The Federal Court has frozen the assets of a number of company directors tied up in a $200 million alleged fraud case against Westpac, in another blow for the major bank’s internal compliance procedures.
Westpac disclosed to the market late last week that it had detected “a significant potential fraud” relating to a portfolio of equipment leases with the bank’s customers arranged by Forum Finance, which were referred to Westpac’s institutional bank.
“While investigations are ongoing and the NSW Police, ASIC and APRA have been notified, at this stage it appears no Westpac customer has suffered a financial loss,” the bank said.
“The bank has a potential exposure of around $200 million after tax, with the extent of any loss dependent on the outcome of its investigations and recovery actions underway.”
The bank said it had initiated proceedings against Forum Finance in the Federal Court and “obtained certain asset freezing and search orders to preserve available assets and relevant information”.
According to court documents, a provisional liquidator is to be appointed to the firm while asset freezing orders were issued on Friday to company directors Basile Papadimitriou and Vincenzo Tesoriero.
Mr Papadimitriou is a prominent member of the business community and until recently sat on the board of Sydney Olympic Football Club. French investment bank Societe Generale has also initiated separate proceedings against him and Forum Finance in the Federal Court for misleading and deceptive conduct.
Westpac’s disclosure of the case came just hours after it announced it would remediate advice customers $87 million for failing to flag corporate actions, including buy-backs, renounceable and non-renounceable rights issues between 2009 and 2015, and two months after the corporate regulator initiated court proceedings against the major bank for insider trading.
Westpac has faced ongoing issues with its risk culture after having to pay the biggest fine in Australian corporate history following AUSTRAC’s case against the major bank in 2020.
It was slapped with an enforceable undertaking by the prudential regulator in December last year, with the bank required to have a detailed plan outlining all major remediation activities related to risk governance.
The bank’s plan was given the tick of approval by APRA in April this year. The prudential regulator declined to comment on the impacts of the latest case on its improvement efforts.