ASIC opened Karen Chester investigation in wake of expenses inquiry

Deputy chair Karen Chester has been grilled over her expenses, and an alleged tirade to a colleague amid questions about the claims.

The corporate regulator investigated its deputy chair Karen Chester over her expenses. Picture: Britta Campion

The deputy chair of the corporate regulator ASIC Karen Chester allegedly “carpeted with F-bombs” a senior colleague after she was questioned over her claiming of travel allowances for time spent in Canberra seemingly not on official business.

The Australian understands the Australian Securities and Investments Commission chief operating officer Warren Day attempted to question Ms Chester, the deputy chair, over her claiming of work expenses in 2021.

Ms Chester, the second most senior figure in ASIC, faced a probe by the agency over her use of travel expenses amid broader internal concerns over her use of agency resources.

In a heavily redacted email chain from March 2021 released under freedom of information laws, Mr Day attempted to question Ms Chester over her claiming of work and travel expenses in 2021 for a number of days she spent in Canberra.

In its response to The Australian, ASIC senior lawyer freedom of information Haydar Tuncer said some information had been redacted as it would “disclose personal information”.

However, the investigation into Ms Chester’s expenses claims was dropped after Mr Day accepted her explanation, after she told the ASIC executive she had made use of travel allowances for meetings “ “even if purely networking in nature” as they “benefit ASIC”.

This all took place when it is understood Ms Chester was lobbying heavily for the role of ASIC chair in Canberra, amid succession planning after the return of James Shipton to the role.

Internal ASIC documents also noted Mr Day attempted to pull up Ms Chester on her use of ASIC resources on her job application after she directed the regulator’s corporate affairs team to assist in the production of a PowerPoint presentation for use in her meetings over the chair role.

The documents note Mr Day allegedly attempted to tell Ms Chester she was using official agency resources for a personal project.

The Australian understands Ms Chester pushed back strongly on Mr Day’s questioning of her diary and expenses claims, in a conversation which saw the regulator open a separate investigation by the human resources division.

Mr Day was reportedly “carpeted with F-bombs” by Ms Chester, who told the ASIC executive she did not like the issue being raised, according to ASIC HR notes.

This came as Mr Day questioned why Ms Chester had claimed work expenses for days when it was “not clear to me what the business purpose was”.

This covered the period of February 10 and 15, as well as March 8 and 11.

ASIC has denied access to earlier emails in the chain, however in response to an email from Ms Chester Mr Day noted “there are also some days with no meetings that are in person, but they are few and coincided with the run up to the short lockdown in Victoria.”

Mr Day told Ms Chester he would accept her work expense claims “on the assumption they all had a business purpose.

“Overall however and when taken together, I can see in person meetings that cover the range of dates and meant travel over the term is required,” he told Ms Chester.

Internal ASIC documents note when Mr Day raised her expenses with Ms Chester, she sent him photocopies of her diary without explanation of the meetings.

In response to Mr Day, Ms Chester told the chief operating officer she decided to stay in Canberra “given the lock down in Melbourne”, noting she had consulted with James Shipton, the current chair of ASIC, over her decision to stay on.

However, The Australian understands Mr Shipton had told colleagues he did not recall a conversation approving Ms Chester’s Canberra trip.

The review into Ms Chester’s expenses came in the wake of several inquiries at ASIC into spending by the agency’s senior leadership.

Ms Chester commissioned a review into commissioner expenses from Melbourne-based consultants the Pitt Group in late-2020.

This review found several “potential instances of noncompliance” with ASIC’s expenses policy as well as “opportunities to improve the control environment”.

A key observation of the review were “identified potential breaches are across, compliance with internal policy, travel allowances and personal expenditure”.

This came as several figures tasselled over power in the agency, with the looming exit of Mr Shipton and announcement of a new chair and deputy chair at ASIC.

Mr Shipton and his deputy Daniel Crennan had stood down from their roles at ASIC chair amid a probe into expenses in the agency.

Mr Crennan resigned from ASIC, while Mr Shipton returned to the role of chair after an investigation cleared two over any concerns relating to their expenses.

However, Mr Shipton’s return was contingent on a pending recruitment process for a new chair and deputy, with Ms Chester a leading candidate for the top job.

A selection committee composed of APRA chair Wayne Byres, ACCC boss Rod Simms, and Treasury secretary Stephen Kennedy interviewed several candidates for the chair and deputy chair roles before Joe Longo and Sarah Court were announced in April 2021.

The investigation into Ms Chester’s conduct in the wake of her interactions with Mr Day came as one of several probes opened into the deputy chair’s behaviour.

Parliament has heard Treasury commissioned an investigation by Seyfarth Shaw into Ms Chester after Mr Shipton and other figures at ASIC complained of bullying.

Mr Longo told parliament there had been “no adverse findings” against Ms Chester.

An ASIC spokesman told The Australian “your questions were addressed in our response to you of 1 September 2023 in relation to your FOI”.

“Other than that, we have no further comment,” he said.

Originally published as ASIC opened Karen Chester investigation in wake of expenses inquiry