Cbus blames death, disability payment delay on Japanese company which handles its claims

Cbus chief Kristian Fok has blamed a delay in death and disability payments on the ­Japanese-owned company the ­industry superannuation fund has outsourced to administer claims.

Cbus chief executive Kristian Fok appears via video link during a parliamentary committee hearing on Thursday.

Cbus chief executive Kristian Fok has blamed a delay in death and disability payments on the ­Japanese-owned company the ­industry superannuation fund has outsourced to administer claims, as the corporate regulator vows to crack down on funds ­exploiting members’ savings.

In his first public appearance since the allegations that Cbus mishandled up to $20m in death and disability payments, Mr Fok declared the organisation was “far from perfect”, though was unable to say whether any fines incurred in the upcoming litigation would be covered by its members.

“I’m not going to speculate on that,” he told senators at a parliamentary hearing on Thursday, prompting the Coalition to call for new laws to prevent super funds from finding loopholes that force members to pay their fines for bad governance.

Despite the government placing the CFMEU into administration this year following allegations of bullying and corruption, Mr Fok left the door open to Cbus continuing the payment of millions of dollars to the union, which in turn funnels millions into the Labor Party. “We do believe there is incredible value in that relationship,” he said.

While admitting Cbus needed to “do better”, Mr Fok said the fund had been “maturing” faster than it could hire staff and the organisation’s administrator – responsible for claims handling – had also suffered from high staff turnover.

“The delays, as I indicated, have primarily emanated from our administrator. We are still responsible for it,” Mr Fok said.

Cbus has a formal outsourcing agreement with a unit of Link Administration Holdings – owned by Japanese giant Mitsubishi UFJ Financial Group – to handle its claims. Link chief executive Vivek Bhatia would not comment on the matter when the company was contacted by The Australian.

Mr Fok apologised to affected members and their families, with the Australian Securities and Investments Commission alleging the $94bn fund in some cases took more than a year to pay out death benefits or disability payments.

“Like many institutions experiencing rapid growth, it has taken time for Cbus to mature and attract the right personnel to meet our needs,” he said.

“Since being appointed as CEO last year I have, with the strong endorsement by the board, initiated some significant changes in our leadership and organisational capabilities in order to address the need to improve the outcomes we need to deliver for our members.”

Following Mr Fok’s failure to answer a number of questions during the hearing, Liberal frontbencher Andrew Bragg said there may be a need to call the Cbus chair and ALP national president Wayne Swan before the committee.

ASIC deputy chair Sarah Court on Thursday said the corporate regulator would increase its efforts on “protecting Australians from financial harm and targeting the people who try to take advantage of them”.

“We will focus on business models that are designed to avoid consumer credit protections, and we will take action against those engaging in unlawful debt management and collection,” she told ASIC’s annual forum.

Despite legislation introduced under the past government that sought to ensure super funds did not turn to their members to cover regulatory fines, Senator Bragg said funds found a loophole to the laws by simply amending their trustee deeds in a way that allowed them to charge upfront fees to members that could then be pooled into capital reserves with which to pay any fines.

“This totally undermines the reforms and parliament’s intention,” Senator Bragg said. “It’s a completely broken system.”

Officials from the Australian Prudential Regulation Authority told the parliamentary committee that it was not their role to endorse or oppose the schemes super funds were using to pay fines from members’ savings.

Senator Bragg accused APRA of “misreading its role” by failing to stop the practice.

However, Ms Court said it was completely up to superannuation trustees as to “how they provide reserves and the extent of those reserves for compliance costs”.

She said ASIC launched legal proceedings against companies such as Cbus for doing the wrong thing because “we are trying to send a strong deterrent message to the sector more broadly, that it is simply unacceptable for these large trustees to fail to deliver to their members”.

“ASIC’s view is that the directors that sit around superannuation trustee boards are in no different position than the directors of any other companies,” she said.

A spokesman for Assistant Treasurer Stephen Jones said the law “was absolutely clear that every single dollar spent by superannuation funds must be spent in the members’ best financial interest”. “We expect funds to meet the highest standards of governance, and we back the independent regulator to uphold the clear obligations in law,” he said.

Senator Bragg slammed Cbus for paying the CFMEU more than $1m in the 2023-24 financial year alone and yet still relied on its members to cover fines.

“You’ve got the situation where funds are making huge transfers of money to unions and employer groups, their shareholders … in some cases millions of dollars to individual unions … and that these unions receive all this money as do the employer groups but they’re not on the hook for supporting the fund when things go wrong,” he said.

“The trustees make errors and the members pay.”

While most Labor Party MPs and members backed Mr Swan and disagreed that he needed to step down while the ASIC investigation into Cbus took place, one senior government source said that by staying on as the fund’s chairman, the former treasurer risked creating an unneeded “distraction” for Anthony Albanese.

Additional reporting: James Kirby