Australian banking giant ANZ is set to face criminal cartel charges over a multi-billion-dollar capital raising, along with its advisers Deutsche Bank and Citigroup, regulators said Friday. The charges, to be laid by federal prosecutors, come at a torrid time for Australia's major lenders as a royal commission probes misconduct in the finance industry.
ANZ in 2015 raised Aus$2.5 billion (US$1.9 billion) from institutional investors and up to Aus$500 million from retail investors to help meet the cost of tougher regulatory requirements. But the Australian Competition and Consumer Commission (ACCC) claimed after an investigation that there were "cartel arrangements relating to trading in ANZ shares" following the share placement.
Prosecutors will allege there was "an arrangement or understanding allegedly made" by the joint lead managers of the bank's institutional equity placement of some 80.8 million shares in August 2015, ANZ said. ANZ, its group treasurer Rick Moscati, the share placement's underwriters Deutsche Bank and Citi, and a number of other individuals will be charged over the alleged criminal cartel conduct, the ACCC said.
"It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct," ACCC chairman Rod Sims said in a statement Friday. According to the ACCC, cartel conduct occurs when businesses act together, instead of competing against each other, to drive up the profit of cartel members. There was no immediate comment from the Commonwealth Director of Public Prosecutions, which is taking the case to court. ANZ shares closed 1.51 percent lower to Aus$26.80 in Sydney on Friday.
ANZ chief risk officer Kevin Corbally said the company "acted in accordance with the law in relation to the placement and on that basis the bank intends to defend both the company and our employee". Citi said it would "vigorously defend" the allegations, adding that the case involved an area of financial markets activity not previously considered by Australian courts or regulatory guidance.
"This is a highly technical area and if the ACCC believes there are matters to address, these should be clarified by law or regulation or consultation," Citi added in a statement. Deutsche Bank has been contacted for comment. ANZ said it was also cooperating with an investigation by the Australian Securities and Investments Commission into whether the bank should have disclosed the joint lead managers took up some 25.5 million shares of the placement.
Global ratings agency Moody's said the case was "credit negative" for ANZ and that the "consequences of the potential proceedings could be significant". University of Sydney banking expert Andrew Grant said ACCC cases were usually prosecuted via civil rather than criminal action. "Resorting to criminal charges against the ANZ and others would suggest that the authorities feel that they have a particularly strong case," Grant said.
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