(Image via @otiose94)

Dr Evan Jones continues his six-part analysis on the series of parliamentary inquiries into systemic bank corruption as the victims of fraudulent foreclosures continue to wait for justice.

Read the other parts of this series:

Part 1

Part 2

Part 3

Part 4 

Part 6

THE CURRENT PARLIAMENTARY inquiry into 'The Impairment of Customer Loans' hears from the regulators Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA).

The regulators to the rescue — of the banks

The Inquiry Committee also heard from representatives of the ASIC on 23 November. Present were Adrian Brown, Warren Day and Michael Saadat, all “senior executive leaders”. And, no doubt, all paid a motzah for their efforts.

The testimony of the ASIC trio is a scandal. One becomes used to the customary lies and arrogance of bank executives. But here are public servants, employed to control corrupt activity, tacitly admitting and defending their complicity with such corruption.

Remember that ASIC was also subject to an inquiry regarding its manifest failings (oriented mostly to ASIC’s failings with respect to the CBA’s Commonwealth Financial Planning Ltd scandal), the damning report of the Senate Economics Committee being handed down in June 2014. The trio showed no humility regarding ASIC’s well-publicised failings. Indeed, the trio’s mentality highlights that ASIC personnel have learned nothing from the inquiry.

Saadat’s opening statement sets the scene:

“Generally speaking, ASIC does not intervene in individual disputes in financial services and corporate regulation and is not funded to undertake such a role. The exception is where such action would serve a broader public interest.”

ASIC perennially receives requests for action from small business and farmer victims of bank unconscionable conduct and fraud. The sizeable scale and the heinous character of the victimisation would render many of these complaints ideal for ASIC to pursue in the “broader public interest”.

But no. Here is ASIC’s Day:

“… we have not seen a case where we would say we get involved and will explore or better something or widen the class or the definition of 'unconscionable conduct'. We just have not seen that type of case in what has been brought to us. So, in effect … any case we would take on we would effectively be becoming a form of pro bono lawyer for the individual borrower concerned. We would be using taxpayers' funds where we are trying to get a wider interest for the Australian public.”

On the CBA takeover of Bankwest front, ASIC has been confronted with cases involving transparent criminality, involving hundreds of millions of dollars. And these overpaid flunkeys show no embarrassment in demonstrating their guile and their gutlessness.

Saadat chimes in:

“What we would say is that there is scope to establish precedents that have wider applicability, whereas in these commercial contracts, whilst you might get a decision in favour of a borrower in a particular case with particular facts, it is unlikely that those decisions would automatically provide a remedy for other borrowers because whether or not the conduct is unconscionable for another borrower will really turn on the very specific facts of the case, whereas in the consumer space we see much more scope for that wider applicability.”

Superficially, unconscionability in “consumer space” is more standardised, although ASIC’s success in this domain is also lamentable — as demonstrated in ASIC’s slovenly handling of the Storm Financial and the Commonwealth Financial Planning sagas. But in the domain of commercial contracts, litigation involving “the very specific facts of the case” nevertheless contributes to the establishment of precedent — the rock (if rather slippery) on which judicial impartiality and objectivity is supposed to be based.

Saadat’s claim is exposed by Committee member Ann Sudmalis (Liberal MP):

“I would like to disagree with that statement because I believe that if you did actually pursue one of those cases and put a return on investment to the wider community as to taxpayer dollars lost in other associated employees and other associated industries, I think you might find the return to investment on your investigation might be enormous and it will be a case that will stand up against other cases because you will get an index of social cost.”

Exactly. Elementary my dear Watson. Saadat parries Sudmalis by blaming the federal Treasury for imposing directives on the allocation of ASIC’s resources to particular areas. One deserves to see the evidence for this claim.

The ACCC acquired responsibility for business to business unconscionable conduct in 1998 after a damning 1997 parliamentary report regarding corporate abuse of small business, called 'Finding a Balance'. This responsibility was written into the Trade Practices Act as s51AC (now s22 in the revamped Australian Consumer Law).

The ACCC assiduously avoided going after the big corporates but it did leverage the new section against some offenders in the “broader public interest”. After s51AC was copied directly into the ASIC Act in August 2001 (in s12C), ASIC declined to follow precedent.

In ASIC’s responses to Small to Medium Enterprises (SME) complainants – telling them to “buggar off” – ASIC has regularly lied, denying that the organisation has legislative responsibility for corrupt conduct against SMEs. But the trio’s testimony on 23 November exposes a different reason for its inaction.

Saadat again:

“It is important to note that courts generally impose a high bar when a party is seeking to establish unconscionable conduct in a commercial loan. The courts put significant weight on the enforceability of contractual promises as being central to the conduct of commerce. In making a finding of unconscionability, the courts have generally concluded that some serious moral fault or lack of ethics must be proved. This requires a consideration of legal, commercial and social norms.”

Quite. ASIC correspondence with aggrieved victims never admits to this claimed reason for its inaction. Can one imagine ASIC disclosing to disgruntled victims that it will not pursue their cases, in spite of its legislated obligation, because it has strategically decided that it lacks the skills and will to carry out its mandated obligations?

It is precisely ASIC’s role to champion individual disputes in the courts because the victims lack the resources to do so. Whatever the outcome, lessons are learned for the more honed pursuit of future litigation.

At the hearing the ASIC trio claim that they have consistently argued for governments to deal with the impasse. Yet in the cited ASIC submissions to various inquiries I can find no evidence for this claim. There is ASIC support for the extension of “unfair contract terms” to SME contracts, pushed elsewhere. This development is important but ultimately not central to the criminal character of bank default mechanisms and judicial complicity. ASIC personnel have shown no interest in surmounting the barriers they claim to have inhibited their action in the courts.

At one stage, Ruddock evinces a mild irritation with the ASIC personnel reiterating, effectively, “all this has nothing to do with us”.

Claims Saadat:

“I suppose where we cannot help you is demonstrating whether the allegations that have been made by borrowers are, in fact, true, because that is not something we have tested. In reviewing whether ASIC can intervene we have made the working assumption that if these allegations were true what could ASIC do about it, and in all the cases that we have seen we have determined that ASIC was not in a position to do anything about those matters.”

To which Ruddock responds:

“You are going to give us an analysis of that but I do not know how representative that is if the people who have substantial complaints took the view of, 'Why would I go to ASIC? It is not going to get me anywhere.' That is the impression I get.”

Exactly. ASIC has conscientiously made itself completely useless. And that has been the reaction of many victims. Why go to ASIC, as it’s a waste of time and energy.

Soon after, Senator Williams launches into a selective rendition of the horrors that have been visited upon the Bankwest victims. To which ASIC’s Day responds:

“I think it is a really difficult area for us to wade into because there is so much commercial judgment involved in that space. I do not think any of us at ASIC would necessarily say that we are experts in this space. That is about business, trading commerce judgment calls, around what seems to be the right value. It is very difficult, sitting here, to actually, line by line against each of those decide what is right and what is wrong. It is very hard.”

Commercial judgement? No — transparent criminality.

And, with respect to Williams’ recounting of the treatment of  victim Rory O’Brien in particular, Day again:

“I think there are always two sides to a discussion about that. The lender may have a very different take on some of those statements for their own perspective because they may say, 'I hear that but we had this risk to deal with. We had this risk to deal with.' As I said before, they might say, 'We weren't prepared to throw good money after bad and so we didn't want to take that risk. We're risk averse businesses because we're banks.' I am just hypothesising in that respect. They might say, 'We're not prepared to do that. We just need to get out', and to a certain extent …”

Day admits implicitly to complicity with bank criminality.

Representatives of the Australian Prudential Regulatory Authority (APRA) appeared at the 16 February hearings. They demonstrated possession of the same mentality as the ASIC representatives.

According to APRA representatives, the deliberation and management of impaired loans is a matter for the banks. We trust their judgement. More, we have seen nothing (in bank foreclosure processes) that would lead us to question their judgement and our faith in their judgement. End of story.

APRA also categorically denied victim claims that Bankwest’s capital needs for an upgrading on Basel criteria, coupled with the CBA’s inability to raise adequate capital, were a factor in CBA’s default spree. Indeed, its denial was taken up by Richard Gluyas the following day in the Australian, who wrote:

'APRA’s intervention has effectively silenced that argument.'

 Well no it hasn’t. How could Gluyas, a veteran reporter of bank bastardry, be so definitive? The APRA representative glibly dismissed the question without explanation. He could readily have used his no doubt detailed understanding of Basel procedures to decisively scotch the claim. He declined to do so, being economical with the truth.

The APRA representative is covering for APRA going missing in action during the CBA Bankwest takeover. Bankwest’s capital requirements were significantly higher than those for the parent bank until Bankwest was brought fully into the parent bank in October 2012.

Here we have a deep insight into the nature of the regulatory impasse. ASIC and APRA personnel are imbued not merely with indifference to victim suffering but share the mentality of the bank lenders. Paid as public servants to protect the public interest, they act as flunkeys for the powerful vested interests that they are required to regulate.

Ditto for the Financial Ombudsman Service (FOS), whose submission to the inquiry (no.46) is vacuous. I am aware of FOS complicity with bank criminality against its (non-retail) customers.

The complicity of the financial “regulatory” apparatus with corporate criminality is comprehensive.

This is the fifth in an Independent Australia six-part series analysing ongoing bank corruption and ineffectual parliamentary inquiries, as victims remain uncompensated.

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