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  • Banks Behaving Badly
  • Four Corners
  • 10/03/1997 Make a Comment
  • Contributed by: Admin ( 14 articles in 2001 )
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This program reveals why the banking industry has lost our trust and how some banks bend the rules and break the law. We reveal a bonus system which rewards bank officials for forcing businesses to the wall. Bank malpractices are revealed and the devastating effect that these have on the lives and businesses that are affected by them.

Reporter: Andrew Fowler
Producer: Ashley Smith
Research: Meena David

Bob Allen, Accountant: It's the biggest bit of bastardry I've ever seen in all my commercial life

Andrew Fowler: After more than a decade of free-market deregulation Australia's banks are out of control.

Diane Felkin, Former Advanced Bank Customer: One of the gentlemen actually said f you don't do it my way you're dead meat lady, which is a fairly, you know, put it this way I didn't miss-understand his meaning.

Andrew Fowler: Increased competition was supposed to have kept the banks honest. But it hasn't worked.

John McLennan, Former Senior Westpac Manager: If I took 300 million dollars from anybody and kept it for myself and was then caught out not paying it back and just said so sue me, I'd be in jail.

Andrew Fowler: Tonight on Four Corners we ask why the banking industry has lost our trust and reveal how some banks bend the rules and break the law in their pursuit of profits.

Title: Banks Behaving Badly

Andrew Fowler: Since deregulation, we're borrowing money like never before....$211 billion last year. And the banks are reaping the rewards. The National Australia is heading for another record 2 billion dollar profit. And shareholders at the other big three - Westpac, the Commonwealth and the ANZ are also celebrating another good year. There's no secret about how the banks got back on their financial feet after the disasters of the 1980's. They made their money by high interest rates They've also cut staff to the bone and shut branches in country and suburban areas to slim down their costs and boost profits.

But the leaner banks are also meaner. A record 17,362 people were bankrupted last year, more than at the height of the last recession.

Mara Bun, Australian Consumers Association: I think that the community at one point in time saw bankers as having a very special place in society. In fact bankers were respected, they were a source of advice and you could trust them. And I think financial sector deregulation has broken and shattered that special position of banks in society.

Andrew Fowler: Here at the annual general meeting of one of Australia's oldest banks - the ANZ, its chairman Charles Goode is targeted with inflamed allegations against the bank.

Lindsay Johnston has just lost his farm. His treatment reflects a banking policy now completely driven by profit. There's a system of bonuses from the boardroom to the bank shop front. But has the quest for profit eroded confidence in the institutions, particularly among small business and farmers?

In the past the banks delivered healthy profits and security. There was scant competition in a largely protected market place. Money was rationed. But in 1983 all that started to change. The Federal Government took the first steps in opening up Australia's financial markets to overseas competition. It cut lose the Australian dollar, allowing it to find its own level against other currencies. By 1986, 17 foreign banks had gained entry to Australia to provide another competitive spur. The mood was euphoric. The Australian dollar became the sixth most bought and sold currency in the world. We were truly part of the global economy. For the banks it was party time. A new kind of banker was emerging - driven by big bonuses for high sales. Money wasn't lent anymore, it was sold like a product.

John McLennan, Former Senior Westpac Manager: Banks introduced a system of management by objectives, which was spear-headed by Westpac, in which they became the sellers of products. They had to meet marketing targets, cost centres. Profit estimates had to be done for everything. And so, staff had to perceive themselves as used-car salesmen. It didn't matter about the quality of the service, as long as they got the product sold. And they shovelled it out the door.

Andrew Fowler: Mara Bun used to work for one of the world's top banks on Wall Street. Now she's Chief Policy Manager for the Australian Consumers Association , the ACA.

Mara Bun, Australian Consumers Association: For finance and for deregulation to work, there has to be a partnership. On the one hand, consumers have to be prepared to do their homework and shop around and really come to terms with what choices are out there. On the other hand, banks have to fully disclose what it is that consumers are entering into when they have relationship with that bank.

Andrew Fowler: This is Tom Quade's property near West Wyalong in south western New South Wales. The first hint of the problems that were to come from deregulation emerged very quickly with the now infamous foreign currency loans. Thousands of people like Tom Quade found themselves trying to keep up with repayments that spiralled out of control. Many went under. Others are still struggling to pay the debts they ran up.

It's a familiar story, but what's not so well known are the methods that banks used to hide vital information from their customers.

Mara Bun, Australian Consumers Association: You only have to look at the letters that come through not only to the ACA but to consumer bodies right across the country, from people who simply did not understand the conditions of what they were getting into, did not understand what other options were available to them. Based on those exact same conditions were not given full disclosure and information where they had a difficulty and a problem and had to really fight through the system to get any redress.

Andrew Fowler: Tom went to the bank to discuss how best to raise the money but he didn't know the full story and he wouldn't find out until nearly six years later.

Tom Quade, Farmer:
Q: You were with the Commonwealth Bank for quite a long time, did you think the Commonwealth Bank would give you the best advice that would be in your best interests?
A: We thought that they would have, or they would have give us the best facility that they had.

Andrew Fowler: Instead the Commonwealth Bank offered Tom Quade one of the most risky ways of all to borrow money - a foreign currency loan - $600,000 worth of Swiss Francs at low interest rates. A bargain until the Australian dollar took a dive.

Tom Quade, Farmer: In no time, well I suppose two or three months, we'd done you know, something like a hundred thousand dollars or were going down very quickly, and we couldn't do much about it. Like the gambler, we had to go on.

Andrew Fowler: By now the debt had ballooned to $1.2 million. Tom was having difficulty meeting the repayments and when that happened the Commonwealth Bank moved in to take his farm and sell him up.

John Griffin, Lawyer: He shouldn't have ever been borrowing in foreign currency. He's exactly the sort of person that shouldn't have been borrowing and it would be wrong to put such a person into a foreign currency loan if you knew all of the tricks to foreign currency loans. Clearly he didn't. And whoever told him to go in or helped him go into these loans led him astray in the worst possible way.

Andrew Fowler: In Tom Quade's case he'd been clearly sold a pup. The problem was proving that the bank knew at the time it was a dodgy deal. Tom took the bank to court. Tom and his lawyer knew the bank had the documents that would incriminate the bank. The problem was getting hold of them. They should have handed them over during what's called discovery where each side in a court case exchanges relevant documents. But it didn't happen

John Griffin, Lawyer: We couldn't get access to them. That was the major problem. The bank made some documents available during the discovery process, but the specific documents that I was trying to get hold of weren't made available.

Andrew Fowler: Tom Quade 's case fell to pieces. The Federal Court ruled in the bank's favour. In desperation he rang John McLennan. McLennan had been a bank efficiency audit manager in the 1980's. Now he was working for the consumers. He would be a key figure in unlocking the bank's most closely guarded secret files. McLennan was prepared to risk all for what became known as the G documents. They were vital for Quade's case. But Quade hadn't got them.

John McLennan, Former Senior Westpac Manager: Those documents were internal memorandum and documents raised within the bank about the foreign currency loan product. They contained quite incriminating and devastating information about the bank's mismanagement of the foreign currency loan product.

Andrew Fowler:McLennan could have been jailed for what he did next. He knew about the G documents because he'd seen them in another court case. But legally he wasn't allowed to pass on that information. McLennan went to see Quade's lawyer.

John McLennan, Former Senior Westpac Manager: I said look these documents exist and we were the able to then, I mean, he was stunned because he obviously felt well I've run a trial and I've had my arms tied behind my back. Vital evidence is missing from that trial.

Andrew Fowler: McLennan managed to identify the documents without breaking he law. The tactic worked and the bank handed them over.

John Griffin, Lawyer: Bearing in mind that I was continually asking for these same documents during the course of the Hearing and wasn't getting them, then it's pretty hard to say that it wasn't, at some point with somebody, a tactic to keep those documents from me.

Andrew Fowler: If it was true that the bank had deliberately not handed over the documents, the Commonwealth Bank would have been in contempt of court. But no-one was holding their breath that a banker would be thrown in jail.

John Griffin, Lawyer: Perhaps it says that the judges hold the banks in high esteem and don't believe that they would deliberately carry on a tactic like this. It's very dirty play and it's pretty tough to go and accuse somebody of such dirty play.
Q: But if something like this occurs again and again and again?
A: As it does.
Q: Then it would be unusual not to think that it was a deliberate policy wouldn't it?
A: Yes.

Andrew Fowler: Federal Court documents give us a glimpse of the G documents. First how the Commonwealth Bank was pushing foreign currency loans to people like Tom Quade. A head office memorandum for the general manager referred to the promotional drive for foreign currency loans and suggests an objective to expose as many people as possible to this type of lending. And according to this memo from head office, even the bank's staff didn't know what was going on. It is now apparent that many of our staff do not have an adequate understanding of the risks involved and were not well placed to advise potential foreign currency loan borrowers.

Armed with the G documents, Tom Quade launched an appeal to the Full Bench of the Federal Court The Full Bench ordered a new trial.

John Griffin, Lawyer: Basically what they said was the documents that were not given over at the time of the hearing were of such a vast number that, taken as a whole, they indicated a state of knowledge in the bank and a state of lack of knowledge in Tom Quade, that if that information had been before the trial judge, he would have found in favour of Tom Quade.

Andrew Fowler: But there would be no new trial. After six years of fighting, the Commonwealth Bank settled. The details still remain secret but Tom Quade kept his farm. In retrospect he counts himself among the lucky.
Q: And now you've got the property anyway - you didn't lose it, which was the important thing.
A: We didn't lose it but we went terribly close, as close as you can go without going over the edge, because of the banks. If they'd had their way, they'd had us out in '87. That's when they made the move on us and - but it didn't come off - fortunately for us.

Lyndell Fraser, Commonwealth Bank: We believe that we had taken the right approach, certainly there were some additional documents which we didn't believe were material and we provided...
Q: A whole bundle of them, I mean not just some, I mean a whole bundle, a load of documents. It took a long time to go through, not just 3 or 4 - many documents.
A: There are some documents, we believe they weren't material. And we also believe that our actions by the approval letter, by the information that had been given to Mr Quade certainly went to pointing out to him the risks of foreign currency loan borrowing.
Q: But that isn't what the judge decided, was it, that wasn't what they decided?
A: It's certainly what we tried to do.
Q: They decided that you were wrong in the way that you treated Tom Quade, and they decided that armed with this welter of new evidence that in fact there should have been a new trial.
A: We didn't believe that additional new material was significant.
Q: What role do you think the G documents played in the bank strategy?
A: The G documents are evidence in many areas. The effort that the bank made to make sure that customers were aware of the risks involved in foreign currency loan borrowing.
Q: And in other areas they were very significant in pointing out how the Commonwealth Bank had a strategy of pushing out as many loans as possible, and according to this judgement in the Federal Court, a general lack of care in the advice given.
A: Our approach was based on trying to help our customers understand the risks.

Andrew Fowler: De-regulation ushered in a host of changes, key among them the bonus system. It gave chief executives salary packages tied to the share price. The more money the bank makes...the higher their potential bonuses can be.

Bob Joss, Westpac -- Salary $1.8 million. If he meets all his targets his bonus could make him $21 million richer.

Don Argus, National Australia Bank -- Salary $1.7 million and bonus shares worth $3.5 million.

Don Mercer, ANZ -- Salary $1 million. Bonus shares worth $1.3 million.

David Murray, Commonwealth Bank -- Salary $800,000. Bonus shares if he meets performance targets.

John McLennan, Former Senior Westpac Manager:All bankers are paid on performance with bonuses. They all have an annual appraisal and at the end of the year, they size it up. If they've done extraordinarily well, they get paid substantial bonuses.

Kevin Nowland, Former Senior Bank Manager:
Q: How far down the chain does it go?
A: Well it goes right to through to the lending officers these days. The lending officers, as opposed to the past, receive commission on the business that they write.

Andrew Fowler: Coffs Harbour on the NSW North Coast. A six year dispute here shows just how dangerous such a bonus system can be.

Angela Greenwood, Former ANZ Bank Customer: Well they're basically saying that the bank had no authority to debit the account.

Andrew Fowler: When Angela Greenwood and her husband migrated to Australia from England in 1986 they invested $800 thousand in the ANZ Bank. It should have been as safe as houses, but instead her husband was gambling it away on the foreign exchange market.

As these documents show, Angela Greenwood had no way of knowing what was going on. Bank statements she should have seen were being collected by her husband directly from the bank.

Angela Greenwood, Former ANZ Bank Customer: And I said why has dad sent 25 thousand dollars for us? And - because we were supposedly quite wealthy. And he just said it's all gone. And I said what's all gone, what do you mean? And he said it's all gone. And I said I don't know what you're talking about Chris, what do you mean? And he said the money has all gone, we haven't got anything left. And that was the first I knew that from emigrating with about 800 thousand dollars, that in 18 months he had lost the lot.

Andrew Fowler: Under the banks rules there was a clear obligation to inform Angela Greenwood. She confronted the ANZ Bank for an explanation. Why hadn't she been told her husband was using their joint account to gamble on the highly volatile foreign exchange market?

Angela Greenwood, Former ANZ Bank Customer: Their response was that it was really none of my business if my husband chose not to tell me then it was, it was between the two of us, it wasn't their responsibility to tell me what was happening.
Q: What did you think of that kind of response?
A: I was very cross, very annoyed and that's when I decided then that I was going to sue the bank.

Andrew Fowler: Angela turned to local lawyer Catherine McKimm. But like Tom Quade before her, she would be frustrated in her attempts to discover the documents which would prove the bank had broken its own rules.

Catherine McKimm, Lawyer: It was almost impossible to find a former bank manager who was prepared to put at their hand and say yes I'll help you beat the banks.

Andrew Fowler: Again, like Tom Quade, she would turn to John McLennan for help.

Catherine McKimm, Lawyer: John was the renegade that we were looking for. He was the Banking Manager who had gone to the other side and who was prepared to work for the consumers.

Andrew Fowler: The struggle to force the ANZ to find the documents dragged on.

John McLennan, Former Senior Westpac Manager: Those documents were documents about the sorts of procedures, prudential procedures that ought to have been adopted inside the ANZ Bank to protect people such as Angela about the very thing that happened. The prudential procedures about establishment of basically gambling limits such as foreign currency dealing limits, procedures about the steps that ought to be taken to ensure that husbands and wives are fully informed of what each party's doing and so forth and so on.

Andrew Fowler: At the end of the second year, McLennan decided to take direct action in the court.

John McLennan, Former Senior Westpac Manager: So I took the risk and in that hearing stood up at the back of the Court and made myself known to Justice Einfield and said well you know, I know what the documents are - they do exist. And he quite kindly said to me well there you have Mr McLennan, wished me Merry Christmas and said he'd probably know where all the documents are and you get them any way you like. They can fall off the back of a truck.

Andrew Fowler: Angela Greenwood got the documents she needed. Four Corners has obtained a letter written by lawyers Blake Dawson Waldron to its client the ANZ Bank warning them that there were grave doubts the bank could win the case. It argued that any authorisation Angela had given the bank was in relation to the joint account she ran with her husband rather than the foreign exchange dealings which are at most only indirectly related to the account. The letter added that no specific authority from Angela Greenwood was held by the bank which expressly authorised Mr Greenwood to enter into such contracts. This letter from the ANZ's lawyers was written in October 1989. The case would drag on for another five years before it was ended with a secret out of court settlement.

Catherine McKimm, Lawyer: It suggested that the bank, knowing that or having received advice that their actions could not be supported at law, continued to fight this case, in my opinion, in the hope that they would basically drive Angela Greenwood into the ground and she'd go away.

Andrew Fowler: ANZ declined an on-camera interview but denied an impropriety by the bank. What the Greenwood case revealed was clear evidence of why bankers are prepared to take such risks financing currency gamblers in defiance of bank policy and even legal advice.

Catherine McKimm, Lawyer: Now, we had suspected early on in the piece, that the local branch and the local bank manager would have received quite a lot of benefits and advantages by virtue of being able to turn over the volume of money that they were through the foreign exchange contracts. Initially, of course, the bank considered that that was irrelevant, to our case we considered it very - it was very relevant, because it gave the bank the motivation to deal only with Chris Greenwood and not to deal with Angela Greenwood.

Andrew Fowler: The bonus system has other problems. The quicker a bank knocks over an ailing company he better the bankers potential bonus.

Rod Zemanek has built breweries in Australia and China. He built his company up over more than a decade. He's banked with the Commonwealth Bank for 45 years. Zemanek was on the verge of signing a $12 million contract to build a brewery in China when the Commonwealth moved against his company.

Rod Zemanek, Small Business Owner: That was our tender price. The actual contract, interestingly enough, the contract was let to a Germany company, after our demise, for $15 million US, so we were by far the cheapest tenderer.

Andrew Fowler: Chartered accountants Ferrier Hodgson which specialise in insolvency believed that Rod Zemanek's company Predict was viable and could have been saved. Four Corners have obtained a copy of their report. The executive summary addressed to the Commonwealth Bank says I would suggest the bank refrains from taking any action as the company is demonstrating genuine attempts to gain an equity investor. And it may also be that the company can demonstrate a position to the Commonwealth Bank that its security position will be enhanced if the company is able to trade on.

Rod Zemanek, Small Business Owner: We didn't need any more money, it would have been nice to have a little bit more money, but we had cash flows which showed conclusively that we could operate and successfully, with the money we had from the bank.

Andrew Fowler: Rod Zemanek believes his company was lost once his account was moved by the Commonwealth from its business banking section into the NSW lending section.

Rod Zemanek, Small Business Owner: They're charged with recovering assets and the more cents in the dollar that they can recover, the better they're doing their job and therefore the more chance they're likely to get a raise, a bonus or a step up the greasy pole.

Andrew Fowler: Zemanek has now started both criminal and civil proceedings against the Commonwealth Bank.

Lyndell Fraser, Commonwealth Bank: The bank's view is that we have given Mr Zemanek's company long-standing help over many years, but there are complex issues which are now before the court which go to their solvency and a profitability of that company and equity. But at no stage have our customers been affected by some sort of notion of a bonus system for staff to put people out of business.

Andrew Fowler: Profit is one thing but the notion of trust has been so eroded that some banks have conducted vindictive campaigns against aggrieved customers.

Andrew Fowler: Diane Felkin, an accountant and her husband Glen, an aircraft engineer sold their home in Sydney and moved here to Bateman's Bay on the NSW South Coast. They sunk their savings it into what looked like an ideal business venture - a caravan park overlooking some of Australia's most beautiful beaches.

Diane Felkin, Former Advance Bank Customer: You know, we were still in our mid 30s, it was a good opportunity to buy a future for our kids as much as anything else and get us away from the city, where we wanted to be.

Andrew Fowler: They had always banked with Westpac but their troubles started when they followed the manager when he left Westpac and joined the Advance Bank in Bateman's Bay in June 1988.

Diane Felkin, Former Advance Bank Customer: He put together a loan package that really turned out to be too good to refuse. It took all the security off our home, combined the working overdraft that we had and the commercial bills we had with Westpac into one neat little package.

Andrew Fowler: But there was a big problem. The bank manager didn't draw down enough money to fully pay out that commitment.

Diane Felkin, Former Advance Bank Customer: There was a short-fall that we knew nothing about - that we were not told of, we were not told that the original loan didn't cover the borrowings to Westpac.

Andrew Fowler: By the time the Felkin's found out it was too late and the debt had ballooned out to $540,000 - that's $52,000 more than they had budgeted for. With interest penalties it was getting bigger every week. Repayments then got behind. Diane was summoned to the bank for an extraordinary meeting of demand concerning her family's affairs.

Diane Felkin, Former Advance Bank Customer: I was sitting, as I'm sitting talking to you now and the four of them were standing in a row staring at me, so I'm sort of completely surrounded by the - these big men telling me that I would do it their way, or else. I think the facts speak for themselves. They crucified us.

Andrew Fowler: Diane and her husband told Four Corners they were harassed and when legal papers were served at home it was their 13 year old son who opened the door.

Diane Felkin, Former Advance Bank Customer: I pulled up as this guy was shoving this paper at David and David had his arms folded, and he shoved it into his arms and swore at him, and said you've been served! And David opened his arms so the paper fell on the ground, and he said I'm 13 years old, you can't do this to me. And he picked it up and he shoved it inside David's shirt. And he said you little so-and-so, you've been served. And I called the police.
Q: What did they do?
A: They told me it was a civil dispute and they would certainly come past and check the house though, when the boys were there on their own, and I should take it up with a solicitor and counter- sue them for doing this. Well, I mean, we'd just really had enough of counter-suing and suing - all I had was a very distressed child to take care of.

Andrew Fowler: Before the year was out, the sheriff served more papers.

Diane Felkin, Former Advance Bank Customer: David was a very quiet kid, never lost his temper, never lost his cool, he was a very self-confident calm young man, and that night he lost it. He screamed at the Sheriff to go away and get a decent job, and he actually said to me - .he walked down the stairs in the house and he said Mum, they will never be happy until we are all dead! And he died the next morning. My sister went out into the back yard and she found him in the back shed - the shed in the backyard. He'd taken one of his father's rifles and shot himself.

Andrew Fowler: The family had been under tremendous financial pressure. The bank had taken the caravan park, Glen had been forced to return to work in Sydney.

Diane Felkin, Former Advanced Bank Customer: David's best friend in the whole world was his father. When David had a problem dad sorted it out and dad wasn't there. It was the bank's fault that dad wasn't there.

Andrew Fowler: Five months after her son's funeral, another bank official, but one she'd never met, contacted her.

Diane Felkin, Former Advanced Bank Customer: One of the bank officers rang me at work and said if I persisted with the Court action, he would have my second son taken away from me, and have me declared an unfit mother. It wouldn't be hard to prove, seeing my eldest son had killed himself to get away from me. And I felt even harder after that.
Q: Is that what he said?
A: It's exactly what he said.

Andrew Fowler: Diane Felkin has told Four Corners she has a witness to that conversation and has sworn an affidavit that the conversation took place. The bank manager who approved her loan has since left the bank. Four Corners is not suggesting that the Advance Bank knew or approved of the conduct of one of its officers. Indeed the bank denies all the allegations that Diane Felkin makes. The Felkin's are now in court. According to the Small Business Association, there's anecdotal evidence that up to 60 percent of small business people have had troubling experiences with their banks.

For Lindsay Johnston it became a one way street to financial ruin.

Bob Allen, Accountant: "It's the biggest bit of bastardry I've ever seen in my commercial life."

Andrew Fowler: It all started in 1994 when, according to Lindsay, the ANZ demanded the title deed to his parents home as security over a $2 million loan to his farming business near Albury in Southern News South Wales. Johnstone refused. A year later the title deeds had disappeared from his parents safe custody envelope at the ANZ and in the end, Lindsay says, they turned up at the offices of the ANZ's Lawyers Corrs Chambers Westgarth in Melbourne.

Bob Allen is Johnston's accountant. He used to work for the ANZ and was amazed when the deeds were discovered.

Bob Allen, Accountant: I've never heard of it before. I have never heard of it before. That's sacrosanct, you don't do those sort of things. I mean, they charge a fee for having that safe custody package there, for the safeguard of that package so there should have been no reason for it.

Andrew Fowler: Johnston complained and then argued about the Bank's charges and fees. Next the bank chose to bounce a cheque.

Bob Allen, Accountant: There was funds to meet the cheque that they deducted on that day. They think they're a law unto themselves.

Lindsay Johnston, Small Business Owner: Now it's my belief that the bank was doing this at this time in response to the flack that I'd created earlier over the safe custody package and the fact that I was pressurising them over the fact that they'd been overcharging in fees. What they did was, the more I fought them to get justice, the more they became determined to put me down.

Andrew Fowler: Johnston and the ANZ are now in court. The Bank in a statement to us denied any impropriety.

Mara Bun, Australian Consumers Association: It doesn't surprise me at all that individual consumers and groups of consumers are actually taking to the courts to make their point. And although we're not a society that likes to litigate all the time, we certainly don't fortunately follow the Americans in that sense. We are a society that's based on, you know, basically having a shot at exerting your rights. And so I think it's likely that we will continue to see people going to the courts.

Andrew Fowler: There seems to be a deep malaise within the banking system. Four Corners has obtained documents which suggest the Advance Bank may have been breaking the law. Sensitive records were ordered to be destroyed. One internal memorandum dated December 1991 told director and executives how to fiddle their insurance cover. The insurance was for personal indemnity in case a member of the bank's staff was sued. According to the memo it was a condition of the insurance policy that the staff pay the premium - to be effective the individual Directors and Officers concerned must contribute personally towards the premium the memo said. Yet in an attached note staff were informed - your portion of the directors and officers liability insurance may be reimbursed through your normal monthly expense claims. The note was headed Destroy Do Not Retain.

It added some advice on hiding the rort - do not claim for the full amount at once but spread it over the next two months. It told the staff do not describe these items as a reimbursement of insurance premiums. They should be shown as entertainment. Another document sent to executives of the bank dealt with the bank's so-called suspense account. Four Corners has been told that the suspense account or slush fund allows expenses to be deducted from taxable income. It was a way of reducing income tax and payroll tax.

Once again the letter from the bank's executive assistant to the managing director added records will be destroyed apart from balance outstanding. Four Corners asked the Advance Bank which is now merging with the St George Bank for an on-camera interview. They declined. Despite providing the Advance Bank with full details of the documents, the bank said they were unable to locate them and so make a proper response.

Another audacious practice has reaped banks a huge bounty. Clients taking out foreign currency loans were being charged a withholding tax - a tax that in many cases should have been paid by the bank.

John McLennan, Former Senior Westpac Manager: The ANZ bank then was caught out recently with - on the withholding tax question and put its hand up and said yes, we wrongly deducted in excess of 30 million dollars in withholding tax from borrowers and we kept it for ourselves and we didn't pay it to the Tax Office and - and whoops, here you are - you can have it back!

But in the meantime, many of these people had either gone into bankruptcy or had lost huge amounts of money. But not all the banks have handed back the money. Westpac in particular, with its huge number of overseas loans, is hanging on to it. A judgement against the bank ruled one of its customers should never have paid $500,000 in withholding tax. The effect of the judgement was that Westpac should reimburse the customer for the amount of the tax. But Westpac is not repaying the money to its other foreign currency customers.

John McLennan, Former Senior Westpac Manager: By my calculation, that amounted to some 300 million dollars. Now what has happened is that the bank has said well, fine, you know there's a judgement, but each individual borrower will have to sue us for that amount. In other words, it knows it's wrong, but it just says so sue me. If I took 300 million dollars from anybody and kept it for myself and then was caught out not paying it back and just said so sue me, I'd be in jail. People go to jail for a lot less than that. But if you're a bank, it seems you're above the law.

Andrew Fowler: Westpac said in a statement to Four Corners that all the withholding tax it had collected had been paid to the Australian Taxation Office. It added that there were a number of defences available to banks against claims for re-payment

Kevin Nowland, Former Senior Bank Manager: You put the opening balance on your statement OK and then you put in your interest details.

Andrew Fowler: Most of us fall victim to the banks single-minded pursuit of profit, mainly in little ways.

Kevin Nowland was a senior banker for 11 years - a chief manager in charge of three divisions when he left. Now he runs The Interest Savers - a company that watches his old employers - the banks. He developed a computer system that ferrets out the mistakes in bank statements. The mistakes are nearly always in the bank's favour. His computer software package can run an instant check on any bank account revealing exactly where there's an error.

Kevin Nowland, Former Senior Bank Manager: We've tried to make the program very, very simple and easy to use.

Andrew Fowler: The basic facts about an account, the interest rate, the overdraft rate. The daily balance are keyed into the computer. And the program then works out whether the totals match up with the bank statement.

Andrew Fowler: The business is in its early days, but so far 95 per cent of the errors he's discovered are in the banks' favour.

Kevin Nowland, Former Senior Bank Manager: I think the most significant one, from my point of view - from a client is that in checking back over the last 54 months, that's four and a half years, that client found in 30 months out of 54, that he had been over-charged. I mean that's almost 60% of the time he'd been over-charged.

Andrew Fowler: It's now more than a decade since the big bang of deregulation. The cases we've highlighted tonight are dreadful but not exceptional. Four Corners has spoken to many more people who tell equally harrowing stories. Self-regulation is clearly in trouble. Accountability and a transparent system of complaint resolution, particularly for small business is a missing component in the deregulated environment. There have been attempts to reign in the excesses of the banks. But the last effort, the Martin Inquiry's report, a Pocket Full of Change, in fact changed hardly nothing.

John McLennan, Former Senior Westpac Manager: The Martin inquiry was like an nice coffee chat session. We all naively thought that something tangible was going to come out of the Martin Inquiry. But the point about it was that virtually none of the recommendations of the Martin Inquiry had any teeth. There was no punitive powers, there was no powers to coercively obtain documents or to obtain evidence.

Andrew Fowler: The Martin Inquiry recommended the Banking Ombudsman accept complaints from small business but it didn't happen. The move was opposed by the Australian Bankers Association.

Mara Bun, Australian Consumers Association: There should, in the same way as individual consumers have a way to exert their rights of the banking industry ombudsman, which is an independent port of call in between, in a sense, the industry and the consumer, small businesses, other businesses, must have somewhere to go or else we're gonna spend an awful lot of money, and tie up our court system, on resolving problems that really can be mediated.

Rod Zemanek, Small Business Owner: Now I'm a small to medium business with a growth potential. My growth potential's been snuffed out at the point where we're just about to be in a position to make major breakthroughs. Now if that continues, then the only people who will have a job will be the politicians and the bankers.

Andrew Fowler: Soon we'll be deluged with the findings of yet another report into the banking industry. The Wallis Inquiry was set up to provide a stock-take of what's happened since deregulation. But don't expect radical change. Judging by the past, whatever happens the banks won't be called to account. And their most precious asset - trust will be hard to regain.

Rod Zemanek, Small Business Owner: You've had all your money taken. You've had your self-respect taken. You've had the people that you owe money, your creditors hate you because you've lost their money. Your staff hate you because you've let down their careers. Their families have depended on their jobs. They've worked their guts out for you in China and in Australia etc. You feel very ashamed. And it's very tough.

Diane Felkin, Former Advanced Bank Customer: You see, no matter what happens, no matter how this ends, David will never walk in that door, and that's the bottom line. They took not only, you know, physical possessions, they took our self-respect, they took our confidence and they took our son.


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