank malpractice was also alive and well in the 1980s. Indeed, it was the cumulation of individual cases brought to the attention of the then Democrat Senator Paul McLean that led him to champion the cause of bank victims in Parliament. Then, as now, Parliament was little interested.
The publicly-owned Commonwealth Bank figured prominently in the cases brought to the attention of Senator McLean. These days, the National Australia Bank has the distinction of topping the malpractice tables, by a considerable margin.
Channel 7’s Today Tonight program ran an episode on the 5th April 2006 dealing with three NAB casualties. The program was put together by Today Tonight’s Adelaide producer, Frank Pangallo, after he was approached by a South Australian builder against whom NAB had reneged on an insurance contract after an injury to the builder. Pangallo sensed an injustice, and used a program that has a reputation for trivia to handle an issue that is neglected by more respectable outlets.
The program went to air in April, but only in South Australia. Curiously, the program did not go to air, as scheduled, in the other States, not least because the other two cases on the program emanated from Queensland. One of these cases was the McMinn child care centre case, documented in my dossier. Nothing that should concern us here, says your letter. Yet the McMinns received an offer of $1,700,000 for the centre, which the Bank prevented the McMinns from accepting, and the receiver/Bank subsequently sold the property for $1,180,000, leaving a residual debt that conveniently swallowed up the McMinn family home along the way. It is this kind of detail that should alert inquiring minds as to the nature of this conflict.
The third case on the Today Tonight program was that of the Troianis. Sante Troiani ran a highly successful brick business out of Bundaberg, building up substantial business and property assets of many millions of dollars. The evidence points to not your garden variety malpractice but a strategic ‘sting’ operation (to use the expression of my collaborator John Salmon), in which the NAB induced Troiani to shift his business to the NAB (in late 1993), after which Troiani’s business was systematically defrauded.
Belatedly, the April 2006 Today Tonight program, albeit edited, appeared in the Eastern States and Western Australia on 4 January of this year. In the ensuing couple of weeks, Pangallo was inundated with phone calls and emails from people who considered themselves victims of bank malpractice, all by NAB except for a Westpac case. The number is well over one hundred.
On the Today Tonight program, NAB executive Ahmed Fahour acknowledged that there were problems that needed attention. That mild contrition was not to last. The NAB had published in the Melbourne Age under Fahour’s name on the 23 January a panegyric to the company, citing its brilliant socially aware contribution to community support. The NAB then wheeled out its public relations flak to pronounce that ‘NAB has a very good relationship with millions of Australian customers and it is in the bank’s interest to see those customers and their businesses succeed. On rare occasions businesses regrettably fail and disputes do sometimes arise, however, NAB works hard to resolve those situations to the satisfaction of all parties.’ In short, pure spin. Business as usual.
The Commonwealth Bank is not to be outdone by the NAB’s ‘competitive advantage’ in malpractice. Cases in the last ten years, some of which have dragged on until recently, include Muirhead in Queensland (primary producer), Cooke in Queensland (medical centres), Timms in New South Wales (negligent advice in business purchase) and Heinrich in South Australia (primary producer). Muirhead and Cooke shared the same corrupt lending manager. The CBA was particularly active in maltreatment of customers of its small business subsidiary Commonwealth Development Bank in the mid 1990s in the course of restructuring then closing down the CDB – Tratzea in New South Wales (horticulture) and Cassegrain in New South Wales (property development) are notable cases of transparent skullduggery.
Even the relative small fries St. George and Bendigo Bank are now aping the big boys on the block, the latter having acquired a lending manager from NAB in Queensland who has carried over an unsavoury culture with him.
How many cases of alleged victimisation does one need before one confronts the possibility that there is systemic malpractice against small business borrowers in the banking sector? One first has to be willing to confront the accumulating evidence.
One also needs to learn to read the signs regarding what is readily attributable to incompetence, possible malfeasance, on the part of borrowers, and what seems like a calculated default by the bank lender. Recently, I came across a case reported in the financial press of a builder, Stuart Bros Pty Ltd, which had collapsed in 1994/95. The press reported the collapse cursorily, but it had all the elements of a calculated default by the NAB. Stuart Bros had been a long established and reputable firm, readily discarded as collateral damage.
How many cases does one need to sit up and take notice? Large numbers carry important implications, but ultimately the character of even one or two cases ought to be decisive in ringing alarm bells. Kabwand/Somerset (NAB) and Heinrich (CBA) are two such cases. The common element is that two hard-working and successful farming families are deceived by corrupt lending managers. The key issue for us, however, is that the bank hierarchy then steps in and enacts a process dedicated to the destruction of the deceived borrowers. The CBA has even had Heinrich declared a ‘vexatious litigant’ – this in the pursuit of justice!
The experience of the Somerset and Heinrich families provide a window into the culture of business practice in banking. Business culture is a phenomenon unknown to the economics profession that pervades the bureaucracy and regulatory agencies, and we have had to draw on the low-status sociologists and management writers for insight. The March 2004 APRA report, Report into Irregular Currency Options Trading at the National Trading Bank, embodied a rare official recognition of banking business culture and the potential for the entrenchment of unsavoury elements. The APRA report focused narrowly on the NAB’s trading desk, but even casual readers of the financial press would know that the NAB has generated a series of debacles, product of a dysfunctional culture that has been evidently more widespread than the trading desk of late. Nevertheless, the APRA report has offered legitimacy to the recognition of banking culture, of the possibility of elements of that culture being a product not merely of incompetence but of a lack of ethics, and thus the prospect that unsavoury business practice will become entrenched.
In short, a dysfunctional business culture generates systemically undesirable business practices. There is that word again, that one is not allowed to speak, and the concept behind it, that one is not allowed to conceive.
The evidence indicates that the Asset Structuring unit of the NAB has possessed an unsavoury culture for some time. One would have expected the new broom at the top to address this inheritance. Certainly, the new broom has restored the NAB to magnificent profitability, but it has curiously chosen not merely to tolerate but to reinforce this cowboy element in the business. Rumours have passed in business circles that former NAB CEO Cicutto was forced to fall on his sword not because he failed to stem incompetence or corruption but because he failed to stem adverse publicity. (One might add in passing that Westpac has devoted considerable resources to advertising its corporate social responsibility, seemingly risen above the pack, but Westpac has as yet declined to clean out its own cultural closet regarding treatment of small business.)
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