Citigroup, Deutsche Bank and ANZ have all vehemently denied allegations of cartel conduct that are being brought against them regarding an institutional share placement.
On Friday (1 June), it was revealed that the Commonwealth Director of Public Prosecutions (CDPP) is preparing to prosecute ANZ for being knowingly concerned in alleged cartel conduct relating to an arrangement or understanding allegedly made between the joint lead managers in relation to the supply of 80.8 million shares in August 2015.
The capital raising comprised a $2.5 billion placement.
The Australian Securities and Investments Commission (ASIC) is also investigating whether ANZ’s announcement on 7 August 2015 should have stated that the joint lead managers took up approximately 25.5 million shares of the placement.
This represented approximately 0.91 per cent of total shares on issue at that time and was jointly underwritten by Citigroup Global Markets Australia, Deutsche Bank AG and JPMorgan.
The CDPP, following a referral by the Australian Competition and Consumer Commission (ACCC), is now seeking to bring legal proceedings against those allegedly involved. However, it has been reported that JPMorgan may have been granted immunity from the alleged criminal cartel proceedings as a result of whistleblowing on the matter.
Under the Competition and Consumer Act 2010 (CCA), it is a criminal offence for businesses and individuals to participate in a cartel.
For corporations, the maximum fine or penalty for each criminal cartel offence is the greater of:
- $10 million or;
- three times the total value of the benefits obtained by one or more persons and that are reasonably attributable to the offence or contravention where benefits cannot be fully determined;
- 10 per cent of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.
Individuals found guilty of criminal cartel conduct could face 10 years in jail and/or fines of up to $420,000 per offence.
Banks refute the allegations
ANZ has stated that it believes it has acted “in accordance with the law” and will defend both the company and its employees.
Deutsche Bank said that it will “vigorously defend [the] expected charges”, adding that it “takes conduct matters extremely seriously”.
The statement outlined that the bank had “cooperated fully with the ACCC during the investigation process”.
Deutsche Bank continued: “Financial markets are highly regulated under the Corporations Act and ASIC market integrity rules.
“The bank believes it and its staff acted responsibly and in a manner consistent with those rules.”
In a more strongly worded statement, Citi highlighted that the allegations involve “an area of financial markets activity that has not been considered by any Australian court or addressed in any regulatory guidance notes previously published by the ACCC or the Australian Securities and Investments Commission”.
Citi added that this was a “highly technical area” and that if the ACCC believes there are matters to address, these should be clarified by law or regulation or consultation.
The statement reads: “Citi steadfastly denies the allegations made against it, and certain employees, by the CDPP in relation to Citi’s role as a joint underwriter of the AU$2.5 billion equity placement conducted by the Australia and New Zealand Banking Group (ANZ) in August 2015.
“Citi will vigorously defend these allegations on behalf of itself and its employees.”
The financial services group said that underwriting syndicates have “operated successfully in Australia in this manner for decades” and that, during the transition in question, ANZ “raised important equity capital through the underwriting arrangement with the syndicate of banks, including Citi”.
It continued: “Citi and its employees acted with integrity and without any bad intent in fulfilling the obligations of this underwriting agreement.
“As required by the Market Integrity Rules, Citi also effectively participated in orderly capital markets to ensure that the required outcomes for ANZ and its shareholders were achieved.”
The statement concluded that the allegations brought by the ACCC through the CDPP that the joint underwriters “reached an understanding with respect to the disposal of less than 1 per cent of ANZ’s outstanding ordinary shares” should be considered in the context that ANZ’s shares are “bought and sold freely by thousands of shareholders in volumes representing hundreds of millions of dollars every business day, including for the period in question”.