Parties, picnics: Watchdog probes what Cbus spent on CFMEU

The financial regulator has launched another investigation into embattled superannuation giant Cbus over its expenses bill, including money spent on parties and picnics with the CFMEU.

The Australian Prudential Regulation Authority said on Tuesday it was concerned the board, chaired by former federal treasurer Wayne Swan, had not provided appropriate oversight of the fund’s management of risks.

APRA has called out the Cbus board, chaired by Wayne Swan, for not providing sufficient oversight of the fund. Credit: Louise Kennerley

The renewed focus on Cbus’ expenses, its board and chairman puts further pressure on the embattled $100 billion construction industry fund which has lurched from one crisis to another over the past six months.

APRA said it had been concerned about governance failures at Cbus four years ago, and that the suite of scandals currently engulfing the fund had been identified back in 2021.

Cbus has entered into a court-enforceable undertaking with APRA and committed to reviewing the root causes of APRA’s concerns, preparing a comprehensive plan that outlines how it seeks to mitigate those issues, and appointing an independent review to provide regular progress reports to the board.

The fund, which has close ties to the disgraced construction union CFMEU, has been under intense scrutiny since the middle of last year after an investigation by this masthead uncovered criminal infiltration and corruption in the construction union.

The financial and corporate regulators have launched separate investigations into Cbus, and Swan has been hauled to Senate inquiries to be grilled on the conduct of one of the country’s largest super funds.

APRA last year ordered the fund to engage an independent expert to review its links to the CFMEU, while the Australian Securities and Investments Commission has pursued the super fund for failing to process insurance claims of thousands of disabled and bereaved members in a timely manner.

On Monday, the Senate released a decade-old secret review by former competition tsar Graeme Samuel who had recommended appointing more independent directors to Cbus’ board to curb the powerful influence of the CFMEU and improve the fund’s culture.

Cbus’ controversial decision to host a $400,000 celebration last year marking its 40th birthday is also expected to be scrutinised by APRA. The regulator said it would investigate the fund’s expenses bill because it had concerns Cbus had breached the Superannuation Industry Supervision Act, which requires trustees to make decisions in the best financial interest of members.

Cbus chief executive Kristian Fok.Credit: Natalie Boog

“APRA expects trustees to have robust governance, compliance and risk-management frameworks in place to prevent, detect and/or mitigate potential adverse outcomes such as operational risk incidents,” deputy chair Margaret Cole said.

“Where an entity’s practices are found wanting, APRA will not hesitate to take action to protect members’ interests.”

The regulator revealed it had warned Cbus in 2021, 2022, 2023 and 2024 that the plans the fund had submitted addressing corporate governance risks did not go far enough.

Two months ago, APRA issued a report to the fund, which it only publicly disclosed on Tuesday, warning its risk-management practices were based on “incomplete and inconsistent information”, and that the board had shown “insufficient oversight and challenge of operational risk”.

“APRA is concerned that notwithstanding the weaknesses identified by APRA in its 2021 prudential review, and APRA’s regular engagement with United Super [the trustee] since then, United Super’s approach to operational risk management is not fit for purpose for the scale and complexity of United Super’s evolving business model,” the regulator published on Tuesday.

“United Super has been slow to implement the required changes to its operational risk-management framework; historically, insufficient investment has been made into United Super’s … risk functions to support the necessary change; board oversight of operational risk requires improvement in certain respects.”

In a statement, Cbus noted APRA’s intention to review its expenses bill, including partnership payments made to unions and employer groups.

“Our priority is to ensure Cbus meets the highest standards, [which are] rightfully expected of us by our members as one of Australia’s leading superannuation funds,” chief executive Kristian Fok said. “While we have made progress in some areas, there is more work to be done, and it must be done at pace.”

However, the fund refused to answer questions on the board composition and whether changes will be made despite ASIC and APRA both raising concerns about Cbus directors not providing appropriate oversight.

The Deloitte review, published in December, found Cbus, which has almost 1 million members, failed to demonstrate sufficiently that its controversial relationship with the CFMEU was in the best financial interests of members when it spent more than $2.5 million on unions, almost half of which flowed to the CFMEU, including for picnic days and Christmas parties.

The review assessed nine payments to the CFMEU in 2023-24, including $120,000 to the NSW and $235,000 to the Victorian and Tasmanian divisions, as well as $240,000 for a research project on renewables.

“A review of the expenditure decisions and related benefits revealed an absence of clearly articulated member outcomes resulting from the documented benefits,” the report by Deloitte found.

Liberal MP Andrew Bragg, chair of a Senate committee that grilled Swan and noted industry super critic, ordered Swan to explain why there were “discrepancies” in his earlier testimony when he claimed the Deloitte review would “demonstrate” Cbus’ relationship with the CFMEU was in the best financial interest of members.

“The fund has handed cash to the CFMEU and failed to meet its legal obligations to members,” Bragg said. “Mr Swan faces contempt of the Senate. The Samuel and Deloitte reports demonstrate indolence. He should consider his position.”

Swinburne University corporate governance expert Helen Bird said given the size of Australia’s superannuation industry and its role as the vanguards of workers’ retirement savings, it was critical funds had “excellent governance”.

“When you are dealing with something as important as the trust of looking after the retirement proceeds of vulnerable Australians, in the sense that they’re giving their money to you and trusting you, it’s important there is excellent governance,” Bird said.

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