Citi, Deutsche Bank & ANZ Face Australian Cartel Lawsuit

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The anti-trust regulator, the Australian Competition and Consumer Commission ("ACCC") has charged Citigroup C , Deutsche Bank DB and Australia and New Zealand Banking Group Limited ANZBY with criminal offences for alleged "cartel" conduct over the sale of ANZ Bank's shares worth A$2.5 billion ($1.9 billion) in Australia.

Also, the regulator laid criminal charges against Citigroup's former Australia head Stephen Roberts, its present local head of capital markets John McLean and the bank's London-based head of foreign exchange trading, Itay Tuchman. Further, Deutsche Bank's former local chief Michael Ormaechea and former local capital markets head Michael Richardson have been sued.

ANZ Bank's treasurer Rick Moscati have also been charged for cartel offences.

Notably, the ACCC's plan to sue these banks was disclosed last Friday. The agency has been investigating the allegations for over two years.


In August 2015, Citigroup, Deutsche Bank and JPMorgan JPM were the underwriters for the institutional placement of nearly 80.8 million shares of ANZ Bank, which was conducted to raise capital for meeting regulatory requirements. Notably, JPMorgan has been charged.

However, Citigroup and Deutsche Bank, as part of their underwriting commitment, created a cartel arrangement. They, thus, reached an understanding for the disposal of 25.5 million shares that the banks absorbed as part of the placement. These shares represented less than 1% of ANZ Bank's outstanding shares at that time.

Further, the market was not informed about the overhang of unsold stock.

What Happens Now?

The ACCC Chairman Rod Sims said in a statement, "Charges have now been laid by the Commonwealth Director of Public Prosecutions and the matter will be determined by the court."

All three banks have denied the accusations and plan to defend their current and former executives. The first hearing of the case will be on Jul 3 in a Sydney court.

If found guilty, the banks will be fined equivalent of 10% of their annual turnover or thrice the benefit derived from the criminal offence. Notably, the individuals found guilty face up to 10 years in jail and/or fines of up to $420,000 per criminal cartel offence, per the Competition and Consumer Act.

Apart from monetary penalty, these will further damage Australian lenders' reputation. Already, the country's financial sector is facing public misconduct probe.

Earlier this week, Australia's one of the biggest banks, Commonwealth Bank of Australia, paid A$700 million ($530 million) to resolve a civil case accusing the bank of breaches in anti-money laundering protocols.

Currently, Deutsche Bank carries a Zacks Rank #5 (Strong Sell) while ANZ has a Zacks Rank #4 (Sell). Notably, Citigroup currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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Australia & New Zealand Banking Group Ltd. (ANZBY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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