Bankers exact their revenge upon ASIC

Via Ian Rogers at Banking Day:

The corporate watchdog has lost its key (and fairly recently-hired) attack dog with the resignation of Daniel Crennan, the deputy chair of the Australian Securities and Investments Commission.

Crennan was the person brought in to chase and nail the corporate crooks down in court.

His resignation from his ASIC role comes after the revelation he claimed and was paid A$70,000 in relocation expenses with disregard for the entitlements set down in rulings of the Remuneration Tribunal.

As Banking Day cheekily said yesterday, senior staff clerks won’t always know what they’re doing and the under-investment in people, scrutiny and production models on the HR side in this affair is palpable. But that’s not the worst of it, no way.

The deputy chair’s resignation comes as his boss, ASIC chair James Shipton, stood aside last Friday pending an investigation into how his own illegitimate expense claim of $118,000 for tax advice from a Big Four accounting firm wandered its way uncritically toward payment.

This is nothing by big bank misconduct standards and regrettably Shipton and Crennan, implicated via inaction as endorsers of clubby choices by APRA chief Wayne Byres, are examples of a general failure of culture and governance.

The acting ASIC chair needs to engineer immediate intervention on matters the taxpayer entrusted APRA and Byres to work out.

To start with, shove straight into the public domain the ANZ self-assessments submitted to APRA two years ago (yep, two) that have been outrageously suppressed ever since. The time for subtlety in the release of this hidden history has long passed.

The fact is, the hoo-ha over ASIC cack-handedness is so exaggerated, it’s clear-cut vested interests are seeking payback against ASIC, the conduct regulator, for doing a decent job for once at sanctioning lawless conduct by banks.

The business newspaper campaign for ASIC reform is hollow and will remain so until a robust proposal for far, far more self-regulation by the banking and finance industry arrives in Scott Morrison’s inbox.

The Shipton/ Crennan affair is all so ho-hum and ham-fisted and in Banking Day’s opinion the market and the public and the parliament are obviously under-informed with regard to the context and the scale of the apparent carelessness of ASIC’s deputy chair and chair. What do allegations of astonishingly unseemly conduct look like in the recent history of a large Australian bankAPRA and ANZ know the answer. Fix it Duck!

Crennan’s exit adds to the pressure for greater scrutiny of the use of taxpayer funds by public institutions that are supposed to act in the public interest.

Several points about internal controls need to be made here because none of this happens without the consent or involvement of other parties. Crennan and Shipton are the front men that must bear the brunt of those decisions to allow the expenses because they are the beneficiaries.

Neither Crennan nor Shipton would have been reimbursed or paid allowances if somebody, somewhere did not allow or sign off on the expenses. They reap the rewards of the largesse but there are people who should have been asking pertinent question about the appropriateness of all of this that need to be involved in some meaningful discussions with investigators.

The key to this is understanding who the people were that allowed the expenses to shuffle their way through and what internal controls existed in this process. Any investigation should require people within ASIC to map out in pictorial format the way these decisions are made.

Understanding the workflow is one thing and that takes you to the heart of who signed off, why and whether they believed anybody would notice?

You then need to look at the judgement of people that made those decisions. How did $70,000 get signed off within the regulator and who thought $118,000 in tax advice was a suitable expense for the taxpayer to cop?

These expenses are hardly a five-dollar coffee with journalists up the road or some other expense that would constitute a reasonable and fair claim on petty cash in a smaller organisation.

This will then require a pretty solid review of ASIC’s internal risk management documentation to ensure that such decisions about payments of this magnitude get further scrutiny.

Who approves that kind of expenditure within a regulatory context in which companies that have had staff breach rules related to approval of loans are hounded? Where was the backbone when it came to looking at these large sums? Did people push this through on some interpretation of the guidelines they believed made the sign off on these payments appropriate?

Maybe internal audit are at fault.

James Shipton will be thinking about his career and no doubt fielding job offers worth looking into. If he wants to return to work at ASIC as chair in January, the exit of his mate Daniel Crennan improves his odds, a little.

Yes, regulators of all kinds need to be held to a higher standard because they are a laundromat doing the people’s work, task with cleansing society of some of the worst ills of business and financial markets.

It is an indictment on the process that the ASIC brass ended up exposed, embarrassed and failing the most basic tenants of codes of conduct and integrity.

Daniel Crennan, spill the beans mate, blow the lid off whatever it is that you found most despairing, dubious or downright near criminal. And don’t go anywhere near The Australian or the Financial Review if you want to share your stories faithfully and fairly.

David Llewellyn-Smith

Comments

  1. Payback for actually doing their job. Their mistake was to take Westpac on over criminal lending practices.
    Demonstrates that the people who run the banks are just a bunch of crooks.

  2. ASIC were warned of the NANT Whiskey debacle well ahead of its collapse and did nothing. Zip. Zero. $30M gone.

  3. Managing risk (including fraud) and working within the bounds of “internal controls” and the risk framework is the squarely the responsibility of line and executive management.

    Oversight of the above for compliance with the “internal controls” rests with another group of people (i.e. not Internal Audit) that report to Management, and should be reported to the Executive and the Board.

    “Maybe Internal Audit were at fault?” For the above points, and many other reasons not worth getting into, no. This is on them.

  4. MathenomicMEMBER

    Once you’ve worked with ASIC as a stakeholder none of this surprises you; they’re a disorganised incompetent mess. I doubt they have the formal processes or governance framework mentioned documented anywhere let alone known by staffers.

  5. When Reith’s son was racking up $50,000 for a quarterly phone bill back in 2000, you know there are no checks on anything in the top echelons of the APS. Time to clean up the swamp.

  6. The LNP can sweep a $27 million property purchase over-payment to an LNP donor under the carpet, a $448 million reef gate scandal (to a group friendly with the LNP) under the carpet and a $X million sports rots scandal under the carpet… among others!

    Less than $200,000 or fairly normal c-suite executive employee expenditure – Got to go. Simply untenable

    WTF?

    • Ukraine fnMEMBER

      That’s what happens when you question the status quo .. Federal ICAC with teeth is needed to get at least some type of accountability.