Timbercorp whistleblower fingers ANZ: ‘They knew it was a house of cards’

WHISTLEBLOWERS testifying before a Senate committee yesterday implied ANZ knew Timbercorp was close to collapse.

WHISTLEBLOWERS testifying before a Senate committee yesterday implied ANZ knew Timbercorp was close to collapse but continued to supply finance to investors in the company’s now notorious agricultural schemes who stand to lose their homes.

The two former Timbercorp executives also accused senior management of the failed management agricultural investment company of trading while insolvent and pocketing some of the proceeds in the wake of the 2009 collapse.

An email between senior Timbercorp executives after an alleged meeting with ANZ — tabled in a committee hearing yesterday — said the bank had told them “some stakeholders will need to get burnt”, implying it knew the schemes were in trouble but continued to supply finance to investors.

“They knew it was a house of cards and it was about to collapse,” former Timbercorp sales executive Andrew Peterson told the inquiry.

“They saw what was going on. They saw the loan book increasing, the loan size increasing and they saw the performance of projects decreasing.”

The bank disputes this view, saying it held a “positive view” about Timbercorp until a transaction fell through in 2008 after the Lehman Brothers collapse in the US, which precipitated the global financial crisis. ANZ said the High Court had dismissed actions brought by investors against Timbercorp and cleared the role of lenders.

Fellow whistleblower and former Timbercorp research chief Michael Bryant also criticised research houses for pocketing $35,000 per report for reports approving the controversial schemes as investments. Mr Bryant said research houses provided financial advisers with a “Teflon raincoat” in the form of a report testifying to their investment grade.

Both men, who have lost money in the schemes along with thousands of other investors, backed calls from senators on the committee for a royal commission into Timbercorp and other corporate collapses.

Mr Peterson also agreed with economics committee chairman Senator Sam Dastyari that in the end the ASX-listed Timbercorp amounted to little more than a Ponzi scheme.

Senator Dastyari said the fallout from the collapse would lead to the biggest foreclosure event in Australian history as people were forced to surrender their homes to cover the debt owed. Many Timbercorp investors have been left with loans outstanding to the ANZ and other banks, which liquidator Korda Mentha is insisting they must be repaid.

A growers’ group said liquidators had rejected a settlement of 45c in the dollar on one batch of the Timbercorp Finance loans. ANZ was among a group of institutions that bankrolled Timbercorp’s loans arm, Timbercorp Finance.

Several hundred investors in the schemes crammed into the Melbourne Town Hall for the hearing yesterday and several told the committee of their heartbreak that their investment losses had caused them.

Investors are demanding debt relief and have criticised liquidator KordaMentha’s offer to waive only 15c in the dollar of their outstanding amounts while continuing to apply punitive interest rates that have seen the sums owed by many investors rise sharply. Reports say up to 70 investors a week are now being issued writs seeking repayment of their loans and face severe financial hardship.

The committee has also heard commissions were paid of up to 12 per cent to sell investments in these schemes, even as the edifice was poised to collapse.

Mr Peterson said Timbercorp’s top management failed to tell him and Mr Bryant — and the market — that the schemes were failing at any point.

Details of Timbercorp’s true financial state were known only at the very top of the company, he said. Mr Peterson described Timbercorp chief executive Sol Rabinowicz and chief financial officer John Murray, along with co-founder Robert Hance, as those in the “hush hush” inner circle.

ANZ corporate affairs chief Gerard Brown appeared at the inquiry to give a brief statement. He told the committee that the bank would be making a detailed submission responding to the issues raised on December 15.