Jeff Morris Submission 136 PJC

8/18/2019 Jeff Morris Submission 136 PJC

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SUBMISSION TO THE SCRUTINY OF ADVICE INQUIRY

NAB & COWPER

Senators last year I appeared before you in relation to the CBA financialplanning scandal and here I am again today in relation to the NAB financialplanning scandal. This is either proof that déjà vu is a real scientificphenomenon or evidence of a systemic problem.

It is noteworthy however that neither of these scandals would have come tolight without two whistleblowers – myself and the NAB whistleblower - andwithout our stories being taken up by the media and by the Senate.

Missing from this equation is the corporate regulator ASIC whose job it actuallyis to catch and punish these crooks. This is the biggest scandal of all. The NABwhistleblower obviously benefitted from my experience and didn’t waste anytime at all on ASIC, he just went straight to the media.

The fact that the NAB & CBA disasters can occur at all is due to ineffectiveregulation. ASIC’s specific multiple failures in relation to the NAB mattermerely provide further ‘on the ground’ evidence of their incapacity.

The big vertically integrated institutions have long found ASIC to be a pleasureto work with and this sentiment seems to have been reciprocated by ASIC’sappreciation of the fact that the big players seldom burdened ASIC with theirproblems. Indeed we recently learned that the relationship is so cosy that ASICactually submitted one of their press releases on NAB to NAB for vetting andamendment. Are they the regulator of these institutions or their generalfactotum?

The 6 big players who between them control 80% of the financial planningindustry have been largely left to their own devices and these systemicproblems are the result.

In both the CBA and NAB scandals ASIC has simply failed to act on informationthat should have set off warning bells. The cosy relationship with the bigplayers may have contributed to this but there is a deeper problem withinASIC: the lethargy and complacency that pervades the organisation. This evenallows ASIC to greet each unfolding disaster with seemingly serene

Scrutiny of Financial AdviceSubmission 136


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detachment and the incredible attitude that: “it’s nothing to do with us, it’s theindustry that is at fault, we‘re just the regulator.”

Whilst seemingly “putting their hands up” after the media exposure NAB have

nevertheless at every opportunity been trying to diminish the true scale oftheir malfeasance and in particular to push the message that the problems arenot systemic and they are not as bad as the established basket case, CBAFinancial Planning.

By quirk of fate however, I was uniquely positioned and qualified, to closelyobserve both organisations during the years they both played ‘Hunger Games’with their financial planning victims, who they called clients, at CBA from 2008

and at NAB from 2009.

In my opinion, the NAB Financial Planning Scandal is a carbon copy of the CBAFinancial Planning Scandal . The only difference is that NAB succeeded insitting on the volcano for longer.

The flawed business model, which puts product sales above the clients bestinterests, is all but identical, the corrupt and abusive management is identical,the weak and ineffectual compliance systems are identical, the fraud, forgedsignatures and appalling advice given to clients is identical.

NAB wouldn’t even know whether it has a systemic problem because itscompliance systems wouldn’t be capable of uncovering it: from the reports oninternal documents it is clear that problems have only come to light due toexternal factors such as client complaints. If NAB’s compliance was up toscratch I suspect a lot more than 37 of their planners, out of 1700, would havegot the push in the past 2 years. I believe the full extent of the problems atNAB has not yet come to light.

Most of all however I think the focus needs to be on management. When thestar planners, like Nguyen at CBA and Cowper at NAB, cease to be the blueeyed boys lauded by management for smashing sales targets by cuttingcorners and morph overnight into so called “Rogue Planners” to be thrownunder the bus when expedient, both NAB and CBA managers acted corruptly topull the wool over ASIC’s eyes, to cover up what occurred, to isolate and lie totheir trusting clients and to defraud them of compensation.



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Veronica Coulston

In May 2009 it was 7 months since I had reported the corrupt managementcover up of CBA rogue planner ‘Dodgy Don’ Nguyen to ASIC when I became

aware of what had happened to a former work colleague and friend VeronicaCoulston at the hands of NAB rogue planner Graeme Cowper.

I was shocked at Veronica’s appearance: her face was drawn, her eyes werehollow. She told me she hadn’t been eating or sleeping for months. She had nomoney, she had been drawing down on her credit cards to survive but was upto her limit. She was wracked with guilt, as a single mother, worried about howshe would provide for her daughter.

Veronica didn’t understand what had happened but it soon became clear itwas a case of another bonus incentivised financial planner gearing upvulnerable, low income clients to flog more product. Just like Storm Financial.Just like “Dodgy Don” Nguyen at CBA.

Veronica didn’t even have the cashflow to support the strategy and was livingon credit cards. The planner, Graeme Cowper, had already advised a further$20,000 drawdown in December 2008 to clear her credit cards but this was just kicking the can down the road. Now, only 6 months later, her cards weremaxed out again and Cowper was coming to her home for a meeting the nextday to recommend a further $25,000 loan drawdown to “solve” her cash flowproblems.

This advice was of course madness but there is a sinister side to this as well:Veronica was targeted for this predatory lending because she was ‘asset rich’.Ultimately the bank would get its money back by selling her home. Forappearances sake, the longer this occurs after the initial loan drawdown thebetter for all those involved in facilitating the disaster – hence the desire tokick the can down the road. This can also allow people like Cowper to exit theinstitution before all their chickens come home to roost.

This is the worst form of predatory lending where the ‘mark’ is set up with anunaffordable loan to facilitate product flogging by related financial planners.The process continues where the ‘mark’ gets deeper in debt, falls behind, getshit with penalties and ‘default’ interest rates [generating super profits for the



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bank] until the bank sells their home at the point where the bank recoups alltheir funds and the ‘mark’ is left with nothing.

Veronica and I spent 9 months dealing with lower level people at NAB, trying

to extract information, also in relation to how her excessive loans ever gotapproved in the first place. As anticipated, we were confronted with a wall ofsilence and obfuscation. We succeeded in extracting a key fact find documentand certain file notes but key documents such as the original signed loanapplication forms and assessments were not forthcoming. Ultimately NAB saidthey were “lost”. Attempts to get them to confirm this fact in writing wereunsuccessful. NAB staff changed and became increasingly discourteous untilone of them hung up on Veronica the moment she said her name.

I then drafted the attached letter of 28 February 2010 for Veronica to send toNAB Chairman Michael Chaney and other NAB Directors including CEOCameron Clyne and ASIC. This letter set out the serious issues surroundingCowper and NAB financial planning/lending and really should have rungserious alarm bells at the highest levels of the NAB. It appears however that allit generated was a systemic cover up.

This letter included a reference to Cowper giving illegal verbal advice toVeronica on investment switches during our meeting [while he was suspendedfrom NAB]. From a licensee standpoint this and other matters should havebeen the subject of a compliance follow up if NAB was even remotely seriousabout its Breach Reporting requirements.

The follow up letter of 25 Nov 2010 to Michael Chaney fills in the rest of thestory.

Eventually Veronica received a payment from NAB in May 2011 ofapproximately $80,000, fully 2 years after we began the quest forcompensation. To obtain this compensation, to which she was clearly entitled,Veronica was forced to sign a confidentiality deed.

There was no compensation for the trauma of having her life turned into aliving nightmare, not only by Cowper but by the corrupt managers who tried tocover up and reduce the compensation payable.



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No compensation for the hundreds of hours spent fighting for justice, fightingto prove what NAB already knew but would not admit to its trustingcustomers.

Throughout the ordeal NAB maintained a solid wall of denial. It suited them toallow Cowper to ‘resign’ and feed this line to the clients. They made noadmissions, argued black was white, ground victims like Veronica down withdelays and obfuscation. They did not share with Veronica or other victims thesalient facts that Cowper had had a Breach Report filed with ASIC in 2010 andthat he had been terminated for “file reconstruction” in 2009 ie forgery orfalsification of documents. NAB kept this information to themselves whiledisputing the claims of victims to minimise compensation paid – claims thatNAB knew to be true.

Other Graeme Cowper Victims

Mainly due to recent media exposure, I am now aware of the circumstances of9 NAB/ Cowper victims. All 9 cases involved excessive gearing into NABproducts and excessive fees and - all ended in tears.

Most of these clients complained to NAB. Aside from Veronica, only 3 othersreceived what they regarded as inadequate compensation, after protractedand difficult argument; the other 5 however were turned away with nothing.

Given what NAB knew about Cowper, extending to Board level, this is anabsolute disgrace.

NAB

Had there been simply one person of integrity in a position of authority, NABcould have acted decisively to clean up this mess from at least early 2010,when the Chairman, Directors and CEO received the letter of 28 February2010. This letter raised multiple serious issues that any competent Boardwould have thoroughly investigated and put right, even if it was under no

pressure to do so from an ineffective regulator.



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Instead of which they, the Board and CEO being complicit, tried to cover it up.Even though NAB had themselves sacked, or forced the resignation of, Cowperin June 2009. Even though NAB had filed a Breach Report with ASIC on Cowperin early 2010. Even though we now know Cowper was sacked by NAB for thevery serious matter of “file reconstruction” according to their internal reports.

Despite all this, NAB lied to the victims/ clients and either denied outright, orlowballed, the compensation. Only 39 clients of Cowper’s clients receivedcompensation from NAB. It has been suggested to me that Cowper had asmany as 700 clients – what happened to the rest of them?

Just like at CBA the plan was to isolate victims and prevent them from joining

up the dots so that they never realised they were part of a systemic issue. Theycould then be ground down individually. The confidentiality agreements thepersistent few were forced to sign were part of the cover up.

I have been advised that in about May 2010 NAB flew in a team of about 10Paraplanners from Melbourne to go through Cowper’s files, a process whichtook several weeks. This would tend to confirm a large number of clients. Thefiles were then passed to legal dept to deal with the clients, so any

paraplanners who found wrongdoing never saw the result. Legal dept thenground the victims down to the lowest possible figure. [I dealt with a NAB in-house lawyer at the end of Veronica’s case.] Why use paraplanners, juniorstaff, rather than compliance people to review the files? A cynic would suggestthey were more likely not to raise tricky issues, or to pursue them.

A former colleague, who left CBA financial planning because the managementthere sickened him, went to NAB financial planning and said the culture there

was even worse. He also told me that two staff in a lift were talking about“cleaning up the mess left behind by Graeme Cowper” and were reviewing 68files. This was in late 2011, suggesting the clean up was protracted andsuggesting a large number of clients – very few of whom however received anycompensation from this seemingly extensive clean up.

The thing about so-called ‘rogue planners’ is that they are a product of theirenvironment. The fact that Cowper could operate the way he did suggested to

me that there would be other ‘rogue planners’. It seems that there were atleast 37 at NAB.



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I am advised that one of these rogue planners was and that NABcovered up his malfeasance in 2012, even though he was apparently reportedto ASIC.

Even when Breach Reports were filed with ASIC it is likely that, like CBA, thefull extent of malfeasance was not disclosed by NAB.

NAB has admitted to compensating 750 clients to the tune of $10m to $15m.That is an average of only 20 for each planner bad enough to sack, the totalclient numbers would have been much higher. Generally if a planner is capableof giving shocking advice to one client he is capable of giving it to many. Asingle rogue file usually means a rogue planner. The number of clients entitled

to compensation is probably much higher. This confirmed by the number ofCowper clients who actually complained but still received no compensation. Itis clear that NAB did not go looking for victims to compensate.

Again the above figures indicate an average compensation figure of $13,000 to$20,000 per victim. Given the amount of high octane gearing advice given andthe large losses this generated in known cases, this amount of compensationseems ludicrously low. The problem that I hear time and again is that inexpert

victims simply cannot take on a large bank, can’t even articulate the argumentswithout expert help and are easily duped into settling for something. Just asCBA, left to their own devices, duped and lowballed the victims for years, sohas the NAB.

In summary, NAB:

• Failed to supervise Cowper and other rogue planners properly• Failed to deal adequately with clear breaches as a licensee• Failed to deal with victims honestly and openly• Failed to compensate victims adequately• Failed to clean up their act in the intervening 5 years• Failed to provide an honest reference for Cowper resulting in his

employment by 3 other dealer groups subsequently and moreunsuspecting people being exposed to his malpractice.

New NAB Financial Planning Remuneration Scheme



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To cap it all off, documents I have sighted in respect of a new remunerationscheme for financial planners would suggest that, contrary to the rhetoric, NABis moving even more strongly to a bonus incentivised, product flogging model.Whereas the previous scheme used total revenue, that is new ‘upfront’revenue plus ongoing service revenue, as the basis for qualifying for a bonus,the new scheme uses upfront revenue as the qualifier for bonus, on a monthlybasis. The purpose of this change can only be to encourage planners to ignoretheir existing clients [most of whom are grandfathered under FOFA and thusnot subject to the ‘opt in’ requirement requiring] and focus on flogging productto new clients.

This is a distinctly retrograde step and chillingly brings the NAB remunerationclosely into line with that at CBA Financial Planning, which has been blamed forcontributing to the well known problems there.

Many people would be surprised to find that FOFA does not preclude monthly payment of bonuses to planners based on product sales. This looks a lot likecommission but the banks cite a ‘balanced scorecard’ approach whereby othercriteria such as customer satisfaction, audit results and ‘behaviours’ are woveninto the mix. Even where these are as much as a 50% weighting they aremerely window dressing to disguise what is, in reality, commission, by anothername. In any case these ‘behaviours’ are open to a good deal of manipulationby managers flogging the planners hard for more and more product sales.

If you accept that most of what happens in the financial sphere is a product ofthe conflict between greed and fear, remuneration models supply the crucial‘greed’ factor in driving behaviours.

Despite everything that has happened at CBA and Macquarie and despite thesystemic problems uncovered by NAB in its internal reports however NAB isdeliberately moving its remuneration model in a direction that will onlyencourage further malpractice by financial planners. When this happens,should we blame the management or the so called ‘rogue’ planners?

So, despite FOFA, despite everything that has happened, NAB still feels safe togame the system with more product flogging.



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ASIC

Aside from the fact that it is ASIC’s somnolence generally that has allowed theindustry to degenerate to the extent it has, their incapacity has beendemonstrated in their conduct of the NAB/ Cowper matter.

At Senate Estimates on 25 February, ASIC made the extraordinary claim thatthey have only been on this for a few days. In fact there was a wealth ofmaterial provided to ASIC 4 to 5 years ago that should have got them moving:

• Breach Report re Cowper from NAB “early 2010”• Copied on letter to NAB Chairman Chaney 28 February 2010• Copied on letter to NAB Chairman Chaney 25 November 2010• Copied on another detailed and damning letter from a victim to NAB

Chairman Chaney on 4 February 2010 [also drafted by me]• Copied on at least one other detailed letter from a Cowper victim

making serious allegations of forgery and fraud.• Advice from NAB that they had compensated 39 of Cowper’s client’s•

Advice from me to my ASIC contact in early 2011, withwhat one would have thought was the credibility of the vindicated CBAwhistleblower.

I first raised Graeme Cowper/NAB in a meeting in Jan/Feb 2011 with. I outlined what had occurred in Veronica’s matter and gave him my

opinion that Cowper was a Don Nguyen clone, that NAB appeared to becovering up the problem and dudding the clients and that all the circumstances

led me to believe there was a similar systemic problem at NAB to that at CBA.said he would give it to somebody to look at, which he did: a

part time employee based in Melbourne [to investigate a Sydney matter]. Inever succeeded in running her to earth as she never seemed to be there anddid not return calls.

ASIC could and should have cleaned this up 4 years ago. Instead they didnothing:



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• The fact that the accumulation of evidence outlined above was not puttogether by someone at ASIC suggests that ASIC does not have aproperly structured database in place to track and cross reference thissort of crucial material. This deficiency is a damning indictment ofcurrent management.

• Such is the level of inertia at ASIC that it seems from ChairmanMedcraft’s comments at Senate Estimates that they will not investigatematters like this unless the investigation is done for them and theevidence is presented in a pile neatly tied with pink ribbon ready to besent off to external Counsel. ASIC has extensive investigative powers fora reason.

• That hoary old chestnut “lack of resources” was trotted out for ASIC’sunfathomable failure to investigate and take action against GraemeCowper. This is risible, ASIC have plenty of resources that aremisallocated on world trips, prosecuting defunct companies or sendinghuge contingents to testify at Senate Estimates.

• ASICknew from NAB that Cowper had a Breach Report and 39 of hisclients were compensated but they clearly couldn’t be bothered to findout how many clients he had or whether the compensation paid wasequitable. This confirms once again that ASIC couldn’t care less aboutconsumers. And what a light touch they have for the big players.

• Whichever way you look at it, when ASIC have to fill in the huge gaps intheir knowledge from the newspapers it is a damning indictment. Thefact that NAB would conceal such matters from ASIC shows the lack ofregard for this regulator.

• When asked at Senate Estimates how many NAB planners ASIC had

received Breach Reports for, ASIC didn’t know. Seemingly they had to filea notice on NAB and wait for their reply to find out! Once again this goesto the lack of proper systems and a database at ASIC. The lack of thisessential tool suggests ASIC are not serious about regulating financialplanners. Another way look at this is that ASIC had several days toprepare for this obvious question at Senate Estimates, even if they hadto use manual procedures and preferred to sit on their hands.



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Compensating the Victims

It’s amazing what public exposure will achieve: NAB now seems to have atotally new attitude towards its victims/clients, to judge by its public

utterances.

However as Churchill said, what counts is “Deeds not words.” and the CBAprecedent for how this sort of rhetoric is translated into reality is notencouraging.

When and only when CBA was caught red handed at the end of the SenateInquiry last year did they do a partial mea culpa. They have never admitted thewhole truth. The Chairman of CBA still falsely asserts that the Board learned ofwhat was going on only late in the day but I advised the CEO in June 2009 andmy client Jan Braund wrote to the Chairman of CBA in February 2010. In bothorganisations, CBA & NAB, the lies and deceit and lowballing of clients oncompensation continued unabated well after senior management and theBoard were in a position to stop it.

In CBA’s case the lowballing of clients continues to the present day under thefarcical “Open Advice Review Program” whereby clients are still beingmercilessly ground down by the same CBA Customer Experience people whohave lied to them and defrauded them for over 15 years. Their main weaponagainst elderly, vulnerable clients is wearing them down through interminabledelay. From public statements made by CBA it would seem that little or nomoney was paid to victims for the first 7 months.

The problems with this scheme are numerous:

• Scheme under the control of CBA• Executive General Manager Dr Brendon French, whose Customer

Experience personnel were responsible for the disgraceful treatment ofvictims for many years, has been placed in charge.

• No obligation on CBA to go looking for problems• Victims have to come forward themselves, many are too old or timid to

do so. Some are simply frightened of the bank.• Main problem is that victims have to first run the gauntlet of CBA

Customer Experience staff, interminable delay and “lost” documents.



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• “Independent” Customer advocates selected and remunerated by CBA.Victims denied the opportunity to be represented by a lawyer,accountant of financial planner of their choice.

• CBA just refuse to deal with a firm like FRA [Financial ResolutionsAustralia] who tripled and quadrupled lowball CBA compensation offers.Exclusion is payback for the role FRA played in exposing CBA’sskulduggery to the Senate.

• Most victims will never make it through the legalised process to ahearing with the Review Panel. They just won’t have the stamina. Theyhave been living this nightmare for too long.

So when NAB talk about their “Independent” Customer Advocate I justshudder.

Bottom line, the banks who have lied to and defrauded their clients of propercompensation for years should not be trusted to finally put things right. TheSenate Inquiry last year was of the view last year that neither CBA nor ASICcould be trusted with the compensation process.

A truly independent body should be set up to administer the compensation for

the plethora of institutions which have dudded their customers. This couldpossibly be done in the short term by expanding the remit of FOS withadditional bank funded resources but FOS too has its problems.

Clean Up at NAB

Like at CBA there were a lot of Board Members, senior managers, line

managers, compliance people, customer experience people and support staffas well as financial planners, involved, by commission or omission, inperpetrating this fraud on the customers.

There needs to be a wholesale clean out at NAB of all the people involved. Thiswill be the best gauge of how their intent measures up to their recent rhetoric.

Profiting from the experience of CBA the NAB will probably come out withtheir own version of the deeply flawed “Open Advice Review Program” as partof a smokescreen to discourage further scrutiny.



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I urge the Senate however to look through this and probe deeply into theproblems at NAB: they are systemic and we have only seen the tip of theiceberg so far.

Clean Out at ASIC

Surely this is one major failure too many for this hapless institution. Newleadership is required. Failures are not confined to Financial Planning butproduct provision, liquidators, mortgage fraud.

Suggestions for the Ultimate Reform of Regulation of Financial Planning

NAB is just the latest scandal whereby the fractured nature of the oversight offinancial planners has allowed too much to fall through the cracks. Splittingresponsibilities between ASIC, Dealer Groups and FOS is just a recipe forcontinuing disaster. I submit that the logical remedy is to bring things togetherunder one roof.

Reform of this industry/profession has to start at the top with a new body, ordistinct division of ASIC, assuming responsibility from ASIC for licensing ofplanners. This body should:

• Be directly responsible for the qualification and admission to practice ofall financial planners

• Be responsible for licensing all Financial Planners directly, rather thanallowing dealer groups to license employees.

• Be responsible for processing complaints against planners anddisciplinary action.

• Be responsible for consumer protection and assume responsibility fromFOS for compensating the victims of malpractice, funded by alevy/practising certificate fee on all financial planners.

• Probably also assume responsibility for the issue of financial products.

A compact and integrated body would thus be created responsible for all

aspects of adviser qualification, licensing, sanctioning and compensation.



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I believe that it almost goes without saying that vertical integration,whereby product manufacturers own financial advice firms, must bedispensed with as a pre condition to the establishment of a true profession.

Royal Commission

None of what has occurred at NAB, CBA and other places will be properlyremedied until there is a Royal Commission into financial services. The RoyalCommission into Child Sex Abuse is uncovering not just the perpetrators butcrucially, also the people who covered up for them. There is a measure of justice in this.

Nobody should underestimate the degree of human suffering that has beenwrought by the welter of financial fraud in this country, the impact on qualityof life, stress related illness, depression, suicides. These people deserve justicetoo.

Jeffrey Morris

5 March 2015



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28 February 2010

Mr Michael Chaney

Chairman

National Australia Bank

800 Bourke Street

DOCKLANDS VIC 3008

Dear Sir

Complaint Re NAB Financial Planner Graeme Cowper & NAB Lender

Precis: Low income, vulnerable single mother in receipt of inheritance targeted for predatory lendingand financial planning practices by bonus incented employees of NAB. Inappropriate, aggressive“Gearing Plan” based on information falsified by the Planner.

Clear inability to service excessive loans resulted in recommendation to borrow more.

Loans do not meet the standard of a Prudent Banker. Former NAB Planner claims that NAB lendingpractices are “corrupt” and loan documents falsified so as to earn lenders bonus. No success to datein obtaining these loan documents from NAB.

************************

I received a call from my banker on 5 December 2005. She was aware of an inheritanceI was receiving and wanted to know what I planned to do with it.[It strikes me now how inappropriate was NAB’s use of this confidential information for directmarketing purposes.] I told her I wanted to pay off my home loan and then a year or so down thetrack borrow about the same amount as I had originally, $150,000, to upgrade my home. She agreedwith this and actually said that, after my divorce, she wouldn’t let me borrow more than $150,000

on my income. She then suggested I talk to a NAB Financial Planner.



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I met NAB Financial Planner Graeme Cowper in early 2006. He was aware of the fact that I wasdepressed after my divorce and the death of my father, a single mother on a low income with onechild. He was also aware of the fact that I wanted to use the proceeds of the inheritance to pay

down my NAB mortgage and then borrow again as above to upgrade my home.

I now believe he ruthlessly exploited my vulnerable position for his own gain. He knew that I signedall the documents he put in front of me on a trust basis because of the state I was in and withoutreading them or having them explained to me.

He prepared a financial plan dated 24 March 2006 which involved borrowing $150,000 to invest.

Having recently taken advice and had this matter reviewed independently I now understand that theadvice I received then and later was negligent and defective in many respects:

1. A “gearing plan” was simply an absurdity for someone in my position, with a low income of$40,000 plus Centrelink plus maybe some dubious child support from my ex-husband. My tax ratewas too low and serviceability of the loan was questionable right from the start, especially giventhat I planned to upgrade my property and take on another housing loan . When I did upgrade myhome and took on further borrowings with NAB I was simply unable to service the debt.

2. The plan itself was based on a notable false premise: inheritance proceeds were overstated as$190,000 whereas on page 4 of the Factfinder I noted an amount of only $55,000 to be received inthe next month. Graeme’s Review Record of 22 September 2006, ie 6 months later, noted that

I would receive a further $90,000 ie a total of$135,000.

3. The suspicion has to be that this was deliberate as the plan itself is somewhat contrived based onthis falsehood. The plan showed on pages 43 & 58 a cash surplus of $66,965 that simply neverexisted . This non-existent cash was then used on page 49 to constitute the 30% defensivecomponent of the asset allocation, supposedly in accordance with my “risk profile” [presumably toslip the plan past whatever internal controls you have in place] and the other 70% in growth assetswould appear to have been made up from the $150,000 borrowings.

4. I am advised that good financial planning practice would not recommend gearing into a portfoliocontaining 30% defensive assets as this component would simply constitute “permanent negativegearing”. Thus gearing would not normally be recommended for investors with this profile by any



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reputable financial planning operation. Graeme appears to have got around this issue by the artfulcontrivance above whereby the non-existent cash was “ungeared” and only the growth assets were“geared”. [Although I am advised that this practice itself makes little sense in financial planningterms and should not have been approved by your compliance & review function.]

5. By this means Graeme managed to take a person with a 70% growth asset risk profile

[by the way, there was no discussion about the risk profile] and effectively gear them 100% as if theywere an aggressive investor.

6. Had he not manipulated things in this way there would have been no basis for any investment andtherefore for the fees he charged: $10,150 fees [on a $150,000 investment] on page 65 of the SoA

that he never disclosed to me . He specifically told me that the $2,200 SoA fee that I paid separatelywas the only fee involved and then ripped me off another $10,150.

7. Page 49 of the SoA also shows significant variations even from the target asset allocation withfairly sketchy justification. Whereas the model shows a 4% benchmark for listed property, the tableshows 21.44%. When you remove the fictitious “cash” from the equation, the $50,000 exposure tolisted property represents 33.33% of the $150,000 funds actually invested ie of the real money.Given the disproportionate losses suffered by the listed property sector, this overweight position has

been a major contributory factor to the disaster I have suffered. This would appear to have comeabout as a result of the personal preferences and unique insights of Graeme Cowper himself,

Why does NAB allow people of obviously limited knowledge and ability like Graeme Cowper tomonkey around with the asset allocation models in this way to the detriment of the trusting clients?Then again, why does NAB employ people like Graeme Cowper as financial planners at all?

8. Regardless of what one might think of this reckless, fee gathering initial advice, things only gotworse. See the notes of meeting 22 September 2006 between Graeme Cowper, andmyself where the house upgrade was again discussed and the comment:

“Veronica discussed this in greater depth with and both agreed that she shouldn’t borrowmore than she did originally when she purchased her Allen Street property.” ie $150,000.

At a meeting with Graeme Cowper on 23 February 2007 however he assured me that I could easilyborrow another $230,000 and encouraged me to do so. I notice now however that he wrote this up



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as me “asking about the impact of borrowing another $230,000 to upgrade”. Total debt would be inthe order of $380,000.

I am advised that at this point any half decent financial planner would have advised me to liquidatethe investment portfolio and repay the investment loan as:

□ This was a ludicrous amount of debt for a single mother on a salary of $40,000□ I simply could never service this level of debt□ That I did not have the reserves to be so exposed to investment markets□ That once this loan was in contemplation, the questionable basis for the plan, the ficitious

$66,965 cash reserve, clearly did not exist [if there had been any room for a mistake aboutit before, there was none now] and this should have triggered a fundamental review of the

plan. In the clear absence of the fictitious cash reserve there was even less basis to continuewith the aggressive gearing strategy.

Graeme merely noted that he “Completed a NAB estimate with the monthly cashflow”. I don’t knowwhat the basis of a “NAB estimate” is but I can tell you from personal experience it doesn’t work forpeople on $40,000 a year. Based on my last encounter with Graeme [see below] it appears he nolonger thinks it works either.

9. See notes of meeting 2 May 2008 At this stage I was in the 35 day settlement period on my newhome. You can see the concerns and issues I was raising about “whether this was a good underlyinginvestment” and “she was concerned at the news and how ‘everyone’ had been advising her not toborrow funds to invest.”

Astonishingly, Graeme also casually notes that “she didn’t fully understand the structure but hadmade her decision based on trust within myself [sic].” Of course he knew I didn’t understand it ashe hadn’t explained it to me in the first place, so he was hardly surprised. But wouldn’t a bona fideplanner in this situation be concerned that his client didn’t understand the structure and take stepsto remedy that?

My trust was obviously misplaced as at this stage it is clear that Graeme himself didn’t “understandthe structure” as the impending home loan had completely undermined whatever questionablebasis it had had to begin with.



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10. See Graeme’s handwritten note of 11 December 2008. The financial distress caused by his –literally – bankrupt strategy is apparent. His brilliant solution to my inability to service my loans?Borrow more!

11. It would seem that NAB Financial Planning’s management eventually tumbled to Graemebecause the next time I saw him he was under suspension whilst NAB was working on getting rid ofhim. [Incidentally, I did not appreciate being lied to by your staff and told he was on a special projectwhen I tried to contact him].

12. Graeme had also advised me to take out a fixed rate loan at a disastrously high rate, based on his“expert” knowledge of interest rate markets.

14. Meeting at my home on 8 May 2009. Fortunately I had a witness present who is a qualifiedfinancial planner and who questioned Graeme and took comprehensive notes.

Graham began with a discussion that sounded knowledgeable to me but which my friend describedas “drivel”. Contrary to all his previous advice, Graeme recommended, verbally, that I switch to cash.He said the natural low for the market was 2800 points and it would retrace to that level. In the next6 month reporting season company results would be smashed. Don’t invest in BHP, Rio or resources.

He produced investor switch forms for me to sign on the basis of this verbal advice because hecouldn’t process it himself as the adviser because he was suspended. My friend stopped me fromsigning them.

My friend then put to Graeme that the nub of the problem was that I had total debts of $342,000and income of $46,000 which wasn’t sufficient to service the debt and asked what his proposalswere for dealing with that.

Graeme’s suggestion was to cash in $25,000 worth of investments, using $9,000 to pay the interestin advance on the investment loan, $10,000 for an emergency fund and $5,000 to clear my creditcard [sic]. He claimed that this would not affect the tax deductibility of the investment loan. Myfriend disagreed.



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My friend then pointed out that this would not solve the problem, which was that I would still begoing backwards.

Graeme said:

“I agree $340,000 is big, it’s no way to move ahead, the current situation is unsustainable.”

My friend then again asked him what he was going to do about it.

Graeme said:

“I’ll do an expenditure review. I’d be interested in seeing the loan submission. I actually think they’vestretched you. You’ve always had equity – it’s the cashflow that’s the issue. I actually think they’vemanipulated the cashflows when they put the loan through. They’ve now incentivised so themore loans they put through the bigger the bonus. My long held opinion is that creates corruption –I can tell you many cases where they’ve given people loans who can’t afford them. They’vesubstituted gross income for net. The formula is $46,000 times 4 which is $184,000 less existing debt

of $150,000 which would have been shaded as for investment. Guarantee you they’ve taken intoaccount investment income and child support which they’re not meant to use. It’s very similar to thecase of Storm Financial where people are given loans – the bank goes on what’s in front of themincluding pension income. Look at Universal Credit Code. Branch Manager – they separateapplication – give you back 2 pages to sign – you never see the rest, they fill it out later. Not sourgrapes – but at the end of the day they’ve given you a loan you can’t service. Get a copy of the Siebelloan application and the hand written applications

and ask for a full reconciliation on purchase. Approval of loan by person getting a bonus for it –that’s corrupt. They’ll settle to get you to go away. Get a lawyer from day 1. I can recommend one.

The one that’s acting for me at the moment.”

Your former employee’s exact words.

Strangely, since my first request on 11 May 2009, I have had no luck in obtaining copies of theoriginal handwritten application or the original Siebel application that are missing from “IronMountain” – although they found the packet that those two documents should have been in. All

they could send me was a copy of the Siebel on the computer run on 22 June 2009 [which seems to



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show negative cashflow of $978 a month]. has moved to another role and I havedealt with .

The loss of the original documents was admitted by on 29 May 2009 during ateleconference with myself and my friend. He asked her to confirm in writing that the originaldocuments had been lost and she agreed to do this however despite 5 follow up emails andinnumerable phone calls, nothing has been forthcoming. On my last phone call to

on 1 February 2010, the moment I said my name she hung up.

You, the NAB, a major financial institution, held these people out to me to be experts with the

imprimatur of your trusted brand. I believed you and put my faith in them and followed their“expert” advice. This is the outcome of my misplaced faith:

I was forced to cash in my investments in June 2009, retrieving $86,212 of my original $150,000. Isimply didn’t have the cash flow to continue – hardly a sustainable financial strategy your employeesput me into.

In addition to the capital loss of $63,788 [which includes the effect of the $10,000 of non disclosedfees], Statement of Advice fee of $2,200, holding costs over $30,000, excessive interest on fixed rateloan and excessive interest on credit cards due to my inability to service the excessive loans, therewas also the excessive interest on the excessive loans themselves that has compounded the further Ihave fallen behind.

I currently have a net debt position to NAB of about $300,000. I believe that no responsible financialentity should ever have lent me more than $150,000 as a housing loan only, as per comments from

at the time and the recently established test of the Prudent Banker by CBA in the StormFinancial resolution process.

$150,000 is therefore the amount I would nominate as compensation to put right the damage doneby NAB’s bonus fuelled, incompetent and predatory Financial Advice and Lending practices.

Yours sincerely



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Veronica Coulston]

CC

Mr Cameron Clyne

Managing Director


800 Bourke Street

DOCKLANDS VIC 3008

Mr Geoffrey Tomlinson

Director


800 Bourke Street

DOCKLANDS VIC 3008

Ms Jillian Segal

Director


800 Bourke Street

DOCKLANDS VIC 3008



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NAB Head of Customer Resolutions

Reply Paid 2870

Melbourne VIC 8060

Mr Gary Dunshea

Special Projects Manager NAB Financial Planning

Level 20, 255 George Street

Sydney NSW 2000

ASIC Complaints

Australian Securities & Investments Commission

PO Box 9149

Traralgon VIC 3844

The Investigations Manager

Financial Planning Association of Australia Ltd

PO Box 109 Collins Street West

Melbourne VIC 8007

Financial Ombudsman Service

Investments, Life Insurance & Superannuation

GPO Box 3

Melbourne VIC 3001



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The NAB letter of 10 August is a mass of obfuscation that seemingly attempts to muddy the watersby doggedly restating a mass of inaccurate “facts” that are simply wearying to struggle through.

What is bewildering about this is that after fully 5 ½ pages of trying to argue that black is white yourpeople finally admit that they have concerns about Cowper’s financial planning advice [notsurprising since they sacked him] and offer compensation “approximately equal” to the loss I havesuffered!

I am happy to accept compensation for Cowper’s financial planning malpractice on this principle and would have been even happier to accept it without the preceding 5 ½ pages.

However, your people have not quite translated this principle accurately and their calculationrequires the following amendments:

□ Plan fee $2,200 left out□ Tax benefit received by me on interest payments of $30,915 deducted but offsetting

allowance for tax paid by me on income received of $25,154 left out.□ Non tax deductible interest paid by me on shortfall on redemption of investment of $63,753

from June 2009 to date left out.

Buried in this 7 page letter however is just one paragraph on page 6 that lightly dismisses the secondcomponent of my complaint about NAB’s bonus fuelled lending practices,

for which no compensation is offered.

In this regard I make the following comments:

Cowper’s comment’s about NAB’s corrupt lending practices set out on page 5 of my letter are anexact transcript of his remarks taken down word for word by my friend, a Certified Financial Planner,who was in attendance. He is more than happy to provide this transcript in the form of a StatutoryDeclaration.

Given that this meeting took place at my home whilst Cowper was under suspension and about to besacked by NAB I would have thought that NAB, acting in good faith, would have found his denial

pretty transparent.



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A statement that “We have reviewed the history of your loans, and are satisfied that appropriateassessment procedures were followed on each occasion.” is made without any supporting evidencewhatsoever. To someone facing the prospect of losing their home as a result this is frankly

pathetic.

No attempt has been made to address the various points raised in my letter on the lending issues,

in contrast to the financial planning issues.

Indeed there is an extraordinary asymmetry in this NAB letter in this regard:

□ 5 ½ pages of “black is white” before admitting the financial planning claim in full

as opposed to

□ couple of unconvincing generalised sentences about the lending practices with no offer ofcompensation

Possibly this asymmetry is due to the fact that the author of the letter seems to sit within the“advice” rather than the “banking” area. This makes me wonder how rigorous the “review” oflending practices really was. Perhaps NAB could share the detail of the “review” and what these“appropriate assessment procedures” actually were.

As a matter of simple common sense, if NAB’s bona fide lending processes really can lead a lowincome single mother into this predicament, then maybe there is something wrong with the NABlending processes?

I note that I have still not been provided with any of the original loan documentation requested

and that the failure to provide same is passed over in silence.

The involvement of Cowper as a Financial Planner in the lending process is ignored.

What qualifications did he have to advise me to take out the disastrous 3 year fixed loan? Whatabout the farcical advice to draw down another $20,000 on 11 December 2008 because of mynegative cashflow. You can’t afford your current loan? Don’t worry, we’ll lend you more! How could



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CC

Mr Cameron Clyne

Managing Director


800 Bourke Street

DOCKLANDS VIC 3008

Mr Geoffrey Tomlinson

Director


800 Bourke Street

DOCKLANDS VIC 3008

Ms Jillian Segal

Director


800 Bourke Street

DOCKLANDS VIC 3008

NAB Head of Customer Resolutions

Reply Paid 2870

Melbourne VIC 8060



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Documents

Jeff Morris Submission 136 PJC