Peter King says Westpac took correct action after Forum Finance fraud review
Westpac’s CEO is adamant the bank has taken ‘appropriate actions’ against a group of its own staff, after a probe into how it was allegedly defrauded of $300m.
Westpac chief executive Peter King is adamant the bank has taken “appropriate actions” against a group of its own staff, after assessing the findings of a sweeping investigation into how it was allegedly defrauded of $300m.
The bank’s 2021 annual report said “a range of remuneration and other consequences were applied” to current and former Westpac employees, relating to the potential fraud against the bank by Forum Finance and its founder, Bill Papas. Sources said the consequences included the partial or full docking of bonuses, while some employees have departed the bank as a result of the review.
The Australian in September revealed law firm King & Wood Mallesons was assisting Westpac with a staff review to determine accountability and if disciplinary action should be applied after the bank fell victim to the equipment leasing fraud. It is understood the review did not uncover any evidence of Westpac employees assisting Forum in the alleged fraud, but given the size of the loss to the bank there were issues raised under its consequence management framework.
When asked about the accountability measures, Mr King said: “We’ve done a thorough review of what happened, including looking at individuals … we’ve taken appropriate actions where warranted, but I can’t talk to you about individuals.”
Pressed on whether the review led to dismissals, Mr King said: “It depends on the individual’s seniority and what they did, what the action was, but I can’t go into individual outcomes.”
The fraud allegations are linked to claims Forum used fake invoices, sometimes with forged signatures, to secure finance from the bank, often for goods that did not exist. It is another lapse in Westpac’s systems, which have been under intense pressure for lax compliance with anti-money-laundering and other laws.
Westpac has made a provision for the claimed Forum fraud in its accounts, as the matter is being pursued by the bank in the Federal Court. Offshore-based banks Societe Generale and Sumitomo Mitsui Banking Corporation have also separately lodged civil actions against Forum.
Federal Court judge Michael Lee last month made an order for the warrant, arrest and detention of Forum founder Mr Papas due to his failure to co-operate with court orders. Justice Lee cited an extradition treaty between Australia and Greece, given Mr Papas has been residing in Greece since June.
Westpac, which is undertaking a multi-year turnaround program to boost compliance functions, admitted in its annual report it had a way to go. The report showed that on a pay scorecard Westpac’s executives achieved 40 per cent of a maximum short-term bonus outcome on measures to fix and boost the bank’s systems, compliance and culture.
“Significant risk incidents arose: APRA’s (Australian Prudential Regulation Authority’s) prudential standards on liquidity, potential fraud by Forum Finance, ASIC (corporate regulator) proceedings in relation to the 2016 Ausgrid transaction and the Reserve Bank of New Zealand requiring reviews into risk governance practices,” the report said.
Westpac’s executives scored better on perform and simplify measures, measuring 47 per cent and 57 per cent of the maximum bonus outcome.
The average 2021 short-term bonus outcome for the executive team was 48 per cent of the available pool, with individual outcomes ranging from zero bonus to 70 per cent of the available payment. Last year, there were no short-term cash bonuses paid across Westpac’s executives as they took joint responsibility for the anti-money-laundering scandal that led to the bank paying a record $1.3bn penalty to Austrac.
Mr King’s take-home pay rose to $3.4m for the 12 months to September 30, up from $2.4m a year earlier. This year’s pay included fixed remuneration of $2.4m, a cash bonus of $840,000 and vesting of prior year deferred bonuses.
Mr King was awarded 47 per cent of his available short-term bonus, while his long-term incentives for 2018 lapsed because hurdles were not met.
The annual report showed consumer and business banking boss Chris de Bruin and financial crime and compliance executive Les Vance received pay increases of 11 per cent respectively, due to taking on expanded roles.
The notice for Westpac’s December annual general meeting outlined a board review of Mr King’s 2022 pay package, which determined a 3 per cent increase to “align with market”.
Westpac is separately seeking shareholder approval to award Mr King a 2022 potential long-term bonus reflecting a maximum grant of 127,401 performance share rights valued at $3.25m. That is subject to the CEO meeting performance hurdles and other vesting criteria.
The annual report showed Westpac managed 1306 employee conduct matters in 2021, with 95 staff exiting the business due to disciplinary outcomes.
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