Commonwealth bank financial planning scandal -
Commonwealth Bank of Australia Is A Provider of Financial Services
PART I. INTRODUCTION
Commonwealth Financial Planning Limited (CFPL) is the financial planning arm of
Commonwealth Bank of Australia.
The Commonwealth Bank of Australia is an Australian multinational bank with businesses
across New Zealand, Fiji, Asia, USA and the United Kingdom. Commonly referred to as
the Commonwealth Bank (or CBA or Commbank), it provides banking, life insurance and related
services for individuals, small businesses and medium sized commercial enterprises. The Bank provides
corporate and general banking, international financing, institutional banking and stock broking and
funds management such as superannuation product. It was founded in 1911 by the Australian
government, the Commonwealth Bank is one of the "big four" Australian banks, with National
Australia Bank (NAB), ANZ and Westpac. The Group is one of the largest listed companies on the
Australian Securities Exchange and is included in the Morgan Stanley Capital Global Index.
The Australian Securities & Investments Commission (ASIC) is an independent Australian
government body that acts as Australia's corporate regulator. ASIC's role is to enforce and regulate
company and financial services laws to protect Australian consumers, investors and creditors
Commonwealth Bank of Australia members of management
Ian Narev - Managing Director and Chief Executive Officer
Annabel F. Spring - Group Executive, Wealth Management
Anna Lenahan - Group General Counsel and Group Executive, Group Corporate Affairs
Barbara Chapman - Group Executive, Chief Executive and Managing Director ASB
David Cohen - Group Chief Risk Officer
David Craig - Chief Financial Officer
Kelly Bayer Rosmarin - Group Executive for Institutional Banking and Markets
Matt Comyn - Group Executive, Retail Banking Services
Melanie Laing - Group Executive Human Resources
Rob Jesudason - Group Executive, International Financial Services,
David Whiteing - Group Executive, Enterprise Services and Chief Information Officer
Adam Bennett - Group Executive, Business and Private Banking
Vittoria Shortt -Group ExecutiveMarketing and Strategy
PART II. BODY OF THE CASE STUDY
Commonwealth Financial Planning Limited (CFPL), the financial planning arm of Commonwealth
Bank of Australia (CBA), was involved in a huge fraud scheme in the period of 2003 to 2012.
Rogue financial planners at CFPL manipulated their clients files and forged documents to invest
their clients money in extremely high-risk investments, with the aim of earning higher commissions and
bonuses. Such fraudulent acts caused hundreds of Australians to lose their life savings, some running
into millions. Despite warnings by whistleblowers, the Australian Securities and Investments
Commission (ASIC) were appraised for doing no decisive action in the reports faxed to them. Meanwhile,
CFPLs efforts to compensate the victims were also criticized as covering up for their rogue planners
while trying to intimidate their victims into settling for minimal compensation.
The case study discussed the issues such as effect of remuneration plan of CBA in its company
culture and employee behavior, management actions in ensuring compliance, role of media in corporate
governance, and ethics.
STATEMENT OF THE PROBLEM
1. Describe the actions taken and behaviour displayed by senior management throughout this saga.
Discuss if these actions and behaviour were inappropriate and whether they aggravated the situation. If
you were in the position of Ian Narev, the CEO, what would you have done differently during the crisis?
2. Show me a companys various compensation plans, and Ill show you how its employees behave -
Jack Welch, Former CEO of General Electric
Examine the key areas of concern in CBAs remuneration plan. To what extent do you think these
influenced the corporate culture and employee behaviour in CBA? What changes, if any, would you
make to the remuneration plan?
3. In the Senate Inquiry Final Report, ASIC was described as waiting for complaints, investigating a
minute proportion of them, and prosecuting even fewer. Critically evaluate the actions taken by ASIC
throughout the course of the financial planning scandal, while highlighting difficulties ASIC might have
faced during its investigations.
4. The media played an important role in exposing the fraud in CFPL. Discuss the role of the media in
promoting good governance in your country. Are there factors which limit its effectiveness?
5. Briefly discuss the importance of a good whistleblower protection policy. Do you think the policy
sufficiently protected Morris and his fellow whistleblowers? What further improvements can be made
to encourage those who are aware of wrongdoings in an organisation to come forward, instead of
6. CBA had an excellent reputation amongst its customers but CFPL severely damaged it. What are the
challenges faced by an organization like CBA in promoting ethical behaviour, compliance and good
governance throughout the group?
First, ASIC opted for discussions with CFPL, which resulted in the joint solution to closely supervise
Don and subject his advice to vetting before approval. However, months passed and there was no sign
of ASIC taking decisive action to obtain evidence from CFPL.
CBA was also pressured to devise a compensation scheme to soothe the affected clients. In November
2010, CBA finally proposed a voluntary compensation scheme for the victims.
These solutions done by the management were inappropriate and just aggravated the situation.
An internal resolution to the matter would never succeed as the management themselves were covering
up for the planners fraudulent acts. The management must propose a compensation scheme which is
just and rational to each of the victims. CBA must strictly implement proper management and
compliance in their policies and rules especially in terms of illicit acts.
Commonwealth Bank of Australias total annual remuneration depended so much on short-term
incentives such as bonuses. Commissions were fixed on the risk levels of investment assets sold, hence
financial planners had an incentive to encourage their clients to choose for as risky an investment
portfolio. Because of this, the culture of CBA was nurtured with aggressive sales-driven point of view,
which leads employees to commit fraudulent activities in their own benefit.
CBA must change other points in their remuneration plan. They must not focus on pay for
performance system. CBA must have a fixed salary price for their employees, but still giving some
benefits and incentives to the people who reached their targets. This plan will still make their employees
strive harder but in a good way.
In the Senate Inquiry Final Report, ASIC was described as waiting for complaints, investigating a minute
proportion of them, and prosecuting even fewer. Critically evaluate the actions taken by ASIC
throughout the course of the financial planning scandal, while highlighting difficulties ASIC might have
faced during its investigations.
The Australian Securities and Investment Commission (ASIC), sent a warning notice to CFPL, indicating
that 38 of its planners had been classified as a critical risk for non-compliance with appropriate
financial planning advice protocols. Morris and his colleagues fax many reports to ASIC, but there are no
ASIC failed to take decisive action after it had been informed by a number of whistleblowers that the
activities of certain lenders in the financial planning arm of the Commonwealth Bank (Commonwealth
Financial Planning Limited ("CFPL")) and the environment in which they operated generally, was of grave
concern and endangering the position of vulnerable clients. It is not the result of inadequate legislative
powers being given to ASIC. The manner, in which ASIC has dealt with complaints from individuals who
have lost money as a result of fraudulent or ill-explained lending processes and complaints from
whistleblowers, is inadequate. The volume of submissions received by this Inquiry detailing the financial
loss and trauma suffered is indicative of a serious problem in the way in which ASIC manages its own
investigative, regulatory, prosecution and penalty powers. The result of AS I C's misuse of its powers is a
loss of faith in the rule of law because of the inability of the law to protect vulnerable members of the
community. The existence of a regulatory body that fails to exercise its powers in an effective
accountable way gives rise to a false sense of security and reliance by the public.
Governance implies the ways through which citizens and groups in a society voice their interests,
mediate their differences and exercise their legal rights and obligations. Good governance includes ideas
of greater participation by civil society in decision making, instituting the rule of law, anti-corruption,
transparency, accountability, poverty reduction and human rights.
The role of the media in promoting good governance is clear. All aspects of good governance are
facilitated by a strong and independent media within a society. Only when journalists are free to
monitor, investigate and criticize the public administrations policies and actions can good governance
Media can inform people giving them the voice to be heard and heeded to. Democracy requires that
people should have the right to know the activities of the government, especially the decision of the
government that affects their life, liberty and property. Information is important for people to make
choices regarding their participation in the State, the market and the civil society. Sufficient information
helps people to decide rationally and take the right course of action beneficial to them. Media-both
print and electronic-thus helps people to know what is happening around the world, socialize them with
the values of diversity and prepare them with the elements of modernity. By publicizing information the
media also make public services more responsive to the people.
But there are still factors which limit the effectiveness of promoting good governance using social
media. The readers of information promoted using media may have different perceptions and point of
view in the message that the media wants to share which may lead to wrong decisions and actions.
Promotion of good governance using media sometimes may harm the reputation of the different people
involved, so before sharing it in media it must be accurate and must be based on facts.
Whistleblower protection policy is a Legal protection from discriminatory or disciplinary action for
employees who disclose to the competent authorities in good faith and on reasonable grounds
wrongdoing of whatever kind in the context of their workplace.*
Whistleblower protection is integral in fostering transparency, promoting integrity, and detecting
misconduct. Past cases demonstrate that corruption, fraud, and wrongdoing, as well as health and
safety violations are much more likely to occur in organizations that are closed and secretive. In many
cases, employees will be aware of the wrongdoing, but feel unable to say anything for fear of paybacks,
concern about acting against the organizations culture, or lack of confidence that the matter will be
taken seriously. The negative implications of this are far-reaching for both organizations and society as a
whole. Effective whistleblower protection supports employees in blowing the whistle on corruption,
fraud or wrongdoing.
Informed individuals need to be confident that they can report alleged misconduct, potentially unsafe
products or dubious practices in Australia's corporate world and for their reports to be taken seriously
and dealt with accordingly.
Instead of remaining silent, a person who is aware of any wrong doings must be encourage to spill out
the details of any illegal act done by other person. The whistle blower policy must be fair in all people of
different levels in life. This policy helps the authorized person to know any fraudulent activities or
irregularities in any course of their business for them to be more aware in things they still need to fix
and develop. Whistleblowers must not be afraid in telling the facts he/she knows because if he/she
remains silent for a long period, the issue will be more crucial and it can affect not only the company or
organization, but also the employees and the customers.
PART V. CONCLUSIONS AND RECOMMENDATIONS
In order to prevent such issues that Commonwealth Bank of Australia is facing, the company must first
modify their remuneration system which is the main cause that lead its employees in committing
fraudulent activities. The company must implement a fixed salary system rather than sales-based salary
culture. Benefits and incentives will still be given to employees who reached their targets and those
with good performances.
Second, the Board or the management must adopt a comprehensive framework of corporate
governance guidelines, designed to balance properly performance and conformance. This enables the
Commonwealth Bank of Australia (CBA) and its related bodies corporate (Group) to undertake, in an
effective manner, the prudent risk-taking activities which are the basis of its business.
The management must also implement properly their policies and laws especially in terms of fraudulent
activities. They must not ignore or disregard non-compliance and unlawful activities even though it
benefits the entire company.
The Australian Securities & Investments Commission (ASIC) which is an independent Australian
government body that acts as Australia's corporate regulator, should develop an internal management
system that fosters a receptive culture that would ensure that misconduct reports or complaints
indicative of a serious problem lodged with ASIC are elevated to the appropriate level and receive due
attention. Our group also recommends that the corporate whistleblowing regime must be strengthened
to encourage whistleblowers to come forward.
The Australian Securities & Investments Commission (ASIC) which is an independent Australian
government body that acts as Australia's corporate regulator, must exercise its powers in an effective
and accountable way in order for the public to be secured.
Commonwealth Bank of Australia must make Internal control programs that should be monitored and
revised on a consistent basis to ensure they are effective and current with technological and other
advances. If you do not have an internal control process or fraud prevention program in place, then you
should hire a professional with experience in this area. An expert will analyze the companys policies and
procedures, recommend appropriate programs and assist with implementation.
Lastly, we also recommend that the company must advance its system in terms of customers files. They
must notify first the customer involved whenever his/her files are being used in some transactions.
Upon verification, that is the only time that his/her files or information are allowed to be accessed
This week, Australia hit a new low point in the politicisation of banking regulation.
In a report into the four major Australian banks, the members of the House Standing Committee on Economics were hopelessly divided along party lines about the answers given to them by the bank CEOs.
The grilling of the Big Four CEOs was less Stalinist show trial, than an episode of Australia’s Got Talent. It was, as ex-CEO of ANZ said, “a bit of theatre”. If it wasn’t such an important topic, the whole episode would be farcical.
The members of the government committee tried their best and have produced a set of ten recommendations, some of which are sensible but others betray a naiveté. For example, in Recommendation 2:
The committee recommends that, by 1 July 2017, the Australian Securities and Investments Commission (ASIC) require Australian Financial Services license holders to publicly report on any significant breaches of their licence obligations within five business days of reporting the incident to ASIC, or within five business days of ASIC or another regulatory body identifying the breach. [In particular,] the consequences for those senior executives and, if the relevant senior executives were not terminated, why termination was not pursued.
A significant breach in banking, if detected within five days, would almost certainly result in someone, somewhere getting fired pretty quickly. It’s the misconduct that is not detected for years (such as fraud in financial planning) that really causes the problems for bank customers.
The banks may not even be aware of these issues, even the committee acknowledged this:
The Commonwealth Bank of Australia was unaware of serious misconduct – including fraud – in its financial planning division prior to a whistle-blower going public in 2013.
But the problem goes much deeper than the committee members falling out over what to do - they weren’t even looking in the right place. The committee members were asking the wrong questions of the wrong people, and as a result, the got the wrong answers and made the wrong recommendations.
Section 198A of the Australian Corporations Act clearly states that:
The business of a company is to be managed by or under the direction of the directors.
So, if the buck stops with the board, why did the committee not question the senior directors of the big banks, in particular the chairmen, senior independent directors and chairs of risk committees?
This is precisely what parliamentary committees into various cases of misconduct in the UK banking system did, such as with HBOS, LIBOR and Northern Rock scandals. The Irish parliament did the same for the directors of their largest banks. And, as a consequence of some very brutal questioning, several chairmen and CEOs of these banks fell on their swords.
The House Committee has been very insistent about “naming and shaming” lower-level executives who commit misdemeanours, why not directors also?
For one thing, it is easy to name the directors of banks. As their roles, responsibilities, CVs and sometimes pictures appear every year in their company’s annual reports. We know how long directors have been in their various roles and, through commentaries in reports, what they are collectively thinking and what remuneration they are receiving.
Australian CEOs come and go, at increasingly shorter intervals. But once appointed, directors tend to hang around for some time, often the only constants in a long-running scandal.
Perhaps an example might help.
Just this month David Turner, the chairman of the CBA, announced his retirement. In his last (and only) media interview Mr Turner decried the “Trumpism” that was causing “bank bashing” in Australia and in an echo of President-Elect Trump himself, blamed the victims:
“And why don’t we like it? Because there’s some element of life that we feel is slightly unequal, that we’re not totally happy about, and here’s a part that, [banks are] a perfect target.”
The only admission from Mr Turner was that “maybe” the bank had been slow to pick up the financial planning scandal in 2014.
A look at Mr Turner’s tenure as a director at CBA might give a clue as to why his testimony to a committee in parliament might give some insight into improving the regulation of banking.
David Turner, a chartered accountant by profession, was first appointed a director of CBA a decade ago. In that time, he has shared the boardroom with two CEOs, Sir Ralph Norris and now Ian Narev. In 2010, Mr Turner was appointed chairman and will pass that role onto Ms Catherine Livingstone, another chartered accountant, on New Year’s Day 2017.
Mr Turner’s elevation to chairman occurred at an interesting time. It was just two months after CBA, along with the other Big Four banks, settled a long-running case with the New Zealand Tax authorities for tax avoidance. It was collectively the biggest such fines in Australian banking history, CBA coughed up some NZ$264 million as part of it.
In his role as chairman, Mr Turner could not be held to blame for this fine for misconduct, but as a director Mr Turner had signed off on annual reports that insisted that CBA had nothing to answer for in relation to court actions. This was despite that fact that the appeals by CBA and others had been knocked back by lower-level courts on several occassions A capacity for not smelling the wind appears to be a necessary attribute for a CBA director.
Mr Turner may have been unlucky, but the New Zealand scandal was not the last that came up at CBA board meetings.
In 2008, CBA acquired Bankwest, a subsidiary of the failing Lloyds bank in the UK. Since then, the bank has been mired in fraud allegations, as customers alleged in a parliamentary inquiry that they were thrown under the bus. In an echo of the New Zealand case, the bank’s 2016 Annual report, stated the bank expected class actions to be discontinued.
In 2013, whistle blower Jeff Morris brought to the attention of the media the now-famous scandal at Commonwealth Financial Planning. In 2014, CBA instituted a compensation scheme, which today is still mired in controversy over CBA dragging its feet in paying out customers.
In 2008 a Queensland financial planning firm, Storm Financial, went into liquidation and it was discovered that CBA and most of the other big banks had been lending money to customers to invest with Storm. In 2012, CBA agreed to pay compensation of A$136 million to customers over the Storm collapse. In 2016, the Storm scandal is still alive but running out of steam.
In 2014, CBA fessed up to the fact that it had been charging customers for financial advice that had not been given, but as ASIC found this year, the bank has not been very forthcoming in providing customers with compensation. Of course, CBA can truthfully argue that all the other major banks are also avoiding it.
The start of 2016 brought an even bigger scandal at Comminsure, CBA’s Insurance arm, in which sick and dying customers were refused payouts for their illnesses. This was despite the fact that Mr Turner had told shareholders at the previous AGM that “we learnt our lessons from the financial advice situation”.
The final indignity for Mr Turner before retirement was, after having handsomely rewarded CEO Ian Narev with an industry-leading pay packet of some A$12.3 million, the bank’s remuneration report was knocked back by its shareholders. Last year Mr Turner earned considerably less than Mr Narev, but nonetheless took home a not insubstantial A$800,000.
While there is no way that Mr Turner can be seen to be involved personally in these scandals, he has been a director and chairman throughout this period. And the questions he and other directors have to answer, is why did they not see these scandals coming and when the scandals erupted, why did the CBA board have to be dragged kicking and screaming into compensating their customers?
Nor is Mr Turner alone in presiding over disasters. The directors of all of the Big Four banks have, as the House Committee report shows, had their own scandals of tax avoidance, bad financial advice and accusations of market manipulation.
Unfortunately, there is no forum, other than a bank’s AGM, where such questions can be posed and answers demanded.
CEOs are only passing through but directors are there for the long-haul. A CEO, such as Ian Narev cannot reasonably be held responsible for the actions or non-actions of his predecessors but as their direct employers, directors can be questioned as to performance of executives and actions taken or not taken to control staff.
Next time, if there is a next time, the senior directors of the Big Four banks should be requested to attend the committee. Furthermore they should be questioned as a group over two days so that better use can be made of the time available and truly systemic issues can be investigated.
And if a Banking Royal Commission is instituted, the terms of reference should include questioning the key directors in every bank. That will make them sit up and think in the meantime.
Banking royal commission: CBA financial planning banned from ongoing service fees
Since then, however, other financial advice players have rocketed up the ignominious league table. In December embattled wealth conglomerate IOOF said it estimated its compensation bill to customers would fall in the range of $5 to $10 million. Its similarly scandal-plagued wealth rival AMP is still reviewing client files to understand the extent of its problems, but in November said it had made a $415 million pre-tax provision in the six months ended June 30 for remediation costs. Analysts at Macquarie, however, expect together IOOF and AMP are facing a compensation bill blowout of more than $2 billion.
Under its enforceable undertaking with ASIC, CBA had been required to lodge a report by big four consulting firm EY into the customer remediation process and its compliance systems by January 31. It also had to provide "an attestation" from CBA's "accountable person" – a role created under the new Banking Executive Accountability Regime – into these two same areas.
ASIC received both reports and noted the EY report flagged a "heavy reliance on manual controls, which 'have inherent risk of failure due to human error being overridden'". ASIC deemed the attestation unsatisfactory.
"As a result, ASIC's requirement under the EU that CFPL stop charging or receiving ongoing service fees and not enter into any new ongoing service arrangements, has been triggered," ASIC said in a statement.
CBA group executive for retail banking services – and the "accountable person" responsible for the inadequate attestation – Angus Sullivan said the bank had taken "immediate steps" to comply with ASIC's requirements.
"We recognise the importance of customers getting quality financial advice," he said in a statement. "Beyond the terms of what is required for the EU, we are evolving the future approach for the delivery of advice. CFP will be moving to a new financial advice fee model where customers will pay for advice services when they are delivered. The details of this model are currently being worked through and further information will be communicated to customers when they are finalised."
The Commonwealth Financial Planning unit includes 450 advisers who are employed directly by CBA. It will not form part of the bank's moves to separate its wealth businesses. In June last year CBA said it would split out its asset management, mortgage broking and external financial planning businesses via a sharemarket listing or sale. However, it always intended to keep the salaried planners in-house.
EY's findings come amid a larger, and ongoing, commercial relationship with the CBA. Last financial year, EY generated consulting fees worth more than $30 million from CBA and more than $15 million in 2016-17.
Conflict-of-interest issues have previously been raised over the use of advisory firms to police ASIC's enforcement regime, but in this case, EY has brought down a finding that will cost its client significantly.
EY, and its peers Deloitte and PwC, have all done Enforceable Undertaking work for the big banks while also earning millions for other consulting work from these same banks.
During the royal commission the ability of the consultants to be truly independent was raisedrepeatedly over separate "independent reports" produced by Clayton Utz and EY.
However, CLSA analyst Brian Johnson said the overall impact would be "immaterial" if the bank was able to resolve its problems in the timeframe set out by EY in their report – 120 days.
"It's a little blip, but it's immaterial," Mr Johnson said. "[It's] hard to imagine it being all that significant."
He pointed to the relatively low profits "fund management income" brought to the bank's retail arm – $66 million in the first half of the 2018-19 financial year – as evidence.
Banking Bad - Profit at all Cost
Adele Ferguson examines a sales-driven culture inside the Commonwealth Bank's financial planning division described as profit at all cost.
Monday 5 May 2014
This program is the Gold Walkley and Weekly TV Current Affairs Walkley winner for 2014.
This is a story about ordinary Australians taking on Australia's biggest bank. It begins with a dying man who believed the Commonwealth Bank wronged him and who was forced into a David and Goliath legal battle in the last six months of his life.
"It's going to be very hard for me to trust anyone at any bank at any given time because they were just ruthless... They knew he was an easy target and they just went for it," his daughter told Four Corners.
This week in a joint Four Corners/Fairfax investigation, reporter Adele Ferguson examines a sales-driven culture inside the Commonwealth Bank's financial planning division that has been described as profit at all cost - a culture that has been built on commissions.
The program also looks at the wilful practices of another financial planner, whose annual salary was almost half a million dollars. The CBA protected him until a whistleblower and several of his clients fought back.
The planner's customers, mostly retirees, believed the Commonwealth Bank when it said it was 'the people's bank'. But when they saw their life savings disappearing as a result of bad advice, they knew they had to act. Adele Ferguson tracks down the planner.
This story reveals how those customers who believed they were wronged took on both the bank and the corporate regulator, ASIC, and won. There are others who didn't fight and may have lost their life savings.
The CBA says it has since cleaned up its act and there is no place for so-called 'rogue' financial planners.
The program comes at a time when Australia's biggest banks are trying to expand a system that rewards bank tellers and financial planners for selling their products to customers.
The Federal Government also wants to make changes to the financial advice legislation that would reintroduce some of the commissions and kickbacks that had been banned under the previous government. If the reforms go ahead it will potentially mean financial planners are less, not more, accountable to their clients.
This program is a sobering lesson for all.
If you have money to invest or you are setting yourself up for retirement this is a program you cannot afford to miss.
BANKING BAD, a joint Four Corners/Fairfax investigation reported by Adele Ferguson and presented by Kerry O'Brien, goes to air on Monday 5th May at 8.30pm on ABC1. It is replayed on Tuesday 6th May at 11.00am and 11.35pm. It can also be seen on ABC News 24 on Saturday at 8.00pm, ABC iview and at abc.net.au/4corners.
Banking Bad - Monday 5 May 2014
KERRY O'BRIEN, PRESENTER: A modern David and Goliath classic except that, while David wins, he dies and Goliath lives on to repeat his exploits.
Welcome to Four Corners.
Australia's four biggest banks now control 80 per cent of the nation's financial planning industry and they're fighting hard to dominate the private wealth sector, contributing billions to their profits.
The public face of this hunt for fatter profits is the humble bank teller, and behind the teller, the financial planner. But when they ask if the bank can help you plan for your financial future, for your own sake, you have to ask, "What's in it for them?"
Indeed, you might liken a tellers job these days to the person behind the counter in a service station: you go to pay for petrol, and they try to sell you confectionary and drinks.
Tonight, we feature three families, almost brought to financial ruin after the Commonwealth Bank steered them out of safe harbours, into stormy seas, without ever explaining the risks.
When watching what is about to unfold, bear in mind that, until Assistant-Treasurer Arthur Sinodinos was recently forced to step down under questioning from the New South Wales anti-corruption body, ICAC (Independent Commission Against Corruption), the Abbott Government had planned to soften the previous government's regulatory protection for consumers of financial services, in favour of the big banks.
That's on hold for now.
Despite repeated requests, the Commonwealth Bank declined to be interviewed for this program.
This report is a joint investigation by Four Corners and Fairfax Media.
The reporter is Adele Ferguson.
ADELE FERGUSON, REPORTER: It's June 2012.
A wintry afternoon in the beachside town of Shellharbour in New South Wales.
Inside this rented brick veneer cottage, Noel Stevens draws a menacing face on the window.
(Footage from Teghan Couper's home video)
TEGHAN COUPER, NOEL STEVENS' DAUGHTER: Dad why don't you tell everyone what you're drawing here?
NOEL STEVENS: Why?
TEGHAN COUPER: Because I've got you on film. Look. Say "Hi".
NOEL STEVENS: Hello.
ADELE FERGUSON: Noel is dying of cancer; he's high on morphine.
His daughter Teghan is recording the last weeks of his life.
TEGHAN COUPER: Say, "I love you, my whole family."
NOEL STEVENS: I love you my whole family.
ADELE FERGUSON: It was never Noel's plan to end his days like this.
Noel had a life insurance policy with the bank.
When he was diagnosed, his plan was to use the money to buy a house for his last months and that house would be left to his family.
TEGHAN COUPER: Smile!
NOEL STEVENS: I'm exhausted just doing that window.
TEGHAN COUPER: They basically just turned around to him and said, "No, your policy doesn't exist anymore. You won't be getting any money."
ADELE FERGUSON: Did he feel robbed by the bank?
TEGHAN COUPER: Absolutely.
ADELE FERGUSON: Noel knew he couldn't beat the pancreatic cancer that would kill him, but in his dying days, he took on a legal battle and the opponent was almost as merciless.
It was the Commonwealth Bank.
ADELE FERGUSON: Would this be one of the most important cases that you've battled?
MARTIN CULLETON, NOEL STEVENS' LAWYER: Oh absolutely, there's no question about that.
It was a privilege, is the best way I can put it to act for them.
ADELE FERGUSON: What do think made him keep fighting?
MARTIN CULLETON: The need to provide for his family and simply that he felt it was wrong.
ADELE FERGUSON: A year before Noel Stevens was diagnosed with cancer, he was working as a scaffolder and living in Frankston, Victoria, caring for his invalid mother, Daphne.
Noel had a water tight life insurance policy with Westpac - a policy he'd had for seven years worth almost $300,000.
It was guaranteed to pay him out if he ever got sick.
ADELE FERGUSON: Did your Dad ever talk to you about life insurance?
TEGHAN COUPER: No, not at all. He was already covered with Westpac, so he didn't need anything more.
(Sound of phone ringing)
ADELE FERGUSON: In early September 2010, the phone rang.
It was the local Frankston Commonwealth Bank, inviting Noel to come in and speak with their financial planner.
JEFF MORRIS, FORMER CBA FINANCIAL PLANNER: The role of the teller is to steer banking clients on to the planners to provide opportunities, um and they're given targets for referrals each week.
ADELE FERGUSON: If the teller succeeds in getting Noel to see a financial planner and sign up for a bank product, he stands to get a bonus worth hundreds of dollars and the financial planner will get even more.
Noel knew none of this.
TEGHAN COUPER: He walked into the Commonwealth bank thinking that they were helping him, not that they were going to get commission, not that they were trying to do something for their own benefit.
JEFF MORRIS: So, a lot of people, what they don't understand is that the teller will be looking up their details on the bank's information system, identifying if they could um be eh sent to a planner, if there were some opportunities there for the planner.
ADELE FERGUSON: Inside the Commonwealth Bank, the financial planner looks at Noel's details.
Noel had few assets: less than $5,000 in his Commonwealth Bank savings account, no property, a small super fund and his weekly wages went into his bank account
But Noel Stevens did have that Westpac life insurance policy.
If Noel switched his policy to the CBA, it would be a win for the bank.
JEFF MORRIS: The emphasis is always on trying to get the maximum share of wallet out of each customer.
FINANCIAL PLANNER (voiceover): Please take a seat
ADELE FERGUSON: At the Frankston CBA branch, Noel Stevens turned up for his 11:30 appointment with the bank's financial planner.
(Footage of Commonwealth Bank advertisement)
COMMONWEALTH BANK ADVERTISEMENT: You may be surprised by how affordable a financial planner really is and what price would you put on the peace of mind that comes from having a plan...
ADELE FERGUSON: Known as the wealth management division, a big part of their business is selling: selling shares, property funds and insurance to their customers.
This division manages $190 billion of customer's money; it's worth $743 million in profit a year to the bank.
COMMONWEALTH BANK ADVERTISEMENT: ...and helping to design a plan that helps you achieve your goals.
ADELE FERGUSON: Banks now own or control up to 80 per cent of the country's financial planners.
JEFF MORRIS: The planners are actually been incentivised or forced, in a way, to give advice that's not in people's best interests, and the whole system is really structured to bring that about.
FINANCIAL PLANNER (voiceover): Mr Stevens, tell me about your...
ADELE FERGUSON: Inside the Frankston branch, the financial planner asks Noel Stevens a series of questions about his job, his financial status and, crucially, his medical history.
TEGHAN COUPER: Dad was just so trustworthy; he didn't think for one second that they weren't doing it for his best interests.
ADELE FERGUSON: Noel is told he will get the same insurance protection as he receives from Westpac.
This wasn't true.
MARTIN CULLETON: I was surprised that um they were so quick to advise him to cancel one policy, which is Westpac, to move to another. Um because he had security there from that policy. And, the reality is, the difference between the Commonwealth policy and the Westpac one was not that huge.
JEFF MORRIS: There's very clear moral obligation, and indeed fiduciary duty, to make sure that you're not putting at risk what Mr Stevens had when you moved that policy.
So, I would have thought um a greater degree of caution was required there in terms of going through those answers very carefully and making sure that you were not putting him in a situation where he'd be replacing a valid in force policy with one in which the insurance company, as it turned out, turned around and said it's not valid
FINANCIAL PLANNER (voiceover): Cysts, moles, sun spots?
ADELE FERGUSON: With Noel Stevens' life insurance policy now in the bag, it's a win for the bank.
It scores a new policy holder and an annual premium of $1,482.
The teller pockets a referral fee of $444.60.
And the planner, he receives an $815 kickback, plus an ongoing annual commission.
ADELE FERGUSON: What would happen to a planner if, if that planner didn't convince the customer such as Noel Stevens to swap from the Westpac life insurance policy to the Comm Bank insurance policy?
JEFF MORRIS: Um well, he wouldn't remain a Comm Bank financial planner for very long. Uh, if he didn't sell that policy to Mr Stevens, he would've had to have sold a policy to somebody else. Um it's a sales culture.
TEGHAN COUPER: Look at the camera and say hello. Say 'Hi Nanna'. It's a recording
ADELE FERGUSON: In 2011, Noel and his mother Daphne moved to a seaside community south of Sydney to live with Julie, Noel's sister and to be closer to his daughter, Teghan.
He had moved into a caravan on his sister's property.
He was diagnosed with pancreatic cancer.
Noel was given six months to live.
TEGHAN COUPER: I just remember dropping the phone and just, just being absolutely devastated. From that moment, my whole world, life as I knew it, turned upside down.
ADELE FERGUSON: Noel, with only months to live made a claim on the CBA life insurance policy, the policy he'd been encouraged to take; a policy that would pay Noel almost $300,000.
He got a response from the bank two days before Christmas 2011.
TEGHAN COUPER: We didn't even feel like it was Christmas; it was such a black time. I vividly remember my dad becoming rapidly distressed and, you know, yelling at the phone. And, I just remember him storming straight out the back, and I knew something bad had happened; something wasn't right.
ADELE FERGUSON: Noel had received a letter from the Commonwealth Bank telling him his policy was void.
It had been rejected, with the bank claiming he had not been honest about his medical history.
TEGHAN COUPER: They basically turned around and said to him, "No, your policy doesn't exist anymore; you won't be getting any money."
JULIE HOLLOWAY, NOEL STEVENS' SISTER: He's like well, "What have I been paying into. Like, you know, that's my life insurance; I've been told I'm in entitled to it." And when he got off the phone to them he was just devastated. He just felt like he was beating his head against a brick wall, that they weren't listening to him.
TEGHAN COUPER: How can you even breathe when you've got children and you have an elderly mother and a sister and you don't own a house, you don't have anything, you don't even get your money?
ADELE FERGUSON: From that moment Noel Stevens lodged the claim, the bank ruthlessly investigated him.
Those promises he would be better off quickly evaporated.
A clause in his policy was used to trawl through his medical records to build a case that Noel Stevens had deceived them.
ADELE FERGUSON: The letter included extracts from his meeting with the planner. The questions required a Yes or No answer.
EXCERPT FROM CBA LETTER TO NOEL STEVENS (voiceover): In the last 5 years, have you been advised or received counselling or treatment for alcohol or substance abuse?
Actual Position: You consulted the Frankston Medical Centre and the notes read as follows:
15 of November 2009 - Drinks 8 stubbles every night. Counselled about alcohol
ADELE FERGUSON: Over the following months, the bank scrutinised his bank statements including itemising his alcohol purchases from liquor outlets.
TEGHAN COUPER: Of course he loved a beer, but a beer and being an alcoholic are two worlds apart.
(Footage from Teghan Couper's home video)
NOEL STEVENS: What's nanny doing? We're going to see nanny; she's watching Elvis Snezley; where is he?
I can dance like him.
See, I can do that, Nanny.
DAPHNE HOLLOWAY, NOEL STEVENS' MOTHER: Yeah, I know.
ADELE FERGUSON: With a few months left to live Noel Stevens was determined to fight for his money and his dream to look after his family.
NOEL STEVENS: It looks good Teags.
TEGHAN COUPER: It's dill.
NOEL STEVENS: You are a dill.
TEGHAN COUPER: I wasn't just trying to impersonate Elvis Presley.
NOEL STEVENS: No, I did. I didn't impersonate him; he took after me.
ADELE FERGUSON: Noel and his family moved into a rental cottage and made an appointment to see a local lawyer: Martin Culleton in Kiama.
(to Martin Culleton)
What was your impression of him? When you heard his story, what was your impression?
MARTIN CULLETON: Oh immediately I felt that he was telling the truth.
(to Noel Stevens)
So Teghan please come this way.
ADELE FERGUSON: As Noel's health deteriorated and the pain became unbearable, Teghan went alone to see the lawyer.
Martin Culleton tried to reach a settlement with the bank over the $300,000 policy payout.
The bank refused to settle.
MARTIN CULLETON: Why the bank didn't resolve it, because it wasn't that much money, I don't know; I can't answer that, but certainly it would've been a case that you would think they could've done shall we say.
ADELE FERGUSON: The Commonwealth Bank also continued to deduct monthly insurance premiums from his CBA bank account.
ADELE FERGUSON: And during this time that Noel was dying and you'd taken on the case, were they still taking out his premiums?
MARTIN CULLETON: Yes, they were.
ADELE FERGUSON: It was May 2012 and Noel was too sick to appear in court.
Weeks away from dying, Noel was determined to see the case through.
In his tiny living room, lying on the couch in his pyjamas, with nurses feeding morphine into his body, the bank's lawyers cross examined him.
TEGHAN COUPER: And, um, he just kept asking questions, and then ah Dad just started bawling his eyes out and broke down. And I just thought, "How could you do that to someone like this?" Like, I couldn't believe it.
ADELE FERGUSON: Days after the trial, Noel went into palliative care.
TEGHAN COUPER: Here you are, have a drink of water, Dad. Your mouth's a bit dry, have a bit of water. Have a nice big drink.
ADELE FERGUSON: He had become so sick that Teghan could no longer look after him.
Noel had fought hard, but the cancer was about to beat him. Then the call from Martin came with news about his battle with the bank.
Noel had won the case.
TEGHAN COUPER: He was in a coma-like state, and I got the call and I just remember thinking, "I wish Dad was just awake." I went straight to palliative care and I got on his bedside and I was with Julie and I just remember saying like, "You won! Everything's going to be fine! All the hard work you did, it's done; you won!"
JULIE HOLLOWAY: Teghan and I were either side of his bed and I believe that he understood us, um and he tried to put like three fingers up, um I think he was trying to say did he win the full amount.
ADELE FERGUSON: The court found that the Commonwealth Bank was "negligent" and demonstrated "misleading and deceptive conduct".
It said the financial planner did not act in Noel's best interests when he advised him to switch life insurance policies. It said commissions and kickbacks might have influenced his advice.
The case was a big win for one individual taking on the deep pockets of the bank.
MARTIN CULLETON: This wasn't, however, a case where we can say that the financial planner acted in a rogue fashion. This was almost a systemic type approach to it.
ADELE FERGUSON: On July 6, three days after winning the case, Noel Stevens died.
As Teghan was organising his funeral, she received a call from Martin Culleton that the bank had appealed the case.
TEGHAN COUPER: It's going to be very hard for me to trust anyone at any bank, at any given time, because they were just ruthless. They did not, they did not care at that point in time. They knew he was an easy target, and they went for it.
ADELE FERGUSON: Two years before Noel was signed up for his life insurance policy with the bank, there was a financial planner working on Sydney's north shore who was becoming increasingly uneasy about the sales culture at the bank.
(Footage of Jeff Morris on a train)
TRAIN ANNOUNCEMENT: This train will stop at Chatswood.
ADELE FERGUSON: Jeff Morris worked as a senior financial planner at the Chatswood branch because it was a quick train ride to home.
It was here Jeff worked with Don Nguyen: a man known by his colleagues as Dodgy Don.
JEFF MORRIS: I first encountered a traumatised client in September of 2008, so about six months after I started there, and ah they came into the branch ah asking to see somebody else.
In fact I think they said they thought he was a crook. And the branch staff actually knew who it probably was; they were able to guess from that that it was probably Don because um the legend was so well established.
ADELE FERGUSON: In 2008, Don Nguyen was one of the bank's top planners.
At the Chatswood branch, he had 1300 customers who invested their money with the bank.
ROBYN BLANCH: He was ah so high up, you know, we thought, "Oh well, he has to be um you know a good person to see", yes.
(Footage of a Commonwealth Bank advertisement)
ADELE FERGUSON: Don had pushed more than $100 million of customer money.
And this star performer was rewarded with commissions and overseas trips by the bank. It turned a blind eye to some of his practices
In 2007, Don Nguyen's legendary ability to sign up new customers scored him number one in the bank's internal financial planning league table.
That year, Don signed up $39 million of customer's money for the bank - more than three times his target.
Don's annual pay hit almost half a million dollars.
In the same year retirees Merv and Robyn Blanch met Don Nguyen to invest their life savings of $260,000.
ROBYN BLANCH: He sort of told us how he'd done so well himself and how much money he had made, and he sort of said we were losing money with the way we had our investments going.
ADELE FERGUSON: Merv Blanch worked hard all his life.
(Footage of Merv Blanch's film)
He was also a keen cameraman.
In 1961, when he was principal of Coolah Central School in north west New South Wales, he made a film of a typical school day.
The film featured an introduction of the Commonwealth Bank in the school.
The Commonwealth Bank had always been the Blanches' bank.
MERV BLANCH: We'd taken our mortgage with our house with the Commonwealth Bank and we even had shares in the Commonwealth Bank. So the Commonwealth Bank was the way to go as far as we were concerned.
ADELE FERGUSON: And Robyn, did you agree with that? Was it the trust factor?
ROBYN BLANCH: Oh yes, yes. I trusted the Commonwealth Bank.
ADELE FERGUSON: At their meeting with Don, the Blanches told him they didn't want to be put into high risk products. They said they wanted to live on $1500 a month.
A year later, things start to fall apart.
(Sound of phone ringing)
ROBYN BLANCH: Hello.
ADELE FERGUSON: It was November 2008 and the couple's investment had fallen by half, which would squeeze their monthly living allowance.
ROBYN BLANCH: He asked us to come down to $1200, then he asked us to come down to $500.
ADELE FERGUSON: Five-hundred dollars a month to live on?
ROBYN BLANCH: Yes, and then he asked us to come down to nothing.
ADELE FERGUSON: Goodness me! How did you feel?
ROBYN BLANCH: Well, devastated at the time, and we could see our investments were going down all the time, you know, from what we had.
ADELE FERGUSON: What the Blanches didn't know was that they were not alone.
Financial planner Jeff Morris was discovering dozens of Don Nguyen's victims who were also losing their life savings.
Jeff Morris had no faith the bank would do the right thing.
JEFF MORRIS: In the case of Commonwealth Financial Planning, the system was set up to allow people to operate the way Nguyen did. It was not set up to provide quality advice to people. It was set up to push product and push CBA product. It's as simple as that.
ADELE FERGUSON: Warning bells were sounding inside the bank. A senior executive started to worry about compensation. During a conversation with Don's boss, the executive took notes:
EXCERPT FROM CBA EXECUTIVE NOTES (voiceover): If we pulled Don out, huge compensation issue for Commonwealth Financial Planning. Better to work for clients' best interests to resolve all issues.
JEFF MORRIS: We were told he'd been suspended for fraud and wouldn't be coming back which seemed appropriate. But then, all of a sudden, Don was returned and indeed promoted to senior planner, and so the other planners and I who'd seen some of these distressed clients, we realised something wasn't right
ADELE FERGUSON: Over a beer with mates, Jeff Morris knew he had to act.
JEFF MORRIS: It was at that moment that I realised that ah, if we didn't do something about it, that hundreds of clients eh were going to have lost you know a third, half their capital ah through no fault of their own.
In fact, these clients were going to be snowballed and duped, and ah that the bank would deny them compensation.
ADELE FERGUSON: Later that evening, Jeff wrote a letter to the corporate regulator ASIC (Australian Securities and Investments Commission). He outlined corruption and misconduct and how innocent people were losing their life savings.
The letter, sent on October 30, 2008 also warned of a cover up inside the bank.
JEFF MORRIS: It was about a high level cover up at Commonwealth Financial Planning ah to conceal the um the uh corruption, misconduct of uh Don Nguyen and to defraud clients of compensation in the tens of millions of dollars.
ADELE FERGUSON: You also mentioned that it was systemic, that it was a sales-driven culture?
JEFF MORRIS: Don was a perfect storm that drove right through that that loose structure and took it to the absolute nth degree, which is why his clients were more exposed than anybody else's, but he wasn't he was by no means the Lone Ranger.
ADELE FERGUSON: It would take ASIC 16 months before launching a formal investigation into the bank.
In the meantime, victims such as the Blanches would be forced to fight tooth and nail for what was rightfully theirs.
(Footage of Merv's home video)
Merv's camera recorded family life, his children, grandchildren and retirement.
WOMAN: Hi Mervyn! I know you love that.
ADELE FERGUSON: But it didn't record the dark days of 2009 when the couple's life savings crashed by two thirds, forcing them on to Centrelink.
MERV BLANCH: We had been self-funded for 22 years. It seemed incredible that you could put over a quarter of a million dollars away and in a few months time it had been eroded by two thirds. It just didn't seem possible.
ADELE FERGUSON: Their daughter, Merilyn Swan, became increasingly worried about her parents mental and physical health.
MERILYN SWAN, DAUGHTER: They had lost their dignity; they were now on a Centrelink payment to keep themselves financially afloat. Ah, they were humiliated, depressed. Dad had suffered some very serious health issues, and I felt that, if I didn't step in, this had the potential to shorten their lives.
ADELE FERGUSON: As Robyn and Merv searched for answers, a letter came from the bank, which sent alarm bells ringing.
It said their money was not sitting in eight conservative bank products, but had been put into nine products and most of them were high risk.
MERILYN SWAN: This was the first ah piece of honest communication, I guess I could say, that had come from their interactions with the CBA.
ADELE FERGUSON: Months later, another letter arrived that left them all gob-smacked
Merilyn, now quite the detective, responded immediately.
The letter blamed their financial destruction on the GFC and it believed the financial advice Don Nguyen had given them was appropriate.
But the bank couldn't give them an explanation for how $25,000 of their money had turned up in a mystery ninth product.
For Merilyn, the letter's closing paragraph was particularly galling.
MERILYN SWAN: At the bottom of this letter as an act of goodwill and as no admission of liability, um they could find no reason why the $25,000 had been transferred without authorisation into this ninth product, and on the basis of that, they were offering $6,770 to settle without any further action.
ADELE FERGUSON: The Blanches, at this point, had lost $160,000, yet the Commonwealth Bank were offering a fraction in compensation.
ROBYN BLANCH: Yes, it was just over $6,000.
ADELE FERGUSON: But you lost more than $160,000.
ROBYN BLANCH: That's right, so of course we turned it down. We sort of said, that's of no use to us, so having lost so much money.
ADELE FERGUSON: Merilyn was incensed.
Merv and Robyn had the good sense to keep a copy of all their documents.
When Merilyn compared her parent's original statement of advice with the one the bank had sent, there were striking differences.
MERILYN SWAN: This document had no footers; it contained several pages that weren't in the original documentation. And it also contained four tables that were not in the original statement of advice.
ADELE FERGUSON: So why do you think they were changing the tables?
MERILYN SWAN: To um minimise the liability of the bank to any compensation that we may seek.
ADELE FERGUSON: Once the bank realised the Blanches had kept the original documents, offers of compensation multiplied.
Within six months, the bank had increased their offer from $6,777 to $95,000, but without admission of liability.
MERILYN SWAN: We'd come a long way from $6,777, but it was a very hard road. And, when we opened that letter, we had a discussion and we decided take it, take it because I don't think I can spend another year doing this. And so we settled.
ADELE FERGUSON: As the Blanches were reeling from their experiences with the Commonwealth Bank, there was an insider, Rod Gayford, who was feeling powerless.
He worked at the bank's head office in Martin Place as a compliance officer.
Rod's job was to make sure financial planners followed the rules.
He previously worked for the corporate regulator for 26 years as an investigator and lawyer.
He said the bank had good guidelines; they just weren't followed.
ROD GAYFORD: CBA's got a robust um compliance manual, which I would say, if you followed that particular manual ah you couldn't really go wrong, you know? They're all fairly similar, these compliance manuals, ah but there's a degree to which they're followed. That's ah you know the elephant in the room.
ADELE FERGUSON: Rod Gayford was well aware of Don Nguyen's antics, but his focus was on the conduct of another planner who he suspected was forging customers signatures and putting them in high risk investments for hefty commissions.
Rod suggested the bank hire a handwriting expert.
ROD GAYFORD: You need to engage the services of a proper expert that can give evidence in court.
ADELE FERGUSON: And did they take your advice?
ROD GAYFORD: No. No. There seemed to be some ah problem about the cost.
ADELE FERGUSON: And do you recall what sort of cost we're looking at?
ROD GAYFORD: Oh, it would've been about $5,000.
ADELE FERGUSON: So that was too expensive?
ROD GAYFORD: That was too expensive, yeah, yep.
ADELE FERGUSON: As well as being denied $5,000 to investigate a possible forger, Rod was also frustrated by the lack of staff to police the planners.
ADELE FERGUSON: So the bank says it operates rigorous compliance and risk management framework. Was that your experience?
ROD GAYFORD: No. I don't see how it could with only one and a half compliance officers.
ADELE FERGUSON: So in 2007 when you joined, there was really one and a half compliance officers?
ROD GAYFORD: Yes, yes, yes.
ADELE FERGUSON: Across the 700 planners and looking after 300,000 clients?
ROD GAYFORD: Yep, yep.
ADELE FERGUSON: Rod Gayford lasted at the bank for less than two years.
He felt powerless to do his job.
JEFF MORRIS: They were really toothless tigers in that organisation.
ADELE FERGUSON: And they had to be?
JEFF MORRIS: Well if they wanted to survive, yes. I suspect anybody who'd taken his job too seriously wouldn't have lasted very long.
(Footage of Don Nguyen unloading boxes from his car)
ADELE FERGUSON: In July 2009, the Commonwealth Bank allowed Don Nguyen to resign, with Don citing medical reasons.
Jeff inherited a few of Don's customers, including retiree Jan Braund.
Neither Jan or the bank knew Jeff was the whistleblower.
JEFF MORRIS: She demanded somebody with a few grey hairs, so I was probably the best qualified.
I got a copy of her file straight away.
ADELE FERGUSON: Braund's husband Alan, a former Qantas executive, was in the early stages of dementia when they met Don.
They had trusted him with their retirement savings.
JAN BRAUND: It was a million dollars we wanted to invest. An extraordinary amount of money for two people who started out with absolutely nothing.
ADELE FERGUSON: Don Nguyen made himself available to the Braunds.
(Footage of a photo of Don Nguyen)
This photo was taken by Jan at a meeting in a coffee shop in Chatswood.
He put their money in high risk CBA products where he would earn extra commission.
By 2009, the couple's wealth had fallen more than 50 per cent and Alan's dementia had taken over their lives.
JAN BRAUND: I just can't tell you how devastated I was. At that stage, I'm carrying a man that doesn't know who he is, where he is, what he is, where he's going - nothing - so that then to be told your financial future was absolutely gone, and I couldn't do anything about it.
(Footage of re-enactment of Jeff Morris speaking to Jan Braund)
JEFF MORRIS: Jan I've been through your file, and this is probably the most important document in the whole file. It's an instruction that was sent to para-planning back in 2002 and it makes it very clear down here that you're a conservative investor who wanted to preserve your capital.
JAN BRAUND: Absolutely.
ADELE FERGUSON: This note clearly states the Braunds had a conservative profile and they were extremely concerned and did not wish to use any of their capital in retirement.
Jeff Morris had taken a copy of Jan's complete file before Don had left.
(to Jan Braund)
JEFF MORRIS: Well if it's any consolation, it seems like you weren't the only one. As far as I can make out, all of his clients were treated exactly the same
ADELE FERGUSON: The note was Jan Braund's ammunition to fight for the hundreds of thousands of dollars she'd lost.
But that didn't stop the bank trying to get away with paying as little as possible.
Two-hundred-thousand dollars was offered.
JAN BRAUND: So, I wrote back and said, That's not it; we're not playing that game." And they said they now offered 215,000. So we said absolutely not. This is not an amount of money that you can do; you're robbers, bank robbers in fact.
ADELE FERGUSON: By August 2012, Jan agreed to an $880,000 settlement.
The bank did not admit any liability.
ADELE FERGUSON: Inside the bank it was a different story.
Four Corners has found an internal document that was written two years before Jeff Morris warned the bank about Don Nguyen.
It rated him 'a critical risk' to the bank
And his actions could attract 'a custodial penalty' or 'criminal liability'.
If they had acted on this document, the trauma of hundreds of victims might have been spared.
ADELE FERGUSON: Last month, Jeff Morris and Jan Braund travelled to Canberra to appear at a Senate Inquiry into ASIC's handling of the Commonwealth Bank's financial planning scandal.
JEFF MORRIS: Originally we set out to correct the wrongs of one planner. Very quickly we realised it was a it was an institution that had a problem.
ADELE FERGUSON: They hope the bank will finally be called to account for its behaviour and ASIC to explain itself.
Everyone was there to give evidence.
Jan, Merilyn, Jeff and a handful of executives from the Commonwealth Bank, including its lawyer David Cohen.
Senator Mark Bishop, the chairman of the inquiry, took particular issue with the bank's submission to the Senate which labelled the advice of Don Nguyen and other financial planners as "inappropriate".
MARK BISHOP, CHAIRMAN OF THE INQUIRY: Do you think 'inappropriate advice' captures the seriousness of what occurred here? The fraud, the doctoring of files, the lying to clients, the cheating, the lack of oversight by senior executives? Is 'inappropriate' the exact, correct description?
DAVID COHEN: 'Inappropriate' covers the fact that some of the behaviours, which I think you are alluding to, from some of our people just were not the appropriate behaviours, were not the behaviours that we expect today.
MARK BISHOP: In my mind 'inappropriate' is not systemic fraud, is not systemic theft, is not loss caused by systemic bad behaviour. You know. when my three-year-old writes on the wall, that is 'inappropriate' and you tell her off. Inappropriate's not the word here, is it?
DAVID COHEN: Well Senator, we believe it is.
ADELE FERGUSON: As the day moved into evening, it was then ASIC's turn.
An army of commissioners readied themselves for a grilling by the senators.
JOHN WILLIAMS, FEDERAL SENATOR: It was 16 months before you actually addressed the whistleblower's concerns. Isn't that dragging the whole program out longer for not making contact with the whistleblowers and acting on their information?
GREG KIRK: When we got that contact from the whistleblowers, we should have been back in contact with them, seeking more information straight away.
JOHN WILLIAMS: I think we would all agree with that.
ADELE FERGUSON: ASIC offered a mea culpa of sorts, and then the chairman asked a question of Jeff Morris that would send a chill through executives at the Commonwealth Bank.
MARK BISHOP: When we come to making our recommendations, is the evidence you have heard sufficient that we should recommend that there be a full, properly independent review of all those client files?
JEFF MORRIS: Absolutely, and I suspect a broader review is just going to uncover there are a lot more, like, you know, tens of thousands of clients who are probably entitled to compensation, and it's never been looked at.
MARK BISHOP: Right. Thank you for your assistance today and I hope you're able now to move on and I hope we are able to do the job.
ADELE FERGUSON: There was one key witness missing from this Inquiry.
ADELE FERGUSON: Don Nguyen was a hard man to track down.
We managed to film him outside his family's dry-cleaning business south of Sydney.
He was having a cigarette.
When Don left the bank, he lodged a claim through CommInsure, the same division that refused to pay Noel Stevens $300,000.
JAN BRAUND: He went on sick leave. The bank didn't even make him- didn't sack him. Now here he is a man with a possible criminal intent here and the bank is sort of patting him on the head and saying, "There, there darling. Go off on sick leave. Oh I'm so sorry your depressed."
ADELE FERGUSON: It's almost five years since he resigned.
So far, Don has received more than $300,000 from CommInsure. He can only get the full amount if he's too sick to work.
Don was at home in his Newtown terrace in Sydney's inner west when we tried to talk to him.
(speaking to Don Nguyen)
Don is it possible to talk to you?
He refused to open the door.
Later, when we were driving away, he phoned.
He showed no remorse and it was hard to get a word in
(to Don Nguyen)
Don, Don can I interrupt you for a second...
Don said he'd done nothing wrong. He was never trained nor reprimanded.
And the advice he gave was within the Commonwealth Bank guidelines.
(to Don Nguyen)
You were never pulled aside?
He also claimed his customers knew what they were signing.
(to Don Nguyen)
So you resigned in 2009 on stress leave and I've been told that you're getting an insurance policy claim of about $80,000 a year and I just want to confirm that that's correct.
He ignored my question
(to Don Nguyen)
I just want you to answer the question.
Are you are you working at the-
He hung up; he didn't want to answer the question
Last year Don Nguyen went with his wife and daughter on a tropical island holiday to the Maldives.
A holiday a man like Noel Stevens only dreamed about.
(Footage from Teghan Couper's home video)
NOEL STEVENS: Come and I'll show you my new boat. That's me boat over here.
TEGHAN COUPER: Oh yeah. Dad has bought a new boat, everyone. There it is.
ADELE FERGUSON: Noel never bought his boat, but he did win the appeal against the Commonwealth Bank.
Noel's family will finally get the $300,000 they were entitled to.
NOEL STEVENS: This black one here, The Marlin.
TEGHAN COUPER: But they had to put us through all of that, and Dad never even got to see that money, never even got to see it.
ADELE FERGUSON: The Commonwealth Bank says it has now cleaned up its act and got rid of rogue planners like Don Nguyen.
But it was no rogue planner who so badly advised Noel.
MERILYN SWAN: It's the can bank; I've found that they can be deceptive; they can be misleading; they can certainly ruin your financial future; they can cover up and they can go out of their way to make life extremely difficult for you.
It becomes a very much a David and Goliath battle.
KERRY O'BRIEN: One last word on Goliath.
The Commonwealth Bank's last full year profit was a record $7.8 billion, and that's about to get another boost.
I should emphasise that both the Commonwealth Bank and ASIC refused to be interviewed for the program. The Commonwealth Bank did provide a statement regarding their treatment of Noel Stevens.
It says, "We acknowledge that the most appropriate action in this case would have been for the customer to have remained with their existing policy."
The full response is on our website.
Next week on Four Corners, Pakistan's hidden shame. The shocking sexual exploitation of thousands of young and vulnerable children. Until then, good night.
Insider's view to CBA financial planning scandal
This was published 7 years ago
By Adele Ferguson and Deb Masters
The man at the centre of the Commonwealth Bank financial planning scandal that sparked a senate inquiry has lashed out at the bank, claiming it never properly trained him or supervised his activities.
Don Nguyen, one of eight CBA financial planners banned by the Australian Securities and Investments Commission from providing financial advice until 2018, claims nobody at the bank ever said to him: “Don, this is too much, don’t do this.”
Mr Nguyen allegedly forged signatures, overcharged fees and created unauthorised investment accounts for his customers clients without their permission. The bank paid hundreds of his clients more than $20 million in compensation.
In Banking Bad, a special investigation by Fairfax Media and the ABC’s Four Corners program airing on Monday night, Mr Nguyen speaks for the first time, saying nobody at the bank, not even its compliance department, ever said “what you are doing is wrong”.
He said most of his customers were “financially educated” and knew what they were signing. “Sorry, how can these people all come up to you and say, oh, I don’t know what I’ve signed, I don’t understand,” he said.
Mr Nguyen was allowed to resign from the bank in July 2009, citing illness amid an investigation that ultimately cost the bank more than $20 million in compensation to hundreds of his clients.
He is claiming $70,000 a year on a personal income protection policy he took out with the Commonwealth Bank’s CommInsure division.
Four Corners and Fairfax Media located him at his family’s dry-cleaning business south of Sydney. Later, in a phone call, he refused to say if he was working in the business. Under the terms of his policy, he is allowed to work in a limited capacity.
The special investigation also uncovered evidence that the Commonwealth Bank suspected Mr Nguyen’s actions might have led to “criminal liability” or attracted a “custodial penalty” if he got caught.
A document, dated September 2006, two years before bank insider Jeff Morris blew the whistle on his misconduct to the corporate regulator ASIC, labels Mr Nguyen a “critical risk”.
The bank refused to comment on whether it sent a breach report to ASIC at the time. Under its licence, the bank is obliged to send a breach report within 10 days.
The senate inquiry is scheduled to report its findings later this month. A key recommendation is speculated to be a review of the bank’s compensation scheme. CBA paid out $50 million in compensation to 1200 clients of seven of its financial planners, a scheme that had been described by many as flawed.
Mr Morris said the bank should be forced to re-open the compensation scheme. “I suspect a broader review is going to uncover there are a lot more, like tens of thousands of clients, who are probably entitled to compensation. It has never been looked at.”
Banking Bad will also examine a case where CBA denied a dying man, Noel Stevens, a payout on his life insurance policy. In the final months of his life, Mr Stevens was forced to fight for what was rightfully his. The case highlights the inherent conflicts of interest in bank tellers and financial planners earning a commission for selling bank products.
The bank released a statement ahead of the program going to air saying: “We acknowledge that the most appropriate action in this case would have been for the customer to have remained with their existing policy. If the Commonwealth Bank had been aware of all relevant circumstances, there would have been no reason for the customer to terminate his existing policy.”
The bank says it has cleaned up its act since the scandal of 2008, including hiring new management and improving its compliance structure.
* Banking Bad airs on Monday night at 8.30pm on ABC Four Corners.
From our partners
Photo: James Alcock (http://www.smh.com.au/business/cba-chief-ian-narev-on-notice-over-compensation)
On 3 July 2014, Ian Narev, the Chief Executive Officer for Commonwealth Bank, addressed a press conference to respond to the Senate Inquiry’s report on CBA financial planning scandal. The scathing report was issued on 26 June 2014 after months of investigation and relentless coverage so the fact that it took a week for CBA to respond is, in itself, telling.
Click here to access the Senate report. And for a high level review of the more interesting aspects, read “Wading in the shallows: Advice, ASIC and Accountability”.
Mr Narev provided a superficial and perhaps unconvincing response to the report and at the heart of the CBA’s considered response was his proposal to commence a CBA-run review of all financial advice provided by CFP and Financial Wisdom over a 10-year period.
The public and media response to this proposal has been other than what Mr Narev might have anticipated. Industry insiders and affected clients remain skeptical of CBAs ability to properly review their own advice.
And for good reason.
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