Share issue: ANZ, Deutsche, Citi face criminal charges

SYDNEY: Australia is preparing criminal cartel charges against the country’s third-biggest bank and underwriters Deutsche Bank and Citigroup over a $2.3 billion share issue, in an unprecedented move with potential implications for global capital markets.
The pending charges, which can carry hefty fines and 10-year prison terms, threaten to change the way institutional capital raisings are handled, and do further damage to the reputation of Australian lenders already mired in scandal.
The Australian Competition and Consumer Commission (ACCC) said federal prosecutors would charge Australia and New Zealand Banking Group Ltd, its Treasurer Rick Moscati, the two investment banks and several more unnamed individuals over the 2015 stock placement.
All three banks denied wrongdoing and vowed to defend the charges, with Citigroup saying the regulator was effectively criminalising practices long seen as the norm in the financial industry.
“The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015,” ACCC Chairman Rod Sims said in a statement.
“It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct.”
The third underwriter, JP Morgan, was not named by the regulator as a target and declined to comment.
Australia has some of the toughest anti-cartel laws in the world, however the decision to pursue criminal charges surprised experts given they are harder to prosecute than civil charges.
The move was “almost unique” in Australian corporate history and indicated prosecutors had a high level of confidence in their case, said Andrew Grant, a banking expert at the University of Sydney Business School.
Rating agency Moody’s said on Friday the charges were “credit negative” for ANZ.
In 2015, Australian banks were under pressure to meet new capital requirements, prompting ANZ and larger rival Commonwealth Bank of Australia to raise a combined A$8 billion in a single week.
The lead managers did not disclose they kept about 25.5 million shares of the 80.8 million shares issued, ANZ said on Friday, a fact that is being investigated separately by the corporate regulator.
The Australian Shareholders’ Association said the pending charges should trigger reforms to capital raising procedures to ensure greater transparency and prevent investment banks profiting from share sales while retail investors have their holdings diluted.
As new bank equity flooded the market, ANZ shares closed 7.5 per cent lower on August 7, 2015, when the Melbourne-based lender announced it had completed the institutional component of the raising, according to a Reuters analysis. ANZ shares took over a year to recover to their pre-raising value of A$32.58. — Reuters