McCrann goes easy on his mate Cathy Walter

Sealed section – 16 March

Dear oh dear, remember the huge campaign that Terry McCrann ran against
AMP audit committee chair Richard Grellman last year. It was a good
effort and we totally agreed with what he was saying.
So why isn’t McCrann extending the same logic to Cathy Walter, the chair of the NAB audit committee who has just been demoted.

“The call for heads to roll is way out of proportion,” McCrann wrote this morning.

Hmmm, we wonder if McCrann’s “soft on Walter” approach reflects the fact that he is friends with Cathy Walter.

Cathy Walter should not be ousted because of the forex scandal but she
should be ousted because she was also chair of the NAB audit committee
when Homeside blew up and she was the person who drove the process that
re-appointed KPMG as NAB’s auditor.

Meanwhile, Chanticleer had a very strong comment this morning about the
appointment of Dr Ken Moss as “senior independent director” at NAB.

“Kraehe has vowed to change all that, so why do we need Moss to double
his team? In short, the concept is a joke and smacks of a board ridden
by guilt of past mistakes and running scared.”

Crikey agrees. The entire NAB board is independent, with the exception
of new CEO John Stewart who represents management. “Senior independent
directors” are needed when you have a dominant chairman like Frank
Lowy. For instance, Macquarie Bank appointed a “senior independent
chairman” because it has four executives on the board, including
executive chairman David Clarke.

Directors’ club rallies around Walter

Sealed section – 19 March

While Crikey has been questioning Catherine Walter’s responsibility and
accountability over NAB’s forex trading fiasco, not everyone is calling
for her head. This letter appeared in today’s Fin Review:

Wrong to make Walter scapegoat

On a number of occasions it had been reported by your newspaper – as
well as other publications – of calls by the Australian Shareholders
Association and others that National Australia Bank director Cathy
Walter should be sacked or should resign from the board because she
chaired the NAB audit committee.

Such calls are unfair and fail to appreciate the fact that the audit
committee role – at the NAB and other banks – is responsible for the
half- and full-year accounts. The risk committee is required to monitor
the other risks, whatever they are, including credit risk, liquidity
risk, currency risk etc. This approach is encouraged by the Australian
Prudential Regulation Authority for all banks.

There is no doubt in my mind that the NAB board lost the plot and it
seems from its latest appointment of a director specifically to deal
with shareholder matters that it still doesn’t have a clue about what a
board’s role and function is all about. However, attempts to make a
scapegoat of a dedicated, experienced and competent director such as
Walter are wrong.

Jim Kennedy
Hawthorn, Qld

CRIKEY: This isn’t any old Jimmy Kennedy. It happens to be the
best regarded and most powerful professional director from Queensland
and he also happens to sit on the ASX board with Walter. Surely this
should be disclosed.

Crikey is a big fan of Jim Kennedy and rates him in the top 10
Australian independent directors. But we are disappointed that he has
allowed his personal friendship with Walter to get in the way of good
corporate governance.

It is powerful stuff for an influential director to go on the record
saying that another board “lost the plot” and he is directly trying to
sheet blame for the fiasco home to Graham Kraehe as chairman of the
newly formed NAB risk committee, a committee that was formed because of
the failings of the audit committee.

Walter chaired the NAB audit committee during Homeside, the forex
scandal and the reappointment of KPMG as auditor. It is a case of three
strikes and you’re out and club members like Kennedy do themselves no
credit trying to protect her.

Chanticleer reports in the Fin Review today there are rumours of mass
departures from KPMG because of the SEC investigation into the failure
to uphold independence of the NAB audit. Surely the chairman of the
audit committee knew about these illegal secondments from the
accounting giant into the bank.

Finally, the Fin Review letters editor deserves a rap over the knuckles
for not alerting the news desk because this is actually a very strong
story because the power struggle between Kraehe and Walter is now out
in the open. Crikey is happy to break if for them and any business
section worth its salt will be onto this story in tomorrow’s papers.

Alan Kohler’s extraordinary Cathy Walter column

Sealed section – 23 March

Alan Kohler had an extraordinary column in today’s Age/SMH which really
turned up the heat on former National Australian Bank audit committee
chair Catherine Walter who is fighting a rearguard campaign to stay on
the board.

We say extraordinary because Kohler talks openly about who was the
source of a controversial column on March 10 which came indirectly from
a director and attempted to undermine the then upcoming
PricewaterhouseCoopers report into NAB’s $360 million forex loss.

Kohler writes:

“In fact the NAB board believes that because of that expectation she
[Cathy Walter] tried to undermine the credibility of the report by
leaking – to this correspondent – that there was dissent within the
board about PwC’s independence.

“There was, indeed, plenty of disagreement but we now learn – thanks to
my colleague Malcolm Maiden’s story over the weekend – that it was
Cathy Walter versus the rest.

“For the record, contact with me was made through a third party; I did
not know who was behind it and still don’t (although Cathy Walter seems
to be a fair bet).

“And as discussed in the context of the Telstra board leak about the
abortive Fairfax deal a few weeks ago, no board can tolerate leaking.”

Read Kohler’s full column here:

Crikey hears that Catherine Walter has a difficult relationship with
Craig Hamer, the PwC partner who handled the forex investigation and
also led the unsuccessful pitch to pick up the NAB audit contract from
KPMG after the Homeside fiasco.

Walter is said to be very close to KPMG and was clearly expecting a
spray from PwC so she launched a rearguard campaign of
self-preservation which included attempting to undermine the very
report which was going to restore confidence in the NAB.

Directors can’t do this sort of thing so we reckon today’s Kohler
column is the final nail in the coffin for Walter. She either has to
point blank deny that she put the third party onto Kohler or admit it
and resign immediately.

Kohler, Walter, Gottie and leak protocols

Sealed section – 24 March

The Australian’s Robert Gottliebsen has weighed into the debate on Alan
Kohler’s controversial column about whether isolated NAB director Cathy
Walter was his indirect source attacking the independence of the PwC
report into NAB’s forex scandal. Check out what Gottie had to say here.
The key lines from Gottie were as follows:

“Like most journalists, I go to extraordinary lengths to make sure the
source of the leak can never be discovered. But under board rules of
conduct, leaking information on debates is one of the worst things a
director can do because it strikes at the heart of board
confidentiality and causes directors to lose confidence in each other.
The board can become unworkable. Once a person is a proven board
leaker, they really have to leave the boardroom because no one can be
sure they will not do it again. But it is hard to prove.

“What has happened at the NAB has few precedents in Australian board
meeting history. The business commentator for Melbourne’s The Age (and
The Sydney Morning Herald) Alan Kohler last week wrote about a split on
the NAB board over PricewaterhouseCoopers independence. Yesterday he
revealed that the source of the report was a third party. Although he
does not know who was behind it, ‘Cathy Walter seems to be a fair bet’,
Kohler says.

“I can imagine that Walter, who puts enormous effort into all her
directorships (including the NAB), would feel hardly done by, which is
why she missed an easy opportunity to go with grace. But now she is
being accused of probably leaking board information through a third
party by the respected journalist who published the leak. It’s another
chapter in an incredible saga.

Alan Kohler is not taking this lying down and told Crikey today that he is “definitely not a source-dobber”.

“When I wrote that ‘Cathy Walter would be fair bet’ as the person who
leaked to me, I meant it would be a fair bet for the board because,
apparently, she was the only one complaining in board meetings about
PwC’s independence,” Kohler told Crikey.

“I still don’t know who it was and there has been no further contact
through the third party. I wrote what I did because I felt I was in a
difficult position commenting about the consequences a boardroom leak
when the leak was to me and a reader would reasonably think I knew who
was behind it and therefore had a conflict.”

CRIKEY: Okay, Kohler was not speculating who his source was, he
was only saying it was a fair bet for the board to think that. We
reckon Kohler probably regrets putting that line in. Crikey has been in
this situation on many occasions. We have numerous sources who we don’t
know but generally try to avoid speculating as to who they might be.
Readers presume that you are best placed to name an anonymous source so
if you do it, people believe you are correct. Maybe the lesson from
this is that leakers should be direct and identify themselves, that way
a journalist can’t even get into the speculation game as Kohler did on

What the columnists said about Cathy Walter

Sealed section – 28 March

Crikey is already sick to death of the NAB forex scandal as a story.
It’s been done to death and we’re now onto Act V with the upcoming
proxy battles between Catherine Walter and the board.
Crikey’s very own Don Boardwalk was quick to pump out his thoughtful
analysis on Friday night explaining why Walter should have quit. Check
it out here:

The Age had the best read in terms of who Catherine Walter is and where
she came from:

Alan Kohler was right when he said Walter would definitely lose and the
major reason is that shareholders prefer stability and fund managers
want those MLC fees to keep flowing:

Stephen Bartholomeusz took the line that there would be no winners from
this battle and even said the Walter’s strategy was “sad”:

Walters seemed to get most support from her old buddy Terry McCrann in
The Australian who suggested there should be an inquiry into her
claims, something he repeated on Business Sunday. McCrann’s colleague Bryan Frith also felt that she landed some
punishing blow against the gang of seven:,5744,9086884%255E16941,00.html

Robert Gottliebsen clearly got his own board leak in what was arguably
the best detail of what happened inside the board room:,5744,9086880%255E16946,00.html

Finally, the SMH’s Kate Askew has a good piece pointing out what a
small world the directors’ club is: