Fury as prosecutor drops charges against Citi and Deutsche in ANZ cartel case

A last-minute review of a case already described as a ‘complete shemozzle’ has seen prosecutors drop landmark bank cartel charges.

The prosecutor has dropped the case against all the accused.

Former senior investment bankers have accused the competition regulator of ruining their lives after prosecutors dropped a major criminal cartel case against Deutsche Bank, Citi and four executives minutes before the matter was set to be heard.

The Australian Competition and Consumer Commission had pursued the men, including former Deutsche bankers Michael Ormaechea and Michael Richardson over allegations that they had manipulated the price of ANZ shares following a $2.5bn placement in 2015.

The ACCC had begun an investigation after JP Morgan, another bank in the placement syndicate, struck a deal with the regulator guaranteeing them immunity from prosecution.

On Friday, the Commonwealth Director Public Prosecutions dropped its charges against all accused in the case – which has been in the courts since 2018 – minutes before a three day hearing before Federal Court judge Michael Wigney was set to commence.

Mr Ormaechea, Deutsche Bank’s former country head, said the past four years had been “extraordinarily difficult for us and the personal and professional toll that these proceedings have taken is immeasurable”.

“This was a test case that should never have been brought, especially not against individuals. It was not in the public interest and an enormous waste of public resources, given there was never any reasonable prospect of securing a conviction,” he said.

“The case is an extreme example of regulatory overreach and highlights a fundamental lack of understanding of financial markets by the ACCC, along with serious deficiencies in its investigatory and prosecutorial processes.”

Mr Richardson, Deutsche’s former head of equity capital markets, said the criminal charges had had an “enormous impact on me, my business career and my family”.

“I struggle to understand why I have been put through this ordeal,” he said. “I will never get back the last four years of my life”. “I am grateful to the CDPP for having the courage to make this decision, although I regret this did not occur much earlier,” he said.

Charges against ANZ and two other senior bankers were dropped in October.

The charges related to an August 2015 share placement by ANZ and discussions among the banks that had underwritten the fundraising. Those conversations included details about future plans to sell stock that remained on their books, which the ACCC alleged constituted cartel behaviour. Mr Ormacheau, Mr Richardson and two city bankers Itay Tuchman and John McLean faced up to 10 years in jail if they had been found guilty.

The last minute decision to pull the prosecution is the latest in a string of embarrassing losses sustained by the competition commission, with the ACCC in June handed a significant defeat in its first criminal cartel case taken to trial in a matter against Country Care and its chief executive Robert Hogan.

The regulator had earlier lost a significant legal stoush against TPG Telecom and Vodafone Hutchison Australia in which it was attempting to block the merger of the two companies.

ACCC chairman Rod Sims said he respected the CDPP’s decision to drop the charges against Deutsche Bank, Citi and the senior banking executives and would consider what “lessons could be learned” from the case.

“We considered that the alleged conduct stood to damage competition and the Australian economy,” Mr Sims said. “That is why the ACCC investigated this conduct and referred the evidence to the CDPP. The Office of the CDPP assessed the evidence very carefully and, as required by law, made an independent decision to prosecute.

“While there can be challenges involved in bringing criminal cartel prosecutions, particularly due to the complexity of the cartel laws, we will continue our efforts to deter, detect and dismantle cartels, and will continue to refer serious cartel conduct to the CDPP for its consideration. That is our role and we will continue to fulfil it, even though not all briefs of evidence given to the CDPP will result in the laying of charges or convictions.”

Justice Wigney said on Friday the CDPP’s move to drop its case came as “somewhat of a surprise”. “The prosecutor is now declining to proceed on the indictment … the accused will be discharged and the matter will come to an end,” he said.

The CDPP, having in October dropped charges against ANZ, the bank’s executive Rick Moscati and former Citi country head Stephen Roberts, had already been forced to scale back charges against the others accused of cartel conduct.

The federal prosecutor dropped the case after a further review of evidence before the Friday hearing, CDPP deputy director Berdj Tchakerian told The Australian on Friday.

“In this case, following a further careful review of the evidence and consideration of detailed submissions received from solicitors acting for the accused, the director concluded that there were no longer reasonable prospects of conviction for the charges before the court,” said Mr Tchakerian.

“This resulted in the director’s decision to decline to proceed further in the proceedings against the remaining defendants in this complex matter.”

The matter had already drawn in other significant investment banking figures including JP Morgan’s head of trading Mark Dewar, its former managing director Jeff Jerbet-Smith, and its former capital markets executive Richard Galvin.

Justice Wigney also called former JP Morgan Australia managing director Andrew Best, former chairman Robert Priestly and senior ACCC employee Rob Ghali.

At the time, Justice Wigney said it was important to hear from the witnesses because Deutsche and Citi allegedly reviewed the ACCC’s draft witness statements and internal JP Morgan documents that showed inconsistencies in witnesses’ recollection of events.

Making the orders in November, Justice Wigney described the situation as “entirely unsatisfactory,” given the long-running criminal case was set to go to trial in April.

“It would not be unfair to characterise the situation concerning the state of the indictment as a complete shemozzle,” he said in his decision at the time.

“It is, on just about any view, an entirely unsatisfactory state of affairs for the indictment to be unsettled well over three years after the accused were first charged and just over six months before the trial has been listed to commence.”

Justice Wigney said it was “unfortunate” that the federal prosecutor had been unable to “properly plead and particularise” its charges in the long-running case, despite already being ordered to revise a previous indictment in July.

“As has already been noted, the prosecutor’s difficulties may in part be explained by the exceptional complexity of the offences in question,” he said.

“That, however, is no consolation to the accused who have had these serious charges, which concern events which occurred as long ago as 2015, hanging over their heads now for over three years.”

A Deutsche Bank spokeswoman said the bank “welcomed” the CDPP’s decision to drop all charges after it had “vigorously defended” the prosecution.

“We recognise the significant impact that this case has had on the lives of the individuals involved but we are pleased to see that they have been vindicated.”