Westpac director Steven Harker has defended his use of a Samoan superannuation fund that was set up by one of the advisory houses at the centre of a major media investigation into tax avoidance schemes and breaches of anti-money laundering laws.Steve Harker: ‘Not avoiding tax’: Westpac director digs in after Pandora Papers expose
Steve Harker’s service to Samoan banking
Neil ChenowethSenior writerIn a celebration of Australia’s pivot to more Pacific engagement, an Order of Australia gong goes to former Westpac director Steve Harker, who provided so much support for Samoa’s finance sector with his offshore super fund. (Westpac director Steve Harker had a second Samoa entity set up by Asiaciti #PandoraPapers)
Harker was a man ahead of his time. When he moved to London with BZW in the 1990s, he says to avoid double taxation, parent company Barclays insisted that he set up a super fund in Samoa, SJH No. 2, which was too complicated to unravel when he returned to Australia to head Morgan Stanley.
Former Westpac board member Steve Harker picked up an AM for “significant service to the banking sector and to the community”. Photo: Michel O’Sullivan
None of his structures were set up to avoid tax at any stage, he stressed in October when records of his Samoan trust were revealed in the Pandora Papers data leak. Everything was disclosed in tax returns and the Tax Office never applied penalties to him, he said.
Between 2009 and 2019 SJH No. 2 made 62 transfers to Harker totalling more than $31 million. But he had to speak sharply with the trustee, Asiaciti, which mistakenly described each of these as loans made out to him, whereas they were actually “post-tax income transfers”, he said.
Harker resigned from the Westpac board on health grounds in late October, citing the need for a double lung transplant.
Meanwhile, when it comes to thinking outside the box, what a masterstroke to sling an OA to Joe de Bruyn, long-time national president of the Shop, Distributive and Allied Employees Association, for (among other things) “distinguished service to superannuation reform”.
We know the super reform they must mean. All that work and employment that REST super fund, where de Bruyn was director for 32 years, provided for the Hayne royal commission to explore how not to run a super fund.
It’s hard to pick just which moment helped super reform most. Was it the 184 instancesthat REST acknowledged when it may have inadvertently breached superannuation laws by failing to provide details in response to the payment of death benefits?
There’s the extensive conditions it imposed on payouts for its total and permanent disablement policies, and its failure to tell members their insurance cover cut out when the balance in their accounts dropped below $3000.
Or perhaps it was the case study Hayne cited, of the member who became a paraplegic after falling from the fifth floor. Insurer AIA accepted her TPD claim and transferred $108,000 to REST, only for REST to return the funds to AIA, requesting that it review the decision over an administrative error over dates.
The member received the payout only after her own protracted legal action.
And there’s more reform potential in ASIC’s ongoing legal action against REST alleging false, misleading or deceptive representations to members.
Of course de Bruyn, who stepped down from REST in December 2019, wasn’t responsible for any of this, and wasn’t criticised in Hayne’s report.
But during his 32 years as director, many of them as chairman, he helped create and oversee the failed governance structures at REST which produced a raft of suspect procedures, many of which could surely be identified solely by the smell. A feature they share with de Bruyn’s gong.
Harker quits Westpac board, blaming lung transplant
Investment banking veteran Steve Harker has resigned as a director of Westpac, in a move blamed on serious illness.
The resignation announced late Tuesday comes after questions about his ties to a controversial trust-fund business.
Steve Harker of Westpac. Michel O’Sullivan
But Mr Harker, 66, cited the need for a double lung transplant in stepping down from the board of the big four bank.
“Early this year, Steve signalled he was considering retiring from the board as he … wants to focus on his health,” Westpac chairman John McFarlane said.
“We commend Steve for his professionalism and commitment to shareholders throughout his tenure and wish him a fast recovery.”
Mr Harker said the time was “right for me to retire” with Westpac on the “right path to restore trust”.
Westpac’s announcement made no mention of recent revelations in The Australian Financial Review that Mr Harker had for decades maintained a superannuation fund in Samoa administered by a boutique business, Asiaciti, which was entangled in tax-avoidance schemes. The detail was uncovered in a leak of documents called the Pandora Papers in collaboration with the International Consortium of Investigative Journalists.
Sources with knowledge of the resignation said Mr Harker’s decision was based on health reasons only. A spokeswoman for Mr Harker said Westpac had commissioned an independent review of Mr Harker’s offshore taxation arrangements, finding he had cooperated with the Australian Taxation Office and been transparent in how commercial and financial affairs were reflected in his tax returns.
The trust fund business, Asiaciti, had been named in Australian tax avoidance court cases involving Samoan superannuation funds since 2004. A judge in 2014 labelled Asiaciti a “puppet” in a “crooked pantomime” in one Australian accountant’s Samoan fund and banking schemes.
Mr Harker’s fund was not involved in any of those cases. He told the Financial Review “all appropriate and required disclosures have always been made to authorities and my employers”. He also stressed that none of the offshore structures were used to avoid Australian tax, Australian taxation authorities were aware of all his assets and structures, and he had never been penalised for them.
Mr Harker, a former head of Morgan Stanley in Australia, had declined to comment on his long-running use of Asiaciti in the context of his compliance role with Westpac. But his spokeswoman on Tuesday said the fund was redundant as it was now classed a bare trust, and Mr Harker has previously said he was waiting on some private equity investments to mature “so I can close off the bare trust accounts in four-five years”.
But questions had arisen as Mr Harker sat on the bank’s legal, regulatory and compliance committee. It oversees conduct risk, which includes avoiding problem dealings with external contractors, and Mr Harker last year warned that when “you are dealing in countries which don’t necessarily have our rule of law or approach to business, you’ve got to be very careful about transactions or making individual decisions about people and who you deal with”.
Bill Majcher, an anti-money laundering expert who as a former undercover Canadian police officer posed in a sting about washing $1 billion yearly for Colombian drug cartels, said a senior figure in compliance should cut personal financial ties with specialist offshore providers appearing in tax avoidance cases.
That was even in the case of the person’s offshore trust being disclosed and legal, he said. “There’s no way it should be done,” he told the Financial Review.
That was because the nature of the personal financial tie was “so directly entwined with your core business and your core responsibility” on the bank, said Hong Kong-based Mr Majcher, who now heads corporate risk and asset recovery firm EMIDR.
He said a senior compliance figure could decide that the financial ties were not the best thing and “just transfer out of there.”
“At some point you have to take some personal responsibility,” he said.
“You can’t say, ‘I didn’t know.’ Because you do know. You chose to let it remain there.”
