Financial planners were hired on small base salaries with the lure of being able to earn hundreds of thousands of dollars a year in fees, bonuses and commissions. Each month a league ladder was emailed to all the financial planners, at branch, state and regional levels, with their rankings listed from highest to lowest. These rankings were based on revenue written and showed how each planner fared against their target and against each other. Planners who didn’t meet their targets had to submit to management a ‘Diary Review for Appointments’ with an explanation of why they had failed to meet the targets and how they proposed to do better next time. Those who hit their targets celebrated at places like Otto, an Italian restaurant in Sydney’s harbourside Woolloomooloo, before moving on to a seedy strip joint in Kings Cross; in Melbourne such celebrations often ended at Spearmint Rhino, a strip joint in Melbourne’s King Street.
It was a pressure-cooker environment where probity and ethics fell by the wayside – and ASIC knew all about it.
*
On 30 October 2008 – seven months after Jeff Morris joined the Commonwealth Bank – he met three colleagues at the Buena Vista Hotel in Sydney’s Mosman to exchange horror stories about what was going on at CBA. The catalyst for the meeting was their shock and dismay at the news that one of CBA’s star financial planners, Don Nguyen, had received a promotion.
Nguyen was known around the traps as ‘Dodgy Don’. His legendary ability to sign up new customers had placed him at number one in the bank’s internal financial planning league table in 2007. That year, he had signed up $39 million of customers’ money for the bank – more than three times his target.
But Dodgy Don had been caught charging improper fees to customers, putting them in inappropriate high-risk products and paying cash backhanders to bank tellers to get them to send clients his way. He had even been caught selling a life insurance policy to a dying man who could never claim. The bank had suspended him in June 2008.
During his suspension, Nguyen’s clients poured through the branch’s doors in a state of anxiety about their loss of income, which had fallen more than 50 per cent in many cases. Some were on walking frames, others had heart conditions, emphysema and dementia. Morris had been asked to deal with them, and it had shaken him up.
‘It was obvious to me from looking at some of Don’s [client] files there was a systemic problem with his advice that needed to be addressed,’ Morris recalls. ‘Rather than do the right thing and just put their hands up and compensate the victims, I could see from their reactions to the complaints that management was going to force these non-expert clients to prove their claims on an individual basis. They were working on the assumption that none of the clients would ever be able to “join up the dots” [to see the systemic nature], and [they] could thus be fobbed off individually. I realised with a shock that the organisation would almost certainly get away with it unless somebody intervened and blew the whistle on them.’
To Morris’s consternation, he had learned before the 30 October Buena Vista meeting that not only had Don been reinstated, he had been promoted to senior planner. As the four men downed beers and discussed what to do about Nguyen, they agreed to become whistleblowers and call themselves the ‘Ferrets’ to protect their identities.
Morris went home that night and wrote a letter to ASIC, on behalf of the Ferrets, detailing their concerns. He outlined corruption and misconduct at CBA and how innocent people were losing their life savings. In the letter he warned there was a ‘high level conspiracy at Commonwealth Financial Planning to conceal repeated material breaches/corruption/gross incompetence of planner Don Nguyen resulting in losses to clients of tens of millions of dollars’. Morris wrote that Nguyen, who had been with the bank since 1999 and controlled an estimated $300 million in investments for 1300 clients, had a history of dishonesty breaches, which resulted in questionable advice to clients. He said CBA had chosen to turn a blind eye to Nguyen’s behaviour because he brought in millions of dollars in sales.
Morris also described the aggressive sales culture at the bank: ‘In the current difficult climate planners are now being threatened with the sack if they don’t meet their sales targets.’ He concluded his letter with an urgent message for ASIC to hurry up and investigate because customer files were being ‘cleaned up’.
The evidence was compelling. Yet ASIC would take sixteen months to launch an official investigation.
*
Meanwhile, it was business as usual at CBA. In December 2008, just weeks after Morris had written to ASIC and Nguyen had returned to work from suspension, Nguyen and one hundred of the bank’s top financial planners were flown to Auckland for an annual three-day bash in honour of the bank’s biggest earners, the so-called ‘diamond alliance’. Dressed to the nines in 1980s fancy dress, the bank’s elite picked up awards and trophies for a job well done.
What was particularly galling to Morris was that very day CBA had announced to the market that it had frozen seven CBA-owned Colonial First State mortgage funds containing $3.3 billion worth of investors’ money. In other words, it had suspended the right of 61,000 investors to withdraw their cash from the funds.
CBA was one of several Australian financial services firms to freeze redemptions on such funds, some of which had suffered a surge in withdrawal requests following the Rudd government’s move to guarantee bank deposits (but not mortgage funds) as the GFC gathered steam. Yet it had been CBA advisers who had persuaded many of these customers to switch from the safety of term deposits to mortgage funds with higher interest rates, mainly because these funds gave the financial planner and the bank a fee and trailing commission (0.44 per cent) that they didn’t get from a humble term deposit. In many cases, it was part of a last-ditch effort by planners to reach their sales targets and boost their funds under management so that they could earn their end-of-year bonus – and qualify for the international three-day conference.
As Morris and the other Ferrets saw what was going on, they became increasingly despondent about ASIC’s inaction. They kept writing, and ASIC kept fobbing them off. In March 2009 ASIC told them: ‘As advised the issues raised in your complaint [have] been referred to ASIC’s Financial Advisers team. It appears that the issues are still currently being considered and we will contact you in due course.’2
Frustrated, the Ferrets tried to work out how to get ASIC motivated. Abandoning anonymity and marching into ASIC was canvassed and rejected. Some Ferrets had begun to suspect that a too-cosy relationship with the bank, rather than mere incompetence, lay behind ASIC’s inertia. Instead, on the morning of 2 June 2009, Morris walked into CBA group security, the bank’s internal fraud and investigation unit, and blew the whistle on management’s attempt to cover up the Nguyen scandal. He didn’t tell them he had already written to ASIC or that there were other whistleblowers involved.
A few hours after the interview concluded, at 2.51 pm, an email was sent from a senior manager in the compliance department to CBA managers with the subject line: ‘Don Nguyen Case’. It said, ‘Group security have asked that any new information be forwarded through to [a CBA lawyer] in legal prior to being forwarded to them. This is so that we have legal privilege over the documents in the event of any legal proceedings.’ That meant any incriminating documents could thereby remain secret. It was an attempt, in other words, to use ‘legal privilege’ to conceal documents in the event of lawsuits – or regulatory action – in relation to Nguyen.
The email showed Morris that group security couldn’t be trusted. So, to force CBA to act, Morris followed up with another, anonymous email to group security and senior CBA management, titled ‘“Dodgy” Don Nguyen Conspiracy’. It named names and included a copy of an internal file note one of the Ferrets had found in a bin. Dated 15 October 2008, it was a transcript of the meeting at which Nguyen had not only been reinstated after his suspension for ‘fraudulent activity’ but promoted to senior planner and given a book of more clients to work his magic on. This primary document confirmed the Ferrets’
allegations about a management cover-up.
‘More bombs exploded at CBA as the group security men started to bounce managers around interview rooms seeking answers,’ Morris recalls. He was sitting at his desk when he heard one of the managers in his area bleating to another about how he’d been hauled into group security: ‘They had everything, the file note, every email I’ve ever written.’ Morris then overheard the same manager asking Nguyen to come in for an ‘update’ meeting with the head of Commonwealth Financial Planning at the Colonial Centre.
In July 2009, Nguyen resigned, citing ill health as the reason for his resignation. That enabled him to lodge an income protection claim, estimated at $70,000 a year, with CBA’s life insurance arm, CommInsure. Nguyen was allowed to resign and keep an insurance payout that he would be allowed to collect for years, while his clients were fobbed off with little or no compensation, and other former staff, like loyal executive Peter Beck, are still fighting for entitlements they believe they are rightly owed.
A team was brought in to go through Nguyen’s customer files, along with the files of other dodgy planners, but to the Ferrets’ increasing astonishment, senior management at CBA didn’t fire anyone. Instead it allowed some of the wrongdoers to collect their hefty bonuses and move to other financial institutions, where they work today. Others were kept on and promoted and still work at CBA.
By February 2010 Morris and one of the other Ferrets had had enough and decided to go in person to ASIC’s head office in Sydney’s CBD to see if that would get the regulator to act. It worked. Three weeks later ASIC wrote to CBA to say it was planning to launch an investigation. Morris remembers the office around that time. ‘ASIC giving them the heads up they were coming in resulted in files being sanitised or suddenly disappearing. Liquid paper was in demand,’ he says.
Around the same time, class-action law firm Maurice Blackburn started sniffing around and sending CBA victims to ASIC. John Berrill, who was a senior partner at Maurice Blackburn, had been contacted by victims of Don Nguyen. After hearing their stories and seeing the evidence, he believed the bank had a case to answer; he also believed ASIC needed to investigate. ‘A number of cases had come through and they were all shocking,’ Berrill recalls. ‘People had lost millions of dollars because of the poor advice of Nguyen.’
*
Inside the small windowless office, Jeff Morris, a burly man with a big presence, was scribbling furiously. Wearing an old college tie, 1980s-style red braces and a pair of jeans, he looked up nervously as Wacka Williams pushed open the door and greeted him loudly.
It was 20 May 2013, and I had gone along with Wacka to meet Morris and a small group of other CBA victims, people I’d been reading about in the documents Morris had sent to me just before I’d gone on my work trip to China. I’d emailed Morris while I was in China to let him know the material – which included allegations of forgery, fraud and a cover-up by CBA – was chilling.
As Morris spoke, everyone in the room leaned in to hear the details of his incredible story – of how ASIC had taken sixteen months to act on inside information provided by Morris and other whistleblowers exposing rampant misconduct at Commonwealth Financial Planning.
Next to Morris sat Jan Braund, an impeccably dressed, no-nonsense elderly woman with silver hair, bright red lipstick, a matching red jacket and a lot of accessories. A retired occupational therapist, Jan talked about the ordeal CBA had put her through, and how she was facing destitution after a lifetime of hard work. She had brought along print-outs of unauthorised transactions carried out by Don Nguyen, as well as copious notes she’d made detailing an ordeal nobody should have to go through.
Wacka was visibly taken aback by what he heard. Rubbing his face, he kept shaking his head. It was a lot to digest. The iconic CBA had peremptorily dismissed Jan’s serious allegations of misconduct and wrongdoing in its planning arm and had tried to fob her off with a low-ball compensation offer.
Jan explained how she had lost all her life savings while caring for her ailing husband, Alan, who had crippling vascular dementia. ‘Not since my daughter’s death at the age of six,’ Jan said to us, ‘have I felt the awful, unpleasant, exhausting, emotional and physical pressure associated with the fact that I would soon be dealing with Alan’s demise, financial insecurity and writing letters to CBA and ASIC.’
Jan told the room how her troubles had begun in 2002 when she and Alan had sold their home. A former Qantas pilot and a CBA bank customer since 1950, Alan wanted to put $1 million into a conservative retirement account. The bank had referred them to Don Nguyen. As Jan found out later, Nguyen had subsequently used her signature, without her permission, to facilitate product switches from conservative financial products to high-risk, high-fee-paying CBA products. She said some of the transactions took place while she and Alan were overseas, when it would have been physically impossible for her to sign the transaction authorisations. She added that she had the passport stamps to prove it.
By 2009, the Braunds’ wealth had fallen from $1 million to $350,000 and Alan’s dementia had taken over their lives. ‘I just can’t tell you how devastated I was,’ said Jan. ‘At that stage, I’m carrying a man that doesn’t know who he is, where he is, what he is, where he’s going – nothing – only to be told our financial future was absolutely gone, and I couldn’t do anything about it.’
She said CBA had tried to downplay the scale of Nguyen’s misconduct, which included forging her signature and switching funds. It initially offered her $200,000 in compensation, then $215,000. In one letter, written on 3 February 2012, the bank told Jan that although they ‘regard[ed] that allegation very seriously’ the matter was closed because she was receiving compensation. The letter continued: ‘This means that all switches, including any which may have been made without your proper authorisation, have been unwound for the purpose of calculating your compensation. Therefore, through our compensation calculation you will have suffered no negative financial impact as a result of this alleged conduct.’
In August 2012, Jan agreed to an $880,000 settlement, which was still short of what she had lost by that time.
Next to Jan sat Merilyn Swan, whose piercing blue eyes darted back and forth as she started to describe the nightmare her parents, Merv and Robyn Blanch, had endured with CBA. Her parents had been customers of the bank for sixty-five years. Merv had even introduced CBA’s school banking program into Coolah Central School in north-west NSW when he’d been the principal there, back in 1961.
In March 2007, eighty-two-year-old Merv had decided it was time to see a financial planner. Robyn was eleven years younger than Merv, and he wanted to make sure she’d be well looked after if anything happened to him. The couple went to their local CBA branch and signed up with Nguyen. He told them he usually didn’t deal in such small amounts because he was one of the bank’s top financial planners, but he would make an exception in their case. The Blanches felt lucky to have him investing their life savings of $260,000. Nguyen told them he would put their money into eight moderate-risk CBA investment funds.
Within twenty-two months, this couple, who had been self-funded for twenty-five years, had lost almost 70 per cent of their savings and been forced to live on the cold charity of Centrelink. Merilyn recalled how the stress had taken years off her parents’ lives. ‘One day I went to visit them and saw my dad sitting with his head in his hands and he said: “I can’t believe what has happened.” He was humiliated, he suffered depression, he’d had a stent put in his heart and had psoriasis due to stress.’
Her parents had received a letter from the bank saying their money was not sitting in eight moderate-risk bank products as they had been told but had been put into nine CBA products, most of which were high risk. Then another letter arrived blaming their financial ruin on the GFC, claiming the advice Nguyen had given them was appropriate. Yet the bank couldn’t explain how $25,000 of the Blanches’ money had been invested in the mystery ninth product, so it offered a $6700 settlement.
&nbs
p; It was an insult. At that point, with the GFC in full swing, the Blanches had lost $160,000.
Merilyn decided to get involved. She rang the bank and was asked if her parents had kept original documents. She pretended they hadn’t and asked the bank to send copies to her. When she compared her parents’ original statement of advice with the one the bank had sent, there were striking differences. ‘One document contained several pages that weren’t in the original documentation. And it also contained four tables that were not in the original statement of advice,’ she recalled.
She believed that someone at CBA had changed the tables to make it appear that the Blanches had been given more information than they actually had – thereby minimising how much compensation the bank had to pay.
Once the bank realised the Blanches had kept the original documents, its offers of compensation multiplied. Within six months, the bank had increased its offer from $6700 to $95,000, but without any admission of liability. In many respects it was an identical story to the one Jan had just told. Exhausted, the Blanches accepted the offer, which again was well below what they had lost, and then laughed with amazement and disbelief when a CBA representative rang them to see if they wanted to invest the compensation payout with the bank.
When Merilyn finished speaking and handed the floor back to Morris, there was a palpable feeling in the room that things were about to get very serious. The time to do something to expose CBA’s malpractice was fast approaching.
There was also a sense of trepidation at the prospect of becoming potential targets of the big bank. The members of the group had already experienced firsthand how CBA could play hard and dirty. I’d spoken to Morris numerous times ahead of the 20 May meeting. I knew he’d shopped the story to a number of politicians and journalists, including some from The Australian and the Sydney Morning Herald. None had acted, telling him it was too complicated, too risky, too much work, too this, too that. Whatever the reason, one of the biggest stories of the past decade had remained untold – until now. A whistleblower like Jeff Morris is rare. And this story was too big to ignore.
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