The illusion of “independence” … Hayne royal commission brings new meaning to the word “independent” … AMP, Clayton Utz, Catherine Brenner and the massaging of an independent report … Clutz alumni Brian Salter is the fall-guy … Nick Bonyhady reports 

Notorious bloviator Jeff Kennett went to far as to say that Clayton Utz should be banned from government work. 

AMP’s chair Catherine Brenner, chief executive Craig Meller and general counsel Brian Salter resigned in a flurried attempt to cleanse the Augean stables while Clayton Utz strenuously denied wrongdoing. 

For years, AMP charged clients for financial advice it never delivered. AMP’s senior managers knew about and approved the arrangement, even after they were told explicitly that it was unlawful.

AMP reported some of this conduct to ASIC, but sought to cast its employees’ actions as the consequences of administrative disfunction rather than deliberate dishonesty. In doing so, according to counsel assisting the Royal Commission, it misled the regulator and may have committed a criminal offence. 

In June 2017, AMP commissioned Clayton Utz to write a report on this conduct and its dealings with ASIC. There should be no surprises about the choice of law firm, Salter having been a partner in the banking and financial services department of Clutz for 19 years, leaving in 2008 to take up the general counsel and company secretary positions at AMP in 2008. 

In the creation of that report, AMP and Clayton Utz were in close contact. Hundreds of emails were exchanged, and the report went through more than 20 drafts before being ultimately approved by the AMP board. 

AMP denies that its former chairperson, Catherine Brenner, acted inappropriately and she says she was unaware of changes made to the report that limited its criticism of senior AMP executives. 

However, emails released by the royal commission cast doubt on that narrative. The Sydney Morning Herald reported that “paragraphs which cleared two senior staff members at AMP of culpability for the scandal were inserted following discussions with Ms Brenner”. 

The report was prepared by Clayton Utz partner Nicholas Mavrakis, who emailed Salter on October 5, 2017: 

“I got the impression from Catherine that her comments were more substantive than the changes marked on the attached and that there were more of them.” 

There were more suggested changes from Brenner on October 11 where she made it clear she didn’t like the use of the term “senior management” in the report. 

Salter told Mavrakis: 

“Please review the reference to ‘senior management’ in the document and confirm that the term has been appropriately used and whether it would be better to refer to the specific people.”  

After all the changes, the report was submitted to ASIC. A significant issue is whether it was submitted as being independent of AMP or merely independent of the financial advice division of the company.

That aligns uncomfortably with a statement by AMP that ASIC should have never expected the report to be independent: 

“The relationship between AMP and Clayton Utz was such that there could be no expectation, by AMP or ASIC, that any report prepared by Clayton Utz could have been intended to be independent within the meaning of Regulatory Guide 112.”

For two entities that have been playing tag-team and generally supporting each other’s statements, their respective statements do not jell. 

The regulatory guide to which AMP referred is an ASIC publication explaining how independent expert reports should be written under the Corporations Act. It states: 

“An expert’s opinion that is tailored to support the views of the commissioning party … may … be misleading or deceptive.” 

According to Cutler, Clayton Utz did not tailor its report to support AMP. Certainly, it included critical language, but it walked a line. It contained passages such as:

“In many ways, AMP bears responsibility for allowing the interactions with ASIC to remain … in the hands of people … who, critically, had no previous experience in dealing with and reporting to ASIC and instead dealt with them as a commercial counter-party rather than a regulator.”

The suggestion seems to be that there are ways in which AMP does not bear responsibility for its interactions with ASIC.

It is easy to see how AMP might prefer Clayton Utz’s vagueness to the language now being used by counsel assisting the Royal Commission, where terms like “deliberately misleading” have been directed at AMP.  

Even if AMP had not massaged the report, it commissioned the work, set the terms of reference, determined what information it would reveal to Clayton Utz and, importantly, paid for it all. 

It calls to mind the situation in America before the global financial crisis.  The American credit rating agencies Standard & Poor’s, Moody’s and Fitch all portrayed themselves as independent, but gave high ratings to ultimately worthless collateralised debt obligations because they were afraid that they would lose customers.

Likewise, some tax barristers are called upon by corporations and wealthy individuals to come up with “independent” opinions on adventurous tax planning – the equivalent to sprinkling holy water. 

It must be obvious to the professionals who prepare these reports that if they seek to be too independent, the client will find someone less independent. Governments do the same, setting terms of reference that point independent consultancies charged with reviewing a policy or program towards a largely inevitable conclusion. 

In 2015, a witty New Zealand software developer created a browser extension that replaces the words “political correctness” with “treating people with respect”. Perhaps ASIC could ask him to create another app – one that would replace “independent” with “beware”.