Crikey has been at the cutting edge of the NAB boardroom battles as the
saga has unfolded and this is kind of in-depth coverage only our paying subscribers

NAB: Macek, Pascoe, Borzi, PWC and the Big Four

Sealed section April 5

The chances of Graham Kraehe remaining the long-term chairman of NAB
appear to be shortening and it was Alan Kohler in The Age who best
explained the argument on Saturday – read it here.

This is the key line which is gathering traction: “The resignation of
Charles Allen and the elevation of Graham Kraehe on February 16 –
before any of the reports on the foreign exchange scandals were
completed – is looking more and more like a big mistake, which Cathy
Walter is mercilessly exposing.”

Michael Pascoe also ran an interesting line on Sunday Sunrise – that
the only way new directors will be enticed onto the NAB board will be
with the additional incentive of assuming the chairmanship in the
relatively near future.

Crikey has now heard from a couple of independent sources that Charles
Macek may be one of the men in the frame for a directorship at NAB.
Whilst he doesn’t have direct banking experience, Charlie is well
regarded in corporate governance circles and has a broking and funds
management background so it is broad financial services.

Meanwhile, National Australia Bank appears to have accepted the verdict
of two external reviews into the quality of its market risk management.

Last November’s annual report for 2003 proclaimed, “The Group has in
place stringent controls and processes governing market risk activities
together with oversight at the appropriate level of management.”

Four months later, the bank’s Form 20-F – recently filed with the US
Securities and Exchange Commission – notes more modestly that, “The
Group has in place controls and processes governing market risk

Further to last week’s item, Crikey also hears that Geoff Tomlinson was
the NAB director who had the consultancy with PwC. Apparently it was
hastily terminated and new office accommodation sought when PwC was
pitching for a big piece of NAB work.

Surely the Big Four accounting firms are now so huge that no mainstream
professional director can afford to have an office deal or consultancy
with them.

Meanwhile, Michael Pascoe had another interesting line on Sunday
Sunrise, citing headhunter sources for a rumor “that 40 of the top 50
National executives are looking for alternative employment”.

Pascoe said, “that sort of exodus would pose a serious threat to the
bank’s stability just through the loss of corporate memory, never mind
the disruption caused by replacing four out of every five senior

See the full Sunrise trranscript here.

Anna Borzi: my battles with NAB

Finally, former BNP banking analyst Anna Borzi has explained her
previous difficult relationship with NAB which Henry Thornton touched
on last week:

Dear Crikey,

Appreciate that at least someone remembers that I put my hand up on
NAB. An article by Henry Thornton kindly attributes my grim view on NAB
in the past (which remains), for the exact same reasons that have now
brought it to its current problems.

However, I am concerned that the writer of this article has given the
impression that as a consequence of my published report on NAB, that
forecast it would lose a full years profit over Homeside [which it
did], I was drummed out of my job and out of the country.

This is categorically not true. It is true that NAB executives
displayed exactly the same response as today – don’t listen through
hubris – and also threatened my career. However, I stared them down,
and time has proven me correct.

The facts are that I went on to continue working in Australia for
several years after that in the same position and duties, and then went
to Asia to accept a more challenging and more senior role in the
industry, with more money. I was regional head financial services
research, with the largest financial institution in Asia and the second
largest in the world. Hardly what what appears to be implied – that I
was drummed out of the industry and country by NAB. I would like to see
them try.

NAB is not the only major bank that has promised me “you will never
work in this town again”. Guess what, still standing and doing very
well, thank you.

Anna Borzi
Banking analyst

NAB saga rolls on

Sealed section April 2

Yes, yes, Crikey is fatally compromised. We’re back on Rupert’s payroll
to the tune of about $300 after this piece calling for Cathy Walter to
quit the NAB board immediately appeared in the business section of The
Australian today.

One of the conclusions that will come out of this whole saga is that
independence is very hard to achieve when you have such a highly
concentrated financial services sector.

For instance, we’d like to know if any NAB director has or had a paid
consultancy with PwC? We’re told that there might be one. NAB also
out-sourced a raft of problem loans to the big four accounting firms
for attention. Is anyone independent?

Crikey defended former PwC financial services auditor John Thorn in
today’s Australian but it is interesting that item 6 in the Blake
Dawson Waldron report suggests that it is perfectly alright to retire
as a senior partner of PwC on September 30 last year and join the NAB
board as an independent director two weeks later.

The stories are still coming thick and fast out of the poisonous NAB
boardroom. For instance, there is some suggestion that the bank’s top
in-house lawyer was locked out of his office yesterday.

And the management changes are also flying. The Fin splashed with the
recall of Ross Pinney from the UK this morning but Crikey hears of more
upheaval as one bank insider explains:

“In late November 2003 Peter Ryan-Kane was appointed by NAB to the role
of Head of Interest Rate Management in Group Balance Sheet Management,
responsible for management of accrual accounted interest rate risk
group-wide. He joined NAB from Invesco Asset Management (formerly
County Investment Management), where he was a fixed income portfolio

This week he left NAB after the intervention of the Board Audit Committee. This had nothing to do with the FX options scandal.

Michael O’Neill, Head of Group Balance Sheet Management is now
effectively performing that IRR role, having lost responsibility for
liquidity and funding.

A GBSM staff member, Gavin Jones, is currently on indefinite leave from
Group Balance Sheet Management. He and ex-dealer Geoff Gibson also of
GBSM have been interviewed by CEO John Stewart personally over
allegations they made.

Senior BSM staff are being interviewed by very senior audit and HR
staff as part of an internal review of the performance of the unit over
the last few years. The Homeside risk management team for example
reported to BSM, which was headed by Chris Matten who resigned
pre-collapse, and Michael O’Neill who headed the Group BSM unit at the
time of the collapse

NAB’s amazing Westpac parallel

A former Westpac executive writes:

Crikey, the NAB saga is all so similar to the crisis that hit Westpac
12 years ago. Big losses; boardroom bloodbath; unexpected loss
offshore; more boardroom mayhem. And that was Westpac – $1.6 billion
loss; half the board gone; and surprise US liability; and then Packer
buys in and new CEO Frank Conroy gets shafted.

What have we got at NAB – big losses (Homeside and forex) boardroom
bloodbath (Cicutto and Allen); unexpected NZ tax liability; and the
expectation of more boardroom battles.

Are we going to see another record AGM of 2 days just like Westpac had in 1992?

CRIKEY: The only difference is that Westpac went from being Australia’s
biggest bank to a miserable market cap of barely $4 billion after the
$1.6 billion net loss. NAB is still our most valuable bank with a
market cap of $50 million and unless new CEO John Stewart takes an axe
to the balance sheet, is likely to report a profit of about $4 billion
this year.

Blakes demolish Walter arguments as Henry Thornton weighs in
Sealed section April 1

The gang of seven NAB directors look like they’ve just landed a
knockout punch on Cathy Walter by releasing the full 20-page probity
report from lawyers Blake Dawson Waldron. Take some time to read it in
full here.

Is it any wonder Walter was arguing strongly that the advice not be
released? Blakes were appointed to deal with all the concerns raised by
Walter about the possible lack of independence of the PwC report.

The report shows the extraordinary lengths that NAB, Blakes and PwC
went to in order to protect the integrity of the final report which has
very much stood the test of time.

For instance, Cathy Walter has alleged that Graham Kraehe’s risk
committee were shown drafts of the PwC report and influenced the final
outcome. The gang of seven threatened defamation over this claim but
they won’t need it as Blakes explains the process as follows:

“We established and monitored a protocol to ensure that PwC did not
invite or consider amendments, other than corrections of factual
matters. We reviewed the summary documents which were provided to
members of the risk committee. We are not aware of any breach of that
protocol or any inappropriate interference or direction by the risk
committee or the board.”

Blakes goes through every single point that Walter raised in her
various letters and basically concludes that there was no problem. At
one level, of course, Blakes would say that, they were hired by the
bank and want to be hired by the bank again.

However, at the end of the day the PwC report stacks up. Walter has not
been able to point to anything removed or missed. Indeed, the Blakes
report reveals that APRA sat in on most of the PwC interviews and were
provided with transcripts. APRA reached pretty much the same
conclusions as PwC.

It really is time that Walter acknowledged the writing on the wall and
resigned to bring this unnecessary dispute to a swift end. She has
damaged Kraehe and can just as easily call for his resignation from
outside the tent. Besides, fund managers won’t risk their huge MLC fees
and back her whilst voting Kraehe and the other directors off the board.

Afterall, these are the sentiments of one former bank chairman that
have reached Crikey second hand and Walter could quit knowing she’s
inflicted serious damage already:

“How did Graham Kraehe allow the situation to deteriorate so far? It
has certainly shortened his tenure in the NAB chair. Why was Cathy
Walter singled out this way and why were fellow audit committee members
in Kraehe and Ken Moss actually promoted.”

Meanwhile, Henry Thornton eschews April Fools’ jokes (why would you
need them when you have federal parliament sitting?) to praise the
beautification of St Cathy of Corporate Governance. See

Finally, there is a nasty rumour going around that NAB walked out of
the corporate governance session at a big Business Council seminar in
Sydney this week. Surely not.

Is NAB the final nail in the Melbourne business establishment

The Sydney-based 7.30 Report put their NAB story to air last night and
you can read the transcript here.

We were interested in this introductory line from reporter Tim Lester:
“It’s civil war at a level the Melbourne Club has never known.
Outsiders look on business in this city as tight-knit, privileged,
pompous and never likely to hang dirty washing outside boardroom
windows, especially in the rarefied air of Level 35, 500 Bourke Street.”

Crikey was interviewed for the story and we contributed to this
“Melbourne Club” theme but were then struck this morning on reading The
Age which had an interesting list of biographies for the seven NAB
non-executive directors in the business section. The list dispels any
suggestion that the NAB board was part of Melbourne’s elite business
establishment, with directors drawn from all over Australia and
overseas. In fact, these 7 non-Victorian blokes are trying to boot the
only Victorian off the NAB board.

* Graham Kraehe – Adelaide
* Peter Duncan – Britain
* Brian Clark – South Africa
* Ken Moss – Newcastle, NSW
* John Thorn – Sydney
* Geoff Tomlinson – Perth
* Ed Tweddell – Queensland
* Cathy Walter – Melbourne

See the NAB board biographies here.

See The Age’s story on the NAB board here.

This might be a big call but we reckon the current NAB ructions will be
the final nail in the coffin of the traditional Presbyterian Melbourne
business establishment. Think about it for a moment. Old school tie
warrior Charles Allen has been turfed from the NAB chairmanship, Hugh
Morgan has bowed out of WMC, Goldman Sachs has effectively taken over
JB Were, the French have put an Englishman in charge of Axa,
Adelaide-based Rick Allert now chairs Coles Myer, Rio Tinto has moved
to London, BHP merged with Billiton and is now run by an American and
even Amcor has a Sydney-based chairman in Chris Roberts.

The only genuine Melbourne establishment Presbyterian figures left in
the big chairs are Charlie Goode at ANZ and Woodside and Michael
Robinson at Tabcorp. Even Foster’s is now chaired by a Catholic in
Frank Swan. Qantas chairman Margaret Jackson was not old school tie and
Don Argus was a Queenslander who now represents the establishment.

The diversity of the NAB board’s experience is also evident with
backgrounds in manufacturing, like Kraehe, the oil industry,
telecommunications, insurance, accounting, pharmaceuticals as well at
Walter’s background in the law.

They even had different educational backgrounds. Some were educated at
public schools, like Kraehe, while others had more privileged private
educations, like Walter.

The Age concludes that all these elements demonstrate a board based on,
“a meritocracy leveraging on skills and experience rather than social
connections”. They seem to forget that most NAB directors were
appointed as a reward for being CEOs of big clients.

Yet despite the various differences Walter still stands out. She is the
youngest director on the board, the only woman, the only director from
Melbourne, and Crikey believes she is also the first Catholic to be
elected to the board at NAB.

A former NAB director told an associate of Crikey in the early 1990s
that the board did not have any Catholics and this was why former
Brisbane Lord Mayor Sally-anne Atkinson was knocked back. In fact,
Atkinson’s “problem” was apparently being married to a Catholic. This
policy appears to have fallen by the wayside as Walter and Graham
Kraehe are said to attend the same church in Toorak each week.

NAB also had loads of problems in Northern Ireland where it was accused
of discriminating against Catholics. The Walter family – veterans of
big legal fights

The Walter family – veterans of big legal fights

Sealed section March 31

The Cathy Walter media frenzy has now moved on to the personal
profiles. Terry McCrann produced one for the News Ltd tabloids today
and Glenda Korporaal did likewise in The Australian.

We now have a picture of a successful a well-to-do Catholic family from
Toorak where the father was a Federal Court judge for 17 years.
Korporaal produced this line: “Walter attended Melbourne’s top Catholic
girls school, Mandeville Hall in Toorak, while her brother Charles
Sweeney, now a QC, attended Xavier College. Clearly it was a very
special, intellectually charged family life.”

Walter had two other brothers who became doctors, but there is one key
fact which has been omitted in the public discussion so far that Crikey
can now exclusively reveal.

Charles Sweeney QC was charged by ASIC over insider trading in Bendigo
Mining shares back in 1993-94. The case was eventually settled when he
agreed not to manage a corporation but he put up one hell of a fight,
not unlike what his sister is doing now.

These are some of the lines from the ASIC release in 2002 when the case was settled after a six year fight.

“ASIC had alleged that Mr Sweeney contravened the Corporations Law
provisions relating to false trading, misleading and deceptive conduct
and insider trading in certain dealings in the shares of Bendigo Mining
NL in late 1993 and early 1994.

“As part of the settlement, Mr Sweeney, through his counsel, provided
an undertaking to the Court that, until further order, he will not
manage a corporation without the consent of ASIC or the approval of the

“Mr Sweeney further agreed that he would not apply to ASIC for consent
or to the Court for further order for a period of two years from the
date of the provision of the undertaking to the Court.

“Mr Sweeney has at all times denied any wrongdoing or unlawful conduct
and has claimed that ASIC has abused its powers in carrying out its
investigation and instituting the proceedings.

” ‘ASIC had applied to the Court for declarations that Mr Sweeney had
breached the Corporations Law and an order that he be banned from
managing a corporation. Today’s settlement is a substantive outcome and
has been achieved without the necessity of further protracted Court
hearings’, Mr Knott said.”

“Mr Sweeney unsuccessfully challenged the service of the proceedings
and the jurisdiction of the Supreme Court of New South Wales to hear
the action brought by ASIC. As part of today’s settlement, he has
agreed to pay costs awarded to ASIC by the Court and by the Court of
Appeal in respect of these challenges. Mr Sweeney has also agreed to
discontinue an application to the High Court for special leave to

You can read the full ASIC announcement from 2002 here.

And have a look at Charles Sweeney’s profile at the Victorian bar here.

NAB board coverage beat ups

“All quiet on the National Australia Bank front” wrote Terry McCrann in
his column today and he’s right, nothing happened yesterday, but that
didn’t stop editors manufacturing a NAB angle to lead business sections
across the country.

The weakest effort was from the Fin Review, splashing with the headline
“NAB feud delays hunt for new directors.” Talk about stating the
bleeding obvious. Of course no new directors will be appointed until
the board room dispute is resolved – no professional directors would be
silly enough to get involved in that mess if they can avoid it.

The Herald Sun ran a page two story reporting that fund managers will
hold the key in the NAB battle, complete with comments from anonymous
brokers and fund managers. Well, obviously. Read it here.

The Australian led its business section with news that the “jostling
for National Australia Bank’s plum $13 million-plus audit role has
intensified.” Is the fact that Australia’s biggest auditing companies
all want one of the country’s biggest auditing contracts really the top
business story of the day? Read it here.

The Age’s story that NAB will release a new report to respond to
Catherine Walter’s criticism was probably the best effort – check it
out here.

Even Lex gets stuck into NAB

Sealed section March 30

Firstly, Don Boardwalk has filed this excellent piece looking at the
amazing powers APRA have to tell the NAB exactly what to do:

A quick search of Google News shows how the brawling NAB directors are really making it on the global stage.

Even the prestigious Lex column in The Financial Times weighed in today
as you can see here. It is worth reproducing a couple of lines from Lex:

“The extraordinary boardroom spat enveloping National Australia Bank
has opened a deep fissure in the clubby, tightly-knit Australian
financial sector.”

“Clearly Ms Walter should go. In attacking the bank’s handling of the
foreign exchange scandal, she cited the Warren Buffett comment that the
atmosphere in a boardroom can lead to collegiality trumping
independence. But unitary boards cannot work when they are riven by
civil war. Ms Walter’s claims are also undermined by her long tenure on
the board and her role as head of the audit committee during the
foreign exchange scandal.”

“The forex scandal has already claimed the scalps of the former
chairman and chief executive. Ms Walter’s call that the board should be
overhauled further by not allowing directors to stand for re-election
is not tenable. It would create a lame duck board. What the board needs
is some certainty to let John Stewart, the new chief executive, get on
with the job of turning around the bank’s culture.”

We pretty much agree with this position.

The media coverage has been enormous and The 7.30 Report is weighing in
tonight. Chanticleer moans today that the directors’ club will become
even more conservative for fear of other independent thinkers “doing a
Cathy” and causing maximum carnage. This is the argument that was put
up on the 18 occasions that Crikey has tried and failed to get on a
public company board. Shareholders want a cohesive board that gets

However, some good things will come from this mess. Firstly, retirement
benefits for directors will get another airing and hopefully can be
consigned to the dustbin of history now that even Walter is offering to
forego her $500,000 whack.

Secondly, the whole question of conflicts of interest in the financial
services sector will get a good going over. NAB is Australia’s biggest
financial institution and it has huge conflicts running right through
the place. How can fund managers possibly take an independent position
on the NAB board when they are dependent on huge fees from MLC? The
same applies for lawyers. NAB is so big that no top 10 law firm will
act against them in a way that could jeopardise future briefs.

Those fund managers that aren’t in the MLC trough are probably
competitors like Colonial First State and AMP. They see NAB as a
competitor and want to maximise the brand damage. Expect to see many
more anonymous fund managers winding up the media in the coming weeks.

Australia really does need public disclosure of institutional voting
like the US have just introduced. This way we could see exactly which
way the institutions jump when it comes to the crunch.

The other interesting issue is the question of who controls shareholder
meetings and the information that goes to shareholders in a contested
corporate election. Crikey has been shafted time and again by boards
who completely control the agenda. Rupert Murdoch wouldn’t even say how
old Crikey was in 2002, let alone ventillating the platform that we
emailed, faxed and snail mailed through with the candidacy.

David Jones, The Commonwealth Bank, Westfield Holdings and NRMA are
some of the other big companies that used this censorship tactic to
shaft a Crikey tilt.

We really do need an independent body like the Australian Electoral
Commission to run contentious shareholder votes and this will hopefully
be one of the lessons that comes out of this battle.

The other interesting point is all this leaking going on. It has to now
that this is a public campaign. However, the gang of seven still have
the moral high ground on this point as we believe it was Walter who
started the leaking with that public attack on PwC through Alan Kohler
three weeks ago.

Walter’s strongest point is probably this question of draft reports
being seen by some directors. Of course PwC wanted to stay sweet with
the board as they want to pick up the audit work from KPMG. Today’s
leak was that Walter used her casting vote on the audit committee to
reappoint KPMG two years ago when they really should have been sacked
after missing the Homeside debacle.

Finally, we should correct a point in Stuart Mackenzie’s piece
yesterday. It was in fact Graeme Kraehe and not Charles Allen that
referred to the draft report and offered Walter the chance to comment
on it on February 27. Allen had resigned and been replaced by Kraehe on
February 16.

Democrats back Walter strategy

Sealed section March 29

The following came in to Crikey this morning:

“I believe that Catherine Walter is justified in thinking herself a
scapegoat. My belief is that the extraordinary general meeting should
be asked to test shareholder confidence in every director who was a
member of the Audit Committee or the Risk Committee during the period
at question.”

Senator Andrew Murray
Democrats Corporate Affairs Spokesperson

And it seems that Murray might get his wish as NAB has postponed
today’s board meeting to consider the proposed resolutions from
Catherine Walter.

Walter is being smart because she is giving shareholders an opportunity
to lodge a protest vote against every director, but specifically her
targets are new chairman Graham Kraehe and the other former audit
committee member who has been “promoted”, Dr Ken Moss.

She obviously can’t come up with her own slate of directors so these
resolutions allow shareholders to sack individual directors
progressively over the next three years because if passed it would
force each director to bow out at the end of their term.

So who will be up for re-election at the AGM next December? None other
than new chairman Graham Kraehe and possibly “senior independent
director” Ken Moss as well.

At least one third of a board must be voted on at each AGM which
generally means everyone gets three years terms although both Catherine
Walter and Peter Duncan were elected for three years terms in 2001 and

This is when the nine existing directors, CEO John Stewart and the eight NEDs, were elected:

December 2001: Graham Kraehe, Catherine Walter, Peter Duncan, Brian Clark.

December 2002: Charles Allen, Ken Moss, Geoff Tomlinson

December 2003: Peter Duncan, Ed Tweddell, Catherine Walter, John Thorn, John Stewart

That means Kraehe and Brian Clark are definites for 2004 and the third
candidate will be Ken Moss or Geoff Tomlinson or possibly both,
depending on whether any new directors join the board before the notice
of meeting goes out in November.

Presuming that Walter gets the sack next month and then NAB appoints
the long-promised two new directors before the December AGM, the two
newcomers will be for re-election in addition to the three incumbents.

The NAB board will look churlish if they knock back the Walter request
and it will give shareholders an opportunity to cast protest votes
against various directors.

Crikey still thinks that Walter should be fired but it is not a good
look that two other members of the audit committee have been promoted
and this might be a way of dealing with that perception problem.

Three more takes on the NAB fiasco

Here are three more excellent short takes on the NAB fiasco by Barry
Banker, Stuart Mackenzie and another close bank watcher called Charles

By Barry Banker

The magnificent seven NAB ‘independent directors’ seem to have some
very strange ideas about APRA’s requirements on ‘People & Culture’

So do some leading figures in the business media and some self-styled corporate governance experts who should know better.

‘APRA requires that the NAB Board reinforce policies to promote and
support ‘whistle-blowing’ within the organisation, and provide avenues
to facilitate this.’

The first whistle blower to step up to the plate has been NAB Board
member Catherine Walter. The reaction of the other Board members
(excluding the CEO)? Sack her.

APRA now has no choice. It must, as a matter of urgency, insist that a
completely independent and qualified legal and banking team investigate
all the matters that Mrs Walter has raised.

APRA has the power and charter to step in and clean out the bank board.
It is not just a matter for shareholders. The US and UK regulators will
be more than interested by now.



By Charles Cicutto
A man well versed in NAB matters

Reports seep out from inside the APRA bunker that chairman Dr John
Laker is still puzzled why former NAB chairman Charles Allen didn’t
hand on or tell the rest of the board about the first APRA letter back
in January 2003.

While conceding that the wording of the letter might have been poor
(pointing out that none of the problems were major), the sleuths argue
that the problems were important and it was vital that they be fixed up.

Dr Laker has said privately to a number of journalists that he can’t
understand Allen’s inaction at all: despite asking the NAB why. It’s as
though Charles Allen was effectively running the bank. And while both
Allen and Cicutto were portrayed in semi-heroic terms after their
resignations in February, APRA’s view isn’t so rose-coloured.

It also paints the rest of the board, including new chairman Graham
Kraehe, in a much less flattering light: here they were, all these
mushrooms being fed bulldust and worse by Charles Allen and getting the
best part of a couple hundred grand a year for the pleasure.

So Crikey asks its corporate lawyer readers, is it an offence under the
Corporation’s Law for a Chairman of a public company not to let the
rest of the board know of an important communication from a regulator?
Sounds a bit like the Pan Pharmaceutical issue.

And, if Slater and Gordon wakes up, perhaps there might be a nice class
action somewhere in all of this, directed at Charles Allen and maybe
Frank Cicutto.

So what progress is there in the ASIC and Federal Police probes of the
NAB’s forex affair: are they looking at the period November
2002-January 2004 or just when the lads on the options desk started
fiddling the books from September last year onwards?

By not passing on the APRA letter, Allen let an operational and
compliance void be exploited by the traders while their superiors did
nothing and worked to snow their superiors, the board and APRA.

There’s a strong case for some sort of public inquiry at which Allen,
Cicutto, the sacked managers and traders and the rest of the board all
go on the record about just what happened when APRA sent the first
letter. Perhaps Messars Slater and Gordon will perform a public service
here! If not, why don’t we have a Senate inquiry as banks are special
beasts and are licenced by the Federal Government.

And APRA observers say the visit to the NAB board last week by chairman
John Laker was perhaps the most important move its history. By visiting
the NAB directors personally in their centre of power, the boardroom,
the NAB, indeed all banks, have been given the strongest message that
APRA is in charge.



By Stuart Mackenzie

More cracks are appearing in National Australia Bank’s new policy of
openness and transparency, not to mention its honesty with the market,
after director Catherine Walter’s media release last Friday.

As Crikey reported on 22 February, the probity of
PricewaterhouseCoopers reporting to directors who they were
investigating in connection with the currency options losses had been
challenging the bank since former CEO Frank Cicutto announced their
appointment on 15 January.

The reporting line was changed at least twice before Cicutto’s
successor John Stewart told analysts on 19 February that he was now the
only director in direct contact with the investigation team.

A NAB spokesperson confirmed at the time that Stewart’s remoteness from
any Australian risk management issues was a factor in changing PwC’s
reporting line away from the board risk committee.

However, according to the correspondence released by Cathy Walter, PwC’s reporting line did not change as claimed by Stewart.

In a memorandum to the board dated 3 March, Walter complains that PwC
were still reporting to the board risk committee, then chaired by new
board chairman Graeme Kraehe.

Moreover, she claims that risk committee members “have been responsible
for major input into the report and apparently for changes of focus and

On 23 and 24 February – four days after Stewart said he was the only
contact with PwC – Walter claims that risk committee members were
provided with copies of a document that former chairman Charles Allen
referred to as “the draft report.”

When Walter again raised concerns about reporting lines on 27 February
with Charles Allen, she claims he offered her the same opportunity to
have input to the PwC report, which she declined.

NAB’s public statements about PwC’s reporting lines show they were
aware of the potential conflicts and had determined an appropriate
course of action – the reporting line to John Stewart.

Shareholders now need to hear an unequivocal denial of this version of
events from Graeme Kraehe or be told why the process announced to the
market was not followed.

[The writer is a former NAB employee and holds NAB shares. He can be contacted at: [email protected]]