Banking royal commission: Talk of straw man was ‘loose language’: NAB’s Anthony Waldron

An NAB executive has denied that the use of the term “straw man” at a 2016 meeting meant it kept information from ASIC.

The Royal Commission into the Financial Services Industry. (Eddie Jim/Fairfax/Pool)

NAB has been unable to explain to the banking royal commission what it meant when it said it had constructed a “straw man” for its engagement with the corporate regulator over a home loan fraud scandal.

Appearing before the financial services royal commission today, NAB’s executive general manager of growth partnerships, Anthony Waldron, denied that the use of the term meant it kept information from the Australian Securities and Investments Commission.

It was instead “loose language”, he said.

Mr Waldron was taken to documents relating to a meeting in October 2016 dealing with the scandal, in which bonus-hungry bank employees took bribes and used forged documents to approve hundreds of millions of dollars in home loans.

“A straw man has been prepared in relation to engagement with ASIC,” the document records.

Asked by counsel assisting the commission, Rowena Orr, QC, what this meant, Mr Waldron said that at that time ASIC did not understand that NAB had drawn together an investigation into bankers in Western Sydney and Project Beacon, a broader internal inquiry into problems with the bank’s introducer program. The regulator needed to be updated on this, he said.

Pressed on the meaning of the phrase “straw man”, Mr Waldron said it was an “outline” of issues or “a situation of an example of a situation outlined, a draft or a hypothesis”.

Ms Orr asked: “It’s a fallacious example, is it not?”

Mr Waldron said this was not his understanding.

“I’m not sure that I can explain it better other than we would have been preparing draft documents” for ASIC, he said.

“It looks like loose language.

“I’m not sure how else to explain it.”

The royal commission has today been probing a fraud ring among bank managers and other employees in Western Sydney related to the bank’s introducer program, under which it pays a commission to people who bring home loan customers to it.

It has also been dealing with a wider investigation of fraud and other banker misbehaviour across NSW and Victoria related to the introducer scheme.

Some customers given inappropriate loans have run into difficulty repaying their loans — but Mr Waldron admitted to the commission that NAB wouldn’t finish remediating them until November this year, more than three years after some of the dodgy loans were taken out.

The exchange took place after it emerged that the bank had failed to provide the royal commission with a crucial board document dealing with the fraud.

The bank this morning provided to the commission papers from a board risk committee meeting, held on November 4, 2015, dealing with the scam, which involved bankers colluding, forging documents and taking bribes to approve home loans and pay commissions to a network of dubious introducers.

NAB’s executive general manager of growth partnerships, Anthony Waldron, who is giving evidence for the bank, was unable to explain why the document was not been produced in response to the commission’s initial demand for material relating to misconduct.

The commission is examining a fraud ring run among bankers in a clutch of NAB’s Western Sydney branches who were hungry to earn bonuses based on how many home loans they wrote.

While introducers, who received a commission of up to 0.6 per cent of the amount loaned, were supposed to come from the ranks of professions, including financial planners and lawyers, the commission has heard that two of those involved in the Western Sydney scam were a gym owners and a tailor.

While some NAB bankers were sacked over the rort, others were only docked a quarter of their bonus, the commission heard.

The bank first got wind of potential problems in Western Sydney in April 2015, and received whistleblower reports in September and October that year.

However, despite the serious nature of the breaches, it did not formally report the issue to the corporate regulator until February 2016 — a delay apparently far in excess of the 10-day time limit to report significant breaches required by company law.

Counsel assisting the commission, Rowena Orr, said that just four introducers “provided $139.78m in loans drawn down to NAB to the end of October 2015”.

Some $488,000 in commissions was paid to a single introducer, she said.

Documents shown to the commission reveal that investigations by NAB and KPMG found bankers were colluding to exploit gaps in the NAB loan process.

An internal NAB email, sent just before Christmas 2015, shows one bank manager was dismissed for misconduct on multiple occasions.

According to the email, the manager “wilfully entered false phone numbers on customer files”, provided “false information” for loan applications and was “wilfully dishonest” when asked how false phone numbers came to be entered on customer files.

Contrary to the rules of the loan introducer program, the manager also told other employees to process loans based on documents from an introducer.

NAB’s belated production of a crucial document comes after Ms Orr yesterday blasted Australia’s biggest bank, the CBA, for swamping the inquiry with spreadsheets rather than coming clean about misconduct over the past 10 years.

She also criticised NAB’s submission, which she said “did not grapple” with commissioner Kenneth Hayne’s request for a full confession of misconduct and conduct falling short of community standards and expectations.

Westpac also needed to provide more information, she said.