ANZ’s Shayne Elliott: lending to the Oswals was a mistake

Lending large sums to “colourful characters” like Pankaj and Radhika Oswal was “a mistake”, ANZ boss admits.

ANZ CEO Shayne Elliott at the House committee hearing in Canberra yesterday. Picture: Kym Smith

ANZ chief executive Shayne Elliott has admitted the bank shouldn’t have loaned more than $900m to Indian businessman Pankaj Oswal and his wife Radhika, based on documentation later discovered to be fraudulent.

Mr Elliott also attempted to distance the bank from a Malaysian political scandal in which about $US1 billion ($1.3bn) allegedly looted from the country’s sovereign wealth fund 1MDB passed through a bank account held by Prime Minister Najib Razak at Ambank, which is 25 per cent owned by ANZ.

Facing parliamentarians in Canberra yesterday, Mr Elliott yesterday defended the bank’s record on other finance sector scandals, including bad financial planning advice and the alleged fixing of the benchmark Bank Bill Swap Rate, over which it is being sued by the Australian Securities & Investments Commission.

He was the second of the big four bank bosses, after CBA’s Ian Narev, to be grilled by the House of Representative economics committee in what is to be a yearly ritual announced by Prime Minister Malcolm Turnbull in a bid to stifle opposition calls for a royal commission into the sector.

A fortnight ago, ANZ paid more than $200m to settle a lawsuit brought by the Oswals over its 2010 seizure and sale of the couple’s stake in the Burrup Fertilisers plant in the Pilbara.

As part of the same settlement, the bank dropped a case in which it alleged the couple misappropriated about $150m from the fertiliser company, using the money to pay for luxury cars, a boat, Mrs Oswal’s restaurant chain Otarian and property, including a Perth mansion dubbed “Taj on Swan”, which was never finished and was demolished on Monday.

Under questioning from the inquiry’s deputy chairman, NSW Labor MP Matt Thistlethwaite, Mr Elliott admitted the bank continued to extend the Oswals credit after Pankaj Oswal admitted to fraud in December 2009.

“It’s not a very good relationship, clearly, but we did continue to engage with him,” Mr Elliott said.

He said this was because ANZ wanted the plant to be finished.

“It’s in our interest to have a fully functioning, operating plant that can be sold to recover debt.”

As The Australian reported in July, allegations of fraud against Mr Oswal were investigated by the Australian Prudential Regulation Authority and ASIC, and reported to Victoria Police, but authorities took no action.

Mr Elliott said the fraud was reported to ASIC “when the fraud was confirmed”. This was “very soon” after it received a report from a handwriting expert on June 9, 2010.

Asked by Mr Thistlethwaite whether this was six months after Mr Oswal had confessed to falsifying the documents, Mr Elliott said: “Technically that’s correct”.

“He withdrew that admission soon afterwards,” he said.

“This is a colourful character who admitted all sorts of things. It was a complex relationship.”

He said ANZ should not have been lending such large sums to “colourful characters”.

“We made a mistake. This is wrong, absolutely, and we’re not debating that for a second. We let ourselves down in terms of our processes here. Absolutely.”

Mr Elliott was also grilled about ANZ’s relationship with AmBank and the 1MDB scandal, in which the US Department of Justice’s Anti-Kleptocracy Unit seeks to recover more than $US1bn spent on assets in America that was allegedly part of $3.5bn looted from the ­sovereign wealth fund.

Mr Najib has always denied doing anything wrong and claims much of the money alleged to have gone through his Ambank account between 2011 and 2013 was a donation from a Saudi prince.

Under questioning from Victorian Green MP Adam Bandt, Mr Elliott said ANZ was “not to my knowledge” under investigation over the US DoJ allegations.

He said ANZ had not investigated whether any staff on secondment to AmBank had done anything wrong. “They are no longer employees,” he said. “They are responsible to the board of AmBank. AmBank has conducted those investigations.”

But an ANZ spokesman has previously told The Australian employees on secondment at AmBank “remain employees of ANZ and continue to receive long service entitlements”.

And in 2008, when ANZ said its employee Ashok Ramamurthy had been elevated from chief financial officer of AmBank to deputy managing director, it said he would report to AmBank group managing director Cheah Tek Kuang and “will also report to ANZ CEO South and Southeast Asia, Mr Joseph Abraham”. Yesterday, Mr Elliott denied this was true, saying: “No. Ashok did not report to Joseph Abraham, no.” Mr Ramamurthy was subsequently made chief executive of AmBank.

“When he became the chief executive, he severed his ties,” Mr Elliott said. “He was fulltime, 100 per cent dedicated to AmBank. He did not report to anybody.”

Mr Ramamurthy left AmBank in January last year and returned to work at ANZ in Melbourne. He has since moved on by “mutual agreement”, Mr Elliott said.