National Australia Bank’s highest officials knew the scale of compensation that was likely to be paid to members in an overcharging scandal, but withheld that information from the corporate watchdog when it released its full-year results, to prevent negative media coverage, the Hayne royal commission has heard.
In an intense afternoon session opening week two of the commission’s focus on the superannuation industry, NAB chief customer officer Andrew Hagger was questioned about a conference call with chief executive Andrew Thorburn and chief operating officer Antony Cahill over the weekend of October 22, 2016, when they discussed what to tell the Australian Securities and Investments Commission.
With Hagger fronting the commission, senior counsel assisting Michael Hodge argued that the fact the board of NAB super trustee NULIS Nominees had not approved a remediation plan should not have prevented NAB from making an accurate estimate to ASIC leading up to the regulator’s bi-yearly report.
Had ASIC had a true picture of the plan, the report, which was released on October 27, would’ve mentioned NAB as “the worst of the banks”, Hodge said.
The report had come at an extremely sensitive time for NAB, as the regulator released it on the same day NAB released its full-year results.
Much of Monday’s afternoon session concerned a phone call Hagger made to ASIC commissioner Greg Tanzer on the morning of October 24 to tell him the board was close to making a resolution about compensation for SWiFT and Encompass members. Hagger had learned ASIC was planning to include its findings about overcharging of members of The Employee Retirement Plan but did not yet know the scale of the problem for members of other NAB products.
Hagger insisted he had “given an indication to Tanzer…in roundabout terms” of the growing dimensions of the scandal.
While he didn’t want to “front run” board discussions, if ASIC wanted to know more about those issues, it could “let me know”, Hagger recalled telling Tanzer.
He said this was part of an open and transparent communication with ASIC.
“It was a very open door, Mr Hodge,” Hagger said. “I don’t think it could be any more open. If he wanted to know anything further about any of this, please let me know,” he told the commission he had said, emphasising the “any” in both instances.
During that phone conversation, he said he had told Tanzer that if the report came out “in, say, a week or two”, he could potentially let ASIC know the board’s position.
He also gave Tanzer “a little hint” that NAB would ultimately decide on an full compensation to members who were charged fees and not provided a corresponding service, he told the commission.
Hodge asked him if being open meant it was up to ASIC to specifically ask for the amount of compensation, and put it to Hagger that he knew that if ASIC knew the full amount of compensation being considered “NAB would no longer be [named in the report as] just one in the middle of the pack”, but rather “the worst of the banks”.
Hagger replied: “Mr Hodge, this is a positive, proactive communication to ASIC. It’s actually the sort of thing that ASIC wants in a constructive relationship…”
An increasingly frustrated Hodge pointed to internal communications involving Hagger about being “reactive from a communication perspective, given, as drafted, NAB is seen as just one ‘in the pack’ rather than called out as an outlier”.
Hagger said the bank’s policy with the media was unrelated to its approach with ASIC.
He later acknowledged the report naming NAB as involved in the overcharging scandal was “potentially an issue of the day”. He knew the full-year results would be released on Thursday, the media would be quite involved at that time, and “that was all being factored in and worked through that following week”, Hagger said, although he wasn’t involved in the media strategy.
He said he had stepped out of a board meeting when he called Tanzer, and admitted to Hodge that, at that time, the board had already that morning resolved to approve full remediation, but he did not tell Tanzer. The reason he gave for this was the trustees could have asked for further work or clarifications, which could have extended timelines.
When the trustee went on to pass a resolution to award full compensation on October 26 – the day before the ASIC report was released – Hagger said he did not contact ASIC to provide the updated compensation number. It wasn’t until November 3 that ASIC was told the entire scale of compensation in an NAB presentation.
Monday’s session was gruelling and involved Hagger throwing what seemed like subtle barbs at Hodge.
Hagger said at one point, when Hodge put to him that the entire strategy was his call: “Yes, but what I’m distinguishing for you, Mr Hodge – and sorry for being pedantic – I know it can sometimes seem complicated but…”
“It doesn’t seem complicated,” Hodge interjected. “It seems very simple, Mr Hagger. You made a decision that you were not going to tell ASIC about the amount of compensation.”
At another point, Hagger remarked that Hodge was “making a lot of the dollar figure” that may not have been given to ASIC.
Hodge later told Hagger to “answer my questions instead of giving speeches about other things in an attempt to bolster your position”.
“Mr Hodge, I understand you want me to be succinct and I will try very hard to do that in relation to making speeches to bolster my position,” Hagger replied.
Hodge later referred to evidence showing NAB had admitted that, on 84 occasions, it had not provided a significant breach notice to ASIC within the required 10 days.
“Does NAB regard breaches of the Corporations Act as serious?” Hodge asked.
“Yes we do,” Hagger replied.
A representative from Suncorp takes the stand on Tuesday.