Stephen Long for Four Corners Updated November 01, 2010
Macquarie Bank has been rebuked by the chairman of the Australian Competition and Consumer Commission (ACCC) for suing hundreds of small business customers who have been caught up in an alleged telco-finance scam.
ACCC chairman Graeme Samuel has told ABC1's Four Corners program that he personally asked Macquarie chief executive Nicholas Moore to "be reasonable" in dealing with the small business customers, many of whom appear to be victims of misleading and deceptive conduct and in some cases even fraud.
But Mr Samuel says he has hit a "brick wall".
"I have to say to you this is a source of great disappointment to us," he said.
"I'd like to think that when the chairman of the ACCC approaches the CEO of a major organisation like this and says, based on all my own commercial experience and based on what we believe at the ACCC is a fair and reasonable way forward, that they'd listen to it and react receptively.
"I have to say we're not encouraged by their reaction at this point in time."
Macquarie has been a major financier of deals for an industry known as "telephony bundling".
The business involves the selling of "bundled" packages that put together telecommunications services with electronic goods or other equipment.
The ACCC is dealing with a large number of complaints that small businesses have been misled into signing agreements by some players in the industry.
"We've found far, far too many - literally hundreds if not thousands of small businesses have been caught by these sorts of arrangements," Mr Samuel said.
Typically, they have signed up with a telco on the understanding they will receive televisions, laptops, phones or other electronic goods "free", then been hit with bills for tens of thousands of dollars under multi-year rental contracts for the equipment from a separate finance company.
"What the small business doesn't realise is that almost invariably they're signing, as well as with the telecommunications company, they're signing a rental agreement with a finance company," Mr Samuel said.
An investigation by Four Corners program has revealed evidence of deceit and trickery in the selling of some of these deals.
In some cases it involved misrepresentation; in others outright fraud.
Four Corners found evidence of:
- Fraudulent or doctored contracts that charge people for equipment that they never asked for and never received
- Signatures forged or transposed from one document to another
- Finance companies directly debiting money from people's bank accounts without authorisation and direct debit authorisations being forged
Whistleblowers who worked in the industry have told Four Corners that they were taught to hide the presence of rental contracts for the equipment and to trick people into signing the deals while maintaining the equipment was free.
The Four Corners investigation also revealed that Macquarie, through its subsidiary Macquarie Equipment Rentals, has sued more than 300 small business customers caught up in the dubious deals.
Thousands of customers have signed up with small telcos only to find the company later goes broke, leaving them without phone services or phone call discounts they had been promised, yet still stuck in an expensive multi-year lease with a finance company for equipment.
And finance companies such as Macquarie have routinely paid out on invoices for electronic equipment presented by telcos or associated companies that include grossly inflated prices.
"I think it is very clear though that the finance companies would have to be deaf, dumb and blind not to realise in many of these cases that what they're dealing with is companies that are engaging in a course of conduct that is potentially misleading small business consumers," Mr Samuel said.
"The worst part about it of course is that under the arrangement that the telco company enters into with the finance company, the telco company receives a large cash sum up front, a capital sum and then like a phoenix disappears.
"Then suddenly the small business consumer finds that he is no longer dealing with the telco that he thought he was dealing with, he's no longer getting the service that he thought he was getting, but lo and behold he's got a continuing rental arrangement with a finance company that he never knew about."
Mr Samuel says he had approached three major companies at CEO level - Macquarie, Cisco Systems and Capital Finance, a subsidiary of Lloyds - and asked them to hold off on enforcing contracts and pursuing small businesses through the courts.
But the finance companies have rebuffed the overtures from the ACCC.
In the 1980s Mr Samuel was executive director of Macquarie Bank and the company Macquarie emerged from, Hill Samuel.
He contrasted the approach Macquarie is taking now with his era.
"If we had to deal with a company to lend it money, or engage in a financial transaction, there was always an assessment made of whether this is the appropriate person that we - this was Macquarie Bank - wanted to deal with.
"You'd expect the same position to arise today and then you'd expect that either transactions would not be entered into with people that are have demonstrated certainly with their corporate history to be rogues and then furthermore, if transactions are entered into with them, that you would deal with consumers in a fair manner."
"You'd expect particularly the more reputable finance companies to actually try and assess who it is that they're dealing with, to make sure that they dealing with rogues, with evil geniuses as some have described them.
"That in my view raises the moral bar. It raises the ethical bar in terms of the finance companies."
Macquarie would not agree to an interview for the Four Corners story, but in a statement released late today said it was surprised by Mr Samuel's comments.
The statement said Macquarie has "fully cooperated with the ACCC and responded to all its requests".
"In all cases in dispute, customers have ceased making rental payments and refused requests to return equipment to Macquarie. These claims are subject to dispute resolution by independent tribunals and the courts."