ANZ mansion sale breached rules - market watchdog

The Hiscos' house at 269 St Heliers Bay Rd, Auckland. Photo: Google
The Hiscos' house at 269 St Heliers Bay Rd, Auckland. Photo: Google
The ANZ Group's sale of a luxury property to the wife of former chief executive David Hisco should have been disclosed as a related-party transaction, the Financial Markets Authority says.

The revelation in June that the 269 St Heliers Bay Rd property, owned by ANZ subsidiary Arawata Assets Limited, was sold to Deborah Veronica Walsh - Hisco's wife - for a lower than market price, raised fresh questions about the nature of his employment deal and sudden departure, related to expense claims.

A Terranet Summary Report shows that the luxury St Heliers mansion was purchased by ANZ New Zealand owned subsidiary company, Arawata Assets, in 2011 for $7.5 million.

Despite a booming property market over the next six years, the property was on-sold to Hisco's wife Deborah Veronica Walsh in July 2017 for just $6.9 million.

As of July 1 2017 the property at 269 St Heliers Bay Rd had a rating valuation of $10.75 million, according to Terranet.

The FMA today said the determination on the St Heliers house was primarily based on the nature of the transaction "which makes this disclosure material for the financial reporting purposes".

As such it should have been disclosed in its 2017 financial statements

ANZ disagreed with the FMA's finding.

In a statement it maintained the "sale price of $6.9m was determined following a process to ascertain the value of the property with reference to external, independent valuations".

It considers the transaction not to be material information on the basis that this disclosure could not influence the economic decisions of the users of financial statements.

Fund manager and ANZ shareholder Simplicity, has been publically critical of the transaction, commissioning its own independent valuations - suggesting the house should have been worth at least $11 million.

"It's amazing that the ANZ feels that selling a house at $4m below valuation to the wife of the CEO is not a related party transaction, or material enough to tell shareholders," said Simpliicty managing director Sam Stubbs.

"It leaves us asking the question, if they chose not to disclose this, what else haven't shareholders been told?"

Stubbs said Simplicty saw this as a matter of public interest and would continue to press for the full disclosure of ANZ's independent valuations.

"It speaks directly to the culture and conduct of the ANZ, and is yet another reason why we need a Royal Commission of Enquiry into Banking," he said.

The FMA said, in terms of the valuations, it had not assessed the appropriateness of the sale price, as this is the matter for other agencies to consider.

It had informed the Reserve Bank of New Zealand of its determination, reflecting the RBNZ's role in banking supervision, and as part of the joint focus on conduct and culture.

The Australian Securities and Investments Commission (Asic), as the primary regulator of ANZ's parent company, had also been informed.

The FMA had engaged with NZICA as the frontline regulator for auditors, for it to consider whether to assess the auditor's procedures in determining the disclosures in the audited 2017 financial statements.

The FMA was continuing to engage with ANZ and required it to issue a corrective statement relating to the 2017 financial statements.

The FMA expects ANZ to review its internal financial reporting in light of this issue.

In its statement the ANZ welcomed the "opportunity to gain further clarity on the FMA's expectations regarding the disclosure of related-party transactions".

As a result of this matter it will consider the impact on its internal financial reporting processes and continue to enhance those processes, where necessary, it said.

In June ANZ announced that Hisco would be departing his $3 million-plus a year job immediately following an investigation which alleged he "mis-characterised" certain personal expenses as business expenses.

Those expenses, which ran into the "tens of thousands of dollars" over Hisco's nine-year stint as chief executive, included personal use of chauffeur-driven cars and storage of wine in Australia - his country of birth.

ANZ has this year also faced censure from the Reserve Bank over its failure to maintain correct capital ratios.

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