The late US President Tricky Dick Nixon found out that it wasn’t
the Watergate break in that did him and his cronies in, it was what
they did afterwards that got them booted and some of them jailed.
Fast forward thirty years.
documents ahead of looming investigations in the US has delivered poor
outcomes for those involved. Remember Enron and Arthur Anderson? The
latest is ex-Credit Suisse First Boston investment banker Frank
Quattrone. Last week Frank, age 48, went down on all three counts in
connection with his ‘document retention policy’ and is facing 2-25
years in the stockade.
Last Friday, the Australian’s
Brian Frith reported that the office and contents of NAB’s colorful
Chief General Counsel David Krasnostein had been secured and put under
the tender care of Ferrier Hodgson. NAB director Mrs Walter was
reportedly concerned that one or possibly more drafts of the
“independent PwC Report” were in danger of being shredded.
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It might occur to the bank’s shareholders to frame some simple questions for Messrs Kraehe and his board and their CEO Stewart.
for example, seeing that a lockout amounts to a loss of confidence in
Krasnostein (and how can it be any other way), why is Krasnostein still
part of the NAB’s management team and not booted like the rest?
Translation? Back him or sack him. Let’s hear it!
What else of interest is in Krasnostein’s office? A stack of old Homeside draft reports and legal advices?
when and what did Kraehe and his Magnificent Seven know about the
bank’s ‘document retention policy’and what Krasnostein was doing or not
doing? After all, Krasnostein was the boss cocky to whom PwC reported
and CEO Stewart is responsible and accountable for controlling his
management team, isn’t he?
Of course, it hasn’t been
alleged that Krasnostein has been engaged in any wrongdoing and your
columnist isn’t saying he has. Perish the thought. But it isn’t every
day that the chief general counsel of major bank is locked out of his
office and is not told to hit the toe.
And seeing it’s
reporting fess-up day for NAB, a focus by the well respected analysts
and institutional shareholders on the bill of goods NAB has peddled
could be interesting. Lets see now.
NAB Culture? Anything
changed? Arrogance still ruling supreme? Any institutions, analysts,
media who have disagreed with the line/defence of the day being peddled
by NAB lately felt any pressure? Whistleblowers? Look at Mrs Walter.
Look at APRA. Weren’t they supposed to be requiring NAB to protect
whistleblowers? Yeah, right.
Trust? Plenty of that. The
NAB board apparently couldn’t even stick to a deal made between
themselves on who should go and who should stay.
changes? Nothing has really changed. The shareholders are still stuck
with the Magnificent Seven less two. What a nice puppy.
Management? Why does six billion odd of shareholders’ funds return only
a paltry three hundred million profit – that’s 5% return? Maybe the
responsible ‘Principal Board Member’, one Geoff Tomlinson, who it is
said didn’t do anything wrong in the forex disaster (he was just a
board member, a bystander as it were), who is in charge of wealth
management, could explain the extent to which his margins are falling
and costs are rising. Is the business going to hell in a hand cart?
Where else but Australia could such a huge multibillion investment be
made and analysts and shareholders not even question its merits or
performance, but just sort of go along with it on some sort of blind
faith? The ‘experienced’ Tomlinson, ex of National Mutual fame which
went broke and needed AXA to bail it out, came aboard NAB in early
2000, in time for Homesuck later that year, and its aftermath. True
Capital management 1? Well the bank did have a share
buyback to ‘support’ (prop up) its weak share price. That cost
shareholders about $3 billion and the share price is now about $4 less
on average than what the bank’s management paid. Let’s see now. On 90
million shares odd, that’s, wait for it, a $360 million loss, just like
the forex loss funnily enough. No wonder the instos and analysts don’t
mention it. They thought it was a great idea, at the time.
Management 2 – the 2004 sequel. Raise $3 billion to prop up the balance
sheet. Good one. Where was APRA when Capital Management 1 was in
progress? Might not that $3 billion have been handy now, and when was
the necessity for this $6 billion capital turnaround noticed.
strategy? 8-10% earnings growth? Positioning For Growth? Forget that
one. More like a swallow dive. The bank hasn’t had a growth strategy
for at least 5 years, despite the best efforts of the NAB’s
consultants, McKinsey & Co.
Forex management. Well Kraehe
& Co panicked in February when the Aussie battler peaked at 80 US
cents and closed everything out in a firesale. Their own mid-late year
forecasts for 2004 were apparently in the 70-75 US cent band. Pity they
didn’t listen to their own forecasts. Maybe that $360 million forex
loss could have been a $360 million profit. Just enough to balance out
the shellacking loss on the share buyback! Maybe they should rehire the
‘dishonest’ dealers? Come to think of it, why hasn’t NAB prosecuted
them for ‘dishonesty’? Maybe something for Krasnostein to do while he
cools his heels outside his ‘secured’ office? Mark that down as a
series of probing questions for CEO Stewart.
Stewart’s territory. Growth prospects? Transfer of core skills from
Australia? That should have the UK bank regulator trembling, let alone
the NAB’s shareholders. Cicutto’s grand strategy for the UK has never
been properly explained over the last 5 years and is now back in the
hands of long time employee Ross Pinney. NAB’s shareholders might
profitably question Pinney’s track record and credentials for the job
of managing about $8 billion of shareholders’ funds.
could go on, but what a pet shop full of pups this litany of disasters
represents. Obviously the NAB’s institutional shareholders who stood by
while all this stuff went down are very easily pleased. They fluffed
the chance to get a whole new board of their choosing by falling for
the old two card trick and effectively rehiring the old guard. Orderly
board regeneration indeed!. Fat dumb and happy is one description that
comes to mind, with more of the same to come.