Two and a half years ago, things were very different at National Australia Bank. Despite the convulsions from dropping almost $4 billion on the Homeside disaster in the US, NAB was still Australia’s biggest bank and seemed to be recovering.

Alas, the biggest unauthorised trading scandal in Australian corporate history suddenly exploded and the bank has been to hell and back, but all up we seem to have achieved some worthwhile outcomes in a remarkably short time.

To start with, the four traders who directly carried out the trading now appear likely to do some porridge. The bullying head of the options desk, Luke Duffy, was sentenced to 29 months with a minimum of 16 months after pleading guilty to three charges of using his position to gain financial benefit, but he’s already out on home detention and will have done his time by Christmas. He is villain number one in all of this.

In April, senior trader Gianni Gray was sentenced to 16 months behind bars and ordered to serve only eight months after also pleading guilty to three charges of using his position for personal advantage. He’ll also be out by Christmas.

Vince Ficarra and David Bullen, the latter a fruit cake who published a terrible book about his experiences, fought the charges arguing they were the most junior traders and simply following orders but on Saturday both were found guilty by a jury after just six hours of deliberation and will be sentenced on 26 June.

Therefore, it appears likely all four will do brief porridge stints in a major victory for corporate regulator ASIC, which first laid charges in December 2004 and has moved with great speed on this matter relative to other more glacial probes in the past such as Steve Vizard’s insider trading and the notorious Solly Lew Yannon transaction at Coles Myer in the mid-1990s.

All up, it’s been a pretty impressive case of corporate accountability and regulatory intervention. The prudential regulator APRA, which was asleep when HIH collapsed in 2001, came at NAB like a bull at a gate and even had the temerity to shut down its forex options desk for more than a year, as if the $60 billion behemoth was somehow in danger of collapsing under the weight of unauthorised trading any day.

Then you have the board and management accountability which this 2004 timeline shows was incredibly fast:

13 January, 2004: scandal first publicly announced
2 February: Frank Cicutto sacked and John Stewart appointed new CEO
16 February: Charles Allen resigns and Graham Kraehe appointed new chairman
12 March: NAB releases response to PwC investigation and fires four of its top 12 executives
26 March: gang of seven directors announce proposal to call EGM to sack Cathy Walter
2 April: CFO Richard McKinnon announces retirement
7 April: NAB announces KPMG to be replaced as auditor
5 May: directors Ken Moss and Ed Tweddell announce intention to retire in three months
7 May: Cathy Walter resigns from board so EGM to sack her cancelled
21 June: Wesfarmers CEO Michael Chaney joins board and announced as new chairman from September 2005
11 August: Ahmed Fahour and Michael Ullmer recruited and announced as John Stewart’s two new heir apparents

The only residual issue is potential litigation by NAB against BGC International and ICAP, two global currency broking houses which allegedly were complicit in some of the false data entry. It sounds a long shot, but NAB might extract a quick $50 million after issuing an initial ambit demand for a whopping $539 million.

Peter Fray

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