A Case Study of Fraud Committed by the NAB - Master Set

8/3/2019 A Case Study of Fraud Committed by the NAB - Master Set

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A case study of Fraud

Committed by

The National Australia Bank

Against their customer

Author

Paul Alan Buckman

Tinamba Victoria 3859

25th

of October 2008.


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Table of Contents

The challenge 3The process of banking 4

Deposits to your bank account 4The Withdrawal process 4The Process of Conversion 5Bank Conduct - Fraud or Mistake 5

The fact of fraud 6Cheque number 006548 7The conduct of the Basstech bank account 9A graphical analysis of Fraud 9

Legal Precedence & Bank Fraud 13Bobbett v Plunkett (1876) 1 Exch D 368: 14National Westminster Bank Ltd v Barclays Bank International Ltd [1975] QB

645 at 666: 14Bankers & the higher Duty of Care owed to their customer: 14Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A. C. 465: 14National Australia Bank Ltd v Voloshin [2000] NSWSC 84: 16Conclusion on the Law as it stands 17The National Australia Banks knowledge of fraud 18Question 19

The Path to Justice for Mr & Mrs Average Citizen 20The State & Federal Police Forces 20The Regulators 21Australian Prudential Regulatory Authority 22Australian Competition & Consumer Commission 22Australian Securities & Investments Commission 23The Banking Ombudsman 24Additional Avenues to justice 25Legal firms No win no fee 26State Fair trading commissions 27The Public Interest Law Clearing House (PILCH) 27

Legal Aid 28

The system at work 28The denial of justice to a victim of fraud 30How the system works against the natural person the victim 30

Conclusion 33The current status of those doors to justice in Basstechs case: 33


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Welcome dear reader, I have here a story of fact that should be of concern to every person thathas money in a bank account in Australia regardless of its value. To quote a bank advertisementin Victoria of some years past Its your money Ralph 1

The challenge

. To assist your comprehension of whathas transpired in this case I have put together a little challenge. I respectfully ask that youparticipate fully in the challenge and to consider the issues and ramifications that result. For

those of you that this case study has been specifically addressed, I have taken the liberty offorging your signature.

Lets assume that I am a thief and have stolen by means various one of your cheques, Ihave made it out to cash for say $500 and forged your signature. The figure below is thatcheque for the purpose of this challenge. If this study has not been specifically addressedto you then the reality will be that I am nowhere near you, and know not your name.Therefore Ill ask that you ask a colleague to sign your name without actually seeing yoursignature for comparison, etc. That is, ask a colleague or passer-by to forge your

signature.

National Australasian Bank of FraudSometown in Australia

Pay CASH $500.00

The Sum of: Five Hundred Dollars only

Your name is often printed here

Your Cheque number BSB Account Number

That completed we proceed. I, the thief, having forged your signature take your cheque toyour bank account branch; I hand it to the bank teller and I demand $500 in cash.

Question 1: At this point what would you reasonably expect your banker to do?

It has been suggested to me that a reasonable course of action would be for the banker toactually check the validity of the document, by at the very least comparing the signatures

on the cheque against your specimen signaturelodged by you with your banker forthat precise purpose. The principal purpose of that procedure is for the banker to provetheir mandate to debit your bank account of those funds.

So, now that we have completed the first phase, I am going to change roles; I am nowyour banker. To simulate that specimen signature and for the purpose of comparison byyour banker, can I now ask you to place your normal signature close to that of theforged one; and please compare the one with the other.

I submit to you that should there be any uncertainty or irregularity between your truesignature and that of the forgery, that it would be reasonable to expect your banker to

1 The State Bank of Victoria prior to its incorporation within the Commonwealth Bank ofAustralia.

N

otNegotiable


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contact you immediately to advise you of that irregularity, and to seek your instructions.Particularly where forged signatures are found during explicit clearance procedures,surely the detection of your forged signature is the detection of a fraud in progress.

Most fundamentally, you would expect your banker to validate that sufficient funds existin your account, and that the transaction is within the normal bounds within which youraccount historically operated. Not to do so would be at the very least negligent.

Now consider that not just one cheque was cleared through your cheque account in thisway without your knowledge or consent, but this cheque was but one of 152 forgedcheques with a total value of $238,750; Also, due to your banks need to protect itselffrom its liabilities to you they have pursued and forced you to bankruptcy & as aconsequence you have lost 35 years of your productive life. How do you feel now? Doyou see a problem here?

The process of bankingLets side step for a moment and consider the banking environment, the system as it isdesigned to be in real not just utopian terms. The mechanics of each segment of a bankingtransaction needs to be frozen in time and analysed. The broad segments are describedbelow:

Deposits to your bank account

Lets say that you deposit $100 into your bank account; that deposit is in the formof four $20 notes, one $10 note and one $5 note, two $2 coins and one $1 coin. Youhand the teller the $100 together with a correctly filled out deposit slip. The

moment that the teller accepted your money for processing, that money ceased to beyour property. It is now the property of the bank to do with as they please.

As part of the bank-customer contract the bank undertakes to return that money toyou upon demand. They do not undertake to return the precise serial numbersand/or denominations of the notes or coinage that you deposited as that wouldclearly be an impractical and unworkable process. What the bank does undertake isto return currency of the realm to the value of the balance of your bank accountat the time of demand by you. If $100 is the balance of your account then thatrelease may well be one single $100 note and that will uphold the letter and spirit ofthe contract.

The Withdrawal process

When you write a cheque for any purpose it is in fact a legal instruction a demandupon your bank by you for the return of your money. The debiting of your accountas a consequence of that transaction is not an immediate process; rather it is onethat is delayed until the act of clearance by the bank often conducted at the end ofthe days trading and that transaction is recorded in your bank account. It may takeas much as three days to complete the transaction in the case of a cheque depositedto a creditors bank account at another bank. In the case of cash cheques presentedfor conversion at a branch of your bank the process is a little quicker but stilldelayed. So lets follow the process of converting your stolen cheque to cash.


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The Process of Conversion

The instant that I, the thief, present the stolen cheque to a teller of your bank he/shehas the option of displaying due diligence in that process, or, accepting thelegitimacy of that cheque upon face value. Buckman makes no comment here at

this point in time; suffice to say that the thief is handed $500 in nice clean cash.At this point in time that money (the $500) is not yours to worry about, it is thebanks money and the bank is perfectly entitled to do with its money as it pleases.The point at which that position changes is when the bank performs its supposedlydiligent clearance process and physically enters that transaction as a debit to yourbank account record. It is at this point that the bank must ensure that it has yourlegal mandate to proceed with that transaction and physically remove those fundsfrom your bank account.

As Buckman understands it that is settled law, and as authority Kerr J 2

Bank Conduct - Fraud or Mistake

is quotedand he said The principle is simply that a banker cannot debit his customers

account on the basis of a forged signature, since he has in that event no mandatefrom the customer for doing so

Yes, there was a time when Buckman and partners could have cheerfully acceptedthat the bank did no more than make a mistake (many mistakes). One could ofcourse reasonably question where and at what point in time those mistakes becamenegligence or indeed incompetence; still mistake was a reasonable defence untilSeptember of 1999. After that point it became increasingly more difficult to acceptmistake as a defence.

The 30th

of September 1999 was the date when the National Australia Bank throughits appointed receiver & manager, Paul Burness, then of Scott Partners MalvernVictoria, sold the Business and assets of Basstech knowing that the bank heldfactual liability in the events leading to the insolvency of the company. Burness hadadvice from the directors of Basstech in a letter to him of the 9th of September 1999of the fact that the National Australia Bank, in clearing forged cheques from theBasstech bank account, had directly led to the insolvency of that company. Despitethat advice and a formal request to investigate, Burness refused to investigate thebanks conduct in writing on the grounds that the National Australia Bank was hisappointor. Further, the National Australia Bank continued to pursue both Buckmanand his partners to bankruptcy knowing full well that the bank held underlying

liability to them its customer over its conduct and cooperation with a thief todefraud Basstech, the banks customer.

So what conduct is Buckman accusing the National Australia Bank of engaging in?The following is an extract of Buckmans recent letter sent and addressed asfollows to: Mr John Stewart, The Managing Thief, National Australia Bank anddated the 4th of October 2007. Note that any respectful tone toward this bank & itsofficers ceased on this day.

2National Westminster Bank Ltd v Barclays Bank International Ltd [1975] QB 645 at666:


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Beginning of extract:

Sir, as a brief overview your bank has in this the Basstech case:

1. Detected forged signatures on your customers cheques & chose to ignore thatfact.

2. You (the National Australia Bank) then chose not to enquire of your customeror to alert them of those detections that is each incident of theft & fraud in

progress.

3. You then chose to conspire with the thief to defraud your customer by honouringthose forged cheques & illegally debiting your customers account of $238,750

from 152 cheques.

4. You knowingly participated in the conversion of stolen property to cash.5. You then charged us, your customer, in excess of $21,000 for this privilege. That

is you gained financial advantage by deception when you charged us in

excess of $21,000 in interest & other fees & charges for services not providedon that money illegally debited from our bank account, without our consent, ourknowledge or authority.

6. When we detected account irregularities, (and advised National Australia Bankstaff of that detection) you then chose to conspire with our financial advisor,Paul Burness then of Scott Partners Malvern Victoria, to place our businessunder receivership in his hands, then to liquidate our business & assets knowingthat you held both factual culpability & liability in the antecedent events leadingto our insolvency.

7. You then took possession of & sold at a mortgagees auction assets from myfellow directors (ie their family home). In National Australia Bank v Voloshin(NSW Supreme Court 2000) the mere attempt by your bank to repossess acustomers property under such circumstances was declared Unconscionable& was refused.

8. In an effort to negate your legal liabilities to us, your customer, you forced us tobankruptcy.

End of extract.

The fact of fraud

Back to reality: what Buckman complains of is not allegation it is fraud proven before acriminal jurisdiction in the state of Victoria. Buckmans analysis of these events and theresulting evidence formed the principal crown prosecution case against one party to thefraud (Brendan James Harty) he was convicted & sentenced to two years & ninemonths with a non-parole period of twenty months (judgement transcript available).Buckman and his partners got an initial a three-year sentence of bankruptcy followed by alife sentence of financial scrutiny bearing continual responsibility for the costs and

ramifications of those actions performed by others, in particular the second and complicitparty to these events the National Australia Bank. This sentence is life for Buckman &


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partners; it does not stop and the system will not allow it. He to this day is still denied acredit card due to his credit history & bankruptcy and income status.

It cannot be in dispute that the National Australia Bank cleared the transactions thatunderpin this fraud and Hartys conviction, through the Basstech bank account. Of the184 cheques proven to be the subject of fraud in the County Court Melbourne, 152cheques bore forged signatures. Of those, other bankers directly referred 38 cheques tothe banks Bairnsdale account manager, Mr Matthew Johnson, for explicit clearance.That explicit clearance was given to those cheques in spite of the existence of forgedsignatures upon those cheques.

Lets actually analyse a real cheque in dispute. A good one to see is cheque number006548 dated the 12th of November 1998. The following three images show the chequestub, cheque face, and the reverse of that cheque.

Cheque number 006548

Note that the payee defined on the cheque stub is theAustralian Tax Office.

The method employed by Harty was to write cheques forlegitimate creditor amounts and process these payments ascreditor payments through the Basstech accounting system,thus giving the directors the illusion that the liability had beensettled.

The large spot to the left is a red sticker applied to thecheque stub during the Police investigation denoting a suspecttransaction.

The corresponding cheque is made to cash as shown for$10,173.00.

The reverse of this cheque, as shown below, shows that this particular cheque was faxedto the Bairnsdale branch of the National Australia Bank for explicit clearance by bankersfrom the South Melbourne branch of that bank; the South Melbourne tellers remarks onthe reverse state chq faxed sigs (signatures) not on system. See also the attachment A

collage of forged cheques.


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The important features of this cheque are as follows, with culpability inherited from bothlegislation and settled law:

1. The cheque is from a pre-printed chequebook produced and supplied by theNational Australia Bank showing in particular the account holders particulars,that is Basstech Pty Ltd and the banks BSB and the Basstech account number(083 519: 51564 8121)

2. The signature on the signature line is a legitimate signature 3

3. The cheque is a pre-printed non-negotiable crossed cheque in accordance withlegislation

(in this case thesignature of Paul Alan Buckman); however the corresponding signature on thecash endorsement is clearly forged even to the naked eye.

4

4. Section 93(2)(b) of the same Act states where the cheque, at the time ofpresentment, does not appear, on its face, to be, or at any time to have been, acrossed cheque.

.

This wording implies that the crossing Not Negotiable cannot be reversed ornullified by indorsement. Once a cheque is crossed it remains a crossed chequein perpetuity. Therefore cheques endorsed Please Pay Cash andcountersigned (particularly with a forged signature) are invalid and have nostatus.

5. Section 50(1) The Holder in Due CourseStates The holder of a cheque is a holder in due course if :..(b) the holdertook the cheque: (iii) Without notice: (B) of any defect in the title of the

person who transferred the cheque to the holder or that the person whotransferred the cheque to the holder had no title to the cheque.

Section 50(2) states Without limiting the generality of paragraph(1)(b),(above) the holder of a cheque shall, for the purposes of that paragraph,be deemed to have taken the cheque with notice of a defect in the title of the

3 Buckmans signature was applied to a blank check in Hartys custody for emergencypurposes. Harty was a fellow director at that time & it was believed by all parties that twosignatures were required on a legitimate document; that was the instruction by theBasstech directors to the National Australia Bank.

4 refer the Cheques Act 1986 Section 53


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person who transferred the cheque to the holder in breach of faith OR undercircumstances amounting to a fraud.

Lets say that you have provided me with a good or a service, youre labour orsold me your garden gnome, & I give you a cheque for the agreed amount; interms of that transaction, you are the holder in due course of my cheque.

The conduct of the Basstech bank account

For the previous 15 years that this bank account had been in operation with theBairnsdale branch of the National Australia Bank, the companys monthly cashdemands were no more than $300 per month and had only reached that level inrecent times due to the establishment of a second office, i.e. late 1998/1999. Therewas thus no history of large cash withdrawals from the Basstech account. It was nota cash business; the business neither deposited nor withdrew large cash amounts.

All cheques in dispute share these same features; the legislation clearly states thatin the event of a fraud the bank is deemed to know that it has no title to the moneysremoved from the Basstech bank account.

A graphical analysis of Fraud

The following graphs show pictorially the progress of the fraud and its impact uponthe company.

Graph #1 A chronology of Fraud shows the monthly debits from the company

bank account with a distinction made between those cheques deposited into thethiefs bank account and those cheques made to cash and redeemed across thecounter of a National Australia Bank branch.

$-

$10,000.00

$20,000.00

$30,000.00

$40,000.00

$50,000.00

$60,000.00

Mar-98

Apr-98

May-98

Jun-98

Jul-98

Aug-98

Sep-98

Oct-98

Nov-98

Dec-98

Jan-99

Feb-99

Mar-99

Apr-99

May-99

Theft - " Cash" Cheques Theft - Deposited to Harty's Accounts

Payments to Legitimate Creditors

Graph #1 A chronology of Fraud

As can be seen from above, conduct of the fraud had three distinct features. Firstlythere are the forged cheques that were actually cleared to the correct creditor bank

1

1

14

6

7

6

6

32

1


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accounts. These amounts can be seen from April 1998 to March 1999 although notevident for January 1999 ($201) & February 1999 ($155) due to the displayedscale. These amounts as a consequence do not feature in this dispute or in theseaccusations of fraud. They still, however, represent moneys removed from theBasstech bank account without the mandate of the customer. The total value of

forged cheques removed from the Basstech account was $238,750; the amountsupported by convictions of theft was $234,400 or thereabouts and that amount plusthe interest and charges accrued forms the basis of this dispute.

The next two series on the graph show the amounts for forged cheques that weredeposited to the thiefs bank account (Light Blue) followed by the Red seriesthat denotes the value of forged cheques that were surrendered across the counter ofa National Australia Bank branch and converted to cash by the bank. The numbersabove each months bar show the number of forged cash cheques that werereferred to the banks account branch for explicit clearance; on all occasionsclearance was granted without enquiry to Basstech the customer.

The home branch for the Basstech bank account was National Australia Banklocated at Main Street Bairnsdale Vic 3875. The banks account manager wasMatthew Johnson and his name appears on the reverse of many of those chequesreferred to the Bairnsdale branch for explicit clearance.

It needs to be emphasised again that Basstech was not a cash business. For theprevious 16 years the normal company cash demands upon our bank were in theorder of $200 to $300 per month. Basstech neither took large cash amounts acrossthe counter nor did it carry large cash amounts for change or other businesspurposes. The business of Basstech operated generally through 30-day accountswith both receipts and payments made by either cheque or credit card.

Graph #2: The National Australia Banks statement of account vs the balance

that should have rightfully been.

From the graph below: The bottom line (blue) NAB balance is the actualBasstech bank account balance as taken from the National Australia Banks issuedStatement of Account as shown at the statement date. This is the base line of thegraph and includes all transactions as they occurred in real time, including the$300,000 loan facility credited to the account on the 24th of June 1999.

The next line (purple) Adjusted Balance depicts what the true account balance

should have been had forged signatures not been cleared through the Basstech bankaccount. This line writes back the amounts on forged cheques, supported withconvictions of theft and making a false document, along with overcharges interms of interest, service fees & other charges. This line is in direct comparison tothe Blue Line NAB balance.

The Red & Green lines are to be seen in direct comparison. The Red line showsthe value of cheques bearing forged signatures that is those cheques supported byconvictions of theft against Harty, the convicted party to this fraud. The Green lineindicates the effect of bank fees and interest charges imposed upon those fundsillegally removed from the Basstech bank account. That difference betweenCumulative Theft (Red line) & Cumulative Overcharges (Green Line)represents the gaining of financial advantage by deception by the National AustraliaBank from its customers bank account.


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Closing monthly balances of the Basstech Pty Ltd

trading account with the

National Australia Bank.

$(300,000)

$(200,000)

$(100,000)

$-

$100,000

$200,000

$300,000

$400,000

Mar-98

Apr-98

May-98

Jun-98

Jul-98

Aug-98

Sep-98

Oct-98

Nov-98

Dec-98

Jan-99

Feb-99

Mar-99

Apr-99

May-99

Jun-99

Jul-99

Aug-99

NAB Balance Adjusted Balance Cumulative Overcharges Cumulative Theft

WHAT SHOULD HAVE BEEN: - The true accountbalance adjusted for Theft and compoundedovercharges in interest & un-warranted fees

WHAT WAS: -The actual Balancefrom our NAB bank Statements

National Australia Bankstaff first detect forged

signatures on Basstechcheques

The thief becomes asignatory to the company

account

20th of Aug 1999 Burness,the banks Receiver &Manager is appointed

Theft & overcharges

1st of Sep 1999 - We aremade aware of forgedsignatures on our cheques by

Victoria Police following theexecution of a searchwarrant on the NationalAustralia Bank.

If the amounts representing the Cumulative Overcharges are added to the NABbalance you then have the Adjusted Balance. That is what the Basstech bankbalance should have been had fraud not been imposed upon it.

There are a few points of interest that should be noted on this graph:

March 1998 Harty, the convicted thief was made a signatory to the Basstechbank account.

May the 1st 1998 cheque number 006114 is referred to Matthew Johnson ouraccount manager at the Bairnsdale Vic branch of the National Australia Bankfor explicit clearance. This cheque, shown below, was cleared withoutreference to Basstech. When this signature is compared to that purported to beBuckmans signature on the cheque it is clear that his signatures both on thesignature line and the cash endorsement are forged. The banks Bairnsdale


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account manager Matthew Johnson cleared this cheque; the phone number onthe reverse of the cheque is the Bairnsdale branch fax number.

Buckmans specimen signature is shown opposite to scale.

Early June 1999 Paul Burness of Scott Partners, Railway Pde MalvernVictoria is appointed as Basstechs financial advisor purportedly assistingBasstech in negotiations for a trade-on position with the National AustraliaBank.

In August Burness advised the Basstech directors that they were in danger oftrading whilst insolvent, itself a criminal offence. He advised them that theyshould advise the bank of that fact and provided a sample letter for thatpurpose. This the directors reluctantly did in early August.

Question: At this point was Burness & Scott Partners acting in Basstechsinterests (his client) or in their own financial interests?

On the 20th of August 1999 the National Australia Bank appoints Burness asits receiver & manager of Basstech Pty Ltd.

Ten days later, on the 1st of September 1999, Victoria Police delivered toBuckman a bundle of approximately 800 cheques for analysis & verification.

This is the first indication to the directors that forged signatures wereinvolved in these transactions.


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Burness is formally advised on the 9th of September 1999 that the bank bearsliability in respect of bank transactions that are the subject of the fraudinvestigation and formally requested him to investigate.

Burness then advised the Basstech directors in writing on the 27 th of October1999 stating after legal advice that I cannot take an action against the bankas they are my appointor. This claim indicates that Burness considershimself to be an agent of the bank. Legal precedent is that the receiver andmanager is the agent of the mortgagor5

in this case Basstech, not the agent ofthe bank.

Indeed in the real world the receiver and manager is given a general immunityby the bank for their actions in the banks favour. This is commercial factbacked by clauses hidden deep within the bowels of the registered debenturesigned by directors of a company over the companys assets. Regardless, atthe time of appointment the receiver and manager is the sole officer of thecompany. That is, he or she is the trustee of that company; he surely has a

duty of care to all interested parties, not just the interests of the bank.

Question: Is the office of receiver and manager a Trustee in legal terms ofthe company over which he exercises control as the sole officer of thecompany? If not by what right does he exercise his or her powers. Indeedfrom where do those powers derive? & to whom is he/ she answerable?

Question: As the receiver & manager is the agent and sole officer of thecompany in real terms, how is it that Burness in this case, sees fit to protectthe interests of one party (the National Australia Bank) above and to thedetriment of all other parties? Isnt it the duty of the receiver & manager toact in the interests of all parties involved with the company, particularly

where fraud and its consequences are concerned?

On the 30th of September 1999 Burness sold the business and assets of Basstech Pty Ltdacn 006 035 301 for $60,000. Its name was changed to acn006035301 Pty Ltd ACN 006035 301 and later deregistered by ASIC.

Legal Precedence & Bank Fraud

Legal precedence is long established governing the duties and responsibilities a bankerhas to his customer, going back as far as Young vs Grote in 1827 and beyond. Thefollowing authorities are relevant and please note the year that these decisions werehanded down. They have stood the test of time and many are to be found specificallyenshrined in current legislation.

5 SPENDER J in Freeman v National Australia Bank Ltd [2002] FCA 427 (9 April 2002)Spender said at [5] it has been said that the receiver & manager is the agent of themortgagor, not the agent of the bank, having said that Spender goes on to ignore thatimplication


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Bobbett v Plunkett (1876) 1 Exch D 368:

No doubt may be had that a payment by a banker contrary to his customersdirection is no mandate by which that banker may debit his customers account.Should that debit occur the banker is negligent6

In my opinion the words Not Negotiable on a crossed cheque are a dangersignal held out before every person invited to deal with it, and are equivalent tosaying Take care: this cheque may be stolen

.

The Commissioners of the State Savings Bank of Victoria v Permewan Wright & CoLtd (1914) 19 CLR 457; Griffith CJ said [at 467]:

7

National Westminster Bank Ltd v Barclays Bank International Ltd [1975] QB 645 at

666:

Kerr J said The principle is simply that a banker cannot debit his customersaccount on the basis of a forged signature, since he has in that event no mandate

from the customer for doing so

Bankers & the higher Duty of Care owed to their customer:

It is clear that the banker is deemed in law to be a professional person carryingprofessional duty of care responsibilities to their customer. This standing carries not justan ethical or moral duty but also a legal Duty of Care.

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A. C. 465:

Lord Devlin likened the position of banker and customer to that ofsolicitor and client p. 530. Lord Denning M.R. did the same in Dutton v.Bognor Regis, treating them both as professional men. Again in relation toprofessional men and after referring to the solicitor cases Lord Denning M.R.had this to say in Esso Petroleum v. Mardenat 819 : In the case of aprofessional man, the duty to use reasonable care arises not only in contract,but is also imposed by the law, apart from the contract, and is thereforeactionable in tort. . A professional man may give advice under a contractfor reward; or without a contract in pursuance of a voluntary assumption ofresponsibility gratuitously without reward. In either case he is under one andthe same duty to use reasonable care. In the one case it is by reason of aterm implied by law. In the other it is by reason of a duty imposed by law.

(my emphasis) {end of extract.}Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [103 of 1983], in the

Hong Kong Court of Appeal, Cons JJA said on page 8:

In Selangor United Rubber Estates Ltd. v. Cradock, the directors of acompany abused their position as signatories of the company's bank account.Their dealings with the company's monies ought to have put the bank onenquiry. It was submitted however on behalf of the bank, that even so thebank's duty extended no further than to see that the signatories on the

6 alsoBanking Law in Australia, Butterworths ISBN 0409 31903 1, Tyree, 25.5.17 seeBanking Law in Australia,Butterworths ISBN 0409 31903 1, Tyree, 34.5.4


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particular cheques concerned were those of the authorized signatories.Ungoed-Thomas J. rejected that submission (at page 1608)

If this were so then it seems to follow that, even if the bank actually knewthat the authorised signatories were misapplying the company's funds, itcould nevertheless rely on the signatures. This could be so outrageous as tolie outside the intention and true construction of the mandate. As betweenthe company and the bank, the mandate, in my view, operates within thenormal contractual relationships of customer and banker and does not excludethem. These relationships include the normal obligation of using reasonableskill and care. And that duty, on the part of the bank, of using reasonable skilland care, is a duty owed to the other party to the contract, the customer, whoin this case is the plaintiff, and not to the authorised signatories. And itextends over the whole range of banking business within that contract. Sothe duty of skill and care applies to interpreting, ascertaining, and acting inaccordance with the instructions of a customer; and that must mean his

really intended instructions as contrasted with the instructions to act onsignatures misused to defeat the customer's real intentions.

Cons JJA also referred to - Brightman J. in Karak Rubber Co. Ltd vBurden [1972] 1 W.L.R. 602:

Cons adopted that higher duty of care when at page 628 he said: In my viewthe Achilles heel of the bank's argument, both in the Selangor case (1968) 1W.L.R. 1555, and in the case before me, is that it is not, and never reasonablycould be, asserted that a paying bank with certain knowledge that theauthorised signatories are misapplying the company's funds may nonethelessrely on their signatures. If that is axiomatic, and it was conceded so to be in

the case before me, it seems utterly irrational to suppose that a bank hasan absolute unqualified duty to pay and no duty to inquire despite a deepsuspicion, approaching but falling short of a certainty, that the funds arebeing misapplied. Once a bank disclaims the untenable position of beingin all cases an automatic cash dispenser, whatever the circumstances,

there is no rational stopping place short of a contractual duty to exercise

such care and skill as would be exercised by a reasonable banker in

similar circumstances."

National Australia Bank Limited v Hokit Pty Ltd & ors 40542/95 commd50220/94, 17 June 1996, the supreme court of New South Wales court ofappeal

This appeal concerns the question of who should bear the burden of forgedcheques, the customer or the bank. An employee of the respondent companiesforged a large number of cheques, which were then presented to the appellantbank and debited to the accounts of the companies. Relying on the principlethat when a bank pays out moneys without a customer's authority, that is, onthe basis of a forged cheque, the bank bears the loss, the companies sued theappellant to recover some of the amounts.

The Bank argued unsuccessfully at trial that the narrow exceptions to theprinciple should be extended, and asked the court to hold that customersshould be subject to an obligation to take reasonable care to prevent thepresentation to their bankers of forged cheques. The Bank also argued that the


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companies should be estopped from denying the regularity of cheques signedby the employee because they knew of, and acquiesced in, her signingcheques for other purposes. These arguments were repeated on appeal. TheConsumers Federation of Australia also sought leave to intervene as amicuscuriae.

Judgement of Mahoney P and supported by Clarke JA, Waddell AJA It hassometimes been said that, in a contest between persons damaged by thedefault of a third party, the burden should be borne by the person whosenegligence contributed to the default: seeMacmillan (1918) AC at 794.However, that principle does not, I think, apply in the present case. For it toapply, it would be necessary for this Court to hold that the companies owed aduty to the Bank to do what they did not do and that it was the breach of thatduty, eg, to take care in respect of the custody and checking of its bankingrecords, which caused or contributed to the acceptance of the forged chequesby the Bank. But, for the reasons to which I have referred, the companies

owed no duty to the Bank to do or not to do what in the present case (as theBank contends) led to the forgeries and led to the Bank accepting thecheques. Unless there be such a duty, there is no negligence. Accordingly, inmy opinion, there is no estoppel by reason of what the companies did or didnot do.

For these reasons I am of opinion that the appeal should be dismissed withcosts.

National Australia Bank Ltd v Voloshin [2000] NSWSC 84:

Maser Harrison noted the following references in support of his judgement in

this case.If a transaction has been originally founded on fraud, the original vice willcontinue to taint it, however long the negotiations may continue, or intowhatever ramifications it may extend: Reynell v Sprye (1852) 1 DM G 660at 697; Smith v Kay (1859) 7 HLC 750 at 775. Not only is the person whohas committed the fraud precluded from deriving any benefit under it, but aninnocent person is so likewise, unless there has been some considerationmoving from himself: Scholefield v Templer (1859); Johns 155; 4 D & J429; Tophamp v Duke of Portland (1863) 1 DJ & S 517 at 569 per TurnerLJ; Morley v Lougham [1893] 1 Ch 736 at 757

The judgement of Master Harrison

Master Harrison brought down judgement in this case on the 25th of February2000. Buckmans understanding is that a Master of a Supreme Court is asenior court official empowered to hear cases and effect judgement uponthem. He is not entitled to interpret the law; his sole authority is to apply theexisting interpretations and legal philosophy as established by the Judges ofthat and other senior jurisdictions.

Background, in Voloshin, someone fraudulently altered the PAYEE fieldof cheques destined for Voloshins bank account with the result that thosecheques were paid into some other bank account not under the knowledge or

control of Voloshin. Moneys deposited to Voloshins bank account wererelied upon for the payment of his mortgage; as moneys were not deposited


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into his account his mortgage was placed into arrears. The bank soughtforeclosure on the property of Voloshin to satisfy the debt to them.

Master Harrison did not just find against the bank with costs; but gave leavefor Voloshin to amend his entire case, and I quote It is my view that it is atleast arguable that the plaintiffs conduct in seeking to enforce the mortgageis unconscionable with the consequence that the court will decline to permitthe National Bank to enforce its legal rights. The bank was the one whoaccepted the forged cheques. The defendant has not pleaded unconscionableconduct and I give leave for him to do so. In addition it may be that thedefendant has suffered some other type of damage other than the loss of themoneys he loaned the company. If no other damage is sought then

paragraphs 1 to 16 of the cross claim which pleaded negligence ought to bestruck out. It is my view that the defendant has an arguable cross claim.

Also the success of this case depends on a matrix of facts, including whetherthe plaintiff knew that cheques were forged prior to the giving of the

$425,000 mortgage. For these reasons the cross claim should not be struckout but needs to be amended. The notice of motion is dismissed. As this caseinvolves fraud, it is not appropriate to strike out the defence nor is itappropriate to enter judgment for possession. Costs are discretionary. Costsshould follow the event. The plaintiff is to pay the defendants costs

Conclusion on the Law as it stands

It appears to be settled law that a banker cannot remove moneys from hiscustomers bank account upon the basis of a fraud. Fraud includes any unauthorised

alteration of any of the fields on a cheque; this includes the Payee, the amount bothin words and figures, the signatures and any endorsements applied. The history ofsettled law in these matters dates well back to the early eighteen hundreds {Youngvs Grote in 1827, Reynell v Sprye (1852)} and has been continuously reinforced byall common law jurisdictions around the world.

Indeed a bank owes its customer a duty of care in the handling and managementof its customers moneys and this duty extends to more than just the checking ofsignatures. In the case of Selangor United Rubber Estates Ltd. v. Cradock, the legalsignatories were misusing the companys funds forged signatures were not used.The Selangor judgement was further reinforced in Tai Hing{refer Ungoed-ThomasJ and Cons JJA above, both referring to Selangor and Brightman J. in Karak RubberCo. Ltd v Burden} The judgement of Ungoed-Thomas J in Tai Hing above said ofthe bankers duty of care: So the duty of skill and care applies to interpreting,ascertaining, and acting in accordance with the instructions of a customer; andthat must mean his really intended instructions as contrasted with the

instructions to act on signatures misused to defeat the customer's real

intentions.

Furthermore, Kerr on the Law of Fraud and Mistake 7th ed (1952) @162 states;But where a person obtains a contract or other advantage by mistake ormisstatements innocently made, he cannot retain the advantages he has gainedwhen he discovers this mistake. If he does so his innocent misstatement becomes

from that moment a deliberate misrepresentation, or in other words FRAUD.


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It is therefore clear from settled law:

1. That a bank owes its customer a high duty of care.2. That the bank cannot debit its customers bank account on the basis of

forgery

3. The fact that Harty was a signatory to the Basstech bank account isirrelevant to the culpability of the bank in terms of forged signatures asevidenced in Selengor, Tai Hing and other cases cited above.

4. That the bank is entitled to make mistake, but once that mistake becomesknown then the bank cannot retain any benefit and/or advantage gainedfrom it; should they do so that is fraud.

5. The banks refusal to return funds that were the subject of proven fraud andto resolve the outstanding consequential issues further compounds thebanks culpability in these matters.

6. Any subsequent action that causes loss to its customer are further instancesof knowing fraud by that bank.Officers of the National Australia Bank and its receiver & manager have beenaware of these mistakes since mid September 1999 and advised of that conditionin writing.

The National Australia Banks knowledge of fraud

So in the words of Kerr {above} he cannot retain the advantages he has gainedwhen he discovers this mistake,you may well ask the question when did theNational Australia Bank become aware of the fact that it was an integral party tofraudulent transactions? That answer is as follows:

20th of May 1999 the banks account manager for the Basstech bankaccount Mr Matthew Johnson was made aware verbally and in writing thatfraud had been detected by the Basstech directors and that the services ofBrendan Harty had been terminated; and that his signatory status was to becancelled forthwith. This is evidenced by the bankers notation on the banksCustomer Service Record for the Basstech bank account dated the 20 th ofMay 1999. A copy of this customer service record was surrendered toVictoria Police under search warrant by the bank.

9th of June 1999 Det Snr Const Sharp (Victoria Police) serves the NationalAustralia Bank with a search warrant ordering the surrender ofapproximately 1100 cheques in the banks custody plus bank and credit cardstatements.

9th of September 1999 in writing from Basstech to Burness the receiver &manager formally requesting him to investigate the conduct of the bank inthese fraudulent transactions. Burness declines to investigate on the groundsthat the bank is his appointor.

Correspondence between Buckman and the National Australia Bank duringNovember 1999; January, February, March, May, and June 2000.


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Correspondence between Buckman and the National Australia Bank duringJanuary, April, May, June, July, and September 2003.

Correspondence between Buckman and the National Australia Bank duringSeptember and October 2004.

Correspondence between Buckman and the National Australia Bank inNovember 2005, including a 3-day placard demonstration outside its 800Bourke Street headquarters, to the chagrin of the banks head of security.

The last correspondence between Buckman and the National Australia Bankwas October 2007 as evidenced by the extract produced at the head of thisdocument.

Given the tone and content of correspondence noted earlier between Buckman andthe NAB, I think that one would agree that that correspondence constitutes formal

notice to the bank that it has made mistakes and that restitution and resolution ofthose issues were demanded particularly where much of this correspondence hasbeen addressed directly to the chairman, managing director and other boardmembers of that bank. As such the National Australia Banks conduct sinceSeptember 1999 reasonably constitutes fraud, condoned protected and reinforced bythe directors and management of that bank. Since September of 1999 the defence ofmistake is not available to the bank.

Question

Both you & I, the natural person, are deemed to know the law as it applies to ourindividual and collective conduct within society; our ignorance of the law isdeemed to be no excuse. A corporation too is deemed to be a person before the lawin precisely the same way and to the same extent that you & I are persons beforethe law.

1. Surely it is reasonable to expect that a bank with 150 plus years ofexperience in the business of banking and finance would know the law as itapplies to its conduct and operations.

2. How much time must elapse and how many judgements must turn against abank before those venerable institutions comprehend:

a. That they cannot clear forged cheques through their customers bankaccount?

b. That they cannot then proceed to act and force the financialramifications and responsibility onto their customer as a direct resultof the banks negligence and unconscionable conduct; that is, afterthe bank having cleared forged cheques from its customers bankaccount that results in the customers insolvency, to then liquidatethat customers business and assets?

3. How is it that a corporation is entitled to act in this fraudulent way, withimmunity from investigation, let alone prosecution?

4. These issues have been brought to the direct attention of the managingdirector & chairman of the board, commencing with Frank Cicutto &Charles Allen, then later with John Stewart, Graham Kraehe, as well as


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Ahmed Fahour & others on many occasions. How is it that this bank cancontinue to ignore the issues and retain custody of funds knowing that it isnot entitled to retain them? From Kerr on the Law of Fraud and Mistake that is fraud.

So how is it that a natural person is required to act honestly and equitably and should theynot do so they are investigated diligently and prosecuted by the agencies of the state; yetthe wealthy and influential corporation is immune from investigation let aloneprosecution?

The Path to Justice for Mr & Mrs Average Citizen

If you are unfortunate enough to be caught in the centre of the type of events that befellBasstech and partners, you really have no comprehension of what is going to hit you. You

believe in the justice system, you believe that the law enforcement and regulatoryauthorities will protect the public interest, you believe that fraud will not be accepted byofficialdom; thats the spin produced for the mass consumption by us, the plebs. Youbelieve in a lot of things, what you believe in though is some utopian ideal of whatAustralia is and how it works. Coming to terms with the loss of 35 years of ones life istraumatic enough; coming to terms with the realisation that the reality is inverse to yourperception of how the legal, regulatory and justice systems operate is soul destroying.You cannot believe the feeling of betrayal that one feels once you realise that justice ismerely a product, distributed by the court system to those that can afford to play thegame. In other words those of wealth, power and influence own the justice system as itcurrently stands.

So how does the system work? The first casualty is the myth that no one is above the law.

The State & Federal Police Forces

State and Federal Police forces are predominately concerned with and focused onthe natural person; in particular the concepts ofmens actus and mens rea, the guiltyact and the guilty mind. As a rule, police officers investigate complaints lodgedwith them impartially, diligently and without fear or favour and in my experiencedo so in both trying circumstances and with limited resources.

When it comes to corporate offences the investigators still view evidence in termsof which natural person can we walk up to and say I charge you with this offence.The corporation in their view has no mind, therefore it cannot have a guilty mind; itis an inanimate object therefore it cannot perform acts guilty or otherwise. Only thenatural person can have a mind, know right from wrong and/or perform an action, ifthat action is illegal then that natural person is charged and prosecuted.

In the case of a corporation (a bank) decisions and actions during the course ofbusiness are shared among several people; each phase of the business process mayappear legal when viewed from a limited perspective; that is, a bank teller receivesa demand for cash and cash is surrendered. If the mandate is secure then the

transaction is legitimate there is no problem. If however there is no mandate forthese transactions to occur as in the Basstech case and bank staff having been made


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aware of those facts after the event refuse to remedy the situation, then the totalconduct of the banks staff constitute fraud. If the banks staff members have notdirectly gained from any transaction then they cannot be charged, indeed oneparticular incident may well be mistake, negligence or indeed incompetence.Incompetence is not a crime.

There is therefore reluctance within law enforcement circles to consider thecorporation as a single person for the reasons above, it has no will or mind andcannot of its own accord take an action. The will, the mind, and the actions areperformed by a multitude of bank officers each performing his or her functionaccording to their job description and doing his or her prescribed portion of aprocess that in the end completes a transaction, evidence and culpability istherefore diluted. Generally, the only time an unauthorised or illegal transactionwill become evident is after the event. It is the conduct of the bank as an entitythat truly constitutes criminal activity; which is enhanced by their refusal to remedythe inequities. Their refusal is justified by the mantra they have no responsibility

to anyone other than the interests of the corporation sic shareholders. Furthermorethe directors & management of the corporation feels it has like the psychopath itresembles, the corporation feels no moral obligation to obey the law 8

The reasoning being that the corporation is an inanimate object; it has no soul tobe damned and no body to kick

as noted in ajoint paper authored by law professor Daniel Fishel and his honour FrankEasterbrook (a noted judge and legal commentator). So the corporation, although aperson before the law, in the eyes of legislation and supposedly the judicialsystem, is not a person for the purposes of an investigation or prosecution byPolice.

9

The Regulators

. So, as related to Buckman, a consequence of thiscomplexity is that the various Police forces generally do not have the expertise to

investigate crime committed by corporate entities, those matters are referred to theAustralian Securities & Investments Commission for investigation.

The bank has learned a valuable lesson here; it is above & beyond the reach of thelaw and immune from investigation for criminal conduct.

The average person has this spin doctor-generated utopian perception that theregulatory authorities are there to protect the public interest; to regulate matters of

fair-trading, unconscionable conduct, monitor business practice and prosecutebreach of law, particularly where there is a size difference between the parties.Wasnt that the impetus for the Trade Practices Act 1974 and the rationale for thecreation of the Australian Competition & Consumer Commission and itspredecessors? Hasnt unconscionable conduct become an integral focus of thislegislation? And hasnt that been extended to ASIC by subsequent legislation tocover the financial system.

8 Frank H. Easterbrook and Daniel R. Fishel. Limited Liability and the Corporation.University of Chicago Law Review 52 (1985)

9 A statement by Edward Thurlow, Lord Chancellor of England in the eighteenth century.


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So how do these shining knights and protectors of the public interest view theconduct of the National Australia Bank in the Basstech case?

Australian Prudential Regulatory Authority

After years of correspondence on this matter with this august body, Ms AliceMantel (Compliance & Governance) wrote on the 16th of November 2007 inresponse to my further complaint in writing of the 4th of October 2007 ref no07/10703 and I quote:

While APRA assesses fraud risk as part of its supervision framework, this isaimed at ensuring that the fraud detection and management systems areadequate for the scale and type of activity undertaken by the regulated entity.

As part of this process, APRA takes into account the number and type ofincident in forming a view on the adequacy of fraud risk management and,where relevant, the fitness and propriety of management, it is not the roll of a

prudential regulator to resolve outcomes in individual cases. Hence, APRA is

not able to assist you in investigating the conduct of the bank in taking theactions it did. These are matters it is able to undertake as an exercise of itscommercial activities, but they are not unlawful or matters of prudentialconcern.

What APRA has actually said here is that fraud by a bank against theircustomer is perfectly acceptable and part and parcel of normal corporateoperations; what is unacceptable in the view of APRA is fraud should itsucceed by anyone else against a bank.

The safety and security of depositor funds or of customer assets are of noconsequence to APRA, and that fraud by a bank against their customer is a

commercial right of passage; it seems that ones bank account is merely aholding account for the banks future profit.

One would reasonably think that the safety and security of depositor fundswould be a principal focus of this regulatory authority.

Australian Competition & Consumer Commission

The abdication of responsibility by the ACCC is legendary. In an article inthe Sydney Morning Heraldon the 30th of June 2004 Anne Lampe writes alot of complaints expire because regulators dilly-dally enough to move themoutside actionable time frames. This statement is borne out incorrespondence between Buckman and this most venerable of institutions, thefierce defenders of the public interest.

Academic Evan Jones, then Associate Professor of the Sydney UniversitySchool of Economics and Political Science, has had much correspondencewith the ACCC, among others, and has questioned on numerous occasions theCommissions commitment to the protection of small business. A letter toCommissioner John Martin on the 13th of January 2005 included his workingpaper ECOP2004-3 10

10 Evan Jones, University of Sydney Faculty of Economics and Business ISBN 1 86487 629 8

ISSN 1446-3814

, outlining a series of unconscionable conduct &/orfraud by the National Australia Bank against at least 8 documented clients.


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He also includes references and court precedents. The ACCC respondedthrough Mr Nigel Ridgway, General Manager Compliance Strategies, on the8th of April 2005, who writes in respect of the Basstech case study and Iquote: At issue here was who was culpable for the loss of the money;

Basstech for hiring the fraudster, or the bank for lack of diligence when

clearing cheques? If the bank was found to have been culpable then it isarguable that its subsequent actions may have been considered unfair tacticsby the stronger party and fall under the provisions of 51AC. Thedetermination of unconscionability by the bank is a threshold issue that relieson legislation other than the Trade Practices Act.

Professor Jones was kind enough to make a copy of that letter available forBuckmans consideration. Buckman responded to Commissioner John Martinon the 23rd of May 2005 outlining anomalies & errors of fact contained inthat letter. Mr Nigel Ridgway responded on the 15th of July noting the datesof previous correspondence with Buckman on this matter. He laments that, in

the Commissions view, neither the Trade Practices Act nor the ACCC isable to provide a remedy for your circumstances.

Buckman then sent a further submission to the Australian Competition &Consumer Commission on the 17th of November 2005. Patrick CroucheDeputy Regional Director replied to that submission on the 1st of December2005 and essentially restates the Commissions position i.e. not our problemgo see someone else. He also said In this case, it would appear that anycause of action that you may have under the Act in respect of anycontravention of section 51AC and or section 52 of the Act by the NABarising from your allegations arose more than three years ago. As such evenif the NAB contravened section 51AC or section 52 of the Act , it would

appear that the ACCC would be statute barred from seeking damages on yourbehalf.

This position was further entrenched in a letter from the ACCCs Mr BobWeymouth and subsequent phone call arising from Buckmans letter to theACCC of the 4th of October 2007; the point of Weymouths position was thethree-year statute bar. With respect to the tenor of Anne Lampes article somethree years earlier, not much has changed it seems dilly dally long enoughand the ACCCs problem is solved.

The convenient supposition that the ACCC are statute barred by reason oftheir three year time frame is totally rejected by Buckman as fraud is a verypowerful crime & it has been said in support of many legal judgements inSupreme Court jurisdictions fraud viates everything11, even judgements &orders of the court12

Australian Securities & Investments Commission

.

Correspondence between Buckman and ASIC has been just as prolific as thatbetween Buckman and the other regulators. Submissions sent to one regulatorwere sent to the others.

11 Kerr on the law of fraud & mistake 1952 @ 612 National Australia Bank v Voloshin (NSW Supreme Court 2000), the judgement of Master

Harrison


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The tussle with respect to jurisdiction between ASIC, APRA & the ACCC isboth well practiced and supported by ASIC; it has been refined to a virtual artform. Its not a tussle where each regulator jealously defends its turf; rather itis one where they each deflect jurisdiction and responsibility to others and arequick to direct you to the Banking Ombudsman go see anyone but us. Of

course the others likewise reject jurisdiction. So the round robin eventcontinues until the complainant generally tires of it or runs out of funds,health, and stamina or will to pursue it further.

As a consequence of Buckmans last correspondence with ASIC he had aface-to-face meeting with Mr Philip Laird and colleague on or about the 19thof November 2007. The focus of ASICs position was that the conduct of thebank, as highlighted above, is regrettable but not criminal. As such it is theprovince of the aggrieved party to take legal action. It was pointed out that asBuckman & partners are not the aggrieved party they are not entitled to takelegal action, it is the company (Basstech) that must initiate such a process.

Basstech being sent insolvent by the fraudulent bank conduct in dispute wasderegistered and therefore does not have directors or funds to launch any suchaction. As Basstech is deregistered all rights and course of action now legallyvest in ASIC.

Both Mr Philip Laird and colleague agreed that there was an excellent caseagainst the bank but in their view a civil case. Once again the fraudulentconduct by a wealthy & influential corporation is protected and defended byofficialdom. The system is corrupt to its core.

The bank has learned a valuable lesson here; it is the law.

The Banking Ombudsman

Buckman first raised the issues with this esteemed body in person between the endof 1999 and mid 2000 at its Melbourne headquarters. The person who conductedthe interview was courteous and very keen to espouse the Ombudsman role andcapabilities. It came to pass that the Ombudsman was limited to cases where thedisputed amounts were below $100,000 at that time. The amounts in the Basstechdispute were much larger, without issues of compensation for losses, health andwell-being etc. being taken into account. So oh dear! We cannot help you, go seeASIC, APRA and the ACCC.

Buckman on the 9th of July 2003 constructed a partial submission containing forgedcheques totalling $44,527.15, well below the Ombudsmans $100,000 limit; heformally requested the him to investigate and cause the repatriation of thosemoneys. A subset of the Cheque evidence from the County Court trial wascontained in a bound volume.

The Ombudsman responded to that submission on the 6th of August 2003 notingthat Basstech had been deregistered. He further advised, When a company isderegistered, all rights, including the right to bring a claim on behalf of thatcompany vest in the Australian Securities & Investments Commission. We are notable to investigate a complaint from a former director. The full submission was

returned to Buckman including the now unbound evidence; copies wereobviously made and kept.


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The fact of the matter is that the Australian Banking Industry Ombudsman is acreation of and directly funded by the banking industry itself. It has no power toenforce or compel a bank to comply or take note of its findings should it indeedchoose to investigate. Of course all parties have an interest in promoting the feelgood public image that the banking industry has an effective code of conduct

and that the Ombudsman is actually doing something effective; to that effect theydo resolve some of the insignificant transactions or mistakes that occur from time totime with retail customers.

Once issues go beyond that to the point of considerable liability on the part of abank, the focus of the Australian Banking Industry Ombudsman is to extricate itselffrom the loop as speedily as possible. The ABIO becomes at that point nothingmore than a sanitisation agent for the industry, deflecting the issues andconcentrating on the glossy script.

Additional Avenues to justice

Like most Australians, Buckman believed in the utopian ideal that the mechanismsof government were there to protect the integrity of the state and its people tocreate and protect the egalitarian nature and culture of a country much loved. The

judicial systems are the ultimate line of defence of these concepts, of justice itself.Without justice we revert to a place of anarchy and the law of the jungle wherepower, wealth, and the gun reign supreme and replace principles of ethics, equity,honesty, integrity and indeed justice itself.

The Australia Buckman thought we had was a truly unique place, far superior tothird world countries, even first world countries like Europe with its cross ethnic

hatreds, or the USA with its manic get out of my face attitude and gun culture.Indeed Buckman remembers when Police Officers in Australia patrolled their beatsunarmed.

Today though we see the community structures eroding and the emerging of USstyle street gangs defending their turf, carrying weapons for their selfprotection; of road rage & the like. This breakdown in the respect for the well-being and safety of others, the community and property Buckman believes is thelogical result derived from the universal abdication by officialdom to manage andprotect the lawful pursuit of just enterprise. Police try very hard to keep control ofthe streets and to a large degree they are successful but the trend continues. The

citizens are confused and at times outraged by examples of seeming preferentialtreatment by enforcement officials, regulators and the judiciary particularly wherewealth power and influence intervene.

In the corporate arena there is but total abdication of responsibility by thosecharged with the protection of the public interest to such an extent that all avenuesare denied to those ordinary folk who find themselves the victim of theunconscionable and criminal conduct of major corporations.

Having exhausted the official process one must turn to the civil process for theremedy of grievances. Buckmans experience is as follows.


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Legal firms No win no fee

Some legal firms such as Slater & Gordon run schemes such as this. There isa cost, however, and their fees (including risk) are the first deduction fromany settlement; fair enough. The most common use of the scheme though

seems to be in class actions and is occasionally successful. But class actionfirms have consistently steered clear of litigation against banks as being in thetoo hard basket.

Law firms large and small are composed of people both good and bad. Somehave viewed this case and considered that the Basstech issues show anexcellentprima facie case against the NAB, but there are issues; issues taketime to resolve and large sums of money.

What right does Buckman have to expect any legal professional ethical andjustice issues aside to put their lives on hold to fight this case with a minisculechance of being paid? They have partners &/or wives, children, cats & dogs

to support after all, and dont forget the budgie.Litigation is expensive and the odds stacked high against those in a positionsuch as Buckman and his partners. To illustrate the problem one needs to lookno further than the case Idoport Pty Ltd vs NAB & others13

The court case went for 222 court days in the NSW Supreme Court at anestimated cost of $70 million with the case being dismissed on the 29th of

January 2002, Justice Einstein presiding. The ground upon which the casewas dismissed was that Idoport ran out of money. In an article by AnnabelHepworth

. Idoport weredevelopers of technical solutions to the banking industry; through that processthey engaged in a commercial development arrangement with the NAB. Thatarrangement for whatever reason went sour with Idoport suing the NAB forsubstantial damages.

14

13 Idoport Pty Ltd vs National Australia Bank NSW Supreme Court [52] [2002] NSWSC 1814 Australian Financial Review on the 31 January 2002 page 37

she writes; The trial judge did say in one of his more than 50interlocutory judgements that this case was difficult for the court's process tohandle, and in practical terms that means if one has enough money, it can behijacked; and further quotes ``It would appear that there is not much the

process can presently do to avoid that." Furthermore Einstein is reported tohave stated that It [Idoports evidence] just hasn't been heard, and the claimcannot be said to have failed.

So the only rational conclusion one can make here is succinctly quoted in thesame article It appears that sufficient money will bestow the privilege ofnot needing a defence" Mr Maconochie said a day after the NSW SupremeCourt dismissed his $50 billion claim against the bank.

I doubt that there is any person on earth with sufficient resources to mount achallenge in a Court, a place of justice, against a criminally mindedcorporation with the intent and financial means to enforce its will. Given theabove it would be grossly unfair to be critical of the many fair minded andlargely ethical members of the legal fraternity who take their oaths to justicewith solemn reverence as a sworn duty, their dollar driven colleagues thoughare a different matter.


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State Fair trading commissions

These entities in all instances, in Buckmans experience, direct all complaintsto the Australian Competition & Consumer Commission.

The Public Interest Law Clearing House (PILCH)

Buckman first contacted PILCH by phone in around 2004 with little successand that avenue was discarded. On the 20th of November 2007 Buckman, inan effort to force some action, visited the usual critters; the AustralianSecurities & Investments Commission and the Australian Competition &Consumer Commission, with zero success. In extreme frustration hephysically confronted the registry of the County Court Melbourne on the 21stof November 2007, demanding answers to two questions. He expected to bearrested but that was the least of his concerns.

The answers demanded related to the following questions:

1. There are two parties cooperating in a fraud against another, one party(a natural person) is diligently investigated prosecuted and convicted inthis place; yet how is it that the second party to the fraud, a wealthyinfluential and powerful corporation is immune from investigation andprosecution?

2. Is the investigation and prosecution of an offender determined by theirwealth power and influence?

The registry office staff must be commended for their patience andunderstanding in the circumstances, Buckman must have appearedexceptionally aggressive, he was firm but polite. Security was not called, theregistry manager went out of his way to explain the position of the court andtry to find an acceptable path of resolution, hence my referral to PILCH asecond time.

PILCH are not normally a walk in service they conduct most of theirbusiness over the phone or by mail. This time, however, they made anexception for which Buckman is immensely grateful. The staff and dutysolicitor were very accommodating and professional; they wanted specificanswers to specific questions. I was not allowed to deviate from the line ofinquiry that they set, we ask the question you answer it. I left limited copiesof the evidence as requested and they promised to try and find a counsel

willing to give an opinion.

On his return home Buckman wrote an email to Associate Professor Jones asa courtesy, owing to Joness assistance and continuing research into smallbusiness banking matters; Buckman related the events of days previous.Jones response was simply one sentence, have you looked at their website? he said no more.

PILCH is set up as a not-for-profit organisation that extends legal services tothose who do not have the funds or cannot access those services for a varietyof reasons a noble and commendable concept.

The staff, and in particular Mr Michael McKiterick, afforded Buckmanrespect and courtesy; and Buckman firmly believes that they went beyond the


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limits of what they could have reasonably declined to do. The matter is not apersonal matter but commercial yet they were moved to at least gain abarristers opinion.

In the mean time and with Jones comments in mind Buckman duly loggedonto the PILCH web site15

Legal Aid

. There are listed a membership list of twenty nineLaw Firms; of those at least eleven are either on retainer to the NAB or haverepresented them in legal matters. The National Australia Bank legal servicesgroup are listed as major contributors to their efforts. One then turns theirattention to the directors of PILCH. Of the sixteen directors six represent lawfirms on retainer to the National Australia Bank; a seventh, David MiltonKrasnostein (President) has been a long time senior counsel to the NationalAustralia Bank.

Notwithstanding that Buckman is grateful to the staff of PILCH for theassistance and legal opinion that they in fact delivered, can anyone believethat a group of directors such as installed would provide a potential litigant

against the National Australia Bank with any substantive form of legalassistance?

Legal aid is a scheme principally designed to assist the disadvantaged naturalperson where they require legal assistance. Whilst Buckman and partners arecertainly disadvantaged, the fundamental issue is essentially a corporatematter. Consequently legal aid has been declined; in fact Buckman wasadvised by legal aid not to waste his time applying.

The bank has learned another valuable lesson here; it is not just above & beyondthe reach of the law, it owns the law.

The system at work

The Australian perception of justice is premised on the belief that the law enforcementand regulatory framework actually do their job of monitoring, investigating and inparticular, prosecuting offenders without fear & favour. That they uphold the publicinterest and the national values of fair play, ethics, equity and the rights of others. As a

nation this concept goes to the core of our being; it has underpinned everything we as anation have done; be it in the field of sport, entertainment, business & commerce orconflict. Indeed everyone who goes offshore to represent this country does so principallyto foster honest competition & hopefully peace and tranquillity between peoples.

So how is it possible for the events that befell Basstech and partners to occur thencontinue their existence for close on ten years without just resolution, despite ample legalprecedent? It has occurred, one offender has been imprisoned for his part in this fraud; sohow does the system work?

15 http://www.pilch.org.au/html/s01_home/home.asp?dsb=22


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In fact it has happened again. A mirror image of Basstech was reported in the MelbourneHerald Sun16

Buckman read with interest an article in theBusiness Daily

by Elissa Hunt; in short good people hire accountant, accountant stealscheques, accountant forges signatures on cheques, and bank clears cheques. The victimof this fraud was Barrie and Margaret Griffiths of Seymour, Victoria. The Griffithsreportedly won their civil case. It took a Supreme Court action to force the National

Australia Bank to return the customers moneys, moneys that the bank had no legal title orright to remove let alone retain another clear case of fraud.

If Buckmans problem were simple it would not be an issue today; it would have beenresolved long ago. The problem is not one specific issue but an amalgam of influencesincluding lax regulation, a severe lack of enforcement of proper fiscal standards,incompetence and neglect that converge to enable theft and fraud by major corporationsto thrive unchecked, particularly where the corporation has the determination to enforcetheir right to act as they please, criminally or otherwise. Why do these majorcorporations engage in this behaviour? Well, the answer is, who is going to stop them?The regulators in Australia loudly trumpet their successes, but who are they largely

successful against? Invariably it is those corporations that have lost their capacity toadequately defend themselves. Generally they are well after the event with the companiesin the throws of insolvency &/or with receivers appointed as in the Pyramid BuildingSociety, One-tel, HIH, and includes the recent crop of 2008 luminaries in ChartwellEnterprises and Opes Prime that bear the weight of regulatory investigation andprosecution; whilst there are some exceptions, the corporations successfully investigatedand prosecuted (well after the event) are generally bankrupt.

17

16 Melbourne Herald Sun, Monday the 24th of January 2005, page 25 $3.2m siphoned off.17 MelbourneHerald Sun, Thursday April 24th 2008 page 71 author: George Lekakis

Fuming on Opes; MikeSmith CEO of the ANZ bank lamenting & he said Should ANZ have been in thisbusiness? Obviously not. George Lekakis wrote further Mr Smiths admission thatentering the deals under which stockbrokers put up their clients shares to the bank as

collateral for credit to the brokers had been a strategic mistake, came only hoursbefore ANZ agreed to invest in another troubled broker, Chimaera Financial Group. Toquote further, the ANZ boards risk management committee had never discussed the

perils of securities lending. This sort of lending is so far below the radar of the board.Notice though that ANZ on the one hand can admit to incompetence in its riskmanagement of this sector, stating that the bank should never have been in it, thensome hours later reportedly pumped $55 million dollars into another similar group.

In the meantime, ignoring the potential for liability for its own conduct, the bank felt noethical or moral pangs as it took possession of and sold off the lifes savings of theunwitting clients of Opes Prime for the sole benefit of the bank. The bank even refused

pleas to enable some of the unwitting clients to payout their facilities more profit andfun to be had by financially destroying people. Banks of course will defend their rightto destroy anyone financially if it is in the banks interest especially where the bank owesthat person a duty of care or there is the potential for liability on the part of the bank.

Question: where were the regulators, what were they monitoring and regulating these pastyears? Financial disasters such as those noted above do not just happen by accident, &lets not mention the global credit crises spewing forth upon the world from the USbanking system presently.


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The denial of justice to a victim of fraud

So what creates the environment, what nourishes and fertilises the ground wherethe conduct of enterprises such as these takes root? Just as there are a multitude offactors that cause a rose to flourish, there are multiple factors that enable

unconscionable and criminal conduct to thrive in the corporate world. Some ofthese factors are listed below and are by no means definitive:

1. The fervent belief by corporate officers that they cannot do anything wrongor hold liability whether by mistake or design from the consequences oftheir actions.

The religious devotion to the mantra that a corporation is an inanimateobject and as such cannot possibly possess a moral compass; officers of thecompany have no other legal or moral obligation to anything or anyoneother than the self-interest of their company.

2. The view of the various state and Federal Police forces, as related toBuckman by serving officers, is that a corporation cannot be charged withan offence such as fraud; a corporation cannot act only people can acttherefore criminal charges must be levelled against a natural person not acorporation.

3. The confused role of the regulators; they are there to monitor, regulate,educate, and foster confidence in the financial system. The apparentconsequence of these conflicting roles is total confusion over what it is infact they are required to do. Yes they do monitor and even prosecute attimes, but only when the entity has no capacity to defend itself or they theregulators themselves are under threat and/or public pressure to do

something, or more the point, be seen to do something.4. The considerable funds required to obtain a legal opinion, let alone the sums

required to launch legal proceedings as in the Idoport case are prohibitive.

5. The privileged position that a bank occupies within the national financialsystem; it is a position of absolute power, influence and wealth. The banksare the foundation stone of any national and international financial system.

6. The reluctance of the judicial system to contemplate that such an influentialindustry is capable of behaving criminally, bestowing an almost reverentialand saintly status upon banking officials. A bankers word is generallyreceived by the judicial system as statements of fact requiring little or nocorroborating evidence.

7. The almost universal perception that everyone that falls victim to financialimpropriety must have been complicit or acted in a stupid fashion and, as aconsequence, they deserve their fate. Bankers after all are diligent, prudentand honest professional people.Arent they?

How the system works against the natural person the victim

The average small businesspersons such as the partners involved in Basstech have

crucial relationships both personal and business. Personal relationships aside, themost crucial of the business relationships are those with your bankers, creditors and


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your customer. Without your customer you have no business; without your creditor,you have nothing &/or no capacity to sell, your banker however is strategically themost important business relationship that any small businessperson can have. It isthe fundamental cement that underpins the financial security of the enterprise, bothin terms of the safety and security of financial transactions as well as the ongoing

funding of the business.

When a bank finds itself in a position of liability to a customer, as in the Basstechcase, that customer is universally bankrupted. It is irrelevant as to whether thecustomer is a natural person or an incorporated business (a company). The bank forthe following reasons engineers the process for its own protection, and this is howthe system works against the customer the average citizen. Basstech & itsowners/ operators is used as a prime example:

1. In most instances the financial backing for that small business is a registereddebenture over the assets of the business and a mortgage over the assets ofits owners and directors and in particular, the family home.

2. Once a bank finds itself with a potential liability to their customer thosecustomers find themselves in an insolvent position very quickly.

3. The bank will withhold from the customer all knowledge & all informationin their possession regarding the conduct of relevant parties to theunderlying transactions. In the Basstech case the bank withheld theirknowledge of their detection of forged cheques, the legal fact that a bankcannot debit their customers account on the basis of forged signatures didnot enter the equation.

You, the customer, have to try and discover what the bank knows well

after the event at great expense to you both in time & money.4. The process commences in a way that seems incomprehensible to the

customer, decisions are made by the bank that have the effect of costing yousubstantial sums of money, despite more effective options being available.In fact the process is designed to maximise your losses. They will renege onprevious and recent agreements and promises. In cases where the customerhas found buyers for their business at a reasonable price, the bank willintervene and scuttle that sale; only to sell it at a later time at a substantialdiscount.

5. In the case of a company a Receiver & Manager is appointed. Once thatoccurs he/she is in direct control of that company. The owner of thatbusiness no long has any input authority or control over decisions made bythe receiver and manger. The judicial perspective is that the Receiver &Manager is considered the agent of the company, in Buckmans view he isthe sole trustee of the company; however the operational reality is farremoved from the sanitized perception of the judicial system. The reality isthat the Receiver & Manager acts as the agent and servant of the bankprotected by an indemnity from that bank.

6. Once the bank has decided to liquidate it will do so in extreme haste. In theBasstech case, it took five working weeks from the time the Receiver &Manager was appointed to the signing of the contracts of sale by him on a$1.6m business. On the other hand it can take considerable Police time touncover and prove the real events and circumstances behind any insolvency


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and bring matters before a court, in Basstechs case in excess of 24 months.By that time the owners' business & assets were liquidated, this is acommon result.

7. In order to protect themselves against liability to their customer the bankpursues the customer to bankruptcy, regardless of the rights or wrongs ofsaid customers position or the liability of the bank. In respect to legalrecourse the customer now finds that he has no access due to the fact thatlegal recourse must be paid for; the customer has no money so who will paythe bill?

8. Oh yes, the legal view is that you the owner and director of the companyhave lost nothing. It is the company that has lost everything. So what areyou bellyaching about?

9. As a bankrupt, the customer/s are banned people in terms of acting for oroperating a company, they also have no control over their own personalfinances or life decisions. Those rights now vest in the Bankruptcy Trusteein Buckmans case the ITSA18

10.Once bankrupt, any and all current or planned litigation is cancelledforthwith. You do not have the right to initiate the action nor do you havethe funds. Should you have any funds remaining the Trustee will confiscatethem for distribution to your creditors.

.

11.The bankruptcy trustee is not there to protect the interests of the bankrupt.They are there solely to protect the interests of the bankrupts creditors inBuckman and Basstechs case that was principally the National AustraliaBank.

12.The bankruptcy trustee will not pursue any legal investigation or legalaction unless the creditors agree to fund such an action. It is not difficult tobelieve that a bank will decline an invitation

A Case Study of Fraud Committed by the NAB - Master Set

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