NACC watchdog eyes former ASIC deputy chief Karen Chester

Documents released under Freedom of Information reveal the NACC was considering a complaint against former ASIC deputy chair Karen Chester in November last year.

Former ASIC deputy chair Karen Chester. Picture: Aaron Francis

National anti-corruption investigators have taken legal advice over one of the corporate regulator’s top commissioners, with the public watchdog considering a probe after a complaint over potential issues related to her time at the top.

Documents released under Freedom of Information reveal the National Anti-Corruption Commission has taken legal ­advice as it considers a report against Australian Securities & Investments Commission deputy chair Karen Chester.

An initial legal assessment from August prepared by the NACC reveals the investigative agency advised its staff to “put in a formal request for legal advice to address the question”.

The Australian understands the NACC was reviewing a complaint relating to concerns over Ms Chester’s behaviour while deputy chair at ASIC. The documents show the NACC met in November to discuss the probe concerning Ms Chester noting staff were considering “how to progress with matter”.

“It would be great if we could get some movement on some of these matters if possible,” a NACC staff member wrote.

It is unclear if the matter has progressed since. The Australian is not suggesting any allegation of corruption only that the NACC was considering whether to investigate a complaint in November.

The NACC revealed on Thursday that it has received over 2444 referrals since it opened its doors last July, of which 358 were under assessment including 11 which have progressed to preliminary investigation.

The NACC is also conducting 11 corruption investigations and monitoring or overseeing 31 investigations by other agencies. The NACC told The Australian it does not provide comment on individual referrals.

Ms Chester did not respond to a request for comment.

At its preliminary stages the NACC can use some of its investigative powers to compel the provision of information or docu­ments.

Ms Chester, who left ASIC on Sunday after a year of mounting criticism, has faced a number of probes over her conduct at ASIC, while others have raised concerns she sought to involve herself in enforcement matters seen as outside her remit.

Ms Chester, who flagged in May she would not seek another term at ASIC, leaves after being the subject of unwanted attention over her time at the top, both as deputy chair and when acting in the top job after the temporary departure of James Shipton.

She has been the subject of repeated skirmishes in the Senate after ASIC faced questions over investigations into her conduct as well as undisclosed communications with market participants and concerns over influence over enforcement matters.

Treasury commissioned law firm Seyfarth Shaw to run an investigation after bullying complaints were made against her by ASIC executives. It found a number of alleged incidents in late 2020 and early 2021, were “wholly or partially substantiated”.

ASIC’s HR team also investigated a complaint against Ms Chester by its then chief operating officer, Warren Day, who was allegedly subjected to a barrage of abuse after questioning her over her expenses records.

As revealed in The Australian, Mr Day told colleagues he was “carpeted with F-bombs” by Ms Chester, who warned him his attempts to quiz her over expenses claims were “not sustainable”.

Ms Chester told the Senate this did not happen, and ASIC also noted in responses to the Senate “Chester denies she ‘carpeted Mr Day with ‘F-bombs’ as reported by The Australian”.

ASIC in its response to the Senate Economics Committee said Mr Day did report the deputy chair to others over an incident.

“While Mr Day did inform an ASIC senior executive of his interaction with Ms Chester, ASIC did not undertake a formal investigation into matters concerning … Ms Chester and Mr Day in March 2021, and did not make any findings about the conduct of Ms Chester,” it said. ASIC declined to reveal material concerning the alleged incident, noting its disclosure “may detail or otherwise refer to comments made about ASIC officials concerning workplace matters … made on a private and confidential basis”.

ASIC has trod a wary path, amid criticism over its enforcement record and moves by chair Joseph Longo to put to bed earlier matters concerning Ms Chester.

Mr Longo previously told the Senate he did not see any conduct from Ms Chester that concerned him, noting the matters dredged up in Treasury’s review had been “historical” and he did not intend to take further action.

But Ms Chester faced further criticism, with the revelation she exchanged several WhatsApp messages with Bronte Capital boss John Hempton, a short seller and friend. Mr Hempton also personally emailed Ms Chester about Mayfair 101 boss James Mawhinney, who views Mr Hempton as a key instigator of ASIC’s actions against him.

Ms Chester played a key role in ASIC’s pursuit of Mayfair 101, with Mr Mawhinney firing off legal warnings to her over some of her public comments. ASIC sources said this sat at odds with Ms Chester’s ­responsibilities, with enforcement the remit of other commissioners.

Court documents also suggest she played a role in the commission’s pursuit of ASX-listed payments company iSignThis; ASIC disputes this.

Court documents filed by iSignThis in both matters with the ASX and ASIC allege a representative of ASIC told the ASX on October 1, 2019 they would discuss a meeting about suspending the company from trade “with Karen Chester and others”.

The documents note ASIC senior market surveillance Tom Veidners and ASX chief compliance officer Kevin Lewis, among others, were “spitballing” the “suspension pending inquiries by ASX and ASIC”.

ASIC sources have indicated this meeting, which was also attended by commission investigator Colin Luxford, was unusual as the iSignThis matters concerned ASIC’s enforcement arm headed up by deputy chair Dan Crennan.

But an ASIC spokesman told The Weekend Australian Ms Chester “had no operational involvement in the iSignThis matter other than at a commission level” and noted the document “incorrectly refers to deputy chair Chester, rather than the then commissioner, Cathie Armour”.

Documents released under FOI reveal Ms Chester declared two tranches of WhatsApp messages from Mr Hempton to ASIC general counsel Chris Savundra in October 2022. Files on her ASIC device were wiped in 2021 before moving WhatsApp to her personal phone in July that year, soon after Seyfarth Shaw commenced its investigation.

In the lead-up to ASIC’s Annual Forum in November, Ms Chester faced veiled criticism by former boss Mr Shipton, appearing before a Senate committee.

Mr Longo refused to comment on questions about Ms Chester at the Annual Forum, but paid tribute to her and farewelled her in an email to staff.