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Wednesday, 21 April 1999
Page: 3999


Senator O'CHEE (12:54 PM) —Some weeks ago, 60 Minutes revealed some of the business dealings of the former Prime Minister of Australia in relation to his infamous piggery. It has taken some time for the full implications of the charges that have been made to sink in. This afternoon I wish to deal with extraordinary favours done for the former Prime Minister Paul Keating by the Commonwealth Bank—`the people's bank'. The favours done by the bank to Keating were massive, secret, crucial to a successful sale of his piggery, absolutely unprecedented, entirely improper, unavailable to any other Australian, against the interests of shareholders in the bank and corrupt.

The Commonwealth Bank's favours to former Prime Minister Keating are by far the greatest scandal in Australian federal history. When Paul Keating began the sale of his piggery in 1994, the government he led was still the majority shareholder in the Commonwealth Bank. As Prime Minister, Keating was in effect the chairman of the board of the bank's dominant shareholder. Every member of the credit committee of the Commonwealth Bank's board at the time had been appointed by a director of the bank appointed by the government of which Keating had either been Treasurer or Prime Minister.

Documents and facts now published lead to one inescapable conclusion: that the CBA did Keating favours which enabled him to sell his interests in his piggery and pocket millions of dollars, even though the piggery remained millions of dollars in debt. The bank, as much as the Indonesians who purchased his piggery, made Keating into a multimillionaire. The bank's favours were also designed to hide forever the deals which made a fortune for Keating.

Apart from what was a remarkably soft treatment of an out-of-order piggery account, as well as failure to insist on a guarantee from Keating, here are some of the extraordinary facts which have now emerged. Having found a potential Indonesian purchaser for his half share, Keating faced the problem that the piggery was greatly burdened with debt. In short, he faced the age-old problem that it is hard to get a good price for a business if it is overburdened with debt. And overburdened the piggery was. I seek leave to table a 1995 report by KPMG, which in paragraph 7 declared that, contrary to Keating's claim that the piggery was a first rate asset, the Euphron group of companies could only continue to trade with the support of the group's shareholders and banks.


Senator Denman —We are refusing leave at this stage because I am taking advice, but we may be prepared to give you leave later.

Leave not granted.


Senator O'CHEE —That is very interesting and we will come onto that later. I am sure that the opposition would not want to cover up for the former Prime Minister, but I take Senator Denman's undertaking at face value because she is indeed a very honourable senator.

However, the bank did come to the rescue. It enabled the sale process with the first great favour. The bank wrote off nearly $5 million of the piggery's debt. 60 Minutes recently reported that the Commonwealth Bank made provision to write off $4.5 million of the piggery's debts. This provisioning occurred in August 1992. As banking specialist John McLennan noted on the 60 Minutes program, `When it got to that point, or even beforehand, the bank would have pursued every form of additional security to prop itself up that it could. So to turn a blind eye to the potential rich source of security from Mr Keating, in my opinion, is a very unusual situation.' I now seek leave to table a bank document which shows that in May 1994 the Commonwealth Bank indeed did write off $4.9 million of piggery group debt.

Leave not granted.


Senator O'CHEE —Isn't this interesting? $4.9 million of debt—here is the proof—and we are waiting for leave to table the document. We want the facts out, and the document is there. A fascinating feature of this document which I am not allowed to table at the moment is that the write-off is recorded by hand on what is otherwise a word processed document. This suggests that knowledge of the write-off was intended to be kept secret by only those with a need to know. The effect of the write-off was, of course, to improve the financial position of the piggery by almost $5 million.


Senator Calvert —How much?


Senator O'CHEE —$5 million, Senator Calvert. Because a write-off is a write-off, banks have rules and procedures governing such matters. Fundamentally, banks only write off debts when they have exhausted all avenues by which they could ever recover those debts. In this case, however, the bank wrote off the debt without any recourse to its security. No effort was made to recover anything from the multimillion dollar purchase price paid by the Indonesians.

Generally, it would be expected that write-offs of this amount would go to the credit committee of the bank's board. In this particular case, where the write-off was enormously beneficial to the Prime Minister of the government of the day—the bank's dominant shareholder—there is not the slightest doubt that it should have been referred not just to the credit committee but to the bank's full board. Equally, there is not the slightest doubt that it was not referred to the bank's full board because exposure to the full and proper processes would have doomed it, assuming that its relevance to Keating's sale had been properly acknowledged. It is, however, unimaginable that the write-off would not have been cleared at the highest levels of the bank.

Write-offs are normally the end point of a process of recovering when all avenues, including all legal avenues, have been exhausted. Write-offs are not normally in the gift of banks to make special customers rich or to curry favour with major shareholders. Not normally, that is. This extraordinary write-off was a favour, a gift, a present, to the Prime Minister worth millions of dollars—indeed, almost $5 million.

The Commonwealth Bank's second great favour or gift or present to Paul Keating was equally extraordinary. Keating and his partner wanted to maximise their take-out of the final settlement of the sale of their shares and Keating's option to the Indonesians. So at final settlement over the Anzac weekend in 1996, the bank came to the party again—this time with a gift worth about $4 million which enabled a successful sale. The gift was in the form of a six-year no-interest loan which the bank extended to the Indonesian purchasers at final settlement.


Senator Calvert —How do you get those loans?


Senator O'CHEE —I would like to know too, Senator Calvert. I think Senator Boswell would like to know; he has a few constituents who have got problems with the bank. The loan does not include any balloon payment at the end of the period to recover the forgone interest. On the same night the bank gifted this $4 million, Keating took away over $2 million as his final settlement—all this only weeks after he lost the prime ministership. Think about it hard. The ramifications of this are extraordinary and, one has to believe, entirely unprecedented.

Somehow Keating gets his bank to sweeten his sale by giving his purchaser six years of no interest on an old Keating debt. Could anyone else in Australia have gotten such a good six-year no-interest loan? Bankers say they have never heard of anything like this. I invite any other Australian—anyone—who has been able to get such a good deal from the Commonwealth Bank of Australia to come forward and tell us how. For the rest of us, out-of-order loans attract penalties and no gifts, certainly no gifts of interest-free loans.

For the thousands of Australians who have been sold up by the Commonwealth Bank, the bank's treatment of Keating must rank as one of the sickest jokes imaginable. I must say that it is almost necessary to suspend disbelief that these things could happen in Australia, but happen they did. Together, the first and second great bank favours were a gift to Keating's piggery worth $9 million. Recently, 60 Minutes posed the question of whether the bank and Keating conspired to blackmail Mr Al Constantinidis to buy his silence about the piggery deals.


Senator Bolkus —You've got to be joking.


Senator O'CHEE —I am not joking, Senator Bolkus, and that is the shame of it. This is not a joke.


Senator Bolkus —This is recycled hash.


Senator O'CHEE —It established that the bank settled its $11-plus million action against Constantinidis—


Senator Bolkus —This is recycled rubbish.


Senator O'CHEE —Well, if you want me to bring something forward which is new—


Senator Bolkus —This is recycled rubbish and you know it.


The ACTING DEPUTY PRESIDENT (Senator Murphy) —Order! Senator O'Chee, it would be useful if you ignored the interjections and addressed your remarks through the chair.


Senator O'CHEE —Mr Acting Deputy President, I accept your ruling. If Senator Bolkus wants me to bring forward something which is entirely new, then the Labor Party should give me leave to table the documents that they do not want me to table. They will give me leave to table the documents that prove that the Commonwealth Bank wrote off $4.9 million. But they don't want me to do it because they are gutless and they want to cover up for Mr Keating. That is the fact. They say, `Come up with something new.' You come up with something new and they say, `We're not going to let you table it.' What an extraordinary performance! What an extraordinary bunch of people on the other side! They are as extraordinary as this deal, but let me continue with the facts about this deal. A number of important questions arise out of these allegations.


Senator Bolkus —Lump of swine.


Senator Abetz —Withdraw it.


The ACTING DEPUTY PRESIDENT —Order! Senator Bolkus, I suggest that you withdraw that.


Senator Bolkus —I withdraw but—


The ACTING DEPUTY PRESIDENT —Thank you. No, there is nothing else.


Senator Bolkus —Hold on, I raise a point of order.


The ACTING DEPUTY PRESIDENT —What is your point of order?


Senator Bolkus —The point of order is that Senator O'Chee has spent the last 13 minutes or so trying to destroy the reputation of a person by recycling hash that we saw on television a few weeks ago. The fact that he is prepared to get in the gutter in this respect ought to be brought to the attention of the Senate.


The ACTING DEPUTY PRESIDENT —Order! There is no point of order. The standing orders do not provide for the protection of former members. As citizens of this country know, they have rights under the standing orders and provisions of the parliament and those people, including former members, have the right to exercise those rights at some point in time.

Senator Abetz interjecting


The ACTING DEPUTY PRESIDENT —Order! Senator Abetz, I am not asking for a comment from you. Continue, Senator O'Chee.


Senator O'CHEE —Thank you, Mr Acting Deputy President. I think your ruling is very perspicacious, because Senator Bolkus is trying to protect Mr Keating. But what is unarguable is the proposition that it was of great benefit to Keating for the bank to write off its claims for $11 million from Constantinidis. By settling for half a million dollars, the bank's action induced Constantinidis to agree not to pursue his legal action against Paul Keating. It also induced Constantinidis to agree to an extraordinary and onerous confidentiality clause in his agreement with the bank, the purpose of which was to cover up all details of the piggery and its dealings with the bank. I say `extraordinary' because the Commonwealth Bank made the write-off of Al Constantinidis's personal debts conditional on his silence on matters to do with the piggery and Paul Keating.

Together, the Commonwealth Bank's $5 million write-off, the $4 million no-interest loan and the $11 million cover-up short-changed Australian taxpayers and bank shareholders to the tune of $20 million—all of which benefited Paul Keating. That is a $20 million benefit which, as I said at the outset, was massive, secret and crucial to a successful sale of this piggery. It was absolutely unprecedented, it was entirely improper, it was unavailable to any other Australian, it was against the interests of shareholders in the bank and it was corrupt.

I intend to provide these observations together with the new documents, once they have been tabled, to the Attorney-General and the Minister for Justice for consideration of the need to hold an urgent inquiry in relation to these matters and this financial impropriety.


The ACTING DEPUTY PRESIDENT —There is still the request for leave. Is leave still not granted at this stage?


Senator Bolkus —No.