Banking royal commission: Hayman Island trip bonus for rogue adviser

A Bankwest manager was rewarded for his hefty sales effort with a trip to Hayman Island, the royal commission has heard.

Queensland cattle farmer Melville Ruddy, left, leaves the Brisbane Magistrate Court in Brisbane. Picture: AAP

A Bankwest rural bank manager who overvalued rural properties, faked farm finance figures, counted non-existent cows and rigged loan applications was rewarded for his hefty sales effort with a bonus and “rural champion” trip to idyllic Hayman Island, the royal commission has heard.

And when Bankwest realised the rogue manager’s conduct issues a year later in 2012 — after his free tropical holiday and $35,000 bonus — the manager was allowed to resign.

The bank told the financial services royal commission that (after his departure) it discovered the full depth of the manager’s inflated property valuations, aggressive and inappropriate loan sales, manipulation of Bankwest’s internal credit system and multiple customer complaints.

But Bankwest — a fully owned Perth-based subsidiary of the Commonwealth Bank — failed to then inform the manager’s farm clients, including Charleville grazier Melville Ruddy, that he had effectively been sacked or that their loans had been issued on deliberately incorrect valuations and were therefore suspect.

The case of Mr Ruddy, 68, a successful cattleman, who went from owning two farms with plans to pay back his debt to being reduced to working as bulldozer driver and watching 80 cattle die because he could not afford feed, was the latest sad farming tale before the inquiry. Mr Ruddy told the hearings in Brisbane that his four years dealing with Bankwest had left him without his Toowoomba farm Sunrise and struggling to make a living from his remaining outback station Arranfield, west of Charleville.

Mr Ruddy said he now had no cash to buy or freight cattle or feed his cows supplementary licks, that no bank would deal with him and that he only owned 300 cows instead of his former 900-head breeding herd.

Bankwest called in Mr Ruddy’s loans in 2013 and forced him to sell Sunrise to pay out his debts, after it accused him of breaching the bank’s loan-to-valuation ratio limits set at 50 per cent.

By then the bank knew its original land valuations had been wrong and downgraded the value of Arranfield from $1.1 million to $900,000 and Sunrise by 40 per cent from $1.2m to $750,000.

“I wasn’t happy; they’d kept on increasing my facility and now they said I had to sell one of my places in the middle of a drought and low cattle prices to pay them back because they’d changed the valuations,” Mr Ruddy said.

Senior counsel assisting the commission, Rowena Orr QC, later produced internal Bankwest documents showing that not only had the rogue manager overvalued the farms, but that he had faked dates and used incorrect land sizes and cattle numbers.

The commission heard Sunrise was valued at $1.2m based on it being 896 hectares when it was actually only 72 hectares.

Bankwest also failed to tell an official inquiry after the Ruddys registered a formal complaint, about its full knowledge of the former manager’s alleged failures.

Bankwest representative Sinead Taylor agreed with Ms Orr that Bankwest had not acted in a fair and reasonable manner to the Ruddys or the former manager’s other farm customers.