Banking royal commission: Westpac executive admits flaws in loan process

Inquiry told documents allowing pensioner to become loan guarantor filled out incorrectly

A Westpac executive has told the banking royal commission it is “not uncommon” for Westpac employees to fill out loan documents on clients’ behalf after questions were raised about a staffer falsely witnessing a document.

The revelation comes after Westpac admitted to falsely witnessing and pre-filling a form of acknowledgement, before allowing an elderly pensioner to become guarantor for her daughter’s loan, and then making a claim on the home after the daughter’s business failed.

The royal commission heard evidence for the second day on Tuesday about the case of Carolyn Flanagan, an elderly pensioner who is legally blind and has trouble hearing, who has suffered from nasopharyngeal cancer, depression, osteoporosis and pancreatitis.

Alastair Welsh, Westpac’s general manager for commercial banking
Alastair Welsh, Westpac’s general manager for commercial banking. Photograph: Stefan Postles/AAP

It heard Westpac allowed Flanagan to become guarantor for her daughter’s $165,000 business loan in 2010, before making a claim against her home when her daughter’s business failed two years later.

After negotiations with Legal Aid, Westpac allowed Flanagan to stay in her home until she dies. But if Flanagan needs to leave her home for health reasons, or to sell it to fund aged care, she will first have to pay Westpac $170,000 from its sale.

Alastair Welsh, Westpac’s general manager for commercial banking, admitted to the royal commission on Tuesday that documents allowing Flanagan to become guarantor for her daughter’s loan had been filled out incorrectly by Westpac staff.

That included falsely witnessing a document and marking documents to suggest Flanagan had received independent legal advice about her business lending agreement when she had not received that advice.

He also said Westpac staff did not look too closely at Flanagan’s sources of income because it knew if the lending agreement failed her house could be sold to recoup the loan.

Michael Hodge, senior counsel assisting, asked Welsh why Westpac would falsely mark a document saying Flanagan had received legal and financial advice about her loan when it knew she had not.

Welsh said the bank understood Flanagan would be seeking advice from a lawyer a few days after meeting with a bank, so it marked a document to say she had seen the lawyer in anticipation of it happening.

“It’s not uncommon for these to be filled out in anticipation of something happening, so in anticipation that she was going to go and see a lawyer,” he said.

Hodge replied: “Let me make sure I’ve understood the position that you’re presenting, which is that you find nothing surprising, nothing inconsistent with Westpac’s policies, writing ‘yes’ in advance to the question ‘you got that advice’, past tense?”

Welsh said: “That is often the practice ... to help [customers] fill the form, yes.” After a small pause, Welsh then amended his statement.

“Sorry, not often, I don’t know that. That’s an opinion,” he said. “It could be the practice at this point in time. It’s not fair to say it’s often, because I can’t know that.”

Hodge also asked Welsh why a Westpac staffer, Fletcher, had filled out the document and pre-signed as a witness without having seen Flanagan sign it.

He told the commission Fletcher signed as a witness on 8 December, 2010, but Flanagan didn’t sign the document until 10 December when she was in the presence of a lawyer.

Welsh agreed that Fletcher had pre-signed as a witness, but he claimed she had done so incorrectly. He couldn’t provide evidence to back his claim.

Hodge said: “Westpac believes that Ms Fletcher signed as the witness without having seen Ms Flanagan sign the document, is that right?

Welsh replied: “Yes.”

Hodge said: “So Ms Fletcher on the 8th December signed this document as the witness without having seen Ms Flanagan sign the document?”

Welsh said: “She signed and crossed it out, yes.”

Hodge asked: “Did she sign and cross it out or did the solicitor cross it out?

Welsh said: “Hmm. I don’t know.”

Hodge said: “Is it normal practice within Westpac for bankers to helpfully pre-witness signatures that they haven’t seen done?

Welsh replied: “Not at all.

Hodge said: “In this case the banker has pre-signed as the witness without, on your view, having seen the guarantor sign the document.

Welsh replied: “Well in my view, she did this in error and crossed it out.

Hodge said: “Or the solicitor crossed it out. You don’t know.

Welsh answered: “No, I don’t know.”

Hodge told the royal commission that if Flanagan needed to move out of her home and sell it, Westpac would take $170,000 from the sale plus 3% per year accruing.

Hodge said: “So if, for example, she needs to, for health reasons, move into some other environment, she couldn’t sell her home to fund that without first having to ... pay out Westpac?”

Welsh replied: “That’s correct.”


Gareth Hutchens

The GuardianTramp

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