News in the last few days that the two top leaders at Australian Securities and Investments Commission (ASIC) have allegedly engaged in personal enrichment at the expense of taxpayers wasn’t just bad news for the two men. It also weakens ASIC’s credibility in ongoing and future oversight of Australia-listed companies – especially those doing business overseas.
Australia shocked the financial community last week when ASIC Chairman James Shipton stepped aside after a revelation that he expensed to ASIC over A$118,000 on “tax advice” connected with his personal move from the U.S. to Australia. Dan Crennan, Mr. Shipton’s deputy, has formally resigned after taking A$70,000 in payments related to his own relocation from Melbourne to Sydney.
Perhaps more troubling is how long it took ASIC to deal with the misappropriation of funds and the lack of disclosure. In a testimony this week, it emerged that ASIC asked about the large payments to tax advisor KPMG in August 2019. The acting ASIC chair, Karen Chester, has even acknowledged that the regulator acted at a “glacial” pace to respond. Indeed, the situation only came to light through an investigation by the Australian National Audit Office, which is a separate entity from ASIC.
The problem for a regulator to allow such a slip – right under its own nose – is what it says about the far more complex job of overseeing dynamic international companies. If ASIC couldn’t find issues with its own staff at the very top of the hierarchy, how can it hope to keep track of Australia’s listed companies, many of which operate in dozens of countries?
It also raises questions about how widespread any financial misappropriation might be at ASIC. Organizations tend to lead by example, and if the number one and two at the watchdog allegedly engaged in this kind of action, what type of behavior might underlings pursue? How much more taxpayer money might have been spent on frivolous, inappropriate or personal expenses?
One obvious place to look is ASIC’s case against last-mile logistics company GetSwift, which is listed in Australia but the vast majority of whose clients are based in other countries. For nearly two years, ASIC has pursued a case called “overly aggressive” by shareholders regarding public announcements GetSwift made a few years ago. So far, ASIC has found no smoking gun but spent millions of dollars in legal fees, experts estimate.
Making matters even more troublesome, ASIC has refused to provide cost transparency despite numerous freedom of information requests. One has to wonder how many other cases has ASIC pursued without accountability and to the detriment of taxpayers?
Pursuing an international crusade can be expensive. Court hearings indicate that ASIC made international trips in its pursuit of GetSwift, indicating money was spent under the leadership of Messrs. Crennan and Shipton that likely included around-the-world flights, hotel rooms, and other expenses. And there is so far no evidence ensuring Australian taxpayers that the case was anything more than a holiday for ASIC staffers.
Given the large sums ASIC’s senior staff apparently spent on themselves, there is also a legitimate question of why they chased a company like GetSwift, which has a handsome net-cash balance sheet. Could it be a hope to recover funds that make up for the wasted dollars burned in expense accounts?
In a Sept. 14 letter, ASIC representative Justin Frank said that while the watchdog has ascertained the amount spent on the GetSwift case, it would not reveal it publicly. Mr. Frank said such a disclosure “has the potential to adversely impact upon the adjudication of this matter.”
One plausible explanation is that the expenses related to GetSwift go far beyond lawyer bills. If the scandal surrounding Messrs. Crennan and Shipton reflects at all on the organization, there may well be illegitimate costs related to the GetSwift fiasco as well.
Returning to Mr. Shipton specifically, there are unresolved issues about his entanglements in the U.S. The former Goldman Sachs executive previously was based in the U.S. and the large tax advice bill was apparently due to “the complexity of the tax affairs being managed” by KPMG.
Surprisingly, it appears Mr. Shipton billed the Australian people in part to deal with his own late tax filings in the U.S. a few years ago. The services expensed to ASIC included “optimization of the Australian taxation of foreign exchange gain or loss in foreign bank accounts” and “assistance in respect of resolution of Massachusetts State tax notices and penalties due to late filing of 2017 Massachusetts state tax return,” according to the Guardian.
Any further efforts to gather evidence in foreign jurisdictions, especially the U.S., may be tainted until the truth about not just Mr. Shipton but all of ASIC expenses involved in the “why not litigate” saga become known. Until then, the global financial community may hesitate to take the regulator’s current or future investigations seriously.
