ANZ, Citi and Deutsche Bank to face charges over $2.5bn issue of shares

THREE high-profile Australian banks are facing criminal charges for alleged cartel conduct but have come out fighting, arguing under Australian corporate law their actions are not illegal.

ANZ and two investment-banking titans are facing criminal charges for alleged cartel conduct but have come out fighting, arguing the behaviour in question is legal.

The federal agency that prosecutes crimes against the Commonwealth was on Friday preparing to charge ANZ, its group treasurer, Rick Moscati, Citi and Deutsche Bank in relation to a $2.5 billion issue of shares in the lender.

In a statement, ANZ declared it was expecting criminal charges to be laid by the Commonwealth Director of Public Prosecutions and was also under investigation by the Australian Securities and Investments Commission.

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The pending charges follow an extensive investigation by the Australian Competition and Consumer Commission.

Shares in the bank fell on the shock revelations, closing 1.5 per cent lower.

ANZ said the DPP intended to launch proceedings against the bank “for being knowingly concerned in alleged cartel conduct by the joint lead managers” of a stock issue in 2015, when it sold $2.5 billion worth of new shares to institutions.

The statement also confirmed Mr Moscati was expected to face charges.

Australian Competition and Consumer Commission chairman Rod Sims.

Deutsche Bank and Citi, as two of the three underwriters for the share placement, issued similar statements about pending charges, which were then confirmed by the ACCC.

“The charges will involve alleged cartel arrangements relating to trading in ANZ shares following (the) institutional share placement,” ACCC chair Rod Sims said. However, the banks rejected the allegations and the basis on which charges could be laid.

“The allegations involve an area of financial markets activity that has not been considered by any Australian court or addressed in any regulatory guidance notes previously published by the ACCC or ASIC,” Citi said in a statement.

“This is a highly technical area and if the ACCC believes there are matters to address, these should be clarified by law or regulation or consultation.”

Deutsche Bank also confirmed it would vigorously defend the charges, while ANZ said it had acted within the law.

The third underwriter, JP Morgan, has reportedly been given immunity from criminal proceedings after offering full disclosure to authorities.

In August, 2015, ANZ announced plans to raise $3 billion by selling new shares to investors, with $2.5 billion to come from institutional investors in an underwritten share placement.

ANZ is facing criminal charges for alleged cartel conduct.

The next day, ANZ said in a short statement that it had raised the $2.5 billion “through the placement” of 80.8 million shares at $30.95.

Now, the bank has revealed institutions only took up about two thirds of the shares on offer. That meant the underwriters had to step in and buy 25.5 million of the shares at a cost of almost $790 million.

ANZ went on to sell $720 million worth of discounted stock in a share purchase plan targeted at retail investors.

According to analysts, the large volume of shares that was not wanted by institutions could have been a signal to retail shareholders and the wider market that ANZ stock was overpriced in the placement.

As the shortfall and forced purchase by underwriters was not disclosed, the market was potentially misled, they said.

The Australian Shareholders’ Association said the alleged cartel behaviour further highlighted the need for company boards and directors to improve their governance.

“The charges should be a red flag for everyone involved in Australia’s highly flexible ‘anything goes’ capital raising system,” it said in a statement.

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