Judge moved, receiving training after 'rude' conduct triggered retrial
By Michaela Whitbourn
September 3, 2020 — 7.38pm
A judge who triggered a retrial in a family law case by bullying a father's lawyers has been moved to a new location and will be monitored in hearings as he receives training on appropriate courtroom conduct.
Judge Guy Andrew was appointed in March last year as the sole judge in the Federal Circuit Court's Townsville registry, complementing 13 judges in the court's busier Brisbane registry.
Judge Guy Andrew's treatment of lawyers for a father in a family law case denied the man a fair hearing, an appeal court said.
Judge Guy Andrew's treatment of lawyers for a father in a family law case denied the man a fair hearing, an appeal court said.Credit:Angela Wylie
His appointment was welcomed at the time as improving access to justice for the local community.
But in an excoriating judgment on August 28, the Full Court of the Family Court of Australia ordered a retrial in a family law case heard by Judge Andrew in September last year after concluding he engaged in "hectoring, bullying, insulting and demeaning" conduct towards a Queen's Counsel and solicitor.
The lawyers were acting for a father in the case and Judge Andrew's conduct denied him a fair trial, the appeal court said. The three-judge bench concluded there was "no basis" for Judge Andrew's "cruel, insulting, humiliating and rude" interjections.
Federal Circuit Court Judge Guy Andrew.
Federal Circuit Court Judge Guy Andrew.Credit:Federal Circuit Court Annual Report 2018-19
His comments included exclamations of "Oh, God", "rubbish", "this is pathetic" and "that's garbage", along with barbs about the QC's state of dress.
A spokesperson for the Federal Circuit Court said on Thursday that "Judge Andrew has been temporarily transferred to the Brisbane Registry and will be receiving counselling, mentoring and his sittings will be monitored".
"In addition, the judge will receive further judicial training specifically on appropriate behaviour in court."
The spokesperson said "Townsville and the wider region will continue to be serviced by the Federal Circuit Court of Australia" including with additional judge time.
"All matters currently listed between now and Christmas will remain listed to be heard face-to-face where appropriate, by two extremely experienced judges in the Townsville registry."
Judge Michael Jarrett will start hearing cases in the Townsville registry from Monday, and will then hand over to Judge Grant Riethmuller on September 21.
"A decision will be made prior to the Christmas break as to whether Judge Andrew will return in the new year to the Townsville Registry or another judge will be assigned to the registry," the court spokesperson said.
"Of utmost importance and priority to the court is that the families of Townsville and the region of North Queensland that need the services of the court have their family law dispute dealt with in a respectful manner."
Judge Guy Andrew.
Judge rebuked for 'cruel, insulting, humiliating' conduct in family law trial
Judge Andrew suggested during the family law hearing that the solicitor acting for the father had a "cognition problem" and took issue with the solicitor using words such as "just" and "query".
"Take it that I understand English to a very high standard," Judge Andrew said.
The appeal court said the father's QC withdrew from the case during the trial in a bid to improve the atmosphere in court but this did not happen and, "if possible, his Honour’s conduct worsened".
Judge Andrew's new judicial colleague in Brisbane, Salvatore Vasta, has been castigated several times in appeal judgments, including for "aggressive and overbearing" behaviour.
Clerical abuse victim sues Slater and Gordon over church payout
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By Cameron Houston
August 21, 2020 — 12.01am
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A victim of one of Victoria's most notorious paedophile priests says law firm Slater and Gordon bungled his compensation claim against the Catholic Church, which paid out $75,000 for horrific sexual abuse.
Slater and Gordon has been accused of negligence in documents filed in the Supreme Court, including claims it failed to advise its client of his alternative rights to compensation that could have exceeded $1 million.
Convicted paedophile and former Catholic priest Michael Glennon.
Convicted paedophile and former Catholic priest Michael Glennon.Credit:Mario Borg
However, a Slater and Gordon spokeswoman said the statement of claim lodged by rival firm Arnold Thomas and Becker was "misconceived and fails to reflect current developments in the law".
Slater and Gordon indicated it would vigorously defend the case, which could have implications for more than 320 victims of clerical abuse, who received about $10 million from the church's compensation scheme set up in 1996 by George Pell.
Known as the Melbourne Response, the Catholic Archdiocese of Melbourne appointed an independent commissioner who investigated allegations of abuse and made a determination based on the evidence.
But compensation payments were capped by the church – first at $50,000, and later lifted to $75,000 – and survivors were required to sign a deed of settlement waiving their right to take civil action.
Victims received an average payout of $36,100, according to church figures provided to the Royal Commission into Institutional Responses to Child Sexual Abuse.
Stephen, who asked for his surname not to be used, was sexually assaulted and raped by disgraced priest Michael Glennon, who was a karate instructor and football coach at St Monica’s Primary School in Moonee Ponds in the mid-1970s.
Glennon died in Ararat Prison in 2014 while serving a 10-year sentence for a string of child sex offences committed between 1973 and 1991, but had previously been incarcerated on four other occasions for clerical abuse.
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In 2016, Stephen provided harrowing details of his encounter with Glennon to the church's commissioner after seeking legal representation from Slater and Gordon.
His statement included a graphic account of being raped at a school camp at the age of 12.
"He (Glennon) told me to bend over and hold onto a tree. He then sexually assaulted me. I was crying and screaming in pain and he said to me to be quiet because the other boys don't scream."
Stephen was awarded $75,000 by the Catholic Archdiocese of Melbourne in September 2016 along with an apology from then Melbourne archbishop Denis Hart.
Now 55, Stephen said he had been urged by a managing clerk at Slater and Gordon to pursue compensation under the Melbourne Response, rather than launching civil proceedings against the church.
"I got this feeling they wanted me to go quietly and pushed me into the easier option," he said. "I wanted to make the church pay, I've not had a life and I have nothing."
He lapsed into alcohol and drug addiction after dropping out of St Bernard's College in year 8, and would later spend several stints in prison.
Stephen, who is unemployed and lives in far north Queensland , said he had been re-traumatised by his dealings with the Melbourne Response and felt he had been let down by Slater and Gordon.
"I still don't understand why all these other people have received huge payouts and I got nothing," he said.
Melbourne lawyer Lee Flanagan, from Arnold Thomas and Becker, said Stephen should have been encouraged to bring a common law claim for damages in the Supreme Court of Victoria.
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"Our firm is of the view that this claim was more a million-dollar claim rather than a $70,000 one," Mr Flanagan said.
"That could have at least bought him a house to give him some stability for the first time in his life and got the satisfaction that the church had paid for it."
A Slater and Gordon spokeswoman said the firm recognised the legal obstacles that confronted survivors of institutional abuse in recent years.
However, the case filed by Arnold Thomas and Becker did not reflect recent legislative changes, the spokeswoman said.
"A bill currently before the Victorian Parliament closes a further loophole in the current compensation regime for victims of institutional abuse," she said. "This bill bridges remaining gaps between the 2015 reforms and the subsequent 2018 reforms..."
Mr Flanagan conceded that if the legislation was passed, Arnold Thomas Becker would need to apply to the court to have the agreement set aside, which would be difficult.
Barry Felstead admits China risk failures at James Packer-based Crown Resorts
Barry Felstead at Melbourne's Crown Casino.
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The Australian boss of the James Packer-backed Crown Resorts has admitted he failed to properly alert the risk committee of the company’s board of directors about the dangers faced by Crown’s China-based staff, following a Chinese government crackdown in 2015 on foreign casinos marketing to its citizens.
Under examination at a public inquiry on Monday reviewing the events leading up to the spectacular arrest of Crown’s staff in China in October 2016, the casino giant’s Australian Resorts chief executive Barry Felstead was repeatedly questioned about his knowledge of warnings by the company’s former China strategy architect, then president of international marketing Michael Chen, about the crackdown.
On one occasion Mr Chen warned Mr Felstead and a number of senior Crown executives in an email about the concerns being expressed by Crown’s staff on the ground about their safety, 18 months before 19 employees were jailed.
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One of those arrested was Crown’s Melbourne-based Group executive manager VIP, Jason O’Connor.
Gambling is illegal in mainland China and the Beijing government at the time was cracking down on foreign casino operators looking to lure its mainland citizens offshore to gamble.
What are OPCA Litigants?
Meads v. Meads, 2012 ABQB 571 (CanLII)
Par CLBC Library — Courthouse Libraries Society of BC
In 2012, an Alberta case, Meads v. Meads, 2012 ABQB 571, introduced a new category of vexatious litigant - Organized Pseudolegal Commercial Argument (OPCA) Litigants. The judge stated:
"This Court has developed a new awareness and understanding of a category of vexatious litigant. As we shall see, while there is often a lack of homogeneity, and some individuals or groups have no name or special identity, they (by their own admission or by descriptions given by others) often fall into the following descriptions: Detaxers; Freemen or Freemen-on-the-Land; Sovereign Men or Sovereign Citizens; Church of the Ecumenical Redemption International (CERI); Moorish Law; and other labels - there is no closed list. In the absence of a better moniker, I have collectively labelled them as Organized Pseudolegal Commercial Argument litigants (OPCA litigants), to functionally define them collectively for what they literally are. These persons employ a collection of techniques and arguments promoted and sold by ‘gurus’ (as hereafter defined) to disrupt court operations and to attempt to frustrate the legal rights of governments, corporations, and individuals."
These OPCA litigants deny state and Court authority. They generally believe that either the laws are in some way invalid or that they do not apply to most citizens, so they have a legal and moral right not to comply.
As Justice Rooke states: "they will only honour state, regulatory, contract, family, fiduciary, equitable, and criminal obligations if they feel like it. And typically, they don’t."
After an extensive review of the Court's inherent jurisdiction and case law rejecting each of the above propositions, Justice Rooke held that any scheme claiming that a person can possess or acquire a status that allows him or her to ignore Court authority is incorrect in law. He ruled that a defence with that basis may be struck without further analysis.
Justice Rooke held that a strict approach is appropriate when the Court responds to OPCA litigants. The decision provides a number of powerful procedural remedies and expressly instructs lawyers to pursue these remedies to minimize harm to their clients.
A lawyer who encounters a claim or a defence based on an OPCA concept may now request:
Costs on a full indemnity or solicitor and own client basis;
Security for costs;
Punitive and aggravated damages (especially in the case of foisted agreements), but please note: punitive and aggravated damages must be specifically sought by counsel;
That the OPCA litigant be found in contempt of Court (not applicable to money-for-nothing arguments);
That the OPCA litigant be declared a vexatious litigant pursuant to section 23.1 of the Judicature Act, RSA 2000, chapter J-2.
Indeed, Justice Rooke suggests that most OPCA strategies potentially meet the threshold for these remedies, especially the costs and contempt remedies. He also indicates that serving a lawyer with a fee schedule containing exorbitant penalties may be enough to charge an OPCA litigant with the Offence of intimidating a justice system participant under section 423.1of the Criminal Code, RSC 1985, chapter C-46.
Statutes often requested by OPCA individuals:
The Petition of Right, (1627) 3 Charles I, c. 1 (available in Vancouver and Victoria courthouse libraries)
An Act for Prevention of Frauds and Perjuries, (1677) 29 Charles II, c. 3 - also known as the Statute of Frauds (available in Vancouver and Victoria courthouse libraries)
An Act to Amend the Law Relating to Petitions of Right, to Simplify the Proceedings, and to Make Provisions for the Costs Thereof, (1860) 23 & 24 Victoria, c. 34 - also known as The Petitions of Right Act (available in resource and regional libraries)
Some Local Case Law:
R. v. Main, 2000 ABQB 56
R. v. Dick, 2000 BCPC 221 - Judgment regarding agent David Lindsay, a non-lawyer acting without remuneration, to undertake carriage of the defence as an agent
R. v. Dick, 2001 BCPC 180 - Proceedings at Reasons for Ruling on Potential Witnesses
R. v. Dick, 2001 BCPC 182 - Proceedings at further Disclosure, Failure to File
R. v Dick, 2001 BCPC 245 - Ruling re Out of Province Witness Subpoenas
R. v. Dick, 2001 BCPC 259 - Proceedings at Reasons for Ruling, Chretien as witness
R. v. Bruno, 2002 BCCA 348
R. v. Millar, 2002 BCSC 958
R. v. Dick, 2003 BCPC 13
R. v. Meikle, 2003 BCPC 162
R. v. Millar, 2003 BCCA 164
R. v. Gibbs, 2003 BCPC 527
Lindsay v. Canada (Attorney General), 2005 BCCA 594
HMTQ v. Watson, 2005 BCSC 1225
R. v. Watson, 2007 BCSC 1707
Sydel v. HMTQ, 2010 BCSC 638
R. v. Lindsay, 2010 BCSC 831
Ambrosi v. Duckworth, 2011 BCSC 1582
R. v. Porisky & Gould, 2012 BCSC 67
Feliu, Vicenc. "Meeting the Information Needs of Constitutionalist Patrons: A Guide for Reference Librarians" in (2006) 25Legal Reference Services Quarterly, 89-116 (available in the Vancouver courthouse library).
Halsbury's Statutes of England and Wales, 4th ed., 1995 reissue, v. 10 - Constitutional Law: Petition of Right (1627) from p. 26 (available in Vancouver and Victoria courthouse libraries).
Bennett Jones. Alberta Court Skewers Gibberish Legal Arguments. canliiconnects.org/fr/r%C3%A9sum%C3%A9/28397
BRETT FITZPATRICK, INJURED WORKER: They've treated me like a leper, they've ostracised me, you know left me out in the wilderness to rot.
CHRIS ILIOPOULOS, INJURED WORKER: I'm trying to get better and I have to fight for treatment, I'm not asking for a diamond ring or a new car, I'm asking for treatment.
ADELE FERGUSON, REPORTER: Australia’s worker’s compensation system is supposed to be a safety net.
GREG DAYMAN, INJURED WORKER: It’s not a safety net at all, I just can't believe that it's in this country, I can't believe that it's such a barbaric system.
SCOTT GINTERS, INJURED WORKER: I felt totally worthless because I was in no state to return to work and yet they were dropping me from the system.
ADELE FERGUSON: The schemes are bleeding money and injured workers and their employers are paying the price.
DEBORAH GLASS, VICTORIAN OMBUDSMAN: The decisions that I've seen in our investigations are not only unjust, unreasonable and wrong, some of them are downright immoral and unethical.
ADELE FERGUSON: With tens of billions of dollars at stake, workers comp has become a gravy train for insurers and consultants.
DAVID SHOEBRIDGE, NSW GREENS MP AND FORMER WORKERS COMPENSATION BARRISTER: You can just imagine how many people and organisations are circling around that pool of money and trying to make a buck out of it.
PETER McCARTHY, FMR ADVISER, STATE INSURANCE REGULATORY AUTHORITY: All these people have their snout in the trough. It's a disaster, unmitigated disaster.
ADELE FERGUSON: Tonight, in a joint investigation with the Sydney Morning Herald and the Age, Four Corners opens the books on Australia’s two biggest worker’s compensation schemes.
We meet the winners and the losers and examine insider claims of systemic abuse and some scandalous practices.
STORY TITLE: “IMMORAL & UNETHICAL”
ADELE FERGUSON: Every day when we head off to work, we trust we’ll be looked after if we get hurt on the job, it could happen to any of us.
Employers bankroll workers compensation schemes, paying compulsory premiums to cover medical bills and wages and the promise is to help workers get back to work.
SCOTT GINTERS: I was a rubbish sorter for a skip hire company.
The skip bins would come in on trucks and they would dump the loads on a factory floor, and we’d sort the rubbish using machinery.
ADELE FERGUSON: Scott Ginters was at work in 2017 when a terrible accident happened.
SCOTT GINTERS: We were incredibly busy and there was a lot going on within the factory and the excavator, the six to seven tonne excavator, started reversing towards me.
I was unable to get out of the way fast enough and it ran over me.
It ran over my legs and pelvis. I was able to look directly up underneath the excavator and see the bottom of it and from that point on my whole life changed.
ADELE FERGUSON: Scott’s pelvis, lower spine and legs were crushed.
SHEELAGH GRIFFITHS: I mean we were talking about him losing his legs, the possibility of not walking again and it happened at work, so therefore WorkCover, were going to be involved.
ADELE FERGUSON: Scott was in hospital for two months then in rehab learning how to walk again.
When he eventually came home his struggle with the workers compensation system created enormous stress.
SCOTT GINTERS: I’ve had problems with getting reimbursement on some bills, delays in getting payments.
I’ve had considerable delays or the stretching of timeframes for certain things, you end up feeling like just giving up and letting a lot of those decisions go by the wayside because the fight that you have to constantly do is unimaginable.
Every day it was a fight and those periods of time when you weren't fighting, or when I wasn't fighting, I was lying in bed with the doona surrounding me in a cocoon.
ADELE FERGUSON: Scott’s case was handled by Allianz Insurance, one of five agents used by the Victorian government’s WorkSafe authority, under its workers comp scheme, WorkCover.
He says it was a constant battle to try to get Allianz to approve the medical treatment he needed.
SHEELAGH GRIFFITHS: It was heartbreaking to watch because he would spend any bit of energy trying to get well, but trying to get decisions in his favour and just, at every turn, was blocked, or denied, or, "Well, we haven't received that bit of paperwork," or, "We haven't had this signed off," or, "No, they haven't approved that”.
SCOTT GINTERS: The only way that they can make money is to save money.
ADELE FERGUSON: Two years after the accident Scott was still suffering severe pain and his mental condition had deteriorated.
And then came a bombshell.
SCOTT GINTERS (reading): After careful consideration, based on the information available your entitlement to weekly payments will cease from the 24th of August 2019.
ADELE FERGUSON: Scott had been on workers comp payments for 130 weeks, which meant he had reached an important milestone in the insurer’s performance targets.
What Scott didn’t know was that agents such as Allianz are paid financial incentives by WorkSafe when they close cases.
SCOTT GINTERS: I felt totally worthless because I was in no state to return to work and yet they were dropping me from the system.
It put me in a point where I have never been so low or felt so low in my entire life as I had at that point, I became suicidal, I wanted to just throw it all away.
ADELE FERGUSON: Scott challenged Allianz’s decision to terminate him and went before a medical panel.
SCOTT GINTERS: My physical Impairment was 63% and mental was 18%.
That's how I was assessed, and they overruled Allianz’s decision and therefore that was final, and binding and I was able to go back onto the system finally.
DEBORAH GLASS: What we have certainly seen is the gaming of a system for financial incentives.
There are a series of moments in time when there is an incentive for the agent to return that worker to work so they're called return to work incentives.
There is an incentive, for example, for somebody to return to work at the 130-week mark, now, if you're a seriously, and some cases, catastrophically, injured worker, the incentive on the agent is to produce some form of medical evidence that allows them to terminate the claim at that point, there is an incentive for them to do that.
ADELE FERGUSON: Victorian Ombudsman Deborah Glass has conducted two separate investigations into WorkSafe.
She found agents were doctor shopping and cherry-picking evidence to terminate claims.
DEBORAH GLASS: Within my legislation, I can express an opinion that something is unreasonable, unjust or wrong.
What I saw was, in some of those cases, was downright immoral and unethical.
ADELE FERGUSON: And systemic?
DEBORAH GLASS: And systemic.
ADELE FERGUSON: The Ombudsman examined internal emails that reveal how some insurance agents treat the people they’re supposed to be protecting.
In one email a staffer encourages workmates to deliberately use a doctor with a record of rejecting claims.
"Two outcomes that … I have done in the last two days resulting in terminations of claims from one doctor, Dr X.
Can we please use him more.”
ADELE FERGUSON: what does that tell you?
DEBORAH GLASS: This isn’t a person, this is a number, this is a target, you know, let's close down this claim, let's ignore the fact that there is a suffering human being involved in this, let's find any excuse to make our numbers, to make some money.
ADELE FERGUSON: The correspondence lays bare how insurance agents are rewarded if they meet set targets to kick people off the system.
In this email they had their eye on a hefty bonus.
“... we cannot take our foot off the accelerator as Maximum Reward for this measure is currently worth $687,000!”
“... we can do this!!”
ADELE FERGUSON: What did you think when you saw those sort of emails?
DEBORAH GLASS: It just proves the point, doesn't it, that this is not about people's lives, it's about money, it's about how can we make some more money out of these claims by let's, you know, let's get rid of them, let's terminate them, let's make sure we hit those targets.
CHRIS ILIOPOULOS: I just felt like I was worthless, like I wasn't, like, "If she dies, who cares you know, great, she'll be off our books, another one off”.
ADELE FERGUSON: Chris Iliopoulos was working in a home wares store in Melbourne when she hurt her back moving furniture.
CHRIS ILIOPOULOS: The pain was excruciating, it was like someone was constantly doing this up and down your spine with a knife, but yet you had no feeling in your legs, but then you'd get these shots of electricity and you know, but they just wouldn't move, they didn't want to do anything.
ADELE FERGUSON: Chris’s doctors recommended back surgery.
BREE KNOESTER, WORKERS COMPENSATION LAWYER: It was getting to the point where even though Chris's treating doctors and very senior doctors at well-known reputable clinics who were recommending treatment were being ignored by the insurance company managing Chris's claim.
And even though those doctors were writing, saying that she needed this treatment to try to regain some of her ability to carry out her activities of daily living, the insurance company would not pay for it.
It got to the point where I had to be involved, liaising with the insurance company to try to get more medical evidence so that she could have treatment.
ADELE FERGUSON: The insurance agent eventually approved her surgery but her excruciating pain persisted.
Her specialist recommended intensive pain relief treatment but once again there were lengthy delays.
CHRIS ILIOPOULOS: All they kept saying to me is like, "You have to wait, you have to wait until we get the okay, they're still having meetings about it”.
BREE KNOESTER: It was clear by late 2017 that the insurance company was taking steps to terminate her weekly payments.
She was approaching 130 weeks on weekly payments and that is a trigger point for someone's claim being investigated.
Each time a treating practitioner provided a report, the insurance company got an independent medical report to say the contrary.
ADELE FERGUSON: At 130 weeks she was terminated.
BREE KNOESTER: She had reached the stage where she simply could not cope in this system anymore because she was not being believed.
Her doctors were not being believed and I think she felt entirely overwhelmed that she was at the mercy of an insurance company who would make decisions contrary to her wellbeing at almost every turn.
ADELE FERGUSON: So, she tried to kill herself?
BREE KNOESTER: She did, and she was found by her daughter and she was taken to hospital.
CLEO GUTSZMIT, CHRIS ILIOPOULOS’S DAUGHTER: We thought an injury, it can be fixed, but there's just so much damage left behind in her mind, and in our minds, and in our life. It's just that's the hardest part, I think, just getting over it.
ADELE FERGUSON: Chris went before a medical panel to appeal her termination and the decision was reversed.
She was later awarded a lump sum payment.
CHRIS ILIOPOULOS: Who's going to be held accountable for this, you know?
If I don't speak out now, who's going to say, "Hey, you're doing the wrong thing and people are suffering because of it”?
DEBORAH GLASS: People have forgotten or failed to recognise they’re dealing with people, this is about people’s lives, this is about human suffering, and what you see are references to numbers and files and claims.
PETER McCARTHY: I advised a lot of governments around Australia in my career around workers compensation schemes, in just about all the states of Australia.
I used to do all the numbers to calculate the premiums, give financial advice, I never met claimants at all, met a few lawyers, but you don't actually see the impact it has on people's lives until you actually meet the people and hear their story.
ADELE FERGUSON: Peter McCarthy spent 35 years inside the workers comp system as a key financial adviser for major firms and regulators.
PETER McCARTHY: Hi Greg
GREG DAYMAN: Hi Peter.
PETER McCARTHY: How are you today?
ADELE FERGUSON: Now retired he does charity work taking food to people in financial stress.
PETER McCARTHY: I bought a couple of hampers here for you.
GREG DAYMAN: Thank you very much.
ADELE FERGUSON: Some have been thrown off the workers compensation system.
PETER McCARTHY: Got some Woollies vouchers.
GREG DAYMAN: Thank you very much.
PETER McCARTHY: Do you want a hand taking this in?
GREG DAYMAN: Yes please, if you wouldn’t mind, they’re pretty heavy.
PETER McCARTHY: A workers comp claim, in my experience, can be an extremely emotional, traumatic period of a person's life, and people need to have a lot of empathy with the person they're dealing with.
ADELE FERGUSON: Through his volunteering, Peter met Greg Dayman, who’s been unable to do his job after a serious injury on a construction site more than a decade ago.
GREG DAYMAN, INJURED WORKER: I have chronic pain, I have chronic pain, so pain up my neck on the left side, side of my head on the left side, down my arm, down my torso, and also down my leg.
I get flare ups, so it sort of goes up and down, up and down, all the time, it's constantly there.
PETER McCARTHY: He used to ring up and ask for help in paying his bills like electricity, he didn’t have enough money to buy food, so we’d go around and take hampers and give him food vouchers.
ADELE FERGUSON: Greg Dayman was thrown off workers comp payments in 2017 as part of reforms to make the NSW scheme financially viable.
GREG DAYMAN: I've got mental health problems now, I don't know what my future’s going to be, it doesn't just affect my work life, it affects my whole life.
It affects my social life, I'm single, which I don't really want to be single, but I've said to myself, no women would want to be with someone like me that hasn't got a future.
ADELE FERGUSON: Do you think the system let him down?
PETER McCARTHY: Absolutely let him down to a terrible extent, it's ruined his life, it's ruined his financial wellbeing, and it's ruined him socially, and he's very depressed about it.
icare PROMOTIONAL VIDEO: icare workers insurance protects more than 320,000 businesses.
ADELE FERGUSON: In New South Wales, icare is the principal workers compensation authority.
It was set up by the state government in 2015 to replace the old WorkCover scheme, which had racked up a $4 billion deficit.
icare PROMOTIONAL VIDEO: We care for more than 60,000 Injured workers each year.
ADELE FERGUSON: When you hear the word icare what do you think?
GREG DAYMAN: I cringe, I don't like the word icare, what a name, they don't care, they just don't care.
ADELE FERGUSON: When icare was established the NSW Government got rid of long term injured workers like Greg Dayman to wipe the deficit.
PETER McCARTHY: Their benefits were cut off after five years, and that had a huge financial impact on the scheme.
It went from basically a $4 billion deficit to a $4 billion surplus at June 2015, that's a huge impact.
ADELE FERGUSON: icare is chaired by Liberal Party donor and businessman Michael Carapiet.
He was appointed by Treasurer Dominic Perrottet and is on his business advisory committee.
icare’s CEO is John Nagle, a former executive in the insurance arm of retail giant, Wesfarmers.
He was one of the architects of icare’s workers compensation model.
JOHN NAGLE, CEO AND MANAGING DIRECTOR icare: When I was first asked to consider the concept of icare I was fascinated.
You know I actually started as a young kid, as a government insurer doing workers compensation claims and to come back some 38 years later and find that not much had changed, I have to say appalled me.
You know it was outdated, it was outmoded, it was a fascinating challenge on how to run a transformation and the amount of effort that we needed to put in to make the changes that we've had to drive, so I'm actually incredibly pleased.
ADELE FERGUSON: From the start there were concerns that the people running icare didn’t have the right experience.
Key executives were recruited from Wesfarmers Insurance, which specialised in home and business policies.
Insiders called them ‘the Wesfarmers club’.
PETER McCARTHY: It seems, from looking at the people who are in there, a lot of people came from Wesfarmers, these people, if you go and look at their CV’s, they've practically no experience in workers compensation.
ADELE FERGUSON: You've been asked about Wesfarmers connections in parliament, is it usual to recruit so many people from the one organisation?
JOHN NAGLE: I'm not quite sure what you're saying here, but, but the reality is, you know, I've worked in the insurance industry for, this is my 44th year, I know lots of people in lots of organisations, and I've worked in a number.
In terms of Wesfarmers, Wesfarmers was sold to IAG, a number of those people went to other organisations and then became available.
If they've got talent, they go through the appropriate process, if they’re selected, you know, I'm very comfortable with that.
icare PROMOTIONAL VIDEO: From January 1, 2018 lodging a new notification of an injury in New South Wales will be a whole lot easier.
ADELE FERGUSON: Icare introduced a slick new computer-driven claims model to assess and triage injured workers.
icare PROMOTIONAL VIDEO: You will be prompted throughout, simply fill in the claim details about the injury by following the prompts on screen, there are hints and tips to help you…
ADELE FERGUSON: In most cases, technology replaced human contact.
DAVID SHOEBRIDGE: The idea was to save money on claims handling, that largely claims would be managed automatically.
They'd be assessed and graded as they came in and then largely handled by a logarithm rather than individual connections with a claims manager and what we saw with that was a literal disaster.
PETER McCARTHY: They seem to have introduced a claims model which would work really well for a car insurance claim or a home claim or a commercial property, it would work. but it just does not work for workers comp.
Workers comp claims are totally different to a home or car claim.
JOHN NAGLE: The logic that we had in introducing the model is that 45% of claims are just not complex, they are simple sprains or strains or minor injuries where we felt that people didn't necessarily need a case manager assigned to them from day one and as long as the process was explained that they could find and navigate their own way through the process.
ADELE FERGUSON: Under icare, all new claims were outsourced to a single insurance agent EML.
PROMOTIONAL VIDEO MARK COYNE, EML, CEO: Obviously Icare were looking for a partner to join with them in developing a world-class claims service model we are very excited that they picked EML to be that one which I think's a reflection.
DAVID SHOEBRIDGE: NSW has the biggest workers compensation scheme in the country and the entity that was chosen to manage it all was one of the smallest, I mean it came entirely out of left field and indeed it came in circumstances where EML hadn't been able to deliver on that kind of work in a much smaller statutory scheme in South Australia.
I don't think it was just me that was surprised, I think the entire industry was surprised that icare thought EML had the capacity or ability to do that job.
ADELE FERGUSON: In South Australia, EML had been investigated and castigated over its poor handling of claims.
It was also criticised in a NSW Parliamentary inquiry in 2016 over its tactics in pursuing injured workers.
SIMON BOOTH, EMPLOYERS’ WORKERS COMPENSATION BROKER: What we saw in South Australia was a lot of, employees becoming disgruntled, again, feeling that they weren't heard from, they didn't have a say in the process and this is similar to what we've seen in the last couple of years in New South Wales.
ADELE FERGUSON: The whole point of workers comp schemes is to get people back to work.
It’s what makes the system financially viable.
On this critical measure, it’s failing.
CARMEL DONNELLY, CHIEF EXECUTIVE, STATE INSURANCE REGULATORY AUTHORITY: The performance by icare has been unacceptable.
In January 2018, and for many years before that, for example, after six months after an injury, only 1 in 10 workers was not back at work.
It's now 2 in 10. It's now 2 in 10, that's thousands of workers, it's unacceptable.
ADELE FERGUSON: Carmel Donnelly, who heads up the NSW government workers comp regulator, says icare’s poor return to work rate has pushed up the cost of medical expenses.
CARMEL DONNELLY: The costs of extra healthcare, the cost of extra weekly benefits increase the liabilities for the scheme, and ultimately lead to higher premiums.
ADELE FERGUSON What about return to work rates? That’s been plunging.
JOHN NAGLE: What we concentrated on was sustainable return to work, making sure that workers recovered, returned to work, and were still there three months later.
So, we anticipated that we would go backwards a little bit, but we went back further than we anticipated, and we've been working with our service providers to close that gap ever since.
PETER McCARTHY: It's a complete disaster.
There are now after 26 weeks, more than double the number of people still off work, they haven't been able to get back to work, and that as a result is creating a financial disaster.
And a rough rule of thumb, if you have double the number of people off work around that time, the cost of your scheme doubles.
ADELE FERGUSON: Last year, icare’s workers compensation scheme recorded a loss of $874 million.
Since 2015 it’s blown more than $3 billion.
CARMEL DONNELLY: It's definitely a grave concern.
Their performance around return to work and about finance is unacceptable, the financial position, there needs to be action.
ADELE FERGUSON: The NSW opposition recently obtained a tranche of internal government documents relating to icare.
ADELE FERGUSON: Peter McCarthy helped Four Corners sift through the massive document dump.
PETER McCARTHY: This is really interesting, there's been a huge increase in psych claims.
ADELE FERGUSON: The documents reveal multiple warnings about a looming financial disaster.
As early as June 2018, Treasury notes the regulator has “become increasingly concerned about the financial viability of the Workers Insurance scheme”.
A year later, the regulator warns Treasury the capital position has “deteriorated significantly”.
And earlier this year the regulator tells Treasury officials “liabilities are now greater than their assets by $459 million.”
Also buried in the pile is a Treasury note from March saying, “the fund’s solvency is at risk.”
DANIEL MOOKHEY: The scheme is heading for a financial disaster, and it was heading for a financial disaster before the COVID pandemic hit.
As it is, for the last few years, the surplus has been dwindling.
It's only now a matter of time before the scheme plunges in deficit.
When that happens, icare or the government will try to either cut benefits further and make injured workers pay for these mistakes or increase premiums on employers and make employers pay for these mistakes.
ADELE FERGUSON: Peter McCarthy believes it’s even worse than the documents indicate.
PETER McCARTHY: I'm saying the liabilities are undercooked by about $6 billion, money they don't have.
ADELE FERGUSON: Does the fund have solvency issues?
JOHN NAGLE: The fund hasn't any solvency issues.
Look solvency it can be measured in many ways, in a political sense it's very narrow, it's a funding ratio, which is merely a point in time exercise.
As I mentioned before, when you look at the risk of ruin, we know that we're ample funds for the next 10 years, if we do nothing.
ADELE FERGUSON: So, you're not concerned at all at the finances of icare?
JOHN NAGLE: Not particularly, I'm always concerned about the next hundred years, the next 40 years, that's the period we have to consider.
ADELE FERGUSON: Just to interrupt you, Treasury has written notes saying that icare has an overly optimistic view of its finances.
Isn't that another polite way of saying 'spin'?
JOHN NAGLE: I don't believe so. I haven’t seen the note from Treasury, so yes, we may have a bias towards positivity, but I don't think that bias towards positivity is silly.
It's just a reality that we are a unique organisation.
Any of the large fund schemes in Australia have the same scenario, we invest for the long haul, we price our products for the long haul.
ADELE FERGUSON: Also revealed in the documents is another debt bomb.
A Treasury briefing note from March this year reveals “...52,000 people have been underpaid an estimated $80 million in claims benefits...”
DANIEL MOOKHEY: That would rank as one of the biggest wage underpayment scandals that Australia has seen, and it certainly is the biggest example of underpayment in Australia by an Australian government.
ADELE FERGUSON: How long will it take to repay the workers?
JOHN NAGLE: Well, we believe it's a massively complex issue, so at least another six months.
We're now ready to contact workers who we've identified, but the number is we believe somewhere between five and 10,000 workers are actually impacted.
ADELE FERGUSON: So, you're challenging the $80 million?
JOHN NAGLE: Absolutely.
ADELE FERGUSON: Despite the massive losses, remuneration for icare’s executives has risen exponentially.
PETER McCARTHY: So, in 2015, prior to icare being created, there were two people, who had an average salary of $305,000, two people.
They now have 45 people, a 22-fold increase in number of executives who receive on average, $300,000 or more.
So, the total remuneration has increased from $611,000 in 2015, to now almost $18 million.
That is 30-fold increase in salaries of senior executives in icare, that's just unbelievable.
ADELE FERGUSON: A confidential Treasury briefing says, “icare’s executive team is likely the highest paid in the NSW government sector.”
ADELE FERGUSON: Just turning to salaries, can you tell me how much you earn?
JOHN NAGLE: My salary and all the salaries in icare are determined by our board.
ADELE FERGUSON: I'm asking how much you earn.
JOHN NAGLE: We're not part of the government employment sector so our board has actually determined our salary range.
ADELE FERGUSON: And what is that salary.
JOHN NAGLE: I'm not releasing that on public television. I don't need to.
ADELE FERGUSON: Senior executives are also paid bonuses if they meet so-called customer satisfaction targets.
ADELE FERGUSON: What about bonuses, did you get your full bonus last year?
JOHN NAGLE: I didn't get a full bonus last year, no.
ADELE FERGUSON How about this year?
JOHN NAGLE: I don't know, the board will make that determination, once the accounts are finalised in normally August, September.
ADELE FERGUSON Given the performance of icare, do you believe it's appropriate to get a bonus?
JOHN NAGLE: As I say, the board assesses us against everything we do in icare.
ADELE FERGUSON: Questions also being asked about how icare awards contracts.
DANIEL MOOKHEY: So, I checked the database, and I saw that on one day icare listed 181 contracts on the public database, 170 of which never went to tender.
I've never seen any government agency list so many contracts on one day in breach of the law, and I've never seen any government agency report this many contracts not going to tender.
ADELE FERGUSON: In 2016 icare awarded a contract without a tender to a small New Zealand company to develop a tool to measure customer satisfaction.
PETER McCARTHY: I don't understand why they had to go to New Zealand to actually find someone to implement it in icare NSW, when there's lots of firms who actually can do that.
ADELE FERGUSON: icare consultant Tony Pescott managed the project which was worth $11 million.
A year after the contract was signed, he lodged a conflict of interest form stating that his son owned the New Zealand firm.
Company searches by Four Corners reveal there was more to it.
At the time Tony Pescott signed the conflict of interest declaration, he was a major shareholder in his son’s company Perceptive.
PETER McCARTHY: That's a huge governance issue, and conflict of interest.
How on earth icare let that happen is just unbelievable.
ADELE FERGUSON: Tony Pescott told Four Corners he held shares on behalf of a family trust and received no financial benefit.
ADELE FERGUSON: You signed off on Tony Pescott’s conflict of interest declaration, were you aware he owned shares in Perceptive?
JOHN NAGLE: I wasn't aware that he owned shares; I was aware that his son was at Perceptive and when I discussed it with him, we decided that he should declare that he had an interest or his son was at Perceptive and that's what the conflict of interest declaration was about.
ADELE FERGUSON: But he actually, if you did a company search, you'd find he also owned shares in the company.
JOHN NAGLE: I understand that that was at a later date.
ADELE FERGUSON It was in September 2016.
JOHN NAGLE: yep, I’ll take your, accept that, we registered a conflict if that wasn't declared, it wasn't declared.
ADELE FERGUSON: icare later told Four Corners that in 2018 the NSW anti-corruption watchdog ICAC asked about Tony Pescott’s relationship with Perceptive.
icare said the watchdog subsequently decided it wouldn’t make any further enquiries.
Four Corners understands there have been concerns with other contracts awarded by icare.
A 2016 compliance report rated some processes “high” risk, some disclosure practices breached the law.
ADELE FERGUSON: Have you had to refer anything to ICAC?
CARMEL DONNELLY: So more broadly, I can say, yes, I have, and I'm very proactive, if I believe there's reasonable grounds to need to report to ICAC, I do. I don't hesitate.
The ICAC guidance is that, when you do that, you keep it confidential.
I'm not going to go into detail, it's not appropriate for me to comment about where they are, but over the times that I've been Chief Executive, there have been matters that I've reported to ICAC and I will continue to be proactive about that.
ADELE FERGUSON: Are you aware that the regulator has referred some matters relating to icare to ICAC?
JOHN NAGLE: I'm not aware that they've referred that.
BRETT FITZPATRICK: I'm one individual going up against an entire system.
They've got billions of dollars behind them, they've got unlimited resources, and what do I have?
I have absolutely nothing, I'm trying to fight against you know against all these multiple parties all at the same time whilst dealing with a mental incapacity.
It's like being in a boxing match with one arm tied behind my back.
ADELE FERGUSON: Brett Fitzpatrick is on a mission to expose how the workers comp system is stacked against workers.
The former prison guard and two of his colleagues lodged a claim of bullying and harassment by their employer, Corrective Services.
A series of doctors agreed Brett had suffered a work-related psychological injury.
BRETT FITZPATRICK: Unbeknown to me at the time, my employer had instructed the insurer to decline the claims.
ADELE FERGUSON: A forensic investigation by consulting giant KPMG revealed the tactics used to reject the prison guards’ claim.
ADELE FERGUSON: The report documented a conversation where Corrective Services told the insurer, the claim should be declined so the claimant would be “left short of money and has to return to work due to ... financial hardship.”
“Sometimes it’s cruel to be kind and got to hit them in the pocket and when he’s not getting any money and he’s married with kids and most probably his own home, he’s most probably got to think well fuck sake I’ve got to do this.”
QBE replies, “yeah... I think he’s close to that now.”
BRETT FITZPATRICK: My employer and insurer were just openly talking and laughing about the fact that they were going to decline these claims and how they would go about doing it.
That, to me, indicates that this perhaps is systemic.
They didn't try to hide it at all. they're playing with people's mental health and to them it's just a game.
ADELE FERGUSON: We've been told the draft report was watered down.
JOHN NAGLE: Well, if you take out speculation and rumour you'd have a change in the report.
The earlier version, my understanding of that report, the, the reason there were two, two reports, the first version contained information that was basically just hearsay so we asked KPMG to just stick to the facts that were actually available and so they had to amend their report.
ADELE FERGUSON: Do you think that, from what you've heard of him, that he's been grossly mistreated?
CARMEL DONNELLY: I've ordered an investigation, a comprehensive investigation and claim's audit into his claim and some others, it's a very thorough investigation.
BRETT FITZPATRICK: I mean I can't tell you how many times in the last five years I've been knocked down, and as the years go on, the more times you get knocked down, the longer it takes to get back up.
ADELE FERGUSON: All of this has taken a huge toll on Brett Fitzpatrick.
He uses a cold-water immersion breathing technique to help deal with his depression and anxiety.
BRETT FITZPATRICK: Once you go into the cold water, you're not thinking about your case anymore, your mind just becomes pure, all you're thinking about is how cold it is, I'm not thinking about the outcomes of my case.
I can stop the voice in my head that's strategizing and trying to plan the outcomes and possible scenarios in the future, it centres you.
ADELE FERGUSON: icare is shaping up as one of the country’s worst financial bungles.
In five short years it’s blown billions of dollars of employers' premiums, yet its management team appears tone deaf to criticism.
ADELE FERGUSON: So, who's ultimately in charge of icare?
Who's calling the shots here?
CARMEL DONNELLY: Ultimately, the icare board is responsible for icare and they're quite an independent organisation.
ADELE FERGUSON: Who is responsible for the board, is there someone in charge who can actually get rid of the board?
CARMEL DONNELLY: My understanding is that it's their responsible minister who appoints the board.
ADELE FERGUSON: So, the Treasurer?
CARMEL DONNELLY: And they report to the Treasurer.
PETER McCARTHY: The government, I think has no choice but to sack the board, and they need to put a new board in there and get people who actually understand this business. that new board needs to sack the executive team at icare, and get some people in there who actually understand the business and how to manage claims, and unwind this disaster, this mess.
ADELE FERGUSON: With icare drowning in red ink, Peter McCarthy believes employers will be tapped for more money.
PETER McCARTHY: Employers’ premiums are probably going to have to least double to fund the problem, that's a huge impost on the current New South Wales economy, when it's really struggling from the coronavirus impact, the bushfires.
It’s money, if they increase the premiums to this extent, a lot of the employers will go out of business.
SIMON BOOTH: If employers are forced to pay higher premiums for deteriorating outcomes, they'll be forced to close down, there'll be a point where they cannot continue to cover those costs and operate.
Employers run this country, they keep it going, they provide work for our workforce, they put food on people's tables, they put roofs over people's heads.
With what's going on at the moment, we will need every employer operating to get us out of the situation we've been put in through COVID-19.
ADELE FERGUSON: Four Corners also understands icare recently proposed to aggressively remove the number of people covered under its workers comp scheme.
ADELE FERGUSON: Have you heard that icare earlier this year, were calling insurance agents to target up to 13,000 workers, who've been on workers comp for up to two and a half years, under a section of the law?
CARMEL DONNELLY: I have recently heard that.
JOHN NAGLE: That's the first I've ever heard of that.
ADELE FERGUSON: Carmel Donnelly’s aware of it.
JOHN NAGLE: I'm not sure where she's got that information from, there wouldn't be 13,000 workers who would be eligible to have that application applied to them, I don't understand where that information would come from.
ADELE FERGUSON: The workers comp safety net is being undermined by greed and broken promises.
Regulators with too few powers and governments too slow to reform, this is a system in crisis.
Injured workers are getting sicker and employers are left holding the bill.
CARMEL DONNELLY: I think people need to be able to trust that all the organisations in the system are there to support injured workers.
I think the turnaround needs to happen, it needs to be paid urgent attention.
We need to help people recover, get back to work, get back to their life.
The performance of icare is a grave concern to me, absolutely a grave concern.
DEBORAH GLASS: It could be any one of us, anybody could find themselves in this position.
Workers comp is meant to be a safety net.
Her boss Helen Glass was on the show....
It is part of that social obligation by the state to ensure that people who are injured at work are not only appropriately compensated but appropriately incentivised to go back to the workplace, it's vital that we get this right.
AMP may face criminal charges by Christmas
Michael RoddanSenior companies reporter
Aug 5, 2020 – 4.32pm
Wealth management group AMP may face criminal lawsuits by the end of the year, according to the Australian Securities and Investments Commission, which has “more than five” current probes into the company.
ASIC deputy chair Daniel Crennan: “There’s a significant number of matters.” James Alcock
ASIC deputy chair Daniel Crennan, SC, told a parliamentary hearing on Wednesday that the regulator had “a number of investigations that are ongoing internally” along with “a number of investigations that have been briefed with the CDPP [Commonwealth Director of Public Prosecutions]” in relation to AMP.
Under questioning from Labor MP Andrew Leigh, who asked if any matters would likely be filed in court by the end of the year, Mr Crennan said: “Yes, I would think so.”
“Can you go to the question of the number of matters that are being handled?” Mr Leigh asked.
“There’s a significant number of matters,” Mr Crennan said, which was “more than five, less than 50 – significantly less than 50".
1.91 at 6/1/20
Sep 19Dec 19Mar 20Jun 201.101.501.90
Updated: Aug 5, 2020 – 5.10pm. Data is 20 mins delayed.
View AMP related articles
“It wouldn’t be within our practice to identify with any precision how many investigations we have ongoing into any particular entity,” Mr Crennan said.
An AMP spokesman said the company would "respond diligently" to any of ASIC's concerns. ASIC handles its own civil cases, but refers cases to the CDPP when an investigation involves potential criminal matters.
The new court matters will compound the problems facing AMP, which had two separate class action lawsuits filed against it last week, the first by aggrieved former financial advisers claiming the company dishonoured longstanding contract terms, and the other seeking damages for "unethical" life insurance advice.
AMP is due on Thursday next week to unveil its half-year results, in which new AMP Capital boss Boe Pahari is expected to outline a new strategy for the key asset management arm of the group.
The group is also expected to flag its plans for about $1 billion in capital it has freed through the sale of its life insurance division, although analysts are split on whether it will have leftover cash to spend after its efficiency drive.
AMP Capital boss Boe Pahari is expected to unveil a new strategy for his division at the company's upcoming results in August. Reuters
AMP shares have fallen 25 per cent since the start of July, in a rout that was exacerbated late last week when the wealth giant blamed the coronavirus pandemic for an expected 50 per cent decline in underlying profit for the half-year.
The 170-year-old company has faced a shareholder and public backlash over the appointment of Mr Pahari as AMP Capital chief executive on July 1 despite him receiving a $500,000 penalty after AMP settled a sexual harassment claim against him by a female subordinate in 2017.
AMP was a frequent flyer during Kenneth Hayne’s royal commission into financial services, and was heavily damaged by accusations it misled the corporate regulator when dealing with its fees-for-no-service issue.
The imbroglio triggered the resignation of AMP chairman Catherine Brenner, the early departure of chief executive Craig Meller, a string of other top executives and all three of the company’s female board directors at the time.
In February, ASIC revealed that of the 13 referrals made by the year-long banking misconduct inquiry, one case was now being considered by the Commonwealth Director of Public Prosecutions for potential criminal action.
In a note sent to clients on Wednesday, Macquarie Wealth Management said AMP was “caught between a rock and a hard place”.
AMP Capital boss Boe Pahari is expected to unveil a new strategy for his division at the company's upcoming results in August.
Lazard no longer a substantial AMP shareholder
While the company’s earnings missed consensus by about 20 per cent, the wealth management arm of AMP still had not yet migrated customers from “high-earning products” to more modern products, which foreshadowed even deeper earnings pressure ahead, Macquarie said.
“In our view, once this migration occurs, Australian Wealth Management will not make any operating earnings unless material cost-out is delivered,” the note said.
“This announcement [of the profit warning] reinforces the ongoing downside earnings risk across all of AMP’s divisions over the medium term.”
AMP CEO Francesco De Ferrari.
'Sticker shock' as AMP flags 50pc profit hit
Following widespread outrage about the appointment of Mr Pahari, in which employees voiced their anger and concerns about the direction of the company directly to the group’s eight-member executive team, chief executive Francesco De Ferrari pledged to establish a group-wide integrity office, a new “cultural taskforce” to boost female employees in leadership positions and the appointment of consultants to help them achieve the goal.
The ructions have also led to major investment consultant JANA suspending its ratings for AMP Capital, warning major superannuation fund clients against placing money with the company because it “seriously misjudged the expectations of staff, clients and the broader market” in promoting Mr Pahari.
Crown Resorts opened accounts with the Commonwealth Bank using "misleading" names that masked their use for gambling and accepted high-risk cash deposits, despite ANZ shutting down similar accounts over money laundering concerns, an inquiry has heard.
Crown's chief legal and regulatory compliance officer Joshua Preston told the NSW government probity inquiry into the James Packer-backed casino group on Friday he could not recall why CBA then also shut down the accounts in late 2019, but it "would not surprise" him if it was also due to fears about dirty cash.
Crown set up two companies to give its patrons 'privacy'.
Crown set up two companies to give its patrons 'privacy'.Credit:Getty Images
The NSW Independent Liquor and Gaming Authority's inquiry is investigating revelations by The Age, Sydney Morning Herald and 60 Minutes that Crown went into business with "junket" tour operators linked to organised crime and was used to launder suspected drug money.
The inquiry heard Crown used two holdings companies with Crown executives as directors called Southbank Investments and Riverbank Investments, linked to Crown's Melbourne and Perth casinos respectively, which opened banks accounts for patrons to deposit money into. Once credited to a patron's Crown account, they could withdraw it as cash, a cheque or as gambling chips.
Former Crown Resorts employee Jenny Jiang
Gangsters, gamblers and Crown casino: How it all went wrong
Mr Preston said the purpose of the holding companies was to give patrons "privacy", but under questioning by counsel assisting the inquiry, Scott Aspinall, about their "misleading" names, he agreed that hiding the fact money was being transferred to a casino created a "vulnerability" for them to be used for money laundering or theft.
The inquiry heard that in January 2014 ANZ Bank contacted Crown to raise the alarm about a string of large cash deposits made to the Riverbank account at different bank branches across Perth, which Mr Aspinall said was a clear red flag for money laundering.
Mr Preston was the head of anti-money laundering at Crown Perth at the time but said he could not recall if he was alerted to the incident or attended a meeting with ANZ about their concerns.
When ANZ cancelled the account, Crown opened a new account with CBA which - despite its experience with ANZ - also accepted anonymous cash deposits. Mr Aspinall took the inquiry through a series of suspect cash deposits of up to $50,000 made to the new CBA account over three months that totalled $5 million.
Crown then transferred the $5 million from the Riverbank account to one of its main bank accounts, which Mr Aspinall said showed Crown had failed to identify what was obviously money laundering.
Gaming & wagering
Crown Resorts sees high-roller turnover dive in 'junket' fallout
Mr Preston said Crown could only lodge reports with the regulator AUSTRAC when it suspects money laundering but "don’t have the ability to determine whether it was or was not [laundering]".
"This has the indicators of money laundering which would have been reviewed by our transaction monitoring program and appropriate reports… would be made," he said.
New Zealand's ASB Bank shut down another account linked to the Southbank company in 2018 after it asked Crown to "urgently answer" a list of questions about how Crown monitored suspect activity on the account and did not receive a reply until three months later.
Mr Preston rejected Mr Aspinall's suggestion that the fact Crown kept opening new accounts with the same functions as ones shut down over money launder concerns was "indicative of the fact that Crown facilitated or turning a blind eye to money laundering".
Pushed by Commissioner Patricia Bergin, Mr Preston accepted "there are weaknesses that have been observed" in how the accounts were handled. However, he said there was a regulatory framework sitting around the accounts that Crown did comply with.
Mr Preston said that the anti-money laundering watchdog, AUSTRAC, had asked Crown why Riverbank and Southbank accounts were not registered as entities that would have had reporting obligations. He said Crown resisted this on legal advice that it was not necessary because there were not engaged in gambling activities. The inquiry will continue on Monday.
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Workers compensation is supposed to be a safety net designed to return injured employees to the workplace and provide assistance to those so badly hurt that they can no longer hold down a job.
Australian workers are guaranteed these protections by law, but there is disturbing evidence the system is failing badly.
Reporter Adele Ferguson reveals the scandalous state of workers compensation schemes in Australia, in a joint Four Corners, The Age and Sydney Morning Herald investigation.
Mon 27 Jul 2020, 9:15pm
By Catherine Bembrick and Liana Witt - Jul 01, 2020 8:45 am AEST
At least one contested criminal cartel prosecution is expected to be heard in the Federal Court in the near future.
If convicted, the Court will need to consider the sentencing of individuals for criminal cartel conduct for the first time.
The sentencing of corporations, considered recently in the NYK and K-Line decisions, provides some guidance on how the Court will approach these questions.
Since criminal cartel offences were introduced in the Competition and Consumer Act 2010 (Cth) (‘CCA’) in July 2009, only two matters have been prosecuted in the Federal Court, each relating to the conduct of a corporation. In both matters, the accused entered an early guilty plea, negating the need for a contested hearing on liability. The Court’s recent decision in Commonwealth Director of Public Prosecutions v Kawasaki Kisen Kaisha Ltd  FCA 1170 (‘K-Line’), gives an indication of how corporations and individuals in criminal cartel proceedings will be sentenced if convicted.
These issues are of current interest given that at least one contested criminal cartel matter, Country Care, is expected to be heard in the Federal Court in the next 12 months. The Country Care matter is not only the first criminal cartel prosecution of an Australian company, but also the first prosecution of individuals. The jury trial that was scheduled for April 2020 has been delayed due to COVID-19 and a new trial date is yet to be fixed. Three other contested criminal cartel matters involving corporations and individuals are currently at the committal stage: ANZ, Citigroup and Deutsche Bank; Vino Money; and the CFMEU.
If any individuals in these matters are convicted, the Federal Court will need to consider the sentencing of individuals for criminal cartel conduct for the first time, including whether custodial sentences should be ordered.
Criminal cartels and sentencing legislation
A corporation commits an offence if it makes, or gives effect to, a contract or arrangement, or arrives at an understanding (‘CAU’), and that CAU contains a cartel provision (CCA, ss 45AD, 45AF, 45AG). The requisite fault element for the criminal offence is ‘knowledge or belief’, that is, if the corporation knows or believes that it is entering into a CAU that contains a cartel provision (CCA, ss 45AF, 45AG; Criminal Code cl 5.3).
Individuals who attempt to contravene, aid, abet, counsel, procure or induce a corporation to contravene a cartel offence provision, conspire with others to do so, or are knowingly concerned in a contravention, are taken to have also contravened the cartel prohibition (CCA, s 79(1)).
For corporations, criminal cartel conduct is punishable by a maximum fine per offence not exceeding $10,000,000; or three times the total value of the obtained benefits reasonably attributable to the offence; or, if the benefit cannot be determined, 10 per cent of the turnover of the corporate group for the 12-month period preceding the offence, whichever is the greater. Individuals can be sentenced to up to ten years gaol and/or ordered to pay a fine not exceeding 2,000 penalty units (currently $420,000) (CCA, s 79(1); see also s 4B(2) Crimes Act 1914 (Cth) (‘Crimes Act’).
Section 16A of the Crimes Act sets out the matters to which a court must have regard in sentencing a federal offender. The overarching principle is that a court must impose a sentence of a ‘severity appropriate in all the circumstances of the offence’ (s 16A(1)). The court may have regard to other relevant matters, but must take into account those in s 16A(2), including: the nature and circumstances of the offence; the degree of contrition shown by the defendant; whether the defendant has pleaded guilty or cooperated in the investigation of the offence; the deterrent effect of any penalty; the need to ensure the defendant is adequately punished; and the character and background of the defendant.
Only two criminal cartel matters have reached the sentencing stage in the Federal Court: K-Line and Commonwealth Director of Public Prosecutions v Nippon Yusen Kabushiki Kaisha (2017) 254 FCR 235;  FCA 876 (‘NYK’). Both proceedings arose out of a global cartel in the supply of ocean shipping services for roll-on, roll-off cargo. Each of NYK and K-Line pleaded guilty to one rolled-up charge of giving effect to an arrangement or understanding for the fixing of freight rates in respect of shipping services on routes to Australia. Another proceeding related to this cartel, Wallenius Wilhelmsen Ocean, has been adjourned for sentencing after a guilty plea was entered on 18 June 2020. When sentencing K-Line, Wigney J considered the application of s 16A of the Crimes Act to a corporate defendant. His Honour pointed to factors including the following as weighing in favour of a higher sentence:
the maximum penalty for K-Line was $100 million, providing a ‘guidepost’ bearing on the ultimate discretionary determination of the sentence;
the offence committed was very serious in all the circumstances, cartels comprising the most egregious form of anticompetitive behaviour, involving conduct likely to harm consumers, businesses and the economy;
the conduct occurred over a lengthy period of time, more than three years;
the conduct was covert, systematic and involved planning and deliberation;
the conduct was engaged in by senior managers and sanctioned or known by some senior executives; and
while the benefits obtained could not be determined, K-Line would have profited from the conduct.
Other factors suggested that a lesser sentence should be imposed on K-Line, including its early guilty plea; demonstrated contrition and remorse (including by way of its early plea); demonstrated rehabilitation and that K-Line had no prior record of criminal conduct in Australia.
A key question considered by the Court was the extent of any discount for K-Line’s guilty plea. Relevantly, K-Line contested the charges during committal, including by applying for leave to cross-examine a number of prosecution witnesses. K-Line pleaded guilty only after it was committed for trial in the Federal Court and the indictment filed. Justice Wigney noted that the timing of the guilty plea was a relevant and potentially significant factor in determining the extent of any discount or reduction in sentence that would otherwise have been imposed. Ultimately, weighing all factors, his Honour determined that a discount of just over 28 per cent was appropriate.
Another central issue considered was the importance of setting a fine at an appropriate level for general deterrence. This required the Court to have regard to the principle of parity given that NYK, a co-accused, had already been sentenced. His Honour noted that sentences for cartel offences should be set so that others who may engage in such conduct will not come to regard any penalty as simply an acceptable cost of doing business.
K-Line was fined $34.5 million, the largest criminal fine imposed under the CCA. But for the discount, the fine would have been $48 million.
The factors discussed above will apply to the sentencing of individuals. However, it is inevitable that where the conduct of individuals is concerned, questions of subjective circumstances relevant to that individual will be significant.
In sentencing an individual, a key focus is likely to be on intention, the (relative) extent of the knowledge and involvement in the conduct, the degree of wilfulness or carelessness, and the extent to which the conduct was covert and deliberate. The individual’s level of seniority, authority and experience will also be relevant factors, particularly in applying the parity principle where there are multiple individual accused. Evidence that an individual sought to cover up the conduct or take steps to prevent the conduct being detected will be considered an aggravating factor.
Matters to be raised by any individual as mitigating factors are likely to include unblemished character and reputation, prospects of rehabilitation, contrition and any cooperation provided to the ACCC. Some guidance on how the Court may approach the issue of character and reputation is provided in the observations of Finkelstein J in Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No 2) (2002) 190 ALR 169;  FCA 559 at . Justice Finkelstein noted that in antitrust cases there is a danger of having too great an emphasis put on the ‘respectability’ of the offender, who is often a ‘top executive’. His Honour was of the view that there are limits on how far one can take the ‘good citizen’ plea in mitigation, particularly where an individual has a choice of whether to engage in the conduct. His Honour noted the importance of general deterrence in sentencing and the need to avoid the erosion of public confidence in the administration of justice that would occur if it is perceived that the law will be applied discriminatorily as regards white collar and blue collar offenders. These observations were referred to by Wigney J in K-Line, stating that prior good character is not generally given significant weight in sentencing for offences where general deterrence is a significant consideration (K-Line at ).
Related to this, s 19B of the Crimes Act provides that charges may be dismissed, or a defendant discharged without a conviction, where the court is satisfied that the charge is proved but is of the opinion that it is inexpedient to inflict any punishment, having regard to factors such as the character, health or mental condition of the accused. Section 85 of the CCA may also be relevant to these considerations, although the application of this section to criminal cartel offences is yet to be considered.
Given the primary objective for the criminalisation of cartels in Australia was to strengthen deterrence, the CDPP will likely press for the imposition of custodial sentences against individuals. However, it remains to be seen whether any gaol terms ordered will reflect the maximum available.
In the US, despite having a 10-year potential custodial sentence in place since 2004, gaol terms imposed on individuals between 2010 and 2019 averaged only 18 months (United States Department of Justice Criminal Enforcement Trends Chart, 6 May 2020). This suggests a reluctance, at least on the part of US courts, to impose maximum custodial sentences on individuals convicted of criminal cartel conduct, particularly where fines may otherwise be available. The US experience suggests that if the Federal Court does impose gaol sentences, they are likely to be significantly less than the maximum term.
* Liana Witt acted for K-Line. The views expressed in thise article are the authors’ own.
Catherine Bembrick is a barrister in 5 Wentworth Chambers and Liana Witt is a special counsel at Gilbert+Tobin.
The tax office, ‘hired assassins’ and how to gag dissent
The nation's tax office has been accused of hiring psychiatrists to diagnose and even coerce complainants during legal disputes. Crikey's freedom of information requests and interviews reveal a worrying culture.
Feb 05, 2013
The Australian Taxation Office has been accused of sending employees to “hired assassin” psychiatrists to silence dissent, discredit whistleblowers and terminate their employment. Taxation professionals say the ATO has not only ignored calls for tighter regulation of these powers but appears to have intensified its use of psychiatry to label taxpayers they are in legal dispute with as “high conflict people”.
Crikey has obtained information under freedom of information about psychiatric seminars rolled out last month to ATO legal and HR managers by psychiatrist Dr Kipling Walker from the National Health Group. An email exchange between Dom Sheil — a senior principal lawyer in the ATO, who oversees compensation for taxpayers — and Dr Walker reveals the arrangement. Sheil writes:
Here is a link to the website I mentioned on dealing with personality disorders in legal disputes — the High Conflict Institute
I have five of their books on high conflict people (HCPs for those of us in the know). I reckon the best is It’s All Your Fault! 12 Tips for Managing People Who Blame Others for Everything.
I think you would like the first part of the book that identifies the 4 personality disorders at issue:
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.
Somewhere in the material they also talk about the corpus callosum, amygdala and motor neurons of HCP’s. That’s very cerebral stuff (pardon the pun) might be of interest to you as a brain specialist!
Tony Greco, the senior tax advisor for the Institute of Public Accountants, tells Crikey it’s wrong to label taxpayers who challenge ATO decisions. “Under the self-assessment system the ATO have rights to challenge an assessment but so do taxpayers. The tax office doesn’t like losing but they should not label taxpayers who are merely exercising their rights under the law,” he said.
Steve Davies, the founder of OZloop who is active in the open government sphere, says the actions of the ATO lawyer mirror the adversarial nature of the legal profession. “[It] provides a mechanism to label employees who object to the bullying as ‘high conflict people’ with personality disorders,” he told Crikey.
“The perspective being advocated medicalises conflict and in doing so provides a mechanism for ATO lawyers and HR staff to mandate psychiatric intervention where they lack the medical qualifications to make such judgments. This gives rise to a direct conflict of interest.”
In November 2012 the House Standing Committee on Education and Employment tabled a report into bullying, finding the reports of public sector cases “particularly concerning”. The committee accepted submissions from aggrieved public servants that the fitness for duty test or the mental health referral powers that enable the Commonwealth and its agencies to compel/direct employees to attend a medical examination with a psychiatrist is being used “against workers who are allegedly not performing their duties” and to “intimidate or further bully workers who made complaints about workplace bullying or other working conditions”.
The Committee was not persuaded by the claims of Annwyn Godwin, the Public Service Commission’s merit protection commissioner, that the review powers available to public servants provide “sufficient safeguards” and that the referral powers have been “exercised responsibly” or “in good faith”. And the committee was not convinced by the justifications of Stephen Sedgwick, the Australian Public Service commissioner, that the “referral powers provide agencies with a flexible tool that allows them to manage genuine cases of illness, including mental illness”.
Law and public policy expert JA James from APSbullying.com was the first to publicly articulate the Commonwealth’s use of compulsory psychiatric referrals against employees in 2011. She examined the literature behind “pathologising” determined litigants in the paper The Commonwealth’s Cry of ‘Vexatious Litigant’.
“There is a trend in the Commonwealth in misusing labels such as ‘vexatious’ or ‘querulous paranoia’ against genuine litigants and complainants to devalue and dismiss their claims with the intent of preventing the legitimate exercise of their legal and policy rights,” she told Crikey. “In some cases, such pathologising by Commonwealth lawyers is based on discredited literature from the late 1800s.”
Stephen Strelecky is a former Jewish ATO officer who won a very public compensation case last year against the ATO over anti-Semitic remarks made by a colleague in the ATO’s Box Hill branch. He complained to management about the abuse and requested a transfer out but managers refused. One day Strelecky told his manager the abuse was continuing and he was feeling stressed because they would not transfer him or the offender out of the area. The ATO responded by referring Strelecky to eight psychiatric assessments over a two-year period.
Strelecky’s case also draws parallels with the Serene Teffaha case, the whistleblower that blew the lid off the ATO’s “tick and flick” culture of determining taxpayer objections. Teffaha, a senior lawyer engaged as a tax technical specialist, was also not granted a transfer out of her work area where she was being bullied. ATO officers referred her to a psychiatrist – as revealed by documents obtained by Crikey – within two weeks of lodging her complaint, without her knowledge. Both Strelecky and Teffaha complained to Assistant Treasurer David Bradbury, who has parliamentary responsibility for ATO administrative matters. Bradbury has never responded to them.
Strelecky would not respond to Crikey questions due to a confidentiality clause in his settlement agreement with the ATO. But a source who witnessed the ATO abuse of Strelecky told Crikey: “He was referred to five different psychiatrists who were nothing more than hired assassins.
“The system could work properly if the referral is done in good faith and a plan to get the employee back to work is negotiated successfully. But it doesn’t work like this and in reality there is collusion between the psychiatrist and the ATO. One of his original psychiatric assessments recommended he return to work. It was subsequently altered to suit the ATO view that he not return to work. This could only have been done after verbal communication between the parties.”Last year Strelecky finally received an apology from Shane Reardon, first assistant ATO commissioner. The letter obtained by Crikey states:
“Personally, I am very sorry that your employment with us got to this point. Let me be very clear in saying that anti-Semitism is never acceptable and I understand you as a Jewish person would be particularly sensitive to such behaviour.”
In a bizarre twist, the worker that abused Strelecky was provided with a generous taxpayer-funded redundancy package to exit his employment.
Three other senior ATO staff have spoken with Crikey but only on the condition of anonymity. Two of them described an experience of being referred to an ATO psychiatrist where they were verballed to make “confessions” that they are adulterous when, in fact, both are happily married. And despite not giving their informed consent, the psychiatrist still went ahead and did the intrusive assessment. One other is refusing to attend a psychiatric assessment and will be taking legal action against the ATO.
Teffaha is now using her legal skills to help others in her predicament. “A number of public servants have reached out for my help,” she said. “The mental health referral powers are being used against professionals such as auditors, economists and IT specialists to distort their reactions and drive them out of the organisation. Taxpayers would not be reassured to know the ATO is being run like a mental health facility, with its lawyers as its resident doctors and its employees as its admitted patients.”
Dr William Wilkie, a prominent psychiatrist and author, believes there are corrupt psychiatrists plying their trade with government agencies. “Enforced referral to a psychiatrist or psychologist may be used to intimidate and discredit whistleblowers by assigning negative diagnostic labels,” he said in a statement.
“A whistleblower may be wrongly described as someone with a personality disorder whose unwillingness to tolerate corruption originates in an intolerance for ambiguity. Or perhaps a whistleblower is said to have a form of paranoia. I advise whistleblowers wrongly labeled as paranoid not to tolerate this. Paranoia cannot be diagnosed unless delusions have been demonstrated.”
Dr Wilkie’s assessment is supported by Susie Rotch, a psychologist and psychotherapist with extensive experience in clinical practice and research. She told Crikey: “Whistleblowers are placed in a pernicious double bind. If they attend the psychiatric appointment they are likely to be diagnosed as mad; if they don’t attend then they are non-compliant and may be disciplined for being bad.
“The person who does have genuine psychological problems will often welcome a referral (through appropriate channels) to a helping professional. Of course the whilstleblower will not. The whistleblower knows that a referral under these circumstances to a psychiatrist is a double bind and a gross abuse of organisational and medical power.”
Garth Eaton, chairman of the Australian Justice Tribunal, says as long as the practice of paying expert witnesses for reports remains in force, government agencies like the ATO “will continue to foster miscarriages of justice that destroy innocent lives”. The AJT wants to incorporate a “public fund” to engage consultants to furnish genuinely independent expert reports which “would counter the reports emanating from highly paid government appointees”.
Steve Davies added: “The misuse of psychiatry and the willing participation of these ‘experts’ in the abuse reveals severe cultural and systemic issues not just within the Australian Public Service but in the bodies that regulate the conduct of medical practitioners and the silence of the Australian Human Right Commission on this issue. These practices strike at the heart of open government and decency in public administration.”
JA James has argued the mental health referral powers are incompatible with the common law requirement of ‘informed consent’, human rights standards and numerous legislative and regulatory requirements, including the Fair Work framework, whistleblower protections under the Public Service Act and privacy and administrative law benchmarks.
Comment was sought from the ATO on all aspects of this story. They declined the offer.
About the Author
Chris Seage —
Friday 17 July 2020
20-163MR Clive Palmer charged over breaches of directors’ duties and fraud
Following an ASIC investigation, Mr Clive Frederick Palmer, 66 of Broadbeach Waters in Queensland, has been charged with two counts of contravening section 184(2)(a) of the Corporations Act 2001 (Act) - dishonest use of position as a director and two counts of contravening section 408C(1)(d) of the Criminal Code Act 1899 (Qld) – fraud by dishonestly gaining a benefit or advantage.
ASIC alleges that between 5 August 2013 and 5 September 2013, Mr Palmer dishonestly obtained a benefit or advantage for Cosmo Developments Pty Ltd and/or the Palmer United Party (PUP) and others by authorising the transfer of $10,000,000 contrary to the purpose for which the funds were being held. It is alleged that he dishonestly used his position as a director of Mineralogy Pty Ltd (Mineralogy), a mining company owned by him, in obtaining that advantage.
ASIC also alleges that, between 31 August 2013 and 3 September 2013, Mr Palmer dishonestly obtained a benefit or advantage for Media Circus Network Pty Ltd and/or PUP by authorising the transfer of $2,167,065.60 contrary to the purpose for which the funds were being held. It is alleged that Mr Palmer dishonestly used his position as a director of Mineralogy in obtaining that advantage.
The maximum penalty for an offence under section 184(2) of the Act is $340,000 or imprisonment for five years, or both.
The maximum penalty for an offence under section 408C of the Code is five years’ imprisonment. However, if circumstances of aggravation are established the maximum penalty at the time the offences are alleged to have occurred is increased to 12 years’ imprisonment.
The matter was first mentioned in the Brisbane Magistrates Court on 20 March 2020, at which time the matter was adjourned for further mention on 17 July 2020. On 17 July 2020 the matter was adjourned until 28 August 2020.
The matter is being prosecuted by the Commonwealth Director of Public Prosecutions.
HIS HONOUR: "I’ve sat and listened to what’s said to be an explanation of some powers of a group said to be called the International Treasury Control organisation. I’ve received documents from someone, purporting to be a representative of that organisation. The submissions that have been made are replete with complex legal language and complex legal ideas. However, they make no real sense to anybody who has studied or practised the law. They proceed on some common themes that we see employed by confidence tricksters. They rely upon the ideas that this is secret and high level, thus explaining why ordinary lawyers, even those quite learned in the law, know nothing of it and fail to grasp what it is said to mean, or fail to understand it as a plausible or rational legal argument. It plays upon the idea that the Castles have become a part of an elite group within society filled with special powers and privileges. It proceeds upon a common trick of shifting the obligation for establishing any rights or entitlements into an obligation upon others to disprove bizarre claims, constantly phrased by way of an obligation upon others to verify these bizarre claims that are made about the Castles, and, as occurs in this case, by way of quite impractical means, for example, requiring or demanding of others to verify the Castles’ claims with Her Majesty Queen Elizabeth. It also proceeds upon threats that rejection is an affront to a powerful and elite group, in order to attempt to dissuade those who would reject these bizarre claims from doing so, for fear that they themselves may be at risk from some secret and powerful elite within society.
I find it very sad that the Castles have been taken in by these confidence tricksters, and have been taken in to such an extent that it presents now almost as some form of psychosis – a bizarre belief that is unshakeable, even by the obvious difficulties that the arguments present. I do not accept the arguments. I reject them entirely, and I see no purpose to be served by hearing evidence from somebody to further put forward such bizarre and obviously unsustainable claims."
Deutsche Bank Settles Over Ignored Red Flags on Jeffrey Epstein
The German lender repeatedly overlooked suspicious transactions, including payments to people a New York regulator described as his co-conspirators.
The settlement is the latest punishment that Deutsche Bank, with headquarters in Frankfurt, has faced for violating anti-money-laundering laws and rules.
The settlement is the latest punishment that Deutsche Bank, with headquarters in Frankfurt, has faced for violating anti-money-laundering laws and rules.Credit...Felix Schmitt for The New York Times
By Matthew Goldstein
July 7, 2020
Updated 4:48 p.m. ET
Payments to his alleged co-conspirators. Money wired to Russian models. A cash withdrawal of $100,000 for “tips and household expenses.”
When Jeffrey Epstein moved his money, Deutsche Bank didn’t ask many questions.
In a $150 million settlement announced on Tuesday, the New York Department of Financial Services said Mr. Epstein, a convicted sex offender, had engaged in suspicious transactions for years, even though Deutsche Bank deemed him a “high risk” client from the moment he became a customer in summer 2013.
“Despite knowing Mr. Epstein’s terrible criminal history, the bank inexcusably failed to detect or prevent millions of dollars of suspicious transactions,” Linda A. Lacewell, the department’s superintendent, said in a statement.
A year and a day after Mr. Epstein was arrested on federal sex-trafficking charges, the settlement described how bank employees had relied on informal meetings and institutional momentum to allow suspicious activity to proceed largely unchecked. Instead of performing appropriate due diligence on Mr. Epstein and the activity in his accounts, regulators wrote, the bank was focused on his potential to “generate millions of dollars of revenue as well as leads for other lucrative clients.”
Continue reading the main story
Deutsche Bank acknowledged that it had erred in taking Mr. Epstein on as a client and that its processes had been weak. “Our reputation is our most valuable asset and we deeply regret our association with Epstein,” a bank spokesman, Daniel Hunter, said in a statement.
In a message to employees on Tuesday, the bank’s chief executive, Christian Sewing, said taking Mr. Epstein on was a “critical mistake and should never have happened.” He urged them to read the settlement document and “learn the appropriate lessons” from the bank’s past conduct.
“We all have to help ensure that this kind of thing does not happen again,” Mr. Sewing wrote.
The settlement — the first regulatory action taken against a financial institution in connection with Mr. Epstein — provides a glimpse into the mysterious finances of the self-described tax guru and financial adviser.
According to regulators, Mr. Epstein, who killed himself in a jail cell in New York last year while awaiting trial, sent $2.65 million in 120 wire transfers through accounts established in the name of an entity called the Butterfly Trust. Some of those payments — as well as money from other accounts — went to three people who had been named as co-conspirators in suits by Mr. Epstein’s accusers that were related to his 2008 guilty plea to prostitution charges in Florida.
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Regulators did not name the co-conspirators in the settlement document. The settlement, citing published reports over those suits, describes the first two as having invoked their Fifth Amendment rights and the third as having been accused of recruiting girls for Mr. Epstein.
Four women were named as potential co-conspirators in the nonprosecution agreement Mr. Epstein reached with federal prosecutors that led to his plea to state charges in 2008. Another woman — Ghislaine Maxwell, a longtime confidante and business associate of Mr. Epstein — was charged last week by federal prosecutors in Manhattan with helping him recruit and groom teenage girls he abused at his lavish residences in New York, Florida and New Mexico.
Upon his death, Mr. Epstein left behind an estate valued at more than $600 million that is the subject of litigation by the attorney general of the United States Virgin Islands, where Mr. Epstein had lived and worked for nearly two decades. The attorney general, Denise George, has sued the estate, alleging that a company Mr. Epstein established there, Southern Trust, was a sham operation that he used to mislead the territory and receive a lucrative tax break.
It was Southern Trust — and a similarly named subsidiary, Southern Financial — that opened the first of Mr. Epstein’s accounts with Deutsche Bank in 2013. Over the next five years, Mr. Epstein, his related entities and his associates opened more than 40 accounts with the bank, the settlement said.
ImageGeoffrey Berman, then the U.S. attorney for the Southern District of New York, announcing charges against Jeffery Epstein last year.
Geoffrey Berman, then the U.S. attorney for the Southern District of New York, announcing charges against Jeffery Epstein last year.Credit...Stephanie Keith/Getty Images
Over the years, activities in those accounts were repeatedly questioned by Deutsche Bank employees, who were ignored by their superiors.
According to the settlement, an unnamed executive emailed the manager in charge of the relationship with Mr. Epstein in 2013, before any accounts were opened. The executive said that he had spoken to two other top bank officials and that neither had suggested that a relationship with Mr. Epstein required a risk review.
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Bank officials frequently pointed to that email as a reason to keep him as a client or accommodate his wishes, the settlement said. That included setting up the Butterfly Trust accounts for him in 2014, even though, the settlement said, the accounts’ connection to the alleged co-conspirators created a “very real risk” that payments could be used to further or cover up criminal activity.
In 2015, after a specialist in the anti-money-laundering department raised concerns about the bank’s continued relationship with Mr. Epstein, a department manager and the executive who wrote the email two years earlier met with Mr. Epstein at his Manhattan townhouse to discuss new allegations of abuse contained in civil suits. The settlement said that bank officials had “appeared to be satisfied by Mr. Epstein’s response” and that the relationship had continued.
When the bank later set conditions for monitoring Mr. Epstein’s activity, the settlement said, they were poorly communicated, creating confusion. Anti-money-laundering specialists interpreted the guidance to mean that unusual activity should be flagged only if it was unusual for Mr. Epstein — which led to an alert about payments to a Russian model and a Russian publicity agent being dismissed because the transactions were “normal for this client,” according to an email cited in the settlement.
At the end of 2018 — after The Miami Herald published details of Mr. Epstein’s nonprosecution agreement with federal prosecutors from a decade earlier — the bank decided it could no longer keep Mr. Epstein as a client. But an unnamed bank employee who managed the institution’s relationship with him still drafted reference letters to send to other banks, on Deutsche Bank letterhead, according to the settlement.
“Banks are the first line of defense with respect to preventing the facilitation of crime through the financial system, and it is fundamental that banks tailor the monitoring of their customers’ activity based upon the types of risk that are posed by a particular customer,” said Ms. Lacewell, the regulator’s superintendent.
The settlement on Tuesday also covered compliance failures unrelated to Mr. Epstein. The department found that Deutsche Bank had not properly monitored transactions with Danske Bank Estonia and FBME Bank, a Tanzanian institution. As part of the agreement, Deutsche Bank promised to continue its work with an independent monitor — in place since 2017 — to improve its compliance systems.
While the settlement described a long list of missteps by Deutsche Bank, it praised the bank for its “exemplary cooperation.” It also said the bank had cut ties with other high-risk clients.
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In a statement, the bank said it had invested nearly $1 billion in training and oversight, and had beefed up its anti-financial-crime division.
“It is our duty and our social responsibility to ensure that our banking services are used only for legitimate purposes,” Mr. Sewing said in his message to employees. “That’s exactly why we should always examine things critically, ask questions and speak up.”
The settlement is just the latest black eye for Deutsche Bank over legal and regulatory mistakes. Those include punishments by federal and state regulators, as well as the British authorities, for failing to stop Russian money laundering. And in 2015, Deutsche Bank agreed to pay $2.5 billion in penalties to settle accusations that it had manipulated the London interbank offered rate, or LIBOR.
Deutsche Bank has also attracted scrutiny for its relationship with President Trump and his family. It has been the long-running lender for Mr. Trump and has been the target of subpoenas from congressional investigators and state prosecutors.
Some of the payments Mr. Epstein made from his Deutsche Bank accounts were “inherently suspicious,” regulators wrote. Those included multiple settlement payments totaling more than $7 million and payments totaling more than $6 million for what regulators said appeared to be legal expenses for himself and for people the settlement identified as co-conspirators.
Other transactions — even if harmless — should have raised alarms, regulators wrote.
One of Mr. Epstein’s personal lawyers made $800,000 in withdrawals for Mr. Epstein over a four-year period. Regulators said the bank never got a good explanation for those withdrawals, except that Mr. Epstein needed the money for travel, expenses and paying tips.
According to the settlement, the unnamed lawyer twice asked bank officials how much money could be withdrawn without triggering some kind of alert. Suspicious that he was trying to circumvent federal regulations that require cash transactions of $10,000 or more to be reported to the government, bank employees spoke to the lawyer.
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The settlement said the lawyer denied trying to avoid such a report, and bank officials allowed him to continue making withdrawals on Mr. Epstein’s behalf — including taking out $100,000 at a branch on Park Avenue, not far from Mr. Epstein’s townhouse.
GRAHAM: OK. You were -- where were you on September the 11th, 2001?
KAVANAUGH: I was in -- initially I was in my then office in the EOB, and then after the first -- as I recall, for the first building was hit, I was in the counsel's Office in the second floor of the West Wing for the next few minutes.
Then we were all told to go down to the bottom of the West Wing, and then we were all evacuated and I think -- I think the thought was Flight 93 might be headed for the White House, it might've been heading here. And Secret Service, we were being hustled out and then -- then kind of panic, started screaming at us.
Sprint run, and we sprinted out. My wife was a few steps ahead of me, she was President Bush's personal aide at the time, and we sprinted out. She was wearing a black and white checked shirt, I remember, and she -- we sprinted out the front gate kind of into Lafayette Park and no -- no iPhones or anything like that, Blackberries at that point in time.
We didn't have that, and our cellphones didn't work so we were all just kind of out there. I remember somehow ending up seeing on TV down more on Connecticut Avenue, there were TV's out -- Mayflower Hotel, I remember I was with Sara Taylor who worked at the White House and we watched -- we were watching as the -- standing with her when the two -- when the two buildings -- when the buildings fell. GRAHAM: So when somebody says post-9/11 that we've been at war and it's called the War on Terrorism, do you generally agree with that concept?
KAVANAUGH: I do Senator because Congress passed the Authorization for Use of Military Force, which is still in effect and that was passed of course on September 14th, 2001, three days later.
GRAHAM: Let's talk about the law in war. Is there a body of law called the law of armed conflict?
KAVANAUGH: There is -- there is such a body, Senator.
GRAHAM: Is there a body of law that's called the basic criminal law?
KAVANAUGH: Yes, Senator.
GRAHAM: Are there differences between those two bodies of law?
KAVANAUGH: Yes, Senator.
GRAHAM: From an American citizen's point of view, do your constitutional rights follow you? If you're in Paris, does the Fourth Amendment protect you as an American from your own government?
KAVANAUGH: From your own government, yes.
GRAHAM: OK. So if you're in Afghanistan, do your constitutional rights protect you against your own government?
KAVANAUGH: If you're an American if Afghanistan, you have constitutional rights against the U.S. government.
GRAHAM: Is there a long-standing...
KAVANAUGH: That's -- that's long-settled law.
GRAHAM: Isn't there also a long-settled law that -- it goes back to Eisentrager case, I can't remember the name of it.
KAVANAUGH: Yes, Johnson vs. Eisentrager.
GRAHAM: Right -- that American citizens who collaborate with the enemy have considered enemy combatants?
KAVANAUGH: They can be.
GRAHAM: Can be.
KAVANAUGH: They can be. They're often -- some -- they're sometimes criminally prosecuted, sometimes treated in the military sense.
GRAHAM: Well let's talk about can be. I think the ...
KAVANAUGH: Under a Supreme Court precedent ...
KAVANAUGH: Just want to make -- yeah.
GRAHAM: There's a Supreme Court decision that said that American citizens who collaborated with Nazi saboteurs were tried by the military. Is that correct?
KAVANAUGH: That is correct.
GRAHAM: I think a couple of them were executed.
GRAHAM: So if anybody doubts there's a long-standing history in this country that your constitutional rights follow you wherever you go, but you don't have a constitutional right to turn on your own government and collaborate with the enemy of the nation.
You'll be treated differently. What's the name of the case, if you can recall, that reaffirmed the concept that you could hold one of our own as an enemy combatant if they were engaged in terrorist activities in Afghanistan? Are you familiar with that case?
KAVANAUGH: Yeah, Hamdi.
GRAHAM: OK. So the bottom line is on every American citizen, though you have constitutional rights but you do not have a constitutional right to collaborate with the enemy. There's a body of law well developed long before 9/11 that understood the difference between basic criminal law and the law of armed conflict.
Do you understand those differences?
KAVANAUGH: I do -- I do understand the -- there are different bodies of law, of course, Senator.
GRAHAM: OK. If you're confirmed, and I believe you will be, what is your hope when all of this is said and done and your time is up, how would you like to be remembered?
KAVANAUGH: A good Dad, a good Judge...
FEINSTEIN: A good husband.
GRAHAM: I think he's getting there.
KAVANAUGH: Good husband.
GRAHAM: Thanks Dianne, you helped him a lot.
(LAUGHTER) Going to be better for you tonight.
KAVANAUGH: Good -- I owe you -- I owe you.
Good son, I'll quickly add.
A good friend. I think -- I think about the pillar -- the pillars of my life are being a Judge of course, being a teacher -- I've done that and I'm -- either way this ends up I'm going to continue teaching. Coaching, as I mentioned, is a huge part of my life, try to continue that.
Senator Kennedy advised me when we met to make sure you keep coaching, even if you get -- I'm going to follow that. Volunteering and being a Dad and a son and a husband and being a friend. You know, I talked about my friends yesterday, I didn't really expect -- I got a little choked up talking about my friends, but ...
GRAHAM: That was well said, you got to tighten it up cause I just ran out of time.
Thank you, Senator. I can go on, as you know, but I'll stop there.