Catholic Super defends caution over merger

Catholic Super deputy chairman Peter Haysey has defended his $9.3 billion fund’s spurning of a potential merger.

Catholic Super’s Peter Haysey, centre, leaves the royal commission. Picture: David Geraghty.

Catholic Super deputy chairman Peter Haysey defended his $9.3 billion fund’s spurning of a potential merger over concerns a lack of control could threaten its “successful strategies”, as he admitted a senior executive failed to declare conflicts of interests that saw $2 million in contracts paid to businesses associated with his family.

The banking royal commission heard Catholic Super general manager of investor relations Robert Clancy had been put on leave recently after an investigation was launched into his failure to disclose that his brother and wife held interests in Australian Family, a consultancy which was tapped to conduct research and marketing for the fund.

Mr Clancy formally told Catholic Super in 2015 of the conflicts of interest, but the admission came five years after Australian Family was contracted by the fund. Emails tendered to the royal commission showed the Clancy brothers were in regular contact during the period.

Counsel assisting Albert Dinelli also extracted admissions from Mr Haysey that Mr Clancy also had made $46,000 worth of unauthorised expenses during a three-year period to 2016.

“You also identify a longstanding practice that was not documented which allowed senior executive staff to incorporate personal travel and accommodation and other minor expenditure, provided it was reimbursed?” Mr Dinelli asked.

“It has come to my attention in recent preparation,” Mr Haysey said. “That longstanding practice has now ceased.”

Despite the fund having a formal policy where employees had to disclose personal conflicts, the Melbourne-based Catholic Super, which managed the savings of private school teachers, awarded $1.5m in contracts and $500,000 in sponsorship money to businesses of which Mr Clancy’s brother Paul Clancy and his wife Jennifer Kernahan, were either a director or shareholder.

The tales of questionable and conflicted payments came after Mr Haysey defended the fund’s decision to scrap potential merger discussions with Sydney-based rival fund the Australian Catholic Super Retirement Fund late last year. While Catholic Super is one of the best performing funds in the country, the takeover target has performed far worse on a relative basis.

Despite the board being presented with a Rice Warner report outlining the benefits of the merger, the royal commission heard Catholic Super chairman Peter Bugden scrapped merger talks as the Sydney-based fund would not accept its anointed independent chairman of the merged entity, Danny Casey. It was later revealed that Mr Casey had been at the time contracted as an adviser to Catholic Super.

This was despite the Sydney-based fund agreeing to a 12-member board that was split equally between the two funds with an independent chairman.

“If you were asked the question why did this fall over, what’s your answer?” Commissioner Kenneth Hayne interjected. Mr Haysey responded that he was concerned that the best interests of both funds members would have been served by Catholic Super being the dominant fund in the takeover.

“There has been no agreement to successor fund transfer, no agreement had been signed. No due diligence had been done,” Mr Haysey said.

“Our position was quite clear that we could not continue the arrangements without having clarity around those critical issues in the best interests of our members.”

Mr Haysey confirmed that merger talks had restarted.