ACCC accused of ‘pressuring’ JPMorgan witnesses to suit regulator’s case

ACCC says it was trying to get to the bottom of various agreements between the banks, in a landmark cartel case.

Marcus Bezzi, ACCC’s executive general manager for enforcement, stressed in pre-trial hearings the importance of ANZ’s underwriting agreement.

The competition regulator is more focused on ANZ’s $2.5bn capital raising underwriting agreement from 2015 in proving a landmark cartel case against it and investment banks managing the deal, over witness evidence.

The Australian Competition and Consumer Commission’s Marcus Bezzi went on the offensive in pre-trial hearings on Wednesday, saying the regulator had closely examined areas including whether the banks’ arrangements were a joint venture and if the parties were in competition.

“The underwriting agreement was a really important piece of evidence, probably more important than anything that was said by the witnesses,” Mr Bezzi, the ACCC’s executive general manager of specialised enforcement, told Penrith’s District Court.

“The material that we had gave us confidence.”

But ANZ’s counsel Tim Game, QC, accused the ACCC of applying pressure to JPMorgan witnesses to give evidence that suited the regulator’s case on the 2015 capital raising events.

“You’re actually heavying them into compliance, you are standing over them, that’s what you’re doing and it’s a warning to others,” he said.

Mr Bezzi fiercely denied those comments.

“I totally reject that. It couldn’t be further from the truth,” he said.

The ACCC and Director of Public Prosecutions are pursuing criminal charges against ANZ, Citigroup and Deutsche Bank and six current and former executives over how they managed a 2015 sale of surplus shares not taken up in the $2.5bn raising. The regulator alleges the banks acted as a cartel and is drawing on evidence supplied from JPMorgan, a fellow bank on the deal, which was granted conditional immunity.

The case is being closely watched by the entire local investment banking community for implications it might have for how they jointly manage capital raisings, and any shortfall in demand. Given a COVID-19-related flood of ASX companies shoring up their balance sheets, the issue is even more topical.

Comments ‘deleted’

Mr Game argued that “highly relevant” comments in initial accounts by JPMorgan witnesses were deleted from final statements lodged with the court.

He was quizzing Mr Bezzi about why references to the banking syndicate, and separate decisions by banks not to trade ANZ shares on a specific day, were removed from the witness statements.

Mr Bezzi said the ACCC was trying to get to the bottom of various agreements between the banks involved in the capital raising, before moving forward with criminal charges. He added the ACCC did not accept bank arguments that they were operating as a joint venture on the ANZ deal, and that there was no surplus of unsold shares because underwriters were under contract to take the unsold stock.

The joint venture defence “really wasn’t capable of applying”, Mr Bezzi said.

“The witness evidence, in one sense, is fairly tangential to what is going on.”

The court also heard of a separate investigation by the Australian Securities and Investments Commission into JPMorgan’s role in ANZ’s capital raising. The corporate regulator was delving into a number of aspects of the capital raising, including ANZ’s disclosure obligations.

Would ASIC ‘keep clear’

Mr Game referenced ACCC file notes that mentioned ASIC could “be swayed” to keep clear of the case if the competition regulator was sure to take legal action.

Mr Bezzi said the ACCC did not restrain JPMorgan from talking to ASIC and providing it with sensitive documents relating to the capital raising.

In Monday’s hearings, it was revealed JPMorgan and its lawyers Gilbert + Tobin told the ACCC as far back as 2015 and on numerous further occasions they believed ANZ’s controversial capital raising did not reflect cartel behaviour by banks. The revelations were important because JPMorgan was at the same time pressing for immunity if an ACCC legal case emerged.

Asked about the JPMorgan position, Mr Bezzi said the bank and its lawyers were at times playing “both sides”.

Mr Game also cited ACCC documents and a phone call outlining the regulator’s concerns about whether JPMorgan’s then local markets boss Jeff Herbert-Smith was giving “full and frank answers” to questions.

Mr Game told the court ANZ was concerned about the reliability of witnesses and limited or no disclosure of their prior accounts of the capital raising.

“If there is an issue about reliability then we need to know what they’ve said at various times. How otherwise would we know whether or not they were reliable?”

Conditional immunity

The ACCC’s timing around the granting of conditional immunity to JPMorgan - and the events leading up to it - have also been closely scrutinised by the banks’ lawyers in the pre-trial hearing this week.

Mr Game said a “letter of comfort” was provided to some JPMorgan witnesses by the regulator regarding its immunity position, even before the issue went to the Director of Public Prosecutions.

Mr Bezzi disagreed, though, saying the letter reflected ACCC’s policy position in the evolving case rather than providing early assurances on immunity from prosecution.

In the damning action launched in 2018, the ACCC charged with cartel conduct six high-profile bankers: ANZ’s former treasurer now Australia chief risk officer Rick Moscati and former Deutsche Bank executives Michael Ormaechea and Michael Richardson. At Citigroup, former Australia chief Stephen Roberts, and bankers John McLean and Itay Tuchman are named in the case. Each banker, and their respective employer at the time, has denied the allegations.

Magistrate Jennifer Giles is presiding over the pre-trial hearing, which she wants wrapped up this week.

The ACCC’s Leah Won, a former enforcement director now financial services competition manager, will be examined on Thursday.

The hearing continues.