Westpac, King & Wood Mallesons mull staff disciplinary action over Forum Finance alleged fraud

Westpac and its law firm are in the thick of a sweeping staff review to determine accountability and if disciplinary action should be applied, after an alleged $300m fraud.

Forum Finance founder Bill Papas, who remains in Greece, is allegedly behind a $400 million fraud against Westpac and two other banks.

Westpac and law firm King & Wood Mallesons are in the thick of a sweeping staff review to determine accountability and if disciplinary action should be applied after the bank fell victim to an alleged $300m fraud.

Sources said the employee probe was well underway and focused on determining any culpability for staff or managers largely in the leasing unit that was exposed to the claimed fraud.

The alleged fraud perpetrated by Forum Finance and its founder and Sydney soccer identity Bill Papas has left the bank fighting in the Federal Court to retrieve the missing funds.

Westpac’s staff review has been narrowed and is centring on whether managers conducted proper spot checks and ongoing due diligence of Forum, and the goods underpinning the equipment leases. The bank claims many of the leases and the finance linked to purchasing the goods were secured via phony contracts and forged signatures.

In some instances, the goods that were the subject of the leases were alleged to not exist, yet the finance was still secured.

It’s understood the Westpac staff probe has so far found no evidence that any employee conspired with Forum executives or Mr Papas to allegedly perpetrate the fraud. But if the review finds that a staff member did not adequately conduct their duties, disciplinary action and potential dismissal are options being seriously considered.

A Westpac spokesman on Friday said the bank declined to comment on staff matters.

Westpac is also said to have handed key material to regulators and the NSW‘s Financial Crimes Squad as it steps up its pursuit of Mr Papas and the missing money.

The NSW Police referred their inquiries to the Financial Crimes Squad in late July after authorities were earlier alerted to allegations of fraudulent activity by Forum Finance, Mr Papas and fellow director Vincenzo Tesoriero.

As well as Westpac, French bank Societe Generale and Japan‘s Sumitomo Mitsui Banking Corporation have lodged separate court claims against Forum and Mr Papas. In total, the alleged fraud amounts to $400m, and Mr Papas and Mr Tesoriero have had their local and global assets frozen while the matters play out in court.

Sources said Westpac’s employee probe has not triggered potential action or consequences under the Banking Executive Accountability Regime, or BEAR, given it is not targeting group executives that report directly to chief executive Peter King.

Head of Westpac’s institutional division Anthony Miller, a former Deutsche Bank executive, has only been in the role 11 months.

The bank has made a $300m individually assessed provision for the alleged Forum fraud, which Mr King in August labelled “very disappointing”.

“In terms of the quarter, we have fully provisioned for that exposure,” he said at the time.

Morgan Stanley analysts have said the potential fraud loss would lower their estimated 2021 Westpac earnings by 3 per cent.

Westpac lodged the court action against Forum and Mr Papas in late June, and the matter became public in early July.

Affidavits lodged with the court say Mr Papas was unreachable for days after missing a Perth meeting on June 15 with customer WesTrac, and he then arrived in Greece six days later, where he remains.

Mr Papas initially pledged to return to Australia to face the allegations before presenting the court with a positive Covid-19 test, then later said he could not afford a return plane ticket.

Westpac and Forum liquidator McGrathNicol are now seeking to scrutinise figures close to and within the leasing company in the Federal Court in coming weeks.

At least four examinations of witnesses are scheduled as the liquidator attempts to piece together what happened at Forum and where the funds are.

Judge Michael Lee has already ordered some assets held by Mr Papas and Mr Tesoriero be sold, including the Miami-moored luxury XOXO yacht. It has been insured and may now be repaired ahead of a sale process kicking off.