ANZ on the back foot over fraud in 1992

February 13, 2008

This Jo Chandler piece appeared in The Age after the ANZ AGM held on January 29, 1992.

The chief executive of the ANZ Bank, Mr Will Bailey, told shareholders yesterday that there appeared to have been "a deliberate attempt to circumvent the bank's internal control systems" over loans made to a development group.

He said that the bank's internal management of lending facilities had, as a result, been thoroughly reviewed and investigated.

Mr Bailey, addressing the ANZ Bank's annual meeting in Melbourne, was referring to disclosures in `The Age' yesterday that a development group had been lent $100 million on virtually no security by the ANZ. Also, senior bank officials claimed they had no idea of the magnitude of the loans until the resignation, on 28 October last year, of the bank official who handled the accounts.

The Age also reported that the group that received the funds, known as the McLean group of companies, had diverted millions of dollars into aircraft, a 60-vehicle car fleet, and loans to directors' families and associates. Almost $18million of the funds could not be traced.

Details reported by the `The Age' were contained in sworn affidavits provided to the Victorian Supreme Court by senior bank officials, the bank-appointed receiver of the group, consultants employed by the receiver and a director of the group itself.

Mr Bailey told the annual meeting yesterday: "When you are dealing with any institution of 48,000 people, there are bad apples ... and eventually they come up. We do not have perfect people, they are not infallible." Mr Bailey said action had been taken against "bad apples", but that "we don't air our dirty linen in public and I don't think it's right to any officer who has been dealt with, nor do I think it's right for any customer who has been dealt with, to be aired in a forum outside those which are the community norm, ie, the courts or in-house".

"The day we hang individual employees' names in front of shareholders is the day you won't see too many people in banking - me for one," Mr Bailey said.

He said that funds had been provided to the McLean group through 33 separate loans to a number of entities, including trusts, within the group.

"We have been aware of the major portion of this problem loan for many months, and other parts of it were identified following internal investigations," Mr Bailey said.

Although the affidavits of a bank official and of a McLean group director, Mr Stephen McLean, both stated that the bank was unaware of the size of the McLean group borrowings until the end of October, Mr Bailey told the meeting yesterday that "the aggregate of the lending was known and classified mortgage risks in our accounts for the year ending 30 September 1991".

He also said that the accounts had provided for a possible loss.

The chairman of the ANZ Bank, Mr Milton Bridgland, said that while legal and confidentiality constraints prevented the bank commenting on many matters, "newspapers don't miss any opportunity to sensationalise little bits of information that are poked their way _ it sells newspapers".

Responding to a shareholder's questions about loans to the development group, and several other bank matters raised in the press, Mr Bridgland said that ``many of the alleged facts that you read in the paper simply are not true at all and our hands are tied, we cannot comment on it".

Mr Bailey also said that the matter had been raised in the media over recent months, and that the substance of the situation had been on the public record since 23 January, when an application by the McLean group to regain control of the companies was withdrawn from the Supreme Court.

A shareholder commented that the McLean group loans issue had been raised by a newspaper in the Fairfax group, and questioned whether reporters had "turned around and attacked the bank". (The Fairfax newspaper empire was in debt to the ANZ Bank until its sale late last year to the Tourang consortium of the Canadian publisher Mr Conrad Black).

Mr Bridgland said the observation was "an interesting one. In the course of the last year or more we have been incessantly attacked as a bank in relation to whole Fairfax situation. We have not been able to respond because of our responsibilities to a major client".