Banking royal commission: NAB brought to heel

A cascade of revelations has left the lender reeling.

Commissioner Kenneth Hayne at the financial services inquiry. Picture: David Geraghty

Never before has Commissioner Kenneth Hayne been so angry.

Jabbing his finger at NAB’s top-tier counsel, Neil Young, he all but accused the QC of trying to coach the bank’s witness, former super trustee chairman Nicole Smith, who was two days into giving evidence and clearly drowning in a sea of obfuscation.

“You will not give her answer, Mr Young,” Hayne barked. “You will not. Do you understand me?”

As the royal commission into financial services enters the sixth month of whirlwind hearings that are exposing the crimes and misdemeanours in Australia’s financial services companies, there are signs that continued blustering, dithering and delay by some of the country’s largest institutions are starting to frustrate the inquiry.

Bank bosses have promised to repair the damage and to find mistakes and fix them, but inside the hearing room their legal counsel have gone down a ­different, far less co-operative path. Those hauled before the commission have produced documents slowly, then flooded the inquiry with documents, or claimed they should be kept confidential.

But for NAB, Wednesday afternoon’s showdown was the moment everything spiralled out of control, leading to a cascade of revelations that by the following night had bank chief executive Andrew Thorburn making a ­series of frantic night-time calls to journalists, including at The Australian, in a bid to limit the bleeding, and to plead that the bad behaviour laid bare wasn’t bad enough to be a crime.

In a further escalation of the war, the commission last night said it would recall NAB head of wealth Andrew Hagger for a second stint in the stand, as early as Monday.

It was one of its struggles over confidentiality that led to Hayne’s afternoon outburst, but NAB is not alone in annoying the com­mission.

At last month’s hearings into the finance sector’s treatment of Aboriginal customers, the managing director of life insurer ­Select AFSL, Russell Howden, was accused of not being frank with the commission after he tried to prevent the release of documents. And just last week Hayne made a formal ruling throwing out an attempt by IOOF to keep details of its dealings with regulators out of the public eye.

In NAB’s case the blow-up was not the first sign that relations between the bank and the royal commission had broken down.

NAB chief executive Andrew Thorburn. Picture: Jesse Marlow.

Hayne and a packed public gallery had spent two days listening to a witness who could have been finished in a couple of hours but for her memory lapses, her insistence on having hard copies of documents brought to her, and her hesitation over conceding the slightest bit of ground.

And in skirmishes the day before, Hayne stopped evidence for a moment to bark “sit down” at a NAB solicitor who was standing up and talking at the bar table, and counsel assisting the commission, Michael Hodge QC, sparred with Young over one of the bank’s many claims for secrecy over documents before the commission.

Young provoked Hayne to rage by trying to keep confidential ­correspondence between the bank and the corporate regulator dealing with a long-running investigation into NAB’s habit of charging hundreds of thousands of customers, including some who were dead, fees for services they never received.

He told the commissioner it was important to allow banks to confidentially negotiate with the Australian Securities & Investments Commission, he complained that the bank had only just received notice of the 18 documents Hodge wanted to table, and he said that, in any case, Nicole Smith, the chairman of the company’s trustee company, wouldn’t be able to provide any answers to questions about the paperwork.

It was this last remark that caused Hayne to explode.

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But what exactly was it that NAB was so keen to keep from the public gaze? The commission had already heard that NAB had charged dead people fees — what worse could there be?

And why was it willing to risk the wrath of the commission to keep it locked away?

On Thursday morning, Hayne answered the first two questions when he unlocked the vault, refusing Young’s request for confidentiality over documents that detailed allegations of misconduct over the fee-for-no-service scandal, and NAB’s failure to report ­licence breaches across the bank within the 10 days required by the law, each of which could result in criminal charges.

NAB, which is chaired by former Treasury secretary Ken Henry, had billions of reasons to try to keep a lid on what the commission hears about its wealth division, which operates under the storeyed MLC brand.

It is trying to sell the business, which manages $78 billion of other people’s retirement savings, for as much as $3bn — a price already steeply discounted from the $4.6bn it paid for MLC 10 years ago, before wave after wave of scandal battered the sector.

In May, Thorburn admitted that revelations at the royal commission could hurt the bank’s bid to sell MLC. “The royal commission may come out with something, or it might not,” he said at the time.

Two months earlier, as NAB executives prepared for their first appearance before Hayne, Thorburn had promised that the bank was “committed to fully participating and co-operating with the royal commission”.

Counsel assisting Hodge clearly felt otherwise. “I need to say some things in response to some things that were said from the bar table yesterday and that might be taken to be an implicit criticism of the staff of the royal commission,” Hodge told Hayne on Thursday morning.

He said NAB had previously been on notice that the 18 documents might be used, because they were uploaded to the commission’s online court book, where all the parties to the hearings could see them, on Sunday night or Monday morning.

Yes, the commission’s staff told NAB the inquiry wanted to use the 18 documents in an email sent at 1.37pm the previous day — but this was a “convenience and courtesy”.

“We do not, as a matter of course, and to put it beyond doubt, will never again provide in advance a list of the specific documents that we intend to tender in an afternoon session,” Hodge said.

He went on to pin the blame on NAB’s tardy production of documents to the commission.

The commission had given NAB until July 9 to cough up documents relating to the bank’s trustee company, NULIS, where Smith was until June the chairman, and a plethora of dubious fees charged to super fund ­members. “They produced 31 documents on that date,” Hodge said. “After that date, the National Australia Bank produced in excess of three-and-a-half thousand documents regarding the fees-for-no-service issue, of which in excess of 3000 were produced to the commission last week.”

And even as late as Thursday last week the bank was holding back some documents because they contained details of “without prejudice” discussions with ASIC.

Wading through the flood of documents must have been a big challenge for the royal commission’s legal staff, who are on secondment from the Australian Government Solicitor.

The Weekend Australian understands the number of lawyers working on the commission goes up and down, but a spokesman for the inquiry said there were “fewer than 20 full-time lawyers working on the AGS legal team”.

“More than 680,000 documents have been reviewed so far, including documents produced in response to notices and submissions received from parties and members of the public,” he said.

The bank doesn’t see it that way; it reckons it has been hammered with notices to produce — some of them very complex — and it has been pumping out documents as fast as it can.

“As we have said previously, we believe the royal commission is an important catalyst for the industry to restore trust and respect and we are committed to co-operating in an open and transparent way.”

Additional reporting: Elizabeth Redman