On June 17, ANZ Bank announced that the Chief Executive Officer (CEO) of its New Zealand business, David Hisco, was leaving ANZ reportedly “after concerns he ‘mischaracterised’ personal expenses including the use of corporate chauffeured cars and wine storage.” ANZ Bank New Zealand’s Chairman (and former New Zealand Prime Minister) Sir John Key cited unspecified “’health issues’ and the board’s concern over the expenses, which were worth tens of thousands of dollars and spanned nine years.”
Key also stated, according to the Sydney Morning Herald, that Hisco “was not paying the money back to ANZ because he was ‘adamant’ he had the authority to spend it, and the bank’s main concern was not the money itself,” but that “there had been a ‘lack of transparency’ in how the expenses were recorded in the bank’s books.” In Key’s own words,
What is at the heart of this issue, though, is the way that that expenditure was recognised in our books, in other words, it was either in our view mis-characterised or there was a lack of transparency. So it’s not about the money itself, it’s the way it was recognised in the ANZ records . . . .
Hisco’s departure has not ended the controversy. The New Zealand Reserve Bank is continuing to question ANZ, which the Reserve Bank regulates as a New Zealand incorporated bank, about Hisco’s hasty departure.
Note: Ethical violations have become increasingly prevalent as a basis for CEO terminations. A May 2019 PwC study of turnover among the top 2,500 global companies found not only that a record 18 percent of CEOs were replaced, but that 39 percent of the CEOs dismissed “had been accused of ethical lapses . . . the first time ethical lapses led the causes of CEO turnover in the study’s 19-year history.”
In ANZ’s case, the facts as reported indicate that ANZ in theory may have more than domestic regulatory concerns to take into account. Given Sir John’s statements indicating that Hisco’s expenses were inaccurately recorded in ANZ’s books and records, ANZ should recognize that inaccurate books and records may bring the matter within the purview of the United States Securities and Exchange Commission (SEC). Under the “books and records” provisions of the Foreign Corrupt Practices Act (FCPA), publicly traded entities – which includes foreign issuers, like ANZ, whose American Depository Receipts are traded on the over-the-counter market – can be held liable for failure to maintain accurate records regarding the company’s transactions.
The SEC would be highly unlikely to pursue an FCPA investigation of ANZ on “mischaracterized” expenses of tens of thousands of dollars unrelated to foreign bribery. Nonetheless, other companies whose shares or ADRs trade on U.S. securities markets should use the Hisco case as an opportunity to remind senior executives about the ethical and legal ramifications of their misrepresenting or falsely reporting the nature and basis of transactions benefiting themselves that involve company funds.