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ASIC chairman's background under scrutiny -

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ASIC chairman's background under scrutiny

Samantha Donovan reported this story on Friday, November 11, 2011 08:12:00

TONY EASTLEY: The Federal Opposition wants the Federal Treasurer Wayne Swan to explain what due
diligence procedures were conducted prior to the appointment of ASIC chairman, Greg Medcraft.

It's emerged that Mr Medcraft held a senior position at international bank Societe Generale which
is now being sued in the United States over huge sub-prime mortgage transactions in the lead-up to
the global financial crisis.

It's also been revealed that Mr Medcraft was named in a 2004 sex discrimination case in the US
which was settled out of court.

Samantha Donovan reports.

SAMANTHA DONOVAN: The Gillard Government appointed Greg Medcraft chairman of the nation's
securities watchdog earlier this year. He worked for the international bank Societe Generale in the
US from 1999 to 2007 overseeing its securitisation business.

The US Federal Housing Finance Agency is now suing the bank, alleging that in the lead up to the
global financial crisis the bank was negligent, failed in its due diligence and misled American
loan providers Fannie Mae and Freddie Mac.

The French based bank was also the subject of a 2008 class action in the US brought by former
employees alleging the bank's securitisation business engaged in fraudulent conduct between 2005
and 2008.

Greg Medcraft wasn't named in either lawsuit.

But he is understood to have overseen the bank's mortgage securities business during the time it
allegedly engaged in misconduct.

The Federal Opposition says the Government didn't do its homework.

Senator Mathias Cormann is the shadow assistant treasurer.

MATHIAS CORMANN: I'm concerned about the fact that the Gillard Government has made this very senior
appointment without going through proper process. I mean this is a very senior role. It is a
$700,000 a year job and they never even advertised the position.

The Government made a lot of the fact that they would ensure an open and transparent and merit by
selection processes in government and within a year and a half of making that big announcement, the
Government threw their own processes overboard when it came to appointing Mr Medcraft as chair of

SAMANTHA DONOVAN: A spokesman for ASIC told AM none of the lawsuits name Mr Medcraft personally and
because some of the matters are before the courts he isn't able to comment on them himself.

He said because Mr Medcraft signed a confidentiality agreement when he left Societe Generale he's
significantly limited in what he can say publicly about his time at the bank.

The spokesman pointed out Mr Medcraft's background in securitisation at Societe Generale is well
known to those regulated by ASIC, the media and the government.

Greg Medcraft was also named in a 2004 sex discrimination lawsuit that alleged he approved $4,000
for clients to be entertained at a strip club, made comments about a woman's legs and discriminated
against an employee.

The ASIC spokesman told AM the case never went to court and the former employee withdrew all their
claims against all parties, including against Mr Medcraft and Societe Generale made a contribution
to the former employee's legal fees.

Senator Cormann says he is not as concerned about the allegations raised in the US as much as the
Federal Government's appointment processes.

MATHIAS CORMANN: Look, as I said, I'm not aware of the detail in relation to those allegations. I
mean the deal that really matters is that Mr Medcraft and Mr Swan will have to explain so from our
point of view I mean obviously there are processes underway which no doubt will take their course
and if there are things that Mr Medcraft has to explain along the way, I'm sure he will do it.

SAMANTHA DONOVAN: A spokesman for the Federal Treasurer Wayne Swan told AM that "Greg Medcraft is
well qualified to lead Australia's corporate watchdog, with three decades of experience across
several regions which earned him wide respect among both regulators and governments, and a proven
track record as a commissioner of ASIC since February 2009."

TONY EASTLEY: Samantha Donovan.