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Economics References Committee - 10/08/2012 - Effects of the global financial crisis on the Australian banking sector

REIHER, Mr Geoffrey, Private Capacity

Committee met at 08:31

CHAIR ( Senator Bushby ): I declare open the third hearing of the Senate Economics References Committee's inquiry into the post-GFC banking sector. This inquiry was referred to the committee by the Senate on 14 March 2012 for report by 31 October 2012. The committee has received over 150 submissions, which are available on its website.

These are public proceedings, although the committee may determine or agree to a request to have evidence heard in camera. I ask everyone to ensure they have switched off their mobile phones. I also ask photographers and cameramen to follow the instructions of the committee secretariat and ensure that senators' and witnesses' laptops and personal papers are not filmed.

I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may of course also be made at any other time.

I welcome Mr Geoffrey Reiher. I understand that you have had to travel to Sydney to attend this hearing and I would like to express the committee's appreciation for the effort that you have made to be here with us today. I invite you to make an opening statement.

Mr Reiher : I am here to represent myself and Paul French, who was my partner when we purchased the Grand Hotel in Cobar back in March 2007 through Bankwest. At the time, we had a 10-year association Ross McGlynn, our solicitor; and Jason Bartlett, who was with Crosby Warren Sinclair, had been our accountant for about seven years. So we felt we were surrounded by the right people at the time.

We were pursued by Bankwest, taken to lunch and, in a whirlwind deal, we had finance for the hotel. We had tried other financial institutions and failed. They were talking a long-term commitment of 20 years and they were committed to helping out and making sure we got through the tough times. Those commitments were all done very quickly back in 2007. Briefly, in relation to our commitment to the bank, our payments were always up to date and at one stage we were paying in advance.

We entered into a two-year interest only deal when the GFC hit. We made sure our commitments were all up to date. The hotel was doing up to $25,000 a week in the good times and through the GFC we went down to probably $11,000 a week. In that time the hotel bar takings actually went up 10 per cent; our downfall was gaming. From that we managed to get it back up to about $18,000 a week, until our termination. We had a valuation of the hotel done probably six or eight months prior to the termination of our agreement with Bankwest. That is when the hotel was down at its worst and we were asking for a revaluation. That never came to fruition.

In the closing stages of our commitment with Bankwest, probably in the last three months, through telephone conversations with some of their senior officers they made it quite clear that they did not want our business and they basically told us to go somewhere else if we could. Obviously at the time it was pretty hard. They did move the goalposts at the start of the deal to accommodate us. Our LVR was not quite right so they actually moved it one way to make sure that we got under the radar.

When the receivers were appointed they came in and they were probably looking for something that was not there, from what I could gather. I referred them to my accountant, Jason, and he assured them that there were no underlying accounts that were not being paid. They were pretty convinced at the time that there should have been, or 'Where were they?' The hotel was not in trouble. It was a bit confusing at the time as to why they foreclosed on us. There was a mine closure in Cobar at the time through the GFC, when 700 people were put off in a population of 4,000, which impacted on us pretty hard. But we have always managed to get through it. That mine was reopened and is at full production again.

We did have a sale of entitlements—a proposal that we put to the bank—which was worth about $250,000. We also had a loan expire and we had one more payment on a loan that was due to expire the following month, which would alleviate another $50,000 a year that obviously we would have put to the bank. All this was to no avail. They were not interested in talking to us.

I personally took no drawings from the hotel. Paul only took a very minimal amount, just to cover his mortgage on his house. The hotel was operating at full strength, with all the funds being put back into the hotel. On the termination of our agreement with them—we were kicked out—Paul was actually offered two other positions in town. There are four hotels in town. He was offered two managing positions in two other hotels. So I do not think there was a management problem with the hotel. He was very well liked. It shows that he was a pretty good operator, given that he got offered two other positions. I am still bewildered as to why we were terminated.

CHAIR: Thank you very much, Mr Reiher. Senator Williams has some questions.

Senator WILLIAMS: Mr Reiher, thank you for your time here today. You said you were pursued by Bankwest. I assume—though you should never assume in life—that they pursued you to give you the loan. Is that what you were saying?

Mr Reiher : Yes. They were chasing our business, yes.

Senator WILLIAMS: How much was the hotel valued at when you went to buy it?

Mr Reiher : $2 million—$1.8 million.

Senator WILLIAMS: How much did you request the loan for?

Mr Reiher : $1.35 million.

Senator WILLIAMS: You said in your opening statement that the bank shifted the goalposts to get the loan through. What do you mean by that?

Mr Reiher : The valuation—I think they were loaning 80 per cent at the time.

Senator WILLIAMS: So, in other words, if something was worth a million dollars they would lend $800,000?

Mr Reiher : Yes. We did not fit the criteria. We fell short. I do not know the number but we did fall short by a small margin. It was said over lunch that we will just move the rate to fit you in.

Senator WILLIAMS: Did they move the rate, the LVR—if it went to 80, did they move it to 82 or did they increase the value of the hotel? How did they get to that loan to value ratio?

Mr Reiher : I am not a hundred per cent sure. They did not revalue the hotel, so I am assuming that they moved the percentage rate.

Senator WILLIAMS: You were given a 20-year commitment by Bankwest when they financed you in this hotel. They chased your business. Did they take you to lunch or anything?

Mr Reiher : Yes, they took me and my wife at the time out for lunch. I still do not remember how they found us. I did not pursue them. It could be that Paul was speaking to someone and word of mouth got to them and they got in touch with me and it was over and done with very quickly.

Senator WILLIAMS: Did you live in Cobar then?

Mr Reiher : Yes.

Senator WILLIAMS: So talk got around that you and Paul, your business partner, were interested in buying a hotel. What is the name of the hotel?

Mr Reiher : The Grand Hotel.

Senator WILLIAMS: As you are driving towards Broken Hill, is that the big one on the corner on the left?

Mr Reiher : It is halfway up the main street. It has got a big Tooheys beer can on the roof.

Senator WILLIAMS: I have been through Cobar many times but I cannot remember that beer can. So they sought your business, they gave you a commitment for a long term—20 years—saying, 'We are not here for a short time; we are here for the long term. We want to get you into this business. We will back you,' that sort of thing. Am I correct in saying that?

Mr Reiher : Very correct. I actually made the point that in the bad times I have had failures with other banks not putting their hand up and getting through the bad times. We hope to think that there are not bad times but we have got to be logical about it, and there was. That is when I made a point of saying to them, 'Are you with us when it gets tough?' and they committed to that 100 per cent.

Senator WILLIAMS: So your hotel was turning over $25,000 a week. When people were put off at the mines and 700 jobs were lost, it went down to $11,000 a week.

Mr Reiher : It actually probably went down to $9,000.

Senator WILLIAMS: Then you got it back up to $18,000 a week?

Mr Reiher : Yes.

Senator WILLIAMS: During that period of the downturn, did you miss any payments to the bank or were you late with any payments?

Mr Reiher : If we were late it was a matter of days and that would have been an oversight from me. That is when I put into place a payment schedule, where I was paying on a weekly basis. I knew it was a two-month period. I broke it down into weekly or two-weekly lots and made sure that, by the time we got to our payment date, the outstanding amount was maybe $2,000. In my view they were getting paid in advance.

Senator WILLIAMS: So you borrowed $1.35 million. When the receivers were sent in, how much did you owe the bank, the principal amount?

Mr Reiher : $1.23 million.

Senator WILLIAMS: How long did you have the hotel for before the guillotine dropped?

Mr Reiher : Nearly four years to the day.

Senator WILLIAMS: So in that period you reduced your debt from 1.35 down to 1.23?

Mr Reiher : Yes. That was only in a two-year period.

Senator WILLIAMS: So that is $120,000 you took off your principal debt.

Mr Reiher : Two years of that was an interest-only deal with them. So the principal was only taken off in a two-year space.

Senator WILLIAMS: You obviously worked long hours and very hard.

Mr Reiher : You bet.

Senator WILLIAMS: I phoned Mr French over this matter. When I phoned him he was driving to the Royal Prince Alfred Hospital to have his three-monthly check to see if his leukaemia was still in remission. Is his health okay?

Mr Reiher : No, not really. He has just been diagnosed with a bit of cancer on his nose and he has to go and have half of his nose taken off. On the leukaemia side, he is on ongoing medication to maintain that.

Senator WILLIAMS: I wish him well. Who ordered the revaluation of the hotel? Was that Bankwest?

Mr Reiher : Yes.

Senator WILLIAMS: Who did the valuation?

Mr Reiher : I am sorry; I cannot answer that.

Senator WILLIAMS: But obviously a licensed valuer?

Mr Reiher : Yes.

Senator WILLIAMS: Who paid for the valuation?

Mr Reiher : We did.

Senator WILLIAMS: How much?

Mr Reiher : I think the second one was about $7,000, but in their wisdom they said they would just tack it onto the loan, because we could not afford it at the time.

Senator WILLIAMS: Bankwest said that?

Mr Reiher : Yes.

Senator WILLIAMS: Right. You never missed a payment to the bank. There might have been the odd occasion when you were a couple of days late. Is that a correct assumption? In the last few months before the receivers came in, did you try to say to Bankwest, 'We've had a downturn in business; it's now picked up; we're meeting our payments; we can reduce our principal debt somehow'. Did you put any proposal to Bankwest?

Mr Reiher : Yes—my solicitor Ross McGlynn handled a lot of that along with myself. We did have a proposal where we were going to sell three of our nine entitlements, which reduced us to six.

Senator WILLIAMS: Just to clarify that: what do three entitlements mean?

Mr Reiher : To poker machines.

Senator WILLIAMS: So you had nine poker machines and, if you were going to sell three poker machines, you would have to hand one to the government, wouldn't you? So you could sell two poker machines.

Mr Reiher : Yes.

Senator WILLIAMS: What are they each worth?

Mr Reiher : $250,000 for the two.

Senator WILLIAMS: $125,000 each.

Mr Reiher : We had a commitment for $235,000.

Senator WILLIAMS: You had an offer?

Mr Reiher : An offer, and that would have been increased after the elections. We were told to hold off until after that. I could say that we had another $50,000—a loan that we were paying off. The commitment to us was $50,000 a year, but that was terminated in one month's time.

Senator WILLIAMS: Are you saying that you only had one month's payment to go and you would have had those poker machines paid for?

Mr Reiher : Correct.

Senator WILLIAMS: And that would have saved you how much a year?

Mr Reiher : $50,000.

Senator WILLIAMS: That is $50,000 you could have committed to Bankwest if they had stuck with you?

Mr Reiher : That is right.

Senator WILLIAMS: And you were already maintaining a payment and had reduced the principal by $120,000. You could have increased that by another $50,000 a year. Is that what you are saying?

Mr Reiher : Yes.

Senator WILLIAMS: Did Bankwest say to you in the last few months, 'We just don't want your business; we want it out of here'?

Mr Reiher : Yes, pretty well. I made sure that when I did deal with the bank I was with either Ross McGlynn, my solicitor, or Jason Bartlett, my accountant, so that I was not on my own. The last conversation we had, they basically said that they did not want to do our business and, if we went back to principal and interest, they would make it so hard that we could not afford to make the payments. He alluded to the fact that he would make it a five-year term.

Senator WILLIAMS: Are you saying that, for there to be an agreement, Bankwest said, 'Forget the 20 years as originally proposed; we'll set you up in a five-year loan where you'll pay the whole lot back in five years'?

Mr Reiher : The way it was put to us, he said they would make it basically a five-year loan so that we could not make the payments. They wanted out; they did not want anything to do with us.

Senator WILLIAMS: Did they say to you, 'If we refinance you in the hope of keeping you in this business, we'll make it so hard that you will fail'?

Mr Reiher : Yes.

Senator WILLIAMS: That must have annoyed you after the original approach and the lunch and the 20-year-long term you were given.

Mr Reiher : To no end. We did not have any choice but to keep going. Leaving that conversation, I went to Ross McGlynn and we put the proposal together, which we thought was solid enough maybe to change their mind. But it was pretty clear that they had made up their mind well before the last phone conversation we had with them.

Senator WILLIAMS: I see a bank's role as buying and selling money. If you are selling money to someone who is meeting their commitments, why would you pull the guillotine down? That is for the committee to work through. You said Paul French would take money each week or each month—a minimum amount—to make his house payment. Does Mr French still have that house?

Mr Reiher : I am not 100 per cent sure. They have had it on the market and they have had a few lookers. If they have actually exchanged contracts or anything—

Senator WILLIAMS: Did he have the equity in that house mortgaged to Bankwest when going into the hotel?

Mr Reiher : No.

Senator WILLIAMS: Where is the house?

Mr Reiher : On the Central Coast.

Senator WILLIAMS: Did the receivers just come in as a total surprise? Did they just roll up one morning and say, 'We're the receivers; you're out'?

Mr Reiher : That's right. I wasn't there; I had since moved to the Central Coast. Paul was in charge of the hotel. I dealt with the accounts and the legalities of the hotel from my house on the Central Coast. Paul had the day-to-day running of the hotel. Obviously, we spoke on a daily basis. I am led to believe that they did send some information to my solicitor's office at five o'clock on Friday afternoon to let him know that they were coming in, but by the time he got that information it was Monday morning and they were already in.

Senator WILLIAMS: The receivers went through the books and your accounts were up to date?

Mr Reiher : I wouldn't say 100 per cent, but there was nothing untoward that was a problem.

Senator WILLIAMS: No creditor had cut you off because you had failed to pay them?

Mr Reiher : No.

Senator WILLIAMS: The brewery was still supplying—

Mr Reiher : Correct.

Senator WILLIAMS: They are pretty strict, aren't they? If you don't pay in 30 days—

Mr Reiher : Yes—you don't get any beer.

Senator WILLIAMS: You end up with the pub with no beer.

Mr Reiher : It is a bit of an issue if you do not pay your bills, that is for sure.

Senator WILLIAMS: I remember one infamous liquidator named Stuart Ariff, who did not pay the account for the Armidale Rugby Leagues Club. Tooheys bankrupted him and the rest is history.

Mr Reiher : The receiver—the guy's name eludes me at the moment—was ringing me constantly, wanting information basically to reduce our debt; or so he said. I was not in any frame of mind to talk to him; I put him onto my accountant. In conversations with Jason Bartlett, my accountant, after that, he said he was looking for debt and Jason had to assure him that it was not there. In his past experience, going into these situations, there is a problem, but he could not find one.

Senator WILLIAMS: Which company was the receiver? Was it one of the big, well-known ones?

Mr Reiher : Ferrier Hodgson.

Senator WILLIAMS: They are a well-known receiver and liquidator and insolvency practitioner. Are you saying the receiver was saying, 'Hang on; is there another set of books? Where's the debt? Where are the accounts in arrears?'

Mr Reiher : Yes.

Senator WILLIAMS: Was he surprised at that? Was he saying, 'Normally, when I get sent into a place like this, we see all the bad debts, the accounts in arrears, the shortfall in money'?

Mr Reiher : On my accountant's say-so to me, he was very surprised that there wasn't a problem with the hotel.

Senator WILLIAMS: We are getting to the end of the story. Was your hotel sold?

Mr Reiher : Yes.

Senator WILLIAMS: Did it go to auction?

Mr Reiher : I think so, yes, in the end. It is funny that they advertised with flyers in the hotel, saying that the hotel was trading very well under previous owners.

Senator WILLIAMS: Who are 'they'? The receivers?

Mr Reiher : Whoever the—

Senator WILLIAMS: Whoever sold it. The broker.

Mr Reiher : Yes.

Senator WILLIAMS: They advertised that on a wall in the hotel.

Mr Reiher : They did.

Senator WILLIAMS: For sale: one Grand Hotel, trading very well, previous owners—

Mr Reiher : They put it under our nose. We have copies of it here if you would like to have a look.

CHAIR: It is in your submission.

Senator WILLIAMS: It is in your submission. How much did the hotel sell for?

Mr Reiher : $700,000, I believe. It was valued at the worst time, when we were evicted, at $1.1 million. We wanted a revaluation, probably six months after that because we knew the trade went up by $5,000 to $7,000 a week over that time.

Senator WILLIAMS: It sold for around $700,000 to the best of your knowledge. How many poker machines were there?

Mr Reiher : Nine.

Senator WILLIAMS: If you had sold nine poker machines, you give three to the government and leave yourself with six to sell at $125,000, that is $750,000. So they have sold the freehold to the building and the licence. Was the stock included?

Mr Reiher : Yes.

Senator WILLIAMS: Walk in, walk out; the price of six poker machines.

Mr Reiher : Yes.

Senator WILLIAMS: That does not appear to be a very good sale.

Mr Reiher : They were just washing their hands of us.

Senator WILLIAMS: The pub is sold. Do you and Mr French still owe money to Bankwest?

Mr Reiher : I have been forced to go bankrupt.

Senator WILLIAMS: You have been forced to go bankrupt?

Mr Reiher : Yes.

Senator WILLIAMS: Did you ever say that you were put into bankruptcy? You were appointed a trustee of bankruptcy.

Mr Reiher : Yes.

Senator WILLIAMS: Did you have personal assets that were sold because of your bankruptcy?

Mr Reiher : I didn't have any assets. My assets, my super, my long-term goal was the hotel. I walked out with nothing.

Senator WILLIAMS: What are you doing these days?

Mr Reiher : I work for a civil construction company, jackhammering and digging holes.

Senator WILLIAMS: Remember we are not a court; we are regulators. I will ask Bankwest, 'Why do you sell businesses up that have never missed payments to you?' There has to be a reason behind this. We heard yesterday that when Bankwest fell over with the HBOS—Halifax Bank of Scotland—the Commonwealth Bank bought Bankwest for $2.1 billion, but the Commonwealth Bank had to cough up $17 billion in that loan book to keep the loans going. The Commonwealth Bank says they never interfered with Bankwest's running of their bank. There has to be a reason that people like you were sold up when you hadn't defaulted.

Mr Reiher : I have been asking myself the same question for a year or so. I am only a novice, but the other question is: is it good business to throw $2 billion down the drain to clean up a business that is paying its way? That is ultimately what it cost Bankwest to get rid of us.

Senator WILLIAMS: Yes. As I said, I am gobsmacked that you would be sold up if you met your commitments. If I was running a bank and you were meeting your commitments, I am making money out of you. Why would I cut off a customer I am making money out of? I would cut one off one who was not paying the bill.

Mr Reiher : Yes.

Senator WILLIAMS: Sadly that happens in a lot of businesses, especially in global downturns and so on. Did you have something to say?

Mr Reiher : Yes. My background is in the industry. My parents were hoteliers. I was working in a hotel from 18 years of age. I leased the Grand Hotel prior to owning it. I owned in partnership with another gentleman the Lennox Point Hotel in Lennox Head and I had a three- or four-year deal in Sodens Hotel in Albury. The industry was not new to me.

Senator WILLIAMS: So you are very familiar with the hotel industry?

Mr Reiher : Yes.

Senator WILLIAMS: I do not know what else I can ask you. I simply wish you well. We need to find out why. When banks make decisions about running their banks, that is their business. We are not here with a big stick. There are regulations they have to work from—we have APRA, the prudential regulator—and there must be something behind this. You are not the only one. There is a lady I was talking to last night who pays $30,000 a month to Bankwest and has never missed a payment—that included $6,000 a month principal with $100,000 in the bank. She was under the pump as well. As I said to the banks yesterday: 'Your job is dealing with money and running your business; but, sadly, when it all falls apart, we as politicians deal with people and often we pick up the pieces.' Thank you for being here, and I wish you well.

Mr Reiher : Given that there was a long-term commitment with the bank, the advice from my accountant and solicitor was: 'Throw everything into it—don't worry about drawing super or putting it away, just punch everything into the hotel and that will be your nest egg.'

Senator WILLIAMS: I am familiar with it. I have been in small farming and small business all my life. I only entered parliament four years ago at the age of 53 with total of $1,650 in super. I put in four grand back in the wool boom and 10 years later it was worth $1,650. I should have put it in the bank!

Senator CAMERON: Mr Reiher, have you read the Bankwest submission to this inquiry?

Mr Reiher : No, sorry.

Senator CAMERON: I might take you to some of the points that Bankwest make to get your views on them. Bankwest said on page 2 of their submission, in relation to defaults:

… it is not in Bankwest’s interests, and it makes no commercial sense, to "manufacture" defaults or to cause or increase losses.

That is fundamentally the same submission we had from the CBA yesterday. Do you have a view on that? Is that in your view a statement of fact?

Mr Reiher : It certainly does not make sense in our situation.

Senator CAMERON: So you think they have manufactured default in your situation?

Mr Reiher : I have no doubt. You could go through our situation and find minor breaches, if you like to call them such. We were a couple of days late with a payment or figures were late by a week. They wanted figures on a monthly basis from us. If they are defaults, yes, we are guilty.

Senator CAMERON: Bankwest, on page 4 of their submission, say:

The Bank strongly prefers to work with customers experiencing financial difficulty to help them resolve their problems as this gives the best outcome both for Bankwest and the customer.

Do you have any comments on that statement?

Mr Reiher : I cannot believe they can say that, given the dealings I have had with them. In the end there was just no help, no commitment at all.

Senator CAMERON: No help, no commitment, no attempt to work through your problems.

Mr Reiher : No, none at all. We had the solutions; they did not want to listen to the solutions. We put it in front of them, but they did not even acknowledge our commitment to the solution.

Senator CAMERON: I am not sure that you can really comment on this, but Bankwest also say on page 5:

Bankwest was also co-lender in a number of high profile transactions such as ABC Learning Ltd and Great Southern Ltd where large losses were incurred by the joint lenders.

Were you aware of these other big losses that Bankwest were involved in?

Mr Reiher : No, sorry.

Senator CAMERON: So you did not follow the big financial issues of the day. You were interested in getting on and running your pub.

Mr Reiher : Yes, we just worried about our own backyard. We thought we were going well.

Senator CAMERON: Were you put into receivership?

Mr Reiher : Yes.

Senator CAMERON: Bankwest also say on page 5:

… a number of the characteristics below are usually present—

it is quite qualified—

before Bankwest makes a decision to appoint a receiver:

The customer breaches their monetary or other contractual obligations …

Were you in that position?

Mr Reiher : Like I said, if you include those minor breaches, such as being a couple of days late on a payment or the figures not being put on their desk the day they wanted them but maybe a couple of days or a week late, yes, we are guilty. But as far as the big picture goes we met all our commitments to them.

Senator CAMERON: I will just take you through that. You are saying they were only minor breaches that you were involved in?

Mr Reiher : Yes. They are breaches, I suppose, if they are two days late.

Senator CAMERON: Yes. They say another reason to appoint a receiver is 'interest not being met when due'. Was that applicable to you?

Mr Reiher : No. Like I said, it was maybe a couple of days late, but it was always there.

Senator WILLIAMS: You said that towards the end, when the receiver came in, you had been paying interest on time at that stage? You had been paying interest on time and were up to date when the receiver was sent in?

Mr Reiher : Yes. Our arrears on interest payments when the receivers were sent in was $368.

Senator CAMERON: Another reason listed by Bankwest is:

The customer’s debt levels are increasing and unsustainable

Were your debt levels increasing and unsustainable?

Mr Reiher : They were declining quicker than they ever had. We had hit some rough spots where our creditors blew out. I had always communicated one-on-one with them and made sure that they were comfortable with everything.

Senator CAMERON: I will take you to the next reason:

A third party creditor (e.g. ATO) has initiated recovery action against the customer

None of that applies?

Mr Reiher : No. My accountant dealt with the ATO on our behalf and always had a good relationship with them.

Senator CAMERON: What about the next reason:

Loss making operations or holdings are deteriorating the customer's equity position

Mr Reiher : No.

Senator CAMERON: The next reason is:

The underlying project or development has stalled or costs have blown out

Mr Reiher : No, not at all.

Senator CAMERON: What about this:

The customer is unable or unwilling to deliver an appropriate strategy to resolve the matter

Mr Reiher : We were ongoing in strategising the hotel.

Senator CAMERON: And:

Further delay or inaction would only compound the problem

Mr Reiher : No. We were going forward.

Senator CAMERON: They appointed a receiver and in your evidence to us that appointment was made in contradiction of those eight points that they say are their principles for appointing a receiver?

Mr Reiher : Yes, in my view—totally.

Senator CAMERON: They also say on the last page of their submission:

… the Bank is often prevented from making full disclosure to the media about a customer's affairs. In addition some of the submissions to the Committee concern individual customer matters that are, or have been, the subject of review and determination by the Courts or the Financial Ombudsman Service.

Do you fit into any of those areas?

Mr Reiher : No, I don't think so, not at all.

Senator CAMERON: If Bankwest come to the committee today, they cannot say they cannot talk about your particular situation because it is subject to review or determination by the court or the Financial Ombudsman Service? They cannot use that argument?

Mr Reiher : They can feel free to say whatever they like about our business.

Senator CAMERON: You are saying that they should feel free to say whatever they like about your business. You have nothing to hide.

Mr Reiher : No, absolutely not.

Senator CAMERON: They say that when they appoint a valuer, the valuer is registered and licensed. I would assume that you do not have a complaint about the valuer—

Mr Reiher : No.

Senator CAMERON: other than the instructions the valuer was placed under?

Mr Reiher : I do not know what instructions he was placed under. Like I said, we offered to pay for another valuation six months after it was valued at our lowest point, and they did not want anything to do with that.

Senator CAMERON: The submission is signed by a Suzanne Tindal. She is probably here—I am not sure. She is the Chief Executive Strategy and Reputation for Bankwest.

Senator WILLIAMS: She has a tough job!

Senator CAMERON: This may be an unfair question. Why would Bankwest need a reputation executive?

Mr Reiher : I think they probably do need one after what they have done to us.

Senator CAMERON: That is probably one good decision Bankwest have made, you reckon?

Mr Reiher : Like John said, I think it is a pretty tough job.

Senator CAMERON: I am equally bemused.

CHAIR: You mentioned in your opening statement that Bankwest had courted you for your business, that you had been interested in buying the hotel but you had not had any success with other financial institutions. First of all, why weren't other institutions interested in backing you? Did you have any indication of what the issue was with them?

Mr Reiher : At the time I think there were a few big hotel companies who had defaulted and the industry was not as rosy as it had looked. We only had preliminary talks with other institutions. We never even got off the ground because a whirlwind came in under us and said, 'Here you go—here's the money.'

CHAIR: So at a time when Bankwest was looking to back you and actually approached you to back you, other institutions were saying, 'The industry is a bit risky and we are not prepared to touch it.' But Bankwest went out of their way to approach you and say, 'We are.'

Mr Reiher : Yes, that is the way I found it.

CHAIR: You also stated in your submission that you entered into a two-year interest only deal with Bankwest, which was a variation from your initial agreement of principal plus interest.

Mr Reiher : Yes.

CHAIR: Was that done in writing?

Mr Reiher : Yes.

CHAIR: It was, so that was an agreed variation. It was not a breach of your initial agreement.

Mr Reiher : No, it was agreed.

CHAIR: What in the end, then, was the breach that they used to send in the receivers?

Mr Reiher : I do not know, to be honest.

CHAIR: Do you believe it was the change in the loan to valuation ratio?

Mr Reiher : Sorry, it was the LVR.

CHAIR: But there was nothing else that you are aware of?

Mr Reiher : No.

CHAIR: No other conduct was put to you by Bankwest as the reason why they sent in receivers?

Mr Reiher : No, not at all. The LVR was the only—

CHAIR: It was purely because of the change in the LVR due to the change in the value of the hotel as a result of the circumstances of the time.

Mr Reiher : Yes.

CHAIR: You also mentioned that when the receivers came in they appeared surprised that there were not more issues with the business. Do you think Bankwest were under the impression that you were hiding issues from them and that was one of the reasons why they came in?

Mr Reiher : I do not believe that, no. I believe they just wanted to get rid of us.

CHAIR: Why wouldn't they want your business? It is hard to get around from a commercial perspective if you were a business that they had signed up and you were meeting all the obligations. Presumably, if they had done the calculations correctly, the interest plus principal or the interest only that you were paying was delivering them a return on their money, which was delivering them a profit. Why would they not want your business on an ongoing basis if it contributed to their bottom line?

Mr Reiher : I am still bewildered. I do not know.

CHAIR: We will put that to Bankwest later on today. There is one other thing. You also mentioned that when you started out you did not meet the LVR requirements.

Mr Reiher : No. That is what I was told by the bank.

CHAIR: You were told that, yes. None of that was in writing, of course?

Mr Reiher : No. As I said, the hotel was valued at $1.8 million. I do not know the numbers, but we needed $1.35 million and it was just short of the requirement.

CHAIR: So they took you on despite the fact that the LVR was not met, and then they used the fact that the LVR was not met to bring in the receivers.

Mr Reiher : Yes.

CHAIR: Thank you very much for your assistance today.