Former Credit-Suisse boss gives The Australian access to emails which seek to put the Ozcar fee deal into context … Apparently, the emails were confidential then, but not now … When documents tabled in the senate are characterised as “leaks” … Treasury submission ignored in exculpatory “analysis”
O’Sullivan became embroiled in the Utegate Affair that mortally wounded Turnbull as the opposition leader in 2009. Before Godwin Grech had decided to leak Turnbull a fake email that falsely made prime minister Kevin Rudd appear corrupt, O’Sullivan as a chairman of Credit Suisse’s investment banking and capital markets division had extensive email contact with the senior Treasury official, often discussing party political matters.
The episode that has attracted the most attention from the Labor Party and others dates from March 2009. At the time, Grech was overseeing the Ozcar scheme that the Rudd government created to assist the car industry during the global financial crisis.
Credit Suisse was engaged as a consultant on the project and Grech was the point man at Treasury.
There was an email exchange on March 19, 2009 that caused considerable angst to both Grech and O’Sullivan, or “jos” as he signs himself:
Pamela Williams, with extensive assistance from O’Sullivan, embarked on an exercise to cast this unfortunate event in a less unforgiving light.
She wrote that the “preferred” new fee arrangement had been canvassed earlier and been approved by the responsible officials at Treasury and that these exonerating facts are documented in a large number of additional emails that were not made public in 2009.
O’Sullivan says that he was unable to refute the innuendo against him at the time because he was bound by confidentiality agreements. It is not clear to whom they were owed, or why he is no longer bound by them.
Williams writes that the exculpatory emails show that Credit Suisse was really being generous to the taxpayer.
“The proposal was for Credit Suisse to do a larger scope of work at the original estimated fee of $5 million – even as the time frame stretched out and ballooned.”
A description of the $5 million as the “original estimated fee” is a little tricky. In another article, Williams explains that Credit Suisse was originally to be paid on a sliding scale. If the project had required less work, presumably the fee would have been smaller.
Under the new arrangement, the fee was set at a guaranteed $5 million for CS. Of course, Credit Suisse claimed it performed more work under the new arrangement, thereby justifying the greater guaranteed payment.
However, it remains a puzzle as to why O’Sullivan agreed with Grech’s suggestion to push the contract through quickly without running it past Ken Henry “and co”.
O’Sullivan believes that “the leaks of a handful of Treasury emails in 2009 had been designed to mislead both the public and possibly a parliamentary committee”. The “leaks” had actually been tabled in parliament.
O’Sullivan’s exchange over the Credit Suisse-Ozcar contract were provided by Treasury to the Senate Privileges Committee, which was conducting an investigation of the Grech affair. Grech was allowed to resign from the Treasury in September 2009.
None of the emails in that cache contained anything exculpatory of Credit Suisse. That is not to say that they did not exist, but rather for some reason Treasury did not submit them to the committee.
In August 2009, Treasury secretary Ken Henry wrote to George Brandis, then the chair of the senate privilege committee and attached the Treasury’s submission to the committee.
Henry said Treasury had “concerns that have arisen to this point in relation to Mr Grech”. Those concerns included:
“Whether, between December 2008 and June 2009, Mr Grech may have dealt with Credit Suisse in a manner inconsistent with his obligations as a public servant by:
• disclosing confidential information to Credit Suisse officials, including on 8 May 2009, giving Credit Suisse advance notice of a tender;
• proposing to enter, or entering, an improper arrangement with Credit Suisse in relation to fees for providing services to the Commonwealth in relation to the Ozcar program; and/or
• inappropriately promoting Credit Suisse and its role in the Ozcar program within Treasury and to the Prime Minister and Treasurer by reason of his personal relationship with a Credit Suisse official,
Contrary to … the [Public Service] Code of Conduct.”
Henry had access to all the emails held on the Treasury IT system.
This became a public document but Williams, in her series of articles, did not mention it. Maybe she did not know of its existence or had been been advised about it by O’Sullivan.
Ultimately, a review of the CS contract by Treasury and accountants Ernst and Young found the arrangement did not breach probity standards.
Of the correspondence about the OzCar fee and adjusting it to suit CS without prior approval from the secretary of the Treasury, Manning wrote: “It was breathtaking, and it was amazing nobody landed in jail.”
Fairfax Media issued a similar apology over statements about O’Sullivan in its CBD column.
There were other issues. In an email of May 8, 2008 Grech tipped off O’Sullivan for the bank to put its hand up as a participant on a financial advisory services panel:
John
FYI in confidence. An ad will soon appear in the AFR inviting investment banks and the like to tender for a Panel that Treasury wants to establish that will allow us to directly engage Credit Suisse without the usual red tape.
CS should definitely put its hand up – something extraordinary would have to happen for you not to end up on the Panel and to cream most of the work.
Godwin
O’Sullivan replied:
“Godwin – much appreciated for the heads up.”
Later Grech CC’d O’Sullivan into an email to his superiors with a list of companies that had been invited to tender for a position on the financial advisory services panel. The email would have provided Credit Suisse with early notice of the tender and its competitors. It read:
“Possible tender invite list outlined as requested. These are people that I have dealt with; if you wise to take a broad approach utilising the AFMA/IFSA membership lists, some sifting would be required and a non ‘personalised’ approach would be necessary as we don’t have working contracts with most of the members of the two bodies.”
Minutes later, Grech emailed the recipients of this email stating that he had included O’Sullivan in error and that, in any case, the email had been blocked by Treasury’s security system.
Another two minutes later, Grech emailed O’Sullivan saying, “ensure you don’t respond to the email; I copied you in by error”.
Williams casts the incident as an entirely understandable error.
“Grech had emailed this document to a large group of Treasury officials after being asked by his superiors in a preceding email to provide a short-list of firms to approach for a new tender.”
In fact, the “large group of Treasury officials” consisted of three people visibly identified in the distribution. Four, counting O’Sullivan. The proposed tender was cancelled in September 2009 and later replayed with a fresh tender.
Even though there is now a determined effort to put Grech at as much distance as possible, it appears evident that O’Sullivan at the time regarded him as a useful Treasury mole.
There was considerable flattery of O’Sullivan’s then wife, Janet Albrechtsen and her articles in The Australian, along with plenty of of stroking of the Liberal Party cause and Turnbull in particular.
Now of course Godwin Grech is painted as “unstable, physically ill”.
In 2017, O’Sullivan was touted as a leading candidate for the position of ASIC chairman but withdrew from the race after Labor opposed his appointment. Announcing his withdrawal, O’Sullivan criticised Labor’s conduct.
“The personal nature of that attack, even including insinuations of old and long since discredited allegations … was unprecedented and disturbing.”
Noting O’Sullivan’s emails with Grech, shadow treasurer Chris Bowen had said:
“To appoint Mr O’Sullivan would raise serious questions around ASIC’s independence and its ability to command trust across markets and the parliament.”
No doubt, Labor was anxious not to have Malcolm Turnbull’s one-time bagman as head of the corporate regulator.
In 2008, just before the Grech affair blew-up, O’Sullivan gave a paper to the 25th annual banking and financial services law and practice conference. He said:
“Conflicts are part of life. If you don’t have major conflicts regularly you either are not smart enough to identify them or you’re not playing first grade. And whilst I accept there are some conflicts that are so egregious they must be prohibited, they are few …
At Credit Suisse, and I’m sure other well run firms, the desire to avoid inappropriate reputational risk drives a high standard of behaviour.”
O’Sullivan has since resigned from Credit Suisse and is seeking appointments to various boards as a non-executive director.
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