Senate debates

Tuesday, 9 May 2006

Questions without Notice

Westpoint

2:19 pm

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | | Hansard source

My question is to Senator Coonan, the Minister representing the Assistant Treasurer. I again refer to the Westpoint financial scandal in which, as the minister is aware, hundreds of millions of dollars of Australian superannuation retirement savings have been lost. Is the minister aware of other revelations on last night’s ABC Four Corners program that Mr Richard Beck, associated with Westpoint and under investigation by ASIC, was the former head of corporate governance at the leading accounting audit firm KPMG? Is the minister aware that KPMG were the auditors of Westpoint entities? Is the minister aware that the chair of ASIC, Mr Lucy, now suspects KPMG were wrong when they signed off unqualified to Westpoint accounts? Can the minister advise what investigations or action has been taken in respect of KPMG’s role as auditor of Westpoint?

Photo of Helen CoonanHelen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | | Hansard source

As I said in response to Senator Sherry’s question, it is very important to understand that ASIC does not prudentially regulate companies such as Westpoint. Westpoint directors were providing statements that Westpoint was solvent as late as 2005, and Westpoint’s auditors were at the same time providing unqualified financial statements for the Westpoint entities. Once ASIC had appropriate evidence in late 2005, it successfully took action to stop Westpoint from operating further.

These matters are under investigation by ASIC, and it is important that these investigations take their course. As I have said, there are a number of steps that have been taken in relation to ASIC’s investigation of both Westpoint and the matters relating to the audited accounts or the state financial statements. It is important that the investors have been kept advised, as I mentioned in answer to the previous question. ASIC started a general campaign back in 2003 to warn investors against the risks of investing in high-yield debentures. It is important to understand that ASIC has done what it possibly can to be able to take action in relation to these matters and in relation to investigating Westpoint. Recently, the Federal Court ordered the winding up of the parent company in the Westpoint group, Westpoint Corporation Pty Ltd, following an application by ASIC. It was a crucial step in preserving the assets and will be a crucial step in enabling investigations to be undertaken of the kind to which Senator Wong alluded in her question.

It is important to inform the Senate that on 31 March ASIC made an urgent application to the Federal Court to obtain orders freezing the personal assets of Mr Carey, Mr Beck and two other directors. It was based on the results of investigations indicating that these persons had taken actions designed to diminish the assets. The court has now appointed receivers of the personal assets of the individuals named. ASIC continues to investigate all the enforcement options open to improve the return to investors, and there is the possibility of both civil and criminal action in relation to the conduct of the Westpoint advisers and directors, including the group’s auditors, KPMG.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | | Hansard source

Mr President, I ask a supplementary question. I remind the minister that the crux of the question I asked her was whether or not there had been any investigation or action taken in respect of KPMG’s role as auditor of Westpoint. She failed to answer the question, and I ask whether she can provide an answer. Can the minister also advise whether she is aware that KPMG were also the auditors of the so-called independent research house report which gave Westpoint a three-out-of-five-star rating as an investment entity, used by many planners as the basis to recommend that Australians place their superannuation life savings in Westpoint. Can the minister advise whether ASIC is investigating KPMG in signing off on the research house report?

Photo of Helen CoonanHelen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | | Hansard source

I thank Senator Wong for the supplementary question. I can tell the Senate, in response to the question, that the actions taken by ASIC, including the actions in the Federal Court, have all been taken as a result of investigations that have been undertaken by ASIC. These investigations are ongoing. There is a possibility of further action, both civil and potentially criminal, being considered in relation to the conduct of Westpoint directors and their advisers, including the group’s auditors, KPMG. It is not the role of either the person I represent, the Assistant Treasurer, or indeed me, to pre-empt the way in which ASIC would pursue these investigations. Suffice to say that the answer I have given indicates that investigations are being undertaken, including of the auditors, KPMG. (Time expired)