Cartel case nets six top bankers as criminal charges laid

Six of Australia’s highest-powered investment bankers have been charged over alleged cartel conduct, in an explosive criminal case.

Deutsche Bank’s former head of Australia, Michael Ormaechea. Picture: Hollie Adams

Six of Australia’s highest-powered investment bankers have been charged over alleged cartel conduct, in an explosive criminal case that has rocked the already scandal-ridden finance sector.

It was revealed last night that the former head of Citigroup in Australia, Stephen Roberts, and Deutsche Bank’s former head of Australia, Michael Ormaechea, were among those served with criminal charges relating to a $2.5 billion capital raising for ANZ in 2015.

Following a two-year investigation by the competition watchdog, the Commonwealth Director of Public Prosecutions has also charged Citigroup’s head of capital markets origination, John McLean, along with the bank’s global head of foreign exchange trading, Itay Tuchman.

Deutsche Bank’s former head of equity capital markets for Australia, Michael Richardson, has also been charged. Mr Richardson now works at Bank of America Merrill Lynch. ANZ’s chief risk ­officer for its Australian division, Rick Moscati, is the sixth to have been charged.

The six men face a maximum of 10 years in jail and/or fines of up to $420,000 for each criminal cartel offence, and a pecuniary penalty of up to $500,000 for each civil contravention, if found guilty.

Along with the charges laid against individual bankers, the banks — ANZ, Deutsche Bank and Citigroup — have also been charged with criminal cartel ­offences, following the Australian Competition & Consumer Commission’s investigation.

The ACCC alleges that the banks and individuals acted as a cartel, when they were faced with demand falling short in ANZ’s $2.5bn share placement to big fund managers in August 2015. The cartel claims relate to how the banks then attempted to offload the unsold shares to investors.

Citigroup, Deutsche and JPMorgan were acting as joint-lead managers on the raising, but JPMorgan is believed to have been granted immunity from the legal action for its co-operation in the investigation.

ACCC chairman Rod Sims late last night described the charges as serious and said they would now be determined by the courts.

The charges involve employees who were, or are, some of the most senior — and most highly paid — investment bankers in Australia. Last week’s announcement of ­imminent legal action sent shockwaves through the investment banking community, where the sort of behaviour involved in the ANZ shortfall is said to be ­commonplace.

The charges came a day after the anti-money-laundering regulator Austrac hit the Commonwealth Bank with a $700 million fine, the largest penalty in Australian corporate history. The bank was also recently found to be guilty of “complacency” following a regulatory investigation into its culture and governance.

The senior ranks at AMP have been rocked by shocking revelations at the royal commission, which triggered the resignation of the wealth group’s chairwoman, Catherine Brenner, and chief executive Craig Meller.

In the wake of the scandalous revelations at the royal commission, the government has increased penalties available to the Australian Securities & Investments Commission and appointed a specialist commissioner for enforcement actions.

In a statement, Deutsche Bank said it believed the bank and its current and former staff, including Mr Ormaechea and Mr Richardson, acted responsibly, in the interests of clients and in a manner that complied with the law and financial market rules. “Both Michael Ormaechea and Michael Richardson are highly regarded and have our full support,” a Deutsche Bank spokeswoman said. “We will vigorously defend charges brought by the CDPP and the ACCC.”

Mr Ormaechea retired last year after a 22-year career with Deutsche.

Citi said it would “vigorously defend these allegations on behalf of itself and its employees”.

Mr Richardson left Deutsche in June last year. Mr Tuchman, who is based London, was at the time Citigroup’s head of markets and securities services.

ANZ said it would defend the charges against itself and Mr Moscati, who was group treasurer at the time of the raising.

The allegations involve a complex area of financial markets activity that has not been tested by an Australian court. The criminalisation of cartel behaviour is a relatively new area of regulation, after the laws were overhauled by then-assistant treasurer Chris Bowen in the first Rudd government, following a lengthy push by the ACCC for the reforms.

A potential separate civil case against the groups being pursued by ASIC is well advanced. ASIC has been working with the ACCC for about a year on the investigations. The matter is listed before the Downing Centre Local Court in Sydney on July 3.

A successful prosecution would mark the second cartel prosecution against ANZ after the Federal Court imposed a $9m fine in December 2016 for 10 instances of attempting to rig the market in the Malaysian ringgit. Macquarie Group was fined $6m in the same case.