Australia’s biggest bank remains spooked by its tumbling share price and a $32 billion law suit against it. Today we update the story that we broke to an uninformed market three weeks ago.
Crikey thought we’d give NAB chairman Mark Rayner and CEO Frank Cicutto a break in last week’s edition.

After all, they’d copped a shellacking in the markets and the print media the previous week after Crikey first brought you the full story on the $32 billion Ausmaq writ brought against the bank by John M Maconochie.

Here’s a quick update for all you NAB aficionados out there – and the owners of the NAB who get to underwrite the adventures of their board and management.

NAB share price slump to $19.90

On Monday 21 February 2000, at 10.13 am, the ASX released this pearl.


The securities of National Australia Bank Limited will be placed in pre-open pending the release of an announcement by the Company. Unless ASX decides otherwise, the securities will remain in pre-open until the earlier of the commencement of normal trading on Wednesday 23 February 2000 or when the announcement is released to the market.”

In the slammer for up to two days.

This drama was apparently triggered by an informative article that appeared in the Australian Financial Review that morning on “NAB to spin off web assets”. Seems the AFR followed up Crikey’s lead on that one.

NAB’s CEO Frank Cicutto came clean with a release issued at 10.31am that in effect confirmed the AFR article – and Crikey’s.

NAB’s grand plan got roundly bucketed in the press and things went downhill from there.

On Wednesday, NAB suffered another minor defeat in the $32 billion Ausmaq case in the New South Wales Supreme Court when another procedural judgement went against them.

On 23 February 2000, NAB’s share price closed at $19.90, down from the previous Friday’s closing price of $20.40 and well shy of its year high of $30.28.

Better news though on Thursday. The share price recovered to $19.99. And on Friday, February 25, investors thought it might be safe to go in the water again and the share price added 80c to close at $20.79 on a huge volume of almost 8 million shares.

Who says NAB’s share price isn’t sensitive to the $32 billion Ausmaq court case and its revelations?

The water surface might appear smooth, but those issues haven’t gone away – corporate governance, disclosure, risk management and e-commerce strategy (to say nothing of documents) in relation to the $32 billion Ausmaq claim.

Business Sunday – 27 February 2000

The finishing touches were being put to Crikey last Sunday when Channel Nine’s financial newsman Michael Pascoe fired off his NAB image piece on Business Sunday. Check out under Extraordinary Items. was chuffed to be elevated by Business Sunday to the status of an internet magazine and featured on its esteemed program.

Crikey just loved BS’s reported comments from the NAB’s PR flack Brandon Phillips. Brandon reportedly said that Crikey’s claim (to have brought price sensitive news to market) is “a bit self serving”. Brandon offered a range of non-Ausmaq reasons for NAB’s share slump which would suggest the bank is still in denial about the world’s biggest e-commerce legal battle.

BS commented on the jam that chairman Rayner and CEO Cicutto will be in if Maconochie wins the $32 billion Ausmaq case, saying “should the NAB lose, the chairman and chief executive would have to resign – both because of what they’ve said about this case so far, and because a Maconochie victory would indicate that NAB can’t be trusted to abide by its contracts”.

It wasn’t all Crikey’s way. BS took a swipe at the accuracy of one of Crikey’s paragraphs and managed to get a quote from SOCOG director and Equitilink founder Brian Sherman along the lines that Maconochie was a mere employee of Equitilink who didn’t go on the road show for the largest IPO in US history.

Well, technically speaking, all directors of public companies are employees. But this gratuitous “correction” made Crikey think that maybe EquitiLink Twin Brian Sherman is rewriting a bit of history here. The Twins haven’t done too badly and readers will be pleased to know that Crikey is researching a piece on them to go in Crikey’s Filthy Rich List. Anyway, here’s what the then Chairman of Equitilink, Twin Sherman, said about Mr Maconochie in a release to the ASX way back in 1987.

“In the 1987 Annual report of the Company, it was indicated that Mr John M Maconochie would not be standing for re-election at the Annual General Meeting which took place on 27 October 1987. This was due to the fact that Mr Maconochie was leaving the EquitiLink Group.

The Board of Directors of EquitiLink Limited regrets that John Maconochie decided not to seek re-election to the Board of Directors of the Company. John was a founding Director of the Company and headed a specialist division of the Company responsible for the development and timely introduction of new investment products. These included the IncomeLink Trust, the two US First Australia Funds, the First Australia Prime Investment Company and the flotation of EquitiLink Limited. Since 1986, John and his division developed the EquitiLink ADF, PrudentialLink and MaxiLink Limited. The Directors wish to thank John for his contribution to the development and continued growth of the Company and wish him all success in the future.”

And here’s what the EquitiLink Limited prospectus said of Mr Maconochie in 1986.

“He is Treasurer of First Australia and Prime Income Fund, Treasurer and Chief Financial Officer of the Prime Investment Company and a director of each of EquitiLink Australia and EquitiLink International.”

Crikey. Is this the chap Mr Sherman was referring to on Business Sunday? Crikey understands the Fund’s underwriters were extremely pleased with Mr Maconochie’s role and may have a different view to Mr Sherman’s.

Crikey was pleased to see Business Sunday giving the themes of “corporate governance”, “disclosure” and “management and board responsibility” a run – saying on the AMP piece it ran:

“Change has to start at the very top…on the board”

Let’s hope the NAB shareholders, foreign, patient or otherwise, are listening – for their sakes.

This Last Week – NAB’s E-Commerce Secrets

On Monday 28 February, NAB’s Melbourne QC John Karkar mounted a last, last, ditch stand in the New South Wales Supreme Court in an attempt to avoid discovery of NAB’s e-commerce secrets as previously instructed by the court. It was unsuccessful. The high level documents referred to in Mr Justice Einstein’s judgement on 28/10/99 were due to be handed over on 29/02/00 – Judgements, Ausmaq,

(1) High level documents created in the period from 6 November 1996 internally with any one or more of the defendants referring to or commenting upon or considering the importance to any one or more of the defendants of E-commerce for the provision of financial services.

(2) High level documents created in the period from 7 November 1996 recording, referring to or relating to analyses or evaluations or consideration of the benefit to any one or more of the defendants of E-commerce for the provision of financial services.

(3) In paragraphs 1 and 2 of this order `high level documents’ means:

All documents which were sent to:

(a) Any one or more of the individual defendants; and/or

(b) The board of directors of one of more of the corporate defendants; and/or

(c) Any person or committee or subcommittee reporting to any of the individual defendants or the boards of any one of the corporate defendants, and/or

(d) Any one or more persons in the Group Leadership Team (as described on page 13 of the National Australia Bank Limited 1998 Annual Report [being exhibit A1 as marked on the interlocutory discovery application heard on 28 September 1999.

(4) Discovery of documents sent to the persons and entities referred to in sub-paragraphs (a) and (b) of paragraph 3 is to take place by 29 February 2000

The NAB has made much of its e-commerce strategy.

Here’s what top CEO Frank Cicutto told Business Sunday on 7 November 1999:


“The flack you’ve copped on the Internet about being a bit slower than some of the others, is that justified?”


“Well, at the end of the day it’s a two mile race and we’re yet to reach the first furlong. And I think you’ll see, and you have seen in recent times, some very smart moves on the part of the National and you’ll see a number of very smart moves in the next twelve to eighteen months. We’re very confident about our strategy with the whole e-space environment.”

NAB’s counsel Mr Karkar QC told the New South Wales Court of Appeal on 9 February 2000 that hundreds of thousands of documents are involved.

By week’s end, the position is still unclear to Crikey. Could it be that NAB has not in fact got any e-commerce documents? Possibly not even any e-commerce? If there were in fact hundreds of thousands of documents, where did they go and why weren’t they produced to the court. What does Frank Cicutto know about NAB’s smart moves in the e-space of NAB’s Aladdin’s Cave of e-commerce documents?

Crikey hears there was a stoush up in the New South Wales Supreme Court on Friday 3 March and harsh words were exchanged at the bar table resulting in some orders involving no less than Cicutto himself and e-commerce discovery. Market, ASX, ASIC, stay tuned on this one.

Frank’s Full Market Disclosure

On Tuesday 29 February, obviously taking advantage of the leap year, and no doubt in the interests of a fully informed market, Frank abandoned mahogany row at 500 Bourke Street and hit the broker analyst trail in Sydney, personally.

NAB’s share price rocketed from a low of $19.90 the week before to $22.73 on Thursday 2 March. That’s an increase in NAB’s market capitalisation of $4.25 billion. Crikey! We checked NAB’s web site. No market releases there. No ASX inquiries either as far as Crikey knows.

Whatever Frank said obviously can’t have been bad, and maybe was nothing at all. However, these types of forays by senior executives into broker land, in this case by no less than the CEO of Australia’s largest bank, do nothing to allay fears that the market may be selectively informed.

How can anyone, least of all the mums and dads investors, have any faith in Australian securities markets when there is not uniform and simultaneous market disclosure? When is ASIC going to investigate and where necessary clamp down hard on selective market disclosure where it occurs? Maybe it’s time to make an example of one or two tall poppies. Over to you Joe Longo at the market integrity and consumer protection division of ASIC. Let’s hear it for the little people.

Anyway, the lip gloss wore off on Friday when NAB’s shares slumped 83c – four per cent – to close at $21.44.

New Participants

Meanwhile, Frank Cicutto rearranged the management deck chairs at NAB this week, and NAB appointed two new directors (old economy types Geoff Tomlinson and Dr Ken Moss), replacing Tom Park who has resigned, to finish the week one director up.

Let’s hope the new directors have got their directors and officers insurance fully paid up. Crikey hears there may be a class action in the US in the wind about the disclosure, or lack of it, in the National Income Securities Prospectus about the Ausmaq claim. National Income Securities closed at an all time low of $90.40 on Friday. Too bad for the 57,000 odd investors who paid $100.00 last year, although the yield remains handy. NAB director Frank Blount, who lives in the US, will be handily situated for any explanations to the US authorities should that become necessary. Welcome aboard new boys.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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