Soccer boss linked to $260m Westpac fraud claims

Westpac has taken legal action over a $260m exposure to alleged ‘significant potential fraud’ involving equipment leases.

“A significant potential fraud.” Westpac CEO Peter King. Picture: Jonathan Ng

Westpac has launched legal action alleging sophisticated and “significant potential fraud” by Forum Finance, whose executive chairman is president of Sydney Olympic Football Club.

The allegations relate to a portfolio of equipment leases, and the bank estimates its potential exposure at $200m after tax, meaning actual exposure is near $260m.

Westpac is also expected to spend tens of millions on the legal case. The action raises doubts about the inner workings of the bank’s compliance systems. In a shock ASX statement on Friday, Westpac said while it appeared none of its customers had suffered financial loss, investigations were continuing and the NSW police and regulators had been notified.

The allegations have entangled some of Forum’s customers, including Seven Group-owned WesTrac, and have shed light on another court case against Forum initiated by French bank Societe Generale this week.

Westpac said its legal action lodged in the Federal Court related to equipment leases arranged by Forum and referred to Westpac’s institutional bank.

“The bank has a potential exposure of around $200m after tax, with the extent of any loss dependent on the outcome of its investigations and recovery actions under way,” Westpac said.

“The bank has obtained certain asset freezing and search orders to preserve available assets and relevant information.”

Court documents and orders from June 28 name Forum as the first respondent and the group’s executive chairman Basile Papadimitriou – also known as Bill Papas – as the second respondent.

That document cites a “search party for the Sydney premises” and subsequent orders a day later allowing the search party at the Sydney premises to “re-enter the premises for the purposes of conducting the search until such time as the search has been completed”.

Sydney-based Forum did not respond to multiple requests for comment.

Mr Papas – whose lawyers have also been contacted for comment – is president of Sydney Olympic and owns Greek soccer team Xanthi FC, which he was seeking to use as a development hub for upcoming Australian players. He is believed to have departed Australia in recent weeks.

Sydney Olympic FC late Friday issued a statement saying Mr Papas had resigned from his position “effective immediately” but did not provide further detail around his exit.

A separate court order late on Friday noted that former Forum director and current shareholder Vincenzo Tesoriero was joining the Westpac action as a third respondent, and cited a freezing order for his assets.

Westpac said it was continuing to investigate how the potential fraud occurred, including undertaking an external review.

Forum’s website says it assists customers with the “basics of running their business, like managing their printer and copier fleets”. It has also expanded into business process improvement and automation. Westpac has a commercial relationship with Forum for the equipment the firm was selling and leasing, but is alleging discrepancies arose in the way end customer accounts were managed.

The Westpac matter is being heard by Federal Court judge Michael Lee.

Societe Generale also initiated separate court action against Forum and Mr Papas this week.

“Societe Generale Sydney branch confirms having provided financing to Forum Finance and our current exposure is approximately $9m. We have commenced legal proceedings in relation to a potential fraud. We are not able to comment further,” a spokeswoman said.

“Societe Generale is committed to the highest standard of ethics to protect the bank and its clients.”

Westpac’s chief executive Peter King said the bank took alleged fraud “very seriously” and would take all necessary actions to protect Westpac and its customers.

“This is a complex issue, and we are working at pace to address it, including engaging with the police and regulators. At this preliminary stage, the potential fraud is sophisticated and appears to have been perpetrated externally,” he added.

“Our new chief executive of the institutional bank, Anthony Miller, is working with our customers to ensure no disruption to their operations.

WesTrac informed Westpac of issues with a loan facility, which is said to have prompted a larger reconciliation by the bank of its leasing arrangements with Forum.

“WesTrac Pty Ltd confirms that in late May 2021, it was informed that funds had been accessed from a loan facility in its name with Westpac.

“WesTrac has no record of having accessed the funds and has advised the bank accordingly,” a WesTrac spokesman said on Friday.

“WesTrac has not suffered any financial loss as a result of this matter. As the matter is currently before the courts, WesTrac can provide no further comment at this time.”

As well as WesTrac, Forum’s website lists accounting group Findex, HWL Ebsworth and Guide Dogs NSW/ACT as customers.

The Australian Securities & Investments Commission and the banking regulator had been notified of the court action, Westpac said on Friday.

Analysts began to downgrade earnings expectations for Westpac on Friday as a result of the fraud allegations.

Credit Suisse analysts said Westpac’s announcement had similarities to National Australia Bank’s 2003 exposure to King Bros, where assets were falsely represented.

“We note that the potential $200m after-tax exposure announced today is before recoveries in which Westpac has sought court orders to freeze assets. We also expect WBC is likely to have insurance but at the same time will incur legal costs,” they added. “While the final financial impact is likely to be relatively small it could reinforce investors‘ view that Westpac’s systems require further investment.”

Morgan Stanley analysts said the potential fraud loss would lower their estimated 2021 earnings for Westpac by 3 per cent and reduce the common equity tier one ratio by about five basis points.

Citigroup analysts lowered their 2021 earnings estimates for Westpac by 3 per cent.

Westpac has endured a turbulent period in the past two years, culminating in the bank paying a record $1.3bn penalty to Austrac in 2020.