Some of the world’s biggest pension funds are planning to launch a class action against the Commonwealth Bank, claiming the lender engaged in misleading conduct and committed a string of disclosure breaches relating to a separate legal claim brought last year by anti-money laundering agency Austrac.
The class action, which has not yet been lodged but was announced last night, has backing from some of CBA’s major shareholders, including heavyweight United States public pension funds with a combined net worth of nearly $US500bn.
This includes the $US224bn California State Teachers Retirement System (CalSTRS), the $US150bn Teachers Retirement System of Texas (Texas TRS), the $US71bn Massachusetts Pension Reserves Investment Management Board, and US$44bn Colorado Public Employees Retirement Association, according to Melbourne-based law firm Phi Finney McDonald
The looming action is a severe blow to new CBA chief executive Matt Comyn, who started in the role earlier on Monday, following the exit of Ian Narev after a little more than six years in the role. The funds are being represented by Phi Finney McDonald, which was launched last year by several Slater and Gordon partners. The CBA action has funding support from UK-based litigation financier Therium Group Holdings.
The move is set to compound the legal headaches for CBA which on top of the Austrac claim, is currently a separate facing a class action launched on behalf of retail shareholders in October last year by Maurice Blackburn Lawyers. At the same time CBA is facing a review from bank regulator APRA into its corporate culture.
Earlier Monday CBA’s Mr Comyn sent a note to the bank’s 51,000 staff apologising for CBA’s “unacceptable” failures in recent years, and promising that “things will change” under his leadership.
In August last year, Austrac launched proceedings against CBA in the Federal Court alleging widespread breaches of anti-money laundering rules.
Among allegations, Austrac claims CBA failed to properly monitor and report thousands of suspicious cash transactions through its smart-ATM network. CBA has admitted to some allegations although has denied many claims. However the bank last month agreed to enter into court-ordered mediation talks with Austrac.
Phi Finney McDonald director, Odette McDonald, said that the action would seek compensation for investors who acquired shares in CBA between 16 June, 2014 and 3 August, 2017.
“We consider that the integrity of CBA’s anti-money laundering and counter-terrorism financing systems, and compliance with laws and directions of regulators, was of incredible importance to CBA shareholders”, said Ms McDonald.
“This is clear from the proactive steps investors have taken in driving this action,” she added.
Phi Finney McDonald’s class action will allege that CBA breached its disclosure obligations over a three year period by not disclosing material information related to the Austrac. CBA raised $5.1 billion in capital during the period of alleged non-disclosure.
CalSTRS and Texas TRS are among the largest public pension funds in the United States. A spokesperson for CalSTRS described the funding terms from Therium Group as “a major step forward in the Australian litigation funding market.”
A CBA spokesman has been contacted for comment.