SYDNEY (Reuters) – A law firm said on Tuesday it would file class-action lawsuits against Australia’s biggest bank and wealth manager seeking “very substantial” damages for allegedly cheating millions of retirees.
The allegations stem from a powerful public inquiry into Australia’s financial sector which could lead to criminal prosecutions and tougher regulations to prevent abuses by the country’s dominant banks, insurers and pension funds.
Australia’s top financial firms have had nearly A$40 billion ($29 billion) wiped off their collective market value this year, as the Royal Commission inquiry unearthed systemic malpractice including alleged fraud, bribery, regulator deception, fee gouging and illegal telephone marketing.
The “series of lawsuits” flagged by Slater & Gordon Ltd would first target the pension arm of Commonwealth Bank of Australia and wealth manager AMP Ltd for giving customers “ludicrously low” or negative returns without justification, the firm said.
“It’s been about lining their own pockets, about propping up their profits and undermining the entire superannuation scheme,” Slater & Gordon head of class actions Ben Hardwick told reporters.
“You may as well have had the money under your bed.”
Slater & Gordon estimated CBA’s Colonial First State and AMP combined had lost A$500 million of retiree money. The lawfirm planned to expand its action to other pension funds, potentially taking the number of plaintiffs to a third of Australia’s 12 million working-age people.
It did not specify the size of the damages it would pursue beyond “very substantial”.
An AMP spokeswoman said the company had not been served with legal proceedings but was working to fix problems identified by the inquiry. CBA said it was aware of Slater & Gordon’s plan and that it would inform the market of developments.
AMP is separately defending multiple class actions for allegedly failing to disclose governance problems, while CBA has also been sued for alleged failures to disclose breaches of anti-money-laundering rules.
The year-long inquiry meanwhile turned its attention to the life insurance industry on Tuesday.
A Baptist minister told how his son who has Down Syndrome bought an insurance policy without understanding what he was doing, as a result of a phone call from Freedom Insurance Group Ltd (FIG).
“I was disturbed at this process and was concerned that others would be targeted in similar situations to him, and perhaps others who didn’t have the support that he has to challenge this process,” the minister, Grant Stewart, told the inquiry.
The inquiry heard recordings of a FIG representative selling the policy to Stewart’s son who answered most questions – including about details of insurance policies – in single syllables after pauses of about five seconds.
The man’s son clearly did not understand the purpose of the 2016 call and “was being compliant”, Grant said.
FIG Chief Operating Officer Craig Orton told the inquiry the company had canceled most of its outbound sales calls and taken its call center operations in-house.
Reporting by Paulina Duran and Byron Kaye, additional reporting by Sonali Paul; Editing by Stephen Coates