All eyes on capital capers

The cartel action entangling ANZ is set to be the most closely watched test case in recent history.

The cartel action entangling ANZ is set to be the most closely watched test case in recent history, given the potential implications for Australia’s capital markets.

The Australian understands the Commonwealth Director of Public Prosecutions is due to further outline its case against ANZ and its investment bankers in a more detailed statement due on March 19.

The long-awaited document sets the scene for the criminal action and adds to a much shorter brief of evidence provided to the parties last year.

It’s been a long gestation time for those whose careers are treading water or on hold after the competition regulator spectacularly lodged the action more than eight months ago.

The criminal charges relating to a 2015 capital raising were laid against ANZ, Deutsche Bank and Citigroup and six individual bankers. The next court date is early April.

The banks and the individuals are defending the allegations, but sources suggest the matter won’t be heard in full until mid-2020.

It also needs to find its way from the Local Court to the Federal Court, given its complexity and the nature of the charges.

One thing is certain: it will be a landmark case for financial markets as the intricacies of ANZ’s 2015 capital raising are laid bare.

The prosecution’s case relates to how ANZ and its investment bankers came to “an arrangement or understanding” about how to deal with a shortfall of 25.5 million shares not taken up in the $2.5 billion raising.

Investment bankers around the country are on tenterhooks as the court action plays out at a snail’s pace, because the practice of conducting conference calls to navigate the sale of shares not taken up in a capital raising is not uncommon.

“Everyone is on notice about this,” an investment banker tells this column.

Listed companies and their lawyers will also be closely watching as they err on the side of extreme caution on disclosure of any negotiations between investment banks if there are shares left over in capital raisings.

Let’s not forget the corporate regulator has also started civil action against ANZ, alleging the bank breached its continuous disclosure obligation by not informing the ASX of $791 million in stock taken up by underwriters.

The ANZ cartel case could spur changes in how deals are managed if those involved are found to have acted in a way that could have had a significant impact on the relevant market.

While there were said to be 20 to 30 people on the ANZ conference call — including legal and compliance managers — the Australian Competition & Consumer Commission took aim at a select group.

At least two of those named in the criminal case didn’t speak on the call, according to sources.

Those charged in the cartel action are former ANZ treasurer Rick Moscati, the former local heads of Citigroup and Deutsche Stephen Roberts and Michael Ormaechea, Citigroup’s John McLean and Itay Tuchman and former Deutsche and Bank of America Merrill Lynch capital markets boss Michael Richardson.

JPMorgan was also working on the ANZ capital raising with Deutsche and Citigroup but is not facing criminal charges.

That is in line with the ACCC’s immunity policy for those that “provide a detailed description of the cartel conduct”.

Sources yesterday said Moscati had returned to work at the bank after several months of leave and was now a senior executive in the strategy division.

Due to the legal action, he didn’t come back to the role of chief risk officer in ANZ’s Australian division after being appointed to that position ahead of the case being launched.

In terms of prior cartel cases pursued by the ACCC, this one sticks out.

It’s not about stifling competition or company representatives meeting in dimly lit rooms to quietly talk about fixing or raising ­prices.

There are several headline cases the regulator has pursued in the past two decades, including Visy and Amcor, where the companies allegedly conspired to raise product prices while maintaining their respective market shares in the corrugated fibre packaging market.

In that instance, Amcor management reported to matter to the ACCC.

Then there was the global sting on airlines by regulators around the world over major airlines colluding in the setting of their fuel and security surcharges.

In Australia, the ACCC pursued 15 local, European and Asian based airlines for price fixing in the local air cargo market.

ANZ and the investment banks fighting their own cartel battle will have their lawyers trawling through case history too.