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Economics References Committee - 02/04/2014 - Performance of the Australian Securities and Investments Commission

FYSH, Dr Stuart, Private capacity

Committee met at 10:00

CHAIR ( Senator Mark Bishop ): Welcome to these proceedings. Dr Fysh, you put in an extensive submission; do you wish to make some opening remarks to the committee?

Dr Fysh : Yes; I would like to, but not by way of moderating, changing or addressing that submission. Hoping that there might be an opportunity to speak to you I have tried to think quite a bit about the 'so what'. Fundamentally, my submission says that in my opinion a number of things went very wrong in the way in which I was dealt with, both by ASIC and the DPP.

CHAIR: We have the time today, so if you would like to go through—perhaps at more length than we would normally allow in introductory comments—your concerns and put them on the record, we will allow you to do that. Then we will come back to our questions. So do not, at this stage, feel constrained.

Dr Fysh : I will not; thank you. I will go through them but I thought this might be rather helpful. I come from a culture of running large organisations. That is what I have done for a long time. I have been very fortunate to work for two very fine organisations: BHP and BG—and I have done well in both of them. I am not, by nature, a negative person; I am, by nature, a positive person. I have thought a lot about what one could honestly say that would contribute to an improvement in the performance in the areas which you are inquiring into. Those parts that are relevant to me we can come back to in a moment.

I just wanted to make sure that we had an opportunity to discuss that, because what I think has happened to me is a very poor outcome. I am a lucky fellow. I had the money—$3.4 million—to defend myself. And I have had the fortitude to sit for 7½ months in a New South Wales jail, and be hit, which is not pleasant. I have lived in a very degrading situation and come out of it pretty good. I am okay. I have had the fortitude to seek you out and come and talk to you. I am extremely lucky that you are sitting at this time.

So I wanted to pull all that together and get to the 'so what'. I will first spend just a minute quickly dot-pointing what the issues were. I have made two submissions to you. I recognise that they are very long. On the first page of the second submission—the supplementary one that was made after the Court of Criminal Appeal had issued—there are six dot points. The first was just that ASIC, by seeking pre-investigation publicity had needlessly damaged me. I think that that is unchallengeable. It is very interesting that in late 2012—I was not aware of this at the time I wrote the submission—ASIC issued a note, called 'Information sheet 152'. I am afraid I have not brought copies, but it is on the ASIC web site. It is ASIC's guidelines for public comment. We can tell that they are important because when you get to the bottom of the first page you see that they are drawing on IOSCO's guidelines. And it is pretty clear that IOSCO is important in ASIC today. It says:

Importantly, if a matter is still in the investigation stage and an enforcement action has not commenced, it is generally accepted that a regulator such as ASIC must balance the public interest benefits of making a statement against the rights of the individual subject to the investigation.

Categorically—clearly—that was not done, in my case. Now what I see is an organisation that is doing things wrongly and then wallpapering itself with best-practice notes, saying 'We won't do that.'

CHAIR: Second point?

Dr Fysh : The second point was that ASIC absolutely failed to bring to bear the right sort of commercial competence in establishing the facts against me. For example, the gentleman who investigated on behalf of ASIC was a part-time investigator who had been brought back. He said in court, very clearly, that if the alleged inside information was out there, unless he could find evidence that BG was aware of the alleged inside information, he just ignored it. Of course, that is not the test.

What was the professional competence of that person? The answer is not to criticise that guy; the issue for the senior management of ASIC is: what are the standards of competence; what is the job description of an investigator? I guess the issue, for me, is what governance structures exist within ASIC so that you do not have that end-to-end responsibility of one person with all the imbedded assumptions he has? Is there someone in ASIC whose Hay point, whose KPI, whose bonus, depends on killing ASIC cases? Is there someone who gets a big tick at the end of year for the seven cases they do not take because they would have ended up looking silly? I do not know, but that is a valid question for someone overseeing ASIC to be asking.

CHAIR: Third point?

Dr Fysh : The third point is ASIC's dealings with BG. I would summarise that, as I have, by reading all of ASIC's transcripts and listening to them and so forth. ASIC were enthralled with BG, and something like 70 per cent of the statements that ASIC tended to the court never really got into evidence, because they were actually narrative around what was going on in BG. But there was never the very important question: 'Was Stuart Fysh in the room?' So I felt that ASIC really did not get past being enthralled at dealing with the senior management of a company, and I thought that was disappointing.

CHAIR: So you argue seriously inappropriate regard for the narrative put by BG.

Dr Fysh : Yes, absolutely. As I said, it would be like coming in and investigating one of you guys and just asking your colleagues. You are in a political party, so people might expect you to be a bit political but, let me tell you, it is every bit as political in large organisations.

I guess the next two points run together. They are more about the DPP than anything. It brings me back to this wrap-up point again. You are going to speak to DPP and I will be interested in what they say. The DPP, in their submission to you, talk about the Commonwealth's prosecution policy. You go through and read the Commonwealth prosecution policy, and it is a beautifully written document.

CHAIR: It is a fine document.

Dr Fysh : It is a great document, and it even has that touching little bit, 'Look we've gotta be fair—but not too fair.' It is a beautiful document. But it did not apply here. It cannot have been applied here. Most of the people making submissions to you do not have the luxury of having had someone fully independent of them—with fine legal minds, like the Chief Justice of New South Wales or the Chief Judge at Common Law in New South Wales—pining on the adequacy of evidence. It would be an awful shame to waste the opportunity that my case has created.

I think the DPP has some really hard questions to answer. I have spoken to a few normal Australians—I'm just a normal Australian—over four or five years. Do you know what the most common thing is that they say to me? They say, 'But when it's all over you'll get your money back, won't you mate?' Being just a normal Australian, I did not realise that if you are accused of something and you defend yourself it is not even tax-deductible. But that is life. There is no come-back for a normal person. ASIC is in a very special position, perhaps unique amongst the regulators, because the laws it is enforcing are so complex that it has to decide if there has been a criminal action during the process of an investigation. They have this phenomenal scope. They have to investigate and they have to interpret. If any of the agencies, that provide input to the DPP that might lead to charges, have a burden on them to be really damn good at their job, it has got to be ASIC. If someone pulls out a knife or a gun and shoots you or if someone smuggles drugs, the AFP do not really have much of a case to make that there has been a criminal action. Most of ASIC's effort needs to go into saying, 'There's been a criminal action.' It is clear to me that the rules in the Commonwealth prosecution policy that talk about the independence of the DPP and so forth are all the right rules. So I cannot come and offer you any different rules. But they are not working; they transparently fail to work.

I can illustrate this. In 2012 I had returned to Australia and I was ready to go to court. The DPP approached us and said, 'Would you be willing to have this heard in the Supreme Court of New South Wales?' We thought, 'We can get a quality of judge. It's a complex case; we'll go for that.' So they then wrote to the Chief Justice of New South Wales and said, 'We'd like to do this in the Supreme Court. We don't get too many of these cases.' And then they put in a summary—of about a page—of the allegations. The first paragraph said, 'At all relevant times the people that Dr Fysh is alleged to have got this information from reported to him.'

This was a bit like my confusing which of you is Labor and which is Liberal. Who reports to whom in an organisation is a matter of fact; it is not a matter of opinion. So if I went back and looked at all of the ASIC investigator's questions I would see that he had not quite understood who reported to who, but he got very straight answers. BG led him down a few garden paths, but at least they knew who reported to me. Somehow he had got that wrong, and that had just been handballed to the DPP.

CHAIR: Are you making a comment on the professional ability of the investigator or are you making—

Dr Fysh : Yes. I am making a comment on the professional ability of the investigator, but also on the independence and the fact-checking—the credibility—that the DPP is alleged to bring to bear under the Commonwealth prosecution policy. I am not saying that they are meant to go out and re-interview the witnesses, but at least they ought to be getting the basic facts right. I did not see that.

My other point is that I am an Australian. I am a normal bloke, just like you. We do not need judges to be telling the DPP about natural justice. We do not need the DPP to be being lectured about bringing some poor fellow to appeal and then trying to change their case on appeal. That is unacceptable conduct by the DPP. Those are very serious statements and they are totally out with what one sees in the DPP version of this fact sheet, or whatever, for ASIC.

In other words, these organisations are wrapped around with all the right rules, created by all the right committees and all the right people, but they are not living them out. I tried to capture that for you by saying that, in respect of the publicity affair with ASIC, I did not believe that ASIC had 'innocent until proved guilty' as a core value. I am not sure the DPP is totally on board with playing a fair hand. I suppose that is where I ended: ASIC's failure to acknowledge the substance of the CCA findings.

Since that time I have again written to ASIC and said, 'Come on, guys. You have seen what I have written to the Senate committee. I am really unhappy. Could you not at least acknowledge this. On your web site—you have a dozen headings up there that I am a crook. That is all that anyone who ever wants to deal with me is going to see.' ASIC has put something up on their web site. I suggested, 'Why don't you put a link through to the findings of the Court of Criminal Appeal.' Blow me down, they have done it. But let us not kid ourselves that they did it because little Dr Fysh wrote to them. They did it because nasty Senator Williams or this committee or someone has said something.

I will get to the end now. What can I say to you? I do not understand how ASIC is run. I do not understand whether your function is, essentially, that of a de facto board of ASIC.

CHAIR: Our function? This committee's function?

Dr Fysh : Yes. I am not reading everything you write, but I keep seeing references saying, 'We had this fellow along,' or 'The last time he appeared before this committee,' or whatever. So my sense is that there must be regular interactions. My feeling is that what ASIC is lacking is a body of people who stand outside the organisation and have no line accountability inside the organisation but who are vitally interested in the conduct, the image, the culture and the human resources policies of the organisation.

You asked me if I was questioning the professional competence of the investigator. I am used to running gas plants and drilling rigs where, if someone gets it wrong, someone gets killed. The way you address that sort of professional incompetence is not to come to a Senate hearing committee in a highly charged, politicised atmosphere. You have a set of core competencies, you have position descriptions and you have a human-resources organisation that makes sure that the guy who is in the job has the right position description and is up to the job, and you watch how well he does. That is not a topic to discuss with you and, with deep respect—I do not know your backgrounds—that is probably not the feedback you are going to give ASIC. That is the sort of thing that a well-run company talks to its board about.

At the moment ASIC is coming to you and saying, 'Give us more power; give us more penalties.' All of that stuff. What I am saying to you is ASIC has enormous stroke. We said this previously. We do not have to revisit it. They have to define the crime. They have one of the broadest remits of any organisation and, by definition, the people they are dealing with earn their daily bread and ASIC is right with them in that same nest. It has an unparalleled ability to stuff them. If a politician comes out and says something negative about someone it might even be good for their career. But if ASIC comes out and touches you, you're toast. I will never sit on the board of a public company. I have taken BG into a dozen countries. The expertise I could bring to some of our little Australian mineral and so-forth explorers—it could be fun. But it will never happen, because I am trashed.

I want an ASIC that everyone is frightened of, but frightened of them because they always get it right. I want an ASIC that is really very powerful but has earned those powers. I think if you guys toss more power to ASIC without bringing some countervailing government structure, which is plainly missing, into that organisation you will be making an enormous mistake.

CHAIR: On that exact point, you said you need some body of people outside the organisation, outside ASIC, with the interests of ASIC at heart, and you itemised four or five—

Dr Fysh : Yes. They would have a day with them. I am sorry to interrupt. What would they do?

CHAIR: Before you do, that comment you made and those functions you identified are really that of a board of a public company or indeed of a private company.

Dr Fysh : Yes. For example, in BG Group they would largely be functions of the group executive, which of course exist in—but half a dozen times a year human-resource policy would be discussed with the board. If we had killed somebody because we had an incompetent operator in place—which is kind of what ASIC has done—the board would want to understand: 'Was that just an accident? Was this guy some sort of nut? How did he get through our system?' They would spend a day looking at the core competencies that we want in investigators or gas operators. You cannot spend a day.

When someone raised the sorts of issues I raised about governance structures inside ASIC that saw one investigator doing a poor job—I have read every one of his interviews. I have listened to them. I know what he did. He did a poor job of listening—that must have escalated through the management structure of ASIC. If I were on the board of ASIC I would be saying to them, 'Look we've just lost this Fysh case. Could you chaps just come in—and don't just bring in all your senior people; bring some of the junior people in, so we get a look at the horseflesh in the organisation—and run me through the flow chart of how a prosecution happens. I want to spend a couple of hours with you really kicking it around. I want to know what went wrong.' I do not think that is your function. Maybe it is. That is what I think a board would do.

If you had some retired judges—the only time that I was impressed with the capability of the people opposite me was sitting in jail, with my pulse at 200 by the time we got to the end of the day, with the quality of questions that came from the three justices sitting on the Court of Criminal Appeal. They asked the questions. They asked the sensible questions: 'You cannot say that the information that existed then was of that calibre then; is that what you are saying, Mr prosecutor?' They asked the questions.

So there are plenty of really clever people out there. Guys like you. There are plenty of guys out there, but they have to have the time and they have to have the interests of ASIC at heart. Right now, quite frankly, it appears to me—you only have to observe the change in ASIC that happens when you go from D'Aloisio to Medcraft—the organisation is too imprinted with the stamp of the guy at the top, and the culture of the organisation swings around. I do not think that is good enough. That will not lead to us having an ASIC that really deserves the respect it should get from all of us.

CHAIR: Are you saying the commissioners as individuals and as a group are not sufficiently stringently carrying out their duties in the way you would expect board members to be doing?

Dr Fysh : Yes, I would say that. And it is not just me saying that, it is the Chief Justice of New South Wales. He said: 'The evidence that you people had at trial was significantly stronger than what you had at investigation stage and it was still not good enough for me', the Chief Justice, 'at trial'. He is not being rude enough to go on and say, 'Pull your finger out, ASIC' but what he is really saying is, 'Where was the governance process in ASIC that led you to take this to the DPP?

Where was the governance process in the DPP that led them to accept this case in the first place?' We all work in organisations—I do not anymore—where people are time-poor and I understand the complexity that Medcraft and his crew face. I think running the ASIC Summer School is not that different from me going over and talking to a bunch of investors when I was on the group's executive in BG. You have a thousand things on the go. You have a greenhouse policy to develop. You have HR policies. You have a corruption policy. You are going to Nigeria, where everyone is crooked. The police are asking your people for money. What are your people meant to do? They are not supposed to corrupt but they do not want to get stuck up either. You need a policy for that.

No one running a modern organisation of such breadth as ASIC can afford to live without someone sitting back with a little bit more distance and saying, 'Look, let me ask you some really basic questions.' Also, those people need—one of the most important functions of senior management in any organisation, and certainly of the board, is to stop having dialogue just with the talking heads at the top. I have listened. I have read some of the interactions in here. I have read some of the banter between some of the committee members who have obviously spoken to some of these characters before. Some of these guys are good media performers and some of them are not. Frankly, it is a bit irrelevant. It is what goes on down in the boiler room of ASIC that counts.

So you need a board. But when it wants to talk about your prosecution policy and 'let's review your top five wins that you're proud of and tell me what went right and let's review your top five lessons on what went wrong' they have got to be prepared to roll up their sleeves and have a day or two with them, and they have to see the quality of people in there. Then they need to have the ability to go around and say to Medcraft, 'Young George looks pretty good; is he on a fast-track? That is what a board does. If we continue to run ASIC like a political animal—you guys are here for however long you are here but you are not a board. You are responding to lots of pressures, and you have to respond to some pretty torrid stuff. To help ASIC develops the policies it needs to have in a whole raft of areas, it needs a board structure with very competent and capable people. Why would ASIC need it and, perhaps, some other federal agencies get on without it? I do not know; maybe they need it too. ASIC has enormous power.

I am just a normal bloke, like you. I made a few bucks in the oil business, so I could afford to defend myself, but I am just a normal guy. You have no idea how debilitating and frightening it is to be a normal Australian and have the entire Australian government sitting against you. I am still arguing with the boys down the road, the Australian Federal Police. I have had all my costs against them awarded, but they do not want to pay. It is very tough to be a single person. So you, when you pass your laws, are empowering a bunch of people to go out and tackle. I hope that most of the people they tackle are crooks. I reckon they probably are. I have met enough of them. We probably all have. But the power that ASIC has is massive, and the governance structures are pathetic. If you are a shareholder in ASIC—Christ!

Senator WILLIAMS: Are you aware of the Parliamentary Joint Committee on Corporations and Financial Services, chaired by Senator Fawcett? That committee is actually the oversight of ASIC.

Dr Fysh : I did not know that. I wondered what—

Senator WILLIAMS: We have a joint committee in this place, of House representatives and senators, and that committee has a job—a duty—to be the oversight of ASIC. Certainly some of those issues you raised I am sure Senator Fawcett could raise in the next meeting with ASIC.

Dr Fysh : Since you asked me, when you become inducted as a board member of a company the size of BG—with, say, 6,ooo, 8,ooo or 10,000 employees and operations in 16 countries—and you are dealing with a technology you do not understand, the induction period is very long, and you do not become a contributing board member, in my view, for a couple of years. I do not know, Senator Fawcett, what training the people who are on this committee have. I do not know how often they come and go. I would imagine that anyone who puts themselves up for public office in Australia are doing it because they want to do a good job. I just think this is the wrong sort of atmosphere. You guys form our government. There is too much power distance between you and ASIC for ASIC to ever let some little wiener in the room say, 'Geez, we really stuffed that up, mate. We've got to do that better.' It is those conversations that give rise to the organisational changes, the proper position descriptions and the proper governance structures.

I bet you do not have those conversations. I bet you do not get below the top level of the organisation, because you are a senator. I can come here today because I do not work for anyone any more, and I am used to dealing with presidents and prime ministers, and I am not frightened. And I do not care. But I am very lucky and unique that I no longer rely on a conversation in a boardroom for my next pay cheque. I think you need a professional board of retired judges and lawyers, some retired company directors and, hopefully, some ordinary people who would sit with ASIC and take it to the cleaners from top to toe and who would say, 'Show us your HR policies, show us your governance structure,'

Your role, is surely to be dealing more with the sorts of issues that this committee is largely dealing with, which is—

CHAIR: All of those commissioners are the board.

Dr Fysh : Well, yes—

CHAIR: Are you really putting the proposition to us—following on from my previous question—that those commissioners, as individuals and as a group, have not done the job that you expect to be performed by that public regulator?

Dr Fysh : I am not the only one putting it. I think I have put it as clearly as I can but I prefer to let the facts speak for themselves. It is not a question of saying, 'Peter Kell is a bad man.' In any large enterprise we all benefit from someone standing back and advising us. I do not think anyone is quite as good as they would need to be to be doing a great job.

Look at the brittleness in ASIC. I have referred to it; you have seen it. We have the chairman's bloody travel schedule on the web site of our national regulator. Don't tell me it is not a brittle organisation!

I have asked my lawyers: 'What's the come-back, here? What can I do?' They said, 'Don't bother. You can't have any effect. You can't have any impact.' When you offer to pay someone $800 an hour to help you think about what you can do, and they say, 'Don't bother,' I do not think the system is configured for the lawyers and the directors in this country to give ASIC the sort of feedback it needs. It is too tight a club. I honestly do not think that politicians—with lots of other things to do and, with the enormous power distance that exists between them as senators in Australia's government and ASIC—are going to get the close relationships they need.

I am saying something which should probably be non-controversial—that is that any large organisation, especially one where image is critical and where getting it right is critical, needs a board of advisors to give them some guidance.

Senator BUSHBY: We have had other evidence that suggests that there should be an outside organisation of retired judges and other people that have a background and expertise that would bring something of an oversight of ASIC. I think you suggested the same. Most of that—this is entirely relevant to you—has been focused more around the enforcement aspect, rather than at the overarching board level. It was about having an external body looking in and providing advice at that enforcement level. Is that something that you think could work? Would that have been of benefit to you? I would also like to express my sympathy for what you have been through, as well. As a lawyer I am a firm believer that it is better to let a guilty person go free than to lock up an innocent person, and that the balance should be calibrated to make sure that that is what happens.

In your circumstances do you think that if there had been an external body—or a body that was not part of ASIC but had a role in examining enforcement decisions to see whether they are stacking up and whether they should proceed—that would have been an acceptable alternative to that high-level board discussion you are talking about?

Dr Fysh : I have thought about that a bit. I do not take myself very seriously but I take you seriously and I did not want to waste your time by not having thought about it. I am not a lawyer. Like most Australians I think, 'Thank God, I'm not a lawyer,' I do not really understand it.

When I was first accused, my first thought was, 'Jesus Christ! Did I do it?' I am pretty naive. My instinct was to say to my lawyers, 'Let's pick up the phone and talk to these characters.' It took me years to learn the wisdom of what they said, which was, 'Keep your mouth shut.' I could go into detail that would bring tears to your eyes of the things that I said to ASIC that helped them sharpen the charges against me. Thank God those things did not sharpen them enough. But, honestly, they were very wide of the mark.

If there was such a group it would still not be able to speak to the accused, because his lawyers would give him the same advice. What you are defining is just another layer of governance within ASIC, and that is not the answer. The product of ASIC, in this narrow area, is investigations, briefs and instruction to the DPP. The organisation has to have in its hold—its grasp, its control—and in its accountability, the end-to-end process. So if you stuck someone else in there they would either work for ASIC and be part of it—report to it and salute it—or they would not.

My view—I have thought about this a lot—is that it is no different to trying to embed environmental consciousness or respect for human life and safety in an oil organisation. You have to tackle the culture. If ASIC is lacking access to people who could have explained to them that the case they had was crap, they have to go and get that advice as part of their function. Your parachuting it in—

Senator BUSHBY: I was just testing other—

Dr Fysh : With the deepest respect—I think you hear that—that is the sort of bandaid solution that I would come up with if I was trying to run the parliament. If you really want to run an organisation well, it has to be planned properly. I do not believe that ASIC has someone sitting outside who the chairman is beholden to and who he regularly needs to stand up and explain his policies and his failures to.

The most you learn in a commercial organisation is when you run a bid for a big gas contract and you spend a couple of million dollars and you lose it. If you are any good you run a decent post mortem! Let me tell you what happens in an organisation when you kill someone. You run weeks of studies and you try so hard to find out what you did wrongly. That is how you embed core values in an organisation, not by parachuting someone in.

CHAIR: On that exact point, Dr Fysh, at the heart of your complaint, the genesis of your problems has been the inadequacy of the investigation at first instance, and a non-understanding or a non-regard for evidence apart from that given by BG on the issue of insider trading.

I have had exposure to that three or four times now, where the internal briefs that were retained by ASIC from senior counsel and from QCs, demonstrated, at the outset, that there was no cause of action against the individual for insider trading. Notwithstanding that, the cases went to court and there was similar criticism to the stuff you have outlined by the Chief Justice of New South Wales.

Is there a serious shortcoming in the adequacy of the unit that is charged, from beginning to end, with insider trading matters? What you are saying to us is that any competent senior investigator or QC reviewing the evidence before DPP laid the charges would have said that there was no case to answer.

Dr Fysh : I would say that, yes. Let me answer your question in two parts; the backend first. I was struck by the fact that the judge, in my case—she is obviously a capable Supreme Court charge; they are not silly—immediately saw the circularity in the arguments, in the expert report, which basically rendered it useless. It did not take her a month to see that; it not take her a hell of a long time.

So my observation is and my contention is that, yes, that unit is failing. But it would not be very efficacious for me as a failed, prosecuted person to come and poke holes at them. I just see a problem that needs really careful examination. In my case, the investigator—I have not named him; his name can be dug out but there is no point in embarrassing the poor guy—told my lawyers at one point that he was retired from ASIC or had left or was fired or something and was just back part-time. He said, 'I'm really glad to have this, you know. My shares took a bit of a hit in the GFC and I'm glad to have the work.'

All throughout this, when the expert report landed and when many and various steps were taken, what my family could not understand and what my lawyers could never understand was how sad I was that ASIC was so poor. My lawyer said to me a few times, 'You should be really pleased' and I said 'But if they'd just done it this way.' Even in the witness box the prosecutor wound me up and said, 'You're being very picky about these charges.' I said, 'Would you like me to rewrite them?' I do not think that did me any good with the jury. So I am not the right guy to give you that feedback. I am too invested in it. But I do not think it is the sort of question—with deep respect—that ought to be asked.

The question ought to be put before someone who is going to spend a few days with that team and understand. You should be saying to ASIC: 'I want to see the flow chart for how you manage an insider investigation. You should not be prepared to give him 30 minutes. You are going to need to give him a Flipboard and you are going to want half a dozen of his people in here and you are going to want an in camera session and it is not going into Hansard, and you really want to learn from it. Then—maybe—you could give some advice, and maybe you would start to say to them, 'It is interesting that you have the one investigator. Do you double-team? Does anyone look over his shoulder and question? How far does it run before you run it up and do a bit of checking and stuff like that?'

There is a real danger that we try and write the script here for how to solve the problem. I thought hard about it before I came. There was a big temptation—I have run organisations—to come in and say, 'This is what they should do. But no, they need a proper board structure to really ensure that in five years time we can all be extremely proud of them—as opposed to, in five years time, sitting here talking about the next cock-up.

Senator BUSHBY: Given your very unpleasant experience over the last few years, do you think the decision to proceed against you solely had its genesis in that lack of competence you were talking about and the lack of appropriate structure and culture, or was there anything personal? Did it become a personal thing, at some point?

Dr Fysh : That is a really good question. I was shocked by how overawed ASIC was by Sir Frank Chapman. It was kind of interesting to watch the people in the court, up to and including the judge, running around for Sir Frank Chapman.

CHAIR: Who is he?

Dr Fysh : Sir Frank Chapman was at that time the CEO of BG. I knew Frank when he was just Frank, and Frank's got very big clay feet. I think that ASIC had rushed to publicise the fact that they had frozen my accounts. They put that out the day they froze them. A lot of the evidence they used to get that ex parte—I wasn't represented—freeze action they never brought to prosecution, because it was just wrong. It was just stuff that BG in a five-minute investigation had shovelled into a bag and emailed cross. It was just wrong, factually—massively, factually, an error. I think that dug a big hole for them. I talked in here about moral hazard. I think they did create moral hazard by their announcements, which would appear to me to be completely barred in their own policy, so maybe it became personal.

The time I really did feel it became personal was when I went to an ASIC examination on 9 September—I think it was, or the 19th—in 2009 and for the first time met ASIC and for the first time actually saw some of the alleged inside information because I had never seen before. The ASIC guy who had been running it from the get go, the guy who represented them in court, this part-time investigator, said to me, 'Well, Dr Fysh, I've had the pleasure of looking in your diary and I know the name of the chauffeur who picked you up from the airport when you arrive back from India.' And I thought yeah, right.

Senator WILLIAMS: Who cares?

Dr Fysh : It is all poppy crap, isn't it? Let us be crystal clear. I had a really good career. The thing I ran was the dam site bigger than Woodside. And yes, I think Australians do like to cut people down.

Senator BUSHBY: From what I am hearing, am I correct that it is your suspicion that they thought there was something there, they commenced the initial freezing of assets, which was publicly done, then having done that they thought they needed to continue in order to secure a prosecution to reasons other than where the evidence was necessarily leading them? Having started it, they needed to—

Dr Fysh : I never subscribe to conspiracy when it can be cock-up. I think it is reasonable to assume that they had started to dig a big goal for themselves. I bet they never sat in a room and said, 'This guy's probably innocent but, hell, let's go for it.' I say that because I do not want that to be true. Some of the most emotional things from me were to be sitting in jail and after 5½ months of the 7½ months I was okay. I was getting used to it. I figured out—I was hit four times—who to be nice to and who not to.

Senator WILLIAMS: How long were you jailed for?

Dr Fysh : I was jailed for 2½ years but with one year to serve. So I had only a year.

Senator BUSHBY: You did most of that anyway.

Dr Fysh : Yes. To be really honest, my lawyers could have started the appeal process on the get go. My poor wife could not get money out of England because I had been moving all of our money out of England and as soon as I went to jail she had all the trouble in the world getting it. The lawyers—they are good people, of course, but they do like to be paid first. We did not file for appeal until May. We were heard in July and I was out that day. I guess I felt through all of that—no, I did not feel it was personal; I just felt it was incompetent and I could not get my lawyers, my wife or anyone else to understand how disappointed I was at the low standard. And yes, it worked to my advantage. I do not think they ever all got in a room and rolled up then left trouser leg and said, 'How do we get this fellow?' I do not think they are well enough organised. I was disappointed sitting in jail— I am sorry to come back to that point—by the conduct of the DPP. It is absolutely unacceptable to my mind that the Commonwealth DPP put someone against someone like me and tried to change the frigging case in the appeal. If I had been the chief justice, I would have spoken more harshly. How disgusting that these people try to change the case in an appeal, for Christ's sake! They tried to change the case!

Senator BUSHBY: Was that once again because they had dug the hole?

Dr Fysh : I do not know. I read the DPP's submission. I don't know whether you are in here, DPP. Are you going to be out next? I am going to listen.

Senator WILLIAMS: Yes, they are next.

Dr Fysh : These characters say in their prosecution policy stuff about fairness. It is not too fair to change the case. I have sent you the link. Like the guy said, it is just not right to change the case at the appeal. To me as a nonlawyer, as just a normal bloke, that sounds really unfair and really Australian. So when I thought, 'Christ, is this a bit nasty?' yes, that is when I thought the process was lousy. These are just normal people like you and I and when they get in there, they want to win.

Senator WILLIAMS: You are very critical of ASIC and I can understand that. I do sincerely feel sorry for what you have been through, Dr Fysh, but I want to take you to the DPP and how they did their job because ASIC would no doubt have briefed DPP and hence the charges to you.

Dr Fysh : Absolutely, but when you read the DPP's policy you see that they make quite a piece of their independence and it can be no other way. Whoever set up the system, the founding fathers or whoever, they did the right thing. The DPP is meant to stand back. There is just not enough standing-back happening.

That is not a problem that you can solve. That is not a problem that is going to get solved by someone getting the DPP in and giving them a rap across the knuckles. It is a cultural issue that needs to be talked about and thought about. Again, it needs to be flow-charted. People have to answer very hard questions. What actually happens when a brief comes across? What level of assessment is done by what level of lawyer with what level of experience and what level of competence?

Senator WILLIAMS: I take that point; it is what I have raised with many witnesses. If there were some retired criminal and civil judges working in ASIC—Justice Finkelstein is a name that has been dropped by some witnesses—and they had seen what the ASIC lower-level lawyers had put together on you, they may well have said, 'This is a waste of time; don't proceed any further.' For decades of their lives they would have been making hard decisions in court rooms—ruling one way or another. They are very experienced, probably totally honest and cannot be bought. They are probably wealthy and on good pensions. Do you think they would be a great addition to ASIC's network?

Dr Fysh : It might be, but it seems as if we are looking at one little vignette of ASIC and coming up with one solution. It might be a very good one—.

Senator WILLIAMS: It would be a good one if innocent people did not get jailed.

Dr Fysh : Yes. It is not my place to tell the Senate committee how to do its job—but I will anyway! Were I confronted with that sort of question I would not have enough faith in my ability as a senator to come up with those sorts of solutions. I would say that there is a gaping hole in the organisational design of ASIC—an organisation with that breadth of power and that very special ability to ruin someone.

If you are Tony Mokbel and the feds come after you—I know; I have been jail with a few of these guys, although only very low-level ones—it is a badge of honour to be prosecuted. My life has finished commercially. It is not a badge of honour to have ASIC even know your name. They have a very special ability to ruin people's lives.

I know that you understand this: they are defining the crime in a way that the police are not, when someone has broken in and stolen something. For me, they failed to define the crime properly. I do not know if they need ex-Judge Finkelstein or whatever, but if they do, they need to know that they do. He needs to be on their flow sheet. I am not sure about our ability—I am putting myself in your honoured company—to design that solution for them. I suspect that there are a number of organisational pathways and routes inside ASIC that have not been subject to the sorts of analysis which, when you are running a large, complex company across a range of countries, you have. These skills are available in Australia in spades. There are lots of people who have run big companies and who care about ASIC. Even I care about ASIC; that is why it hurt so much when they got it wrong. There are plenty of people that would give advice—who would be far cleverer than me at giving meaningful advice.

Senator FAWCETT: Thank you for your evidence. I am not a lawyer; I am experimental test pilot by background.

Dr Fysh : I am a physicist; a much nicer job.

Senator WILLIAMS: I am a broker and a shearer.

Senator FAWCETT: I used to run our flight-test centre. I am very aware of the concept of systems engineering, and looking at the system as a whole as opposed to bandaid solutions. So I value the evidence you have provided today. One of the concerns that I have with a number of Commonwealth departments—government departments in general and regulators in particular—is their ability to attract and retain people with appropriate competence for their roles. When I talk about 'competence' I mean task-specific competence, qualifications and experience.

Dr Fysh : That is a terrible issue.

Senator FAWCETT: In your interactions with ASIC do you believe that that is a core issue in terms of their ability to have people to identify risk and make appropriate, timely decisions?

Dr Fysh : Yes. ASIC—bless their cotton socks!—are really in a very difficult position. I would not have given a job to the people I met from ASIC. You do not bring someone from the other side of the world and negotiate with him for a few months to make sure that you will not hold his passport and let him go back to see his child born, and then rock up to the meeting—which is pretty important to this character—with your tie askew and needing a shave. You do not do it. I was not impressed with the quality of people I dealt with. But I do not imagine that ASIC pays as well as my lawyers. So I do not know the answer to that.

I will tell you what I do think. This, again, is such a rarefied solution. We are seeing the participation rate in our economy go down. The baby-boomers like me, who have apparently sequestered all of the wealth, are wondering what to do to make our lives meaningful. Australians are really good at systems engineering; it is our core skill. As one Prime Minister said, Australia is at the arse-end of the earth so we can afford to look back and see what everybody else is doing and fix it. That is why we ended up with PAL television, not NTSC. So I just wonder whether we couldn't find a way to tap into that sort of expertise. But it would be a whole-of-government thing. Maybe a lot of our large public organisations could find a lot of very capable people who would be willing to give time. An awful lot of us are not working now and would like to help. I don't know—it is too hard.

I did a course in Canberra when I worked for BHP 30 years ago—that was the last time I was in Canberra. The Public Service was thinking of bringing in management training technology and they asked BHP if it would join with them. It was a very expensive thing, so only BHP and the state governments and the Commonwealth could afford to bring it in. So I came and sat here for all week and went through this course. I met the DPP and a few other people. These were the bright young 30-something up and comers of the Public Service. I was desperately impressed by their intellect but I went away knowing that I would never enter the Public Service because I could not handle all the 'gay black whales', the multiple agendas. I do not say that lightly. Politics is too complicated for most of us—the multiple agendas. I think I wrote to one of you that I would not have your job for quids—because I have read what you have got to cope with. It is a tough job, but there are a lot of people out there, with a lot of capabilities, who would like to help. I think there got has to be a way of tapping into that experience in Australia.

Senator FAWCETT: ASIC, when we have questioned them around competence, make a great deal of their industry secondment program. They have people from industry come to work in ASIC and send people from ASIC to work within industry. Do you have any comment on the effectiveness of that?

Dr Fysh : The lawyers I used had one or two ex-ASIC people—and they were not terribly complimentary. So that is going in the opposite direction. Getting quality people into any government organisation is a world-class problem. Most people, like me, quail at the multiple agendas that you have in a government organisation—it is tough. It is a lot easier when you have just got to dig it up and ship it out, or manufacture a better widget or something—life is a lot less complex. When you get further up in the organisation you do find that all of those agendas are absolutely important for whether you have got a sustainable organisation. But a lot of people do not see any of that. I wish there were easy answers. I think you are asking all the right questions but I just think they have got to be answered in a forum where they will be thrashed out by people who have a long-term investment—at least four or five years—in seeing a great organisation emerge at the end of it.

Senator FAWCETT: One of the functions that ASIC oversees is the Takeovers Panel, a group appointed by government to be a very quick dispute resolution process. They are industry practitioners. Uniquely, they have the power to overturn decisions of ASIC. Do you think that is a model that could be more broadly applied? Even in a case like this, with insider trading, could we have a panel of people who understand the industry and can review quickly and either give an opinion—

Dr Fysh : No. I have thought about that, and you are asking the same question in a different way. How would that panel know the facts? They would need to talk to me. And why would I talk to them? My lawyers would tell me not to. I do not see a way around it. I think you cannot get by needing ASIC to do a better job. ASIC has got the power. ASIC has got the responsibility. With respect, you are reaching for ways to bring better minds in to help. I am no lawyer but I know how I would be advised. My advice would be, 'Yeah, there is this bunch of guys and they might be able to help. But do you know what? It is better to sit down and shut up.' The legal analogy there is a committal hearing. I spent ages—and a few hundred thousand dollars—preparing for a committal hearing. Do you know what I did in the end? I pulled it—after we had scheduled it—because I was too frightened that ASIC would recognise, just through the questioning, how pathetic their case was. They have the right to tighten it, even while the case is ongoing. That is a sad thing, isn't it? I made that decision—not my lawyers—because the case against me was so pathetic. I could not believe that a proper lawyer could really have looked at it.

CHAIR: Your submission said you got 60 per cent of your costs awarded—and you are still in negotiation to get any of it

Dr Fysh : No. There have been four court actions against me. There has been a New South Wales court action to freeze funds, which I never opposed—and it did not cost much. Then, the DPP decided to move it to Queensland. We fought that for six months because there was just no locus in Queensland. I will not bother to go into why I think they did it. And I was awarded costs there. Uniquely, the judge awarded costs—and she said that in the interests of natural justice it ought to be in New South Wales. So it cost me 118 grand. We managed to get the AFP, because they were in charge of PoCA, to pay 60 per cent.

The second court action against me was the main prosecution, which cost $3 million. The appeal was $270,000. And then a couple of hundred thousand dollars was lost in various PoCA actions, which is the Federal Police. The PoCA actions are civil actions, so costs can be awarded. The Federal Police did not like the costs award that the judge gave—the judge said that he should only pay back his profits. They wanted the money that I had invested in the shares in the first place. Their argument was that that is what you do with drug dealers. Well, there is a big difference between going out and buying drugs and buying shares—one is illegal and one is not. I could show where my investment funds had come from—it was taxed earned income. So the judge said they were wrong. They did not like the decision, so they appealed it. Of course, I had to fight that. When you roll all that up, I got costs awarded there.

But the main money was the $3 million for the case and the two or 300 grand for the appeal. All Australians better be aware that, when you are prosecuted for a criminal matter in this country and found innocent, you have no recourse on costs. I think that is wrong. There are innocence projects in many countries, which look for people who have been not just wrongly prosecuted but wrongly convicted—and then the conviction is overturned. In most jurisdictions there is some form of compensation available. In Australia we do not have that. So in each of the states, and federally, there is a possibility of an ex gratia payment being made. I decided to pursue that because I wanted to illustrate how lousy the system is. It is because of what a few people in jail said to me: if someone who has got the ability to chase things does not, it will never change.

And do you know where it has got to? I have spent quite a bit of money. My wife and I have put together statements about what it was like for my children for me to be in jail. It is heart-rending stuff. The Department of Finance has sent it back and said: 'What category of ex gratia payment do you think you are in? We have decided to go for the "ex gratia ex gratia payment".' So sometime, gentlemen, in the next weeks or months—or, knowing the federal government, years—the Department of the Prime Minister and the Cabinet will make that decision. That is pathetic. We need a law for compensation of people who are innocent in this country. We really do.

CHAIR: Thank you very much for your attendance and assistance today.

Proceedings suspended 10:59 to 11 : 09