Ralph Norris on Centro conflicts of interest
December 13, 2008
Here is the transcript of an exchange about teetering property giant Centro from the Commonwealth Bank AGM in Melbourne on November 13. Listen to the audio file as well.
The Mayne Report: There is a piece in The Australian by John Durie on May the 8th saying that Centro had won a last minute reprieve from its banks, after a last minute intervention by Sir Rod Eddington who was chairman of JP Morgan Australasia. It talks about there were late night talks between Sir Rod and CBA boss Ralph Norris.
Now someone who's, I own 750 stocks – tiny holdings, I'm in everything that moves in the market, so I'm in all the Centro stocks. Now in the situation like Centro, the Commonwealth Bank is the largest shareholder. So the Commonwealth Banks sits there with, what, 7 or 8 percent in both Centro Retail and Centro Properties Group, you've smoked $600 million on behalf of your funds management clients in Centro.
Now what I don't understand, is when Sir Rod Eddington rings you late at night to talk about rolling over a billion dollar exposure that we have
in Centro - $160 million of which is unsecured, how can you even take the call, when you also know that the Commonwealth Bank on behalf of millions of Australian superannuants have dropped half a billion on the equity side?
So when you take that call, are you speaking as a banker trying to recover $1.1 billion? Or are you speaking as the ultimate man in charge of a funds management operation that desperately wants a rollover? That wants to salvage something from the wreck, the wreck in the case of your funds management clients, of $600 million. So how do deal with the supposed Chinese wall, when you're the CEO of the whole show and you're getting these calls from other bankers late at night?
CBA CEO Ralph Norris: Well Mr Mayne, yes I did take a call from Sir Rod Eddington, and I have to say that my definition of late night and John Durie's, probably is significantly different, because I took that call at 5:25pm. So, therefore I generally find that as being fairly early in my day.
But the reason I took that phone call was, yes, there were issues around documentation. It had nothing to do specifically with, whether or not we should actually be involved in a process. The process was that we were putting in place a memorandum of understanding, and Sir Rod was concerned that we had not signed it. And the reason that we had not signed it was that there were 15 material errors in that 200-page memorandum of understanding. My people were insisting, and I was obviously supporting them, that we would not sign that particular memorandum until those 15 errors had been corrected. I don't understand, how a number of other banks had not come to same conclusion that documentation was flawed.
So that was the reason why the discussion took place. And we certainly made sure that those 15 errors were corrected before we actually signed the document. So it was an issue over a document.
The other matter in regard to our Colonial First State operations, I do not get involved in the picking of stocks or the managing of those particular funds. They are appropriately managed by the management team and under appropriate trustees, and with appropriate trustees. So that is a situation where obviously there is a significant Chinese wall from the point of view of my involvement. In fact that wall is a lot more than a Chinese wall, it's a very real one.
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