Citigroup, Deutsche, ANZ Bank Face Criminal Cartel Charges In Australia

by Ike Obudulu Posted on October 9th, 2018

Sydney, Australia : A criminal cartel case against Citigroup, ANZ Bank, Deutsche Bank, and six senior bankers has been adjourned until early next year. The ANZ cartel defence is being hampered by document delays, the court heard.

ANZ Bank’s ability to prepare its defence against charges of alleged criminal cartel conduct in a $2.5 billion share sale is being hampered by delays in receiving key documents from the prosecutor, a court has heard.

The landmark case against ANZ, Deutsche Bank, Citi and six senior bankers was adjourned on Tuesday until February 5, as the Commonwealth Director of Public Prosecutions (CDPP) assembles its evidence

The allegations against the banks relate to the role played by investment banks as lead managers or “underwriters” – where a bank guarantees some proportion of shares being issued to investors will be bought at a certain price.

The case centres on a botched capital raising in August 2015, where big investors took up only part of the $2.5 billion ANZ shares on offer, leaving the investment banks handling the deal to buy the remaining $791 million of stock.

The banks stand accused of reaching an “understanding” over how they would offload ANZ shares after they ended up buying hundreds of millions in ANZ stock as underwriters.

JPMorgan Chase, the other underwriter on the deal, is believed to have been given immunity by the Australian Competition and Consumer Commission (ACCC), the country’s competition watchdog, and has not commented on the case.

Lawyers jammed into the courtroom in downtown Sydney for the first administrative hearing of the case, which could have major implications for the underwriting business and lead to increased scrutiny from regulators worldwide.

Lawyers representing the banks and bankers, who have said they will defend the charges, appeared in a brief and crowded procedural hearing at Sydney’s Downing Centre on Tuesday. The bankers, who were charged in June, were excused from attending Tuesday’s hearing as well as the next court date.

ANZ’s barrister, Simon Buchen, told the court the bank had not yet received a statement of facts on the case, despite the charges being laid several months ago, and this was “hampering” its ability to work on its response to the prosecution’s case.

Prosecutor Ruth Higgins said there was “no present obligation” to file the details while they were still being compiled.

But Magistrate Jennifer Atkinson said prosecutors needed to get the statement of facts to the accused banks as quickly as possible in order to “move forward” with the case.

The six bankers who were charged in the case are former ANZ treasurer Rick Moscati, Citi’s former country head for Australia, Stephen Roberts; Citi bankers John McLean and Itay Tuchman; Deutsche Bank’s former country head Michael Ormaechea, and former head of equity capital markets for Australia and New Zealand, Michael Richardson.

JPMorgan Chase, the other underwriter on the deal, is believed to have been given immunity by the ACCC.

Under criminal cartel laws, individuals can face up to 10 years’ jail or fines up to $420,000 if they are found guilty, while companies could face maximum penalties of 10 per cent of annual turnover, or three times the benefit gained from the behaviour.

ANZ is also facing civil action over the share sale, with the Australian Securities and Investments Commission (ASIC) alleging the bank failed to comply with its continuous disclosure obligations because it did not tell the sharemarket that roughly a third of the newly issued stock had been picked up by its underwriters, rather than institutional investors.

The bank, which also plans to fight that matter, has said it was not aware of any precedent where a listed company had disclosed the take-up of shares by underwriters in an equity placement.

Both cases are being closely watched in investment circles, as they raise questions about the legality of some aspects of share placements, underwriting agreements and share trading practices, and come as banks grapple with the reputational fallout from the banking royal commission.

If convicted, the companies could face penalties of up to A$10 million or triple the benefit of the conduct. The individuals charged could face 10 years in jail.

The matter was adjourned until Feb. 5 and the prosecution ordered to file the full details of their case by Dec. 11.

Deutsche Bank said it would “vigorously” defend the charges and it believed the bank, Mr Ormaechea and Mr Richardson acted responsibly, in the interests of clients, and consistently with the Corporations Act in the 2015 raising.

“Both Michael Ormaechea and Michael Richardson are highly regarded and have our full support,” the bank said.

Citi said it would “vigorously defend” the claims against it and employees. It said “this is a highly technical area”.

ANZ Bank chief risk officer Kevin Corbally also said on Friday the bank believed it had acted in accordance with the law, and it would defend the company and Mr Moscati.

None of the executives charged in the case has commented publicly.

The case comes as Australia’s financial sector comes under intense scrutiny from a separate public inquiry that has uncovered widespread misconduct.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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