BRANDSON, Dr Peter, Chief Executive Officer and Founder, Bank Reform Now

FIELD, Mr Archer, Member and Researcher, Bank Reform Now

CHAIR: I now welcome representatives from Bank Reform Now. Thank you for appearing before the committee today. Information on procedural rules governing public hearings has been provided to witnesses and is available from the secretariat. I'd like to advise witnesses that answers to questions on notice should be sent to the secretariat by 5.30 pm, Wednesday 16 June 2021. Did you wish to make an opening statement?

Dr Brandson : Yes. Thank you. I would like to thank the committee and senators for inviting us to speak here today. I believe that it is a no-brainer that corporations and their directors should be held accountable for their actions. For this to occur, honesty and transparency are critical. Thus, we believe that corporate AGMs should be run using a hybrid format: virtual and physical in real time. Similarly, accountability is promoted by maintaining corporate obligations to provide mandatory continuous disclosure. Fortunately, we live in a free liberal democracy. Most people would expect that they should be able to interact with each other, corporations and government without any person or entity using force, fraud or coercion in those dealings and relationships. Government has a fundamentally important role: the imposition and maintenance of a framework in which people can work with trust in their institutions, both public and private. In order for this to work, accountability and transparency are essential and must be integrated into the legal structures and culture of our society. If government effectively facilitates this, there will be an accessible legal means for aggrieved clients or citizens to achieve justice when a dispute arises.

What the government is now proposing is the removal of some key elements which can assist with the identification of misconduct or illegal practices in the private sector. Of course, we are equally concerned about these types of issues in the public sector. With regard to continuous disclosure, it is clear that share prices can move quite dramatically after certain company announcements. The government's proposal could mean that only insiders will have access to this knowledge, perhaps for a significant time before shareholders and the community. Whose interest does this legislative change serve? The community that parliament represents, or the insiders?

With regard to the provision of electronic signing of documents, it is critical to understand the importance of document integrity and identity verification. Without these issues being well thought out, you are heading into a minefield. Cybercriminality is booming and will only get worse. Documents can be intercepted and manipulated. Impostors could participate in various identity theft scenarios that involve falsely executing contracts and deeds.

Many times in history, professional conmen have been looked upon as pillars of society. The ability to do business without the effective validation of documents and identity will empower these types of people even more. Perhaps the blockchain will assist with these issues; time will tell.

The key point I would like to now illustrate using the financial services sector as an example is that we can't afford to relax our demands for accountability and transparency, because over the last 40 years there have been many examples of unconscionable corporate skulduggery that have led to many hardworking, decent people being stripped of their life's work. The full presentation with specific cases, including the NAB Biritz scandal, and supporting material, along with URLs, will be given to the committee for inclusion in the Hansard.

A serious legacy case I will mention here is that of CBA and Tony Rigg. In 1985, Tony was given a simulated foreign currency loan and agreed to pay five to six per cent interest to build his factory in Nowra. What he didn't realise was that this was in the middle of Australia's foreign currency loan scandal. Soon he was paying 50 per cent interest. CBA unconscionably set up the Rigg family and others. The business was destroyed, and the family was devastated—and tortured now for 35 years. It is worth mentioning here that the foreign currency loan scandal of the 1980s, mostly involving CBA and Westpac, was very well documented in ex-senator Paul McLean's book Bankers and Bastards. Senators do have the ability to expose corporate skulduggery. In fact, holders of public office have a fundamental obligation of trust. The ultimate obligation of those who hold office in any branch of government is to serve the best interests of the people, not the financial services industry, or indeed other industries where corruption is common, such as the arms industry.

It is worth considering some reasons that companies and governments often seem uninterested in exposing the sale of dodgy or harmful products such as simulated foreign currency and other predatory loans or even junk insurance. Every dodgy product or service sold increases economic activity and GDP. Therefore, these often harmful or useless business activities also lead to increased profits, dividends and tax revenues. The big picture strongly implies that our economy actually relies on people being fleeced. This is why millions of complaints about corporations behaving poorly over many years seldom seem to lead to any real change or significant reform. Bankers here and worldwide have been shown to be involved in fraud, forgery, predatory asset stripping, money laundering, rate rigging, drug trafficking, terrorism funding, superannuation rip-offs, financial planning abuses, insurance scandals, farmer evictions—and many resulting suicides—and, most recently, in facilitating the predatory exploitation of children.

Can you really make a reasonable case for any decrease in accountability when dealing with an industry with this track record? And, by the way, how can anyone justify the phasing out of cash when doing so locks people into a system such as this? Perhaps it will be in the best interests of the people if MPs and senators encourage some competition in the sector by backing calls for a National Australia Post Bank, the type of operation Christine Holgate was working towards before she was so rudely interrupted.

It is also now worth mentioning the role of whistleblowers. They are another essential element in exposing public and private sector misconduct. It is not enough to talk about respecting free speech, transparency and accountability. Governments and corporations must not harass journalists, public servants and corporate players that blow the whistle on misconduct. Actions demonstrate to voters that you are on their side. Please give us a sign that you are, by axing the changes which would diminish corporate accountability. At the same time, get off the backs of whistleblowers currently under attack. You know who they are.

Let me finish on a high note. The Senate has actually given us two recent signs that you are able to make a difference. Crossbench senators have made sure that the government's plan to axe responsible lending laws have been well and truly knocked out. In addition, a Senate inquiry has just made clear that Christine Holgate was terribly treated by the government and the Australia Post board. I would like to see the Senate continue the path set by Paul McLean, help expose crime and misconduct in the financial sector, and assist victims like Tony Rigg, Dr Robert Cooke, Goran Latinovich and Erika Biritz receive justice and remediation. Governments must make it a top priority for the corporate elite to be accountable for their actions and decisions while operating their businesses ethically, honestly and transparently.

CHAIR: Thanks Dr Brandson. Mr Field, did you have anything you wanted to add?

Mr Field : I would like to, thank you very much. I retired 11 years ago. I may look like I am old, but I am actually older than I look. I was picked up by two of the business councils to do research for them. I had been to university a couple of times and, even though I never got good marks, they kept me there a lot longer than I should have been! I will not speak for more than two minutes, by the way.

I have been speaking to my chairman daily for 11 years. So he cannot sack me and I cannot sack him, I understand. I said to him that I can speak for two minutes and he said would I please read the last half page of my submission paper because that's what he would like to place on record. I think it is relevant to the bigger picture that covers everything you are doing, so I will just put this on the record.

'The evidence before this inquiry suggests the government and banks must want not to repeat deceitful and fraudulent conduct, and to act in good conscience. It should not be possible for industry bodies to continue to make unilateral changes,' I will not read all the little pieces, 'conspire with industry associates to conceal deception and fraud, fail to comply with essential clauses in customers' lending contracts and fail to comply with ASIC and APRA guidelines.'

By the way, I have been involved with APRA lately, when I got involved in their contagion investigations, which would frighten everybody in Australia if they knew enough about it. But I think that tightening up all the legislation, which I think is what this particular committee is looking at at the moment, intends to make justice more affordable to the 25 million people who are not in the leading sector of business. I will continue reading, 'The Senate committee's recommendations should call on government to require regulators to ensure all banks and bankers comply with contract law and the associated regulatory guidelines.'

You would have no idea of how many hours work I had to put in when trying to put this together. One of these documents we referred to in here has, on page 2, 'Small business recommendations'. I did that with the recommendations by McKinsey. As all of you would appreciate, it is very hard to get a firm like McKinsey to take a role in what I am talking about. It is in part 2. It is only a couple of pages long, but that paper took me a year and a half to write; it is some 100,000 words long. I reviewed the whole of the banking contracts for the Australian council.

What surprised me was when we came down to McKinsey and I was talking about, 'So what?' This guy who used to be one of the senior directors at McKinsey UK wrote the last paragraph of what was required. I might just read it, because it is worth saying, 'This report recommends that the Senate,' that is you guys, and federal government and Treasury, 'commission an inquiry into the issues raised,' that is, here in the 100,000 report. It continues, 'The government report would have specific intent to implement legislation and procedures that would add to the truly independent element of governance,' which is where this area is just at the moment, 'and principles involving,' in this case it was banks' behaviour, because small business councils and banks are joined at the hip, I think, 'If the review finds banks and bankers use a particular constitution,' this is 10 years later and I would like to replace this with the word 'contagion', but I cannot do that because I wrote it 10 years ago, 'and other practices to the disadvantage of customers, the government's report may recommend a corrective action.'

I think that is what Peter approached me on. I have never worked with Peter before, so we are allies but we are not actually working together. My report was done in association with the business council; it was not so much to support Peter's submission.

CHAIR: Thanks, Mr Field. Just a few questions from myself, Mr Brandson, and I know Senator Patrick has got questions as well. To start—and this is more of a comment—it wasn't just the crossbenchers that stopped the responsible lending laws; the Labor Party played a role in that as well.

Dr Brandson : The crossbench couldn't have done anything without the Labor Party supporting this, so I 100 per cent agree.

CHAIR: I was just wondering if you could briefly just give me a bit of history on the organisation on which you are appearing on behalf of today.

Dr Brandson : I didn't want to talk about myself particularly, but I founded the organisation Bank Reform Now when a member of my family was harmed by the predatory actions of a bank. The only way I thought that people could win against the bank is if they teamed up. Individuals fighting a bank is extremely difficult because you just haven't got access to the legal system. You can't fight a bank in the courts, really, so I thought the way to do it would be to have a public campaign to get people power and mobilise.

Basically the idea is we've got an advisory panel of people who are also aggrieved clients of banks. Actually, I'll tell you the real key point. The key point is that we wouldn't be needed if the regulatory apparatuses worked properly. Basically, and I'm not just talking about banks but also the corporate sector, if ASIC and APRA did the job properly, there wouldn't be need for people like me. In the banking royal commission, one of the main points that the Commissioner Hayne made was that the regulators have failed. If the regulators fail, where do people go? They can't fight in the legal system, they've got no access to justice, there's no equality of arms. The regulators fail, so what do you do? The only thing you can do is you team up. What Bank Reform Now wants to do is use politicians in parliament to try to expose the issues that need to be exposed. We often try to use the media, and we also often try to battle the corporations, and particularly in our situation the banks, through the boards of the banks and AGMs.

This brings us back to the point of this inquiry. I'll clarify it: the hybrid AGM that we're talking about is only acceptable if online participants are able to interact with the board in the same way a physical participant can. So the virtual environment has enabled corporations to triage and censor questions. This has happened to bank warriors we work with, such as Craig Caulfield and Rita Mazalevskis. If material that should be made public is covered up and hidden, you can't get reform. Misconduct is thus hidden from public attention. So, for example, my introductory comments were two pages out of a 49-page presentation. Apparently some people on this committee—I'm not sure who—might not want this 49-page document tabled so that it goes in the Hansard. That could mean that it's excluded from Hansard. If it were in the Hansard, anyone at any time could research this sort of case, and it's the sort of case that bankers don't want to see discussed at AGMs. If we can't access AGMs and ask these sorts of questions, what do we do? I'd like to have someone on the committee—maybe you'd like to table the 50-page document; I'd appreciate it, because we can't cover these sorts of things up. The whole point of this inquiry is that we're fighting changes that will actually decrease accountability. If the hybrid AGM or the virtual AGM is put in place the way the government seems to want it, we'll have less opportunity to present this information. It seems to be pretty clear that we don't want these things covered up.

CHAIR: I'll just go to some particular questions about the legislation we're talking about today, but I will ask one last question before I do. Do you provide advice to individuals who are before the courts, informally, or—

Dr Brandson : We don't provide legal advice; we're not lawyers. In fact, we discourage people from using the legal system; it's very difficult. In fact, we also discourage people from using some of the regulatory systems like AFCA, because AFCA has also been proven to be ineffective. We do give informal advice and help, and I've personally represented multiple victims. In fact, the victims I'm talking about are in that 50-page document that I'd like to have tabled, because their stories need to be told and not covered up. I've actually put the cases of those people in it—for example, Tony Rigg, a few other ones, Goran Latinovich, Erika Biritz. I've actually put those cases into the hands of the CEOs of the bank, and if you want more details about how they responded I can elaborate. The thing is, I personally put those cases into their hands hoping that they would look at it themselves and make a decision. In some cases the banks have actually done quite well. NAB and CBA have been the best of the banks as far as helping some clients get remediation. So we have had some success. But the thing is that it's bloody difficult, very difficult, and there is great pushback when the amounts involved are significant. So, for example, in the Rigg case and the Biritz case, there are significant amounts of money, and the lawyers for the banks usually like to shoot people down when there's a significant amount of money involved. I'll give you another example from the document.

CHAIR: Quickly, if you could.

Dr Brandson : Okay. Dr Robert Cooke—it's a shocking case; you can read about it. I won't go into details. I put the case into Matt Comyn's hands. He got one of his assistants to look at it. We had a meeting with her on the day after one of these House Economics Committee meetings. She was in tears when she heard the details of his case, and she said she was going to get onto it and sort it out. Three or four days later, the CBA lawyers got onto this and, bang, shot it down in flames. There are more details in the document you've got, which hopefully you will table. This man has been tortured for decades, and it's just unbelievable what the banks can get away with.

Senator McALLISTER: Before we go onto questions I wonder if we should just deal with this procedural question about tabling. I might ask the secretary whether we have a copy of these documents. I wonder if the better way to deal with it might be for them to be submitted as a supplementary submission, and then the committee could have a chance to talk about it the next time that we meet. Chair, what do you think?

Dr Brandson : Actually, my two-page intro is just an excerpt from the full presentation. I'd appreciate it if you could table the whole thing.

Senator McALLISTER: Yes. Maybe if we receive it as a submission so that we can review the documents. To explain, as committee members, we would ordinarily review the documents before we table them. We probably don't have time to do that now.

Dr Brandson : You could table it right now, if you'd like.

Senator McALLISTER: We could receive it as a supplementary submission and then the committee can have a look at it. Would that work for everybody?

Senator PATRICK: I would prefer that approach, Senator McAllister.

Senator McALLISTER: Great, tops. Thank you, Senator Patrick.

CHAIR: Alright. Specifically on schedule 2, in your submission you say that continuous disclosure obligations should not be watered down. Could you outline your key concerns about schedule 2?

Dr Brandson : I just think that if you don't have continuous disclosure then there's scope for things to be covered up. Look, not everyone's an angel in business, and sometimes people operate in self-interest. It's hard to believe, but self-interest often trumps everything else. So, if there's some news that would negatively affect the company's reputation or negatively affect the companies share position, sometimes that information is withheld. Obviously, you've got to be transparent. People are investing often their life savings into the market. You need to have a market which is trustable. We've seen so many scandals over the years. You've got the Trio Capital scandal, the Storm scandal, the Sterling First scandal. You've got ASIC failing to prevent these, failing to put in place a routine which will detect things early. You've got to have transparency. How can you argue that we should have less transparency? That's the point. The government is saying we need less transparency, and I can't see how that's justifiable.

CHAIR: In developing schedule 2, the Morrison government did not consult with a single shareholder or consumer advocate. I don't think they consulted with your group either, or the Australian Shareholders' Association or any institutional investors. Does that leave you disappointed?

Dr Brandson : It's very suspicious, isn't it? Of course we're disappointed. The government is pushing this agenda for various reasons which aren't in the interest of the community or shareholders, really. Can you interpret it in any other way? They're not talking to the people that are affected; they're just pushing it through.

CHAIR: Do you believe that directors and shareholders will provide investors with less information, and possibly less accurate information if the proposed changes to continuous disclosure laws become law?

Dr Brandson : I think it's quite possible. I think it's quite possible that the information won't be provided in the timely manner that people would expect and appreciate. Our first presenter today pointed out very well the issues that we're worried about.

CHAIR: Senator Patrick, are you there?

Senator PATRICK: I am, Chair.

CHAIR: Did you have some questions?

Senator PATRICK: Yes, I do. I apologise if any of these repeat anything you asked. I dropped out briefly. Firstly, in relation to schedule 1, I presume you have no issue with that particular schedule, relating to virtual meetings and electronic communications of documents?

Dr Brandson : Well, the electronic communications of documents I do have an issue with, as I said in my opening statement. With cybercrime the way it is now, it's possible for electronic documents to be intercepted electronically online in various ways and manipulated, and it's also possible, without proper validation of identity, that documents could be falsely presented. Before you do that, you've got to have a mechanism put in place which will ensure that identity verification is accurate and that the document's integrity is guaranteed. Otherwise, you open up a can of worms for people to cause all sorts of trouble. There are plenty of cases now, even without electronic documents being intercepted. There are cases now where bank documents, for example, have been falsified; forged signatures have been involved in some of the takedowns that we've been concerned about. So this is an important issue, whether it's electronic or paper based.

As far as the AGM issue goes, the only problem we have is the virtual AGM. All the questions need to be allowed to be recorded and asked. The companies must not be able to triage or censor legitimate questions from people who are attending virtually. At a live AGM, if you stand up, you go to the microphone and you ask your question, there's no triaging, there's no censorship. At a virtual AGM, as I said before, some of our bank warrior colleagues found last year that they were not able to ask the questions, and they were given the run around. There were all sorts of technical issues. Some people weren't even able to sign in, and that was just not acceptable. If you're interacting virtually, you've got to have the same capabilities and same rights as anybody else in the physical environment, and that should be guaranteed. I prefer a hybrid model, but if we're going to have virtual you've got to have the same rights as anybody else.

Senator PATRICK: When you say hybrid, you're talking about physical as well as virtual—

Dr Brandson : Yes.

Senator PATRICK: which the provisions of the act seem to provide?

Dr Brandson : I didn't catch that exactly, but we support a hybrid model, because you've got to go with the times. It's quite useful to have a hybrid model, because a hybrid model means that people can attend the AGM who normally wouldn't be able to attend. We want a system which enhances your capacity to run an AGM, not limits it. By having a hybrid model you enhance the participation of shareholders, which is crucial.

Senator PATRICK: Yes, but it seems to me that the bill does exactly that. It allows for physical meetings, supplemented by virtual dial-ins and perhaps virtual dial-ins from another physical location as well.

Dr Brandson : Yes, that's right. Some groups would prefer to have virtual only, so we're opposed to virtual only. We're happy to have a hybrid model. But, as I said, if it's a hybrid model the virtual participants must be able to have the same rights as the other people and all their questions should be allowed and all the questions should be recorded properly and transcribed and be available for research purposes.

Senator PATRICK: In relation to schedule 2, which is about continuous disclosure, I have just a couple of questions. Firstly, the provisions are purportedly bringing Australia in line with the United States and the United Kingdom. I wonder if you've got any comments on experiences from those domains or any comparisons you may have done. Secondly, perhaps on the other side of the coin, there is a difficulty, I would imagine, with establishing the mental state of the directors, and I wonder if you've got any comment on that.

Dr Brandson : That mental state issue I think is just rubbish. A director either does the right thing or they don't do the right thing. I don't care what his mental state is. There's no mental state issue with organisations. There are directors, and they're the ones that are responsible, and, if they deliberately withhold something, then they've deliberately withheld something. I could make up some sort of analogy—if someone's walking down the street and they get mugged by a criminal, I don't care what his mental state is. He might have mugged the guy to give the guy's wallet to a children's charity. I don't care what his mental state is. The issue is they've done the deed, they've withheld information, they've done something which is harmful to the shareholders and they should be held accountable for it.

With regard to US and UK issues, I wouldn't say that the US is a gold standard in corporate behaviour and governance. I'd like to see Australia lead the pack and have a system which really encourages ethical business behaviour, so I'm not interested in whether we're the same as America or England. We can do much better. We should set the example.

Senator PATRICK: Thank you.

CHAIR: There being no further questions, thanks very much for your appearance today. I appreciate it.