Lid lifted on ‘immunity deal’ in ACCC’s ANZ cartel case

A key player in the regulator’s cartel case against ANZ and a string of banks forced to reveal details of an immunity deal.

The ACCC has launched a legal action over ANZ’s bungled $2.5bn capital raising. Picture: Hollie Adams

An immunity deal given to Wall Street bank JPMorgan and its staffers has come under scrutiny in the competition watchdog’s landmark criminal cartel case against ANZ and several high-profile bankers.

JPMorgan head of equity, capital and derivative markets Richard Galvin, who on Thursday was being examined in Sydney’s Downing Centre Local Court, was forced to come clean on how an immunity deal was secured.

Mr Galvin revealed intimate details of how the investment banking giant alerted its staff to the Australian Competition and Consumer Commission’s investigation into ANZ’s bungled $2.5bn capital raising.

Mr Galvin and his firm JPMorgan have been granted immunity from the criminal prosecution being waged against a several high profile bankers.

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In an explosive suit launched mid-last year, the ACCC charged with cartel conduct six of the country’s most high profile bankers: former Deutsche Bank head of capital markets Michael Richardson, ANZ’s chief risk officer for the Australian division Rick Moscati and former Deutsche Bank chief executive Michael Ormaechea, along with Citigroup’s head of capital markets, John McLean, Citigroup’s global head of foreign exchange trading, Itay Tuchman, and former Citigroup Australia chief executive Stephen Roberts.

The ACCC alleged the individuals and the banks, Citigroup, Deutsche Bank and ANZ, acted as a cartel when they were faced with a shortfall in demand for ANZ’s $2.5bn share placement to big fund managers in August 2015.

Each has denied the allegations.

While Citigroup, Deutsche and JPMorgan were acting as joint-lead managers on the raising, JPMorgan was granted immunity from legal action for its co-operation in the investigation. Two JPMorgan bankers, Mr Galvin and Jeffrey Herbert-Smith, were also granted immunity.

The cartel allegations relate to how the banks then attempted to offload the unsold shares, worth about $800m, to investors.

The committal hearing on Thursday was the first examination of witnesses in the case, after the ACCC lost a bid to block cross-examining key witnesses and investigators from the regulator ahead of the trial.

The watchdog had argued the move could violate legal privilege and shed too much light on its internal procedures for dealing with complex investigations.

Magistrate Jennifer Giles expressed frustration that certain matters hadn’t been settled before the five days scheduled for cross examination. Picture: Reuters

Lawyers acting for the defendant banks were granted the ability to ask questions restricted to procedural matters aimed at examining the carriage of justice, including how the regulator questioned and dealt with JPMorgan witnesses, dealings between the ACCC and the Australian Securities and Investments Commission, and certain telephone recordings which are alleged to have been recorded improperly.

On the stand, Mr Galvin revealed he had received a “letter of comfort” from the Commonwealth prosecutor in late June 2016, after JPMorgan lawyer, Gilbert+Tobin partner Gina Cass-Gottlieb received a letter from the ACCC in August 2015 following the bank applying for “first-in marker” to gain immunity from any cartel prosecution in the wake of the raising shortfall.

Mr Galvin’s first indications of the case came in March 2016. “I received a call from my boss in Hong Kong, Nicholas Johnson (Head of Equity Capital Market for Asia Pacific),” Mr Galvin said.

He then attended a meeting with JPMorgan Asia Pacific litigation lawyer Josh Kyle, along with his colleague, head of Australian compliance Oliver Bainbridge. There, Mr Galvin said he was told: “You need to drop everything you’re doing.”

“There was an issue with the ACCC and you need to get your own counsel,” Mr Galvin recounted being told. “The ANZ transaction had flagged issues with the ACCC and potential cartel issues.”

Citi lawyer Dean Jordan said the issue of whether to allow further examination of Mr Galvin was “elevated in its significance” was the case was “only the second time these unusual immunity processes have come under any scrutiny in criminal courts”.

Mr Jordan said his firm had written to the ACCC in September 2019 asking the regulator to waive privilege for its witnesses as they were not under threat from prosecution. “We haven’t received a reply,” Mr Jordan said.

Magistrate Jennifer Giles expressed frustration that these matters hadn’t been settled before the five days scheduled for cross examination.

Magistrate Giles said the prosecution’s case was “completely opaque” on the issues of the timeline and how Mr Galvin gained immunity, which was vital in a “massive prosecution”.

“It is always necessary for defendants to know really basic things like when witnesses were first asked to remember events, and they are events that ground the prosecution,” Magistrate Giles said, before ruling that privilege had been waived.

Immunity deal

The court had been considering arguments put forward by Deutsche’s legal team, who said the immunity deal had compromised the witness statement taken from JPMorgan bankers. At the same time counsel acting for Citi questioned the way the witness statements from Mr Galvin and Mr Herbert-Smith were collected. They argued the statements could have been contaminated as they were shown notes made by others when recounting a series of phone calls over the weekend from Friday August 7 to Monday August 10, 2015.

Mr Galvin said after being advised by JP Morgan to get his own legal counsel, he hired Stan Lewis, a Partner at Corrs Chambers Westgarth.

“Almost immediately,” Mr Galvin said. “I met Mr Lewis a day or two later at Corrs’ offices,” he said, and was instructed to “think more about what happened through the details of a capital raising that was nine or 10 months ago”.

“I needed to refresh my memory,” he said.

After meeting with Mr Lewis “a number of times” to work out his “own chronology” about the raising, Mr Galvin attended a meeting with Mr Lewis and Gilbert + Tobin lawyers, including Ms Cass-Gottlieb. He said the purpose of the meeting was to “understand more detail about the cartel provisions under the Act”.

Mr Galvin then had a series of emails over April, June and July 2016, before attending the ACCC’s offices on July 20 to negotiate a confidentiality deed, which he signed and then prepared a statement for the regulator.

At this meeting, ACCC enforcement director Michael Taylor was also present and Mr Galvin instructed regulatory staff to amend his statement that was being projected onto a screen.

“Do you recall anything else?” Mr Jordan asked. “We had a coffee break. Apart from that we spent the whole time drafting the statement on screen,” replied Mr Galvin.

Mr Galvin has also listened to two recorded phone calls at the Corrs’ offices and amended transcripts. One call had all the banks participating in the raising on the line, while the second call was between Mr Galvin and Mark Dewar, head of equity trading at JPMorgan, who has also been granted immunity.

In December 2016, Mr Galvin met with the ACCC where he was “read a legal document” by the regulator outlining his obligations and then went through his draft statement over two days. Mr Galvin missed a third day of meetings as he was overseas.

After reviewing the statement in early 2017, Mr Galvin returned to the ACCC offices on 13 February to sign his statement, which ran to “about 35 pages”.

Mr Galvin also signed a supplementary statement in July 2018, after the ACCC filed its claim in the court in June.

The case continues.