The Westpac Banking Corp (ASX: WBC) share price is in focus today after the latest news relating to fraud.
What's going on with fraud?
On 2 July 2021, Westpac announced it had uncovered significant potential fraud. It decided to commence proceedings in the Federal Court of Australia against Forum Finance Pty Ltd.
This potential fraud relates to a portfolio of equipment leases with Westpac customers arranged by Forum Finance, which were referred to Westpac's institutional bank.
Westpac said that while investigations are ongoing and the NSW Police, ASIC and APRA have been notified, at this stage it appeared that no Westpac customer had suffered financial loss.
The bank has a potential exposure of around $200 million after tax, with the extent of the loss dependent on the outcome of its investigations and recovery actions underway.
Westpac has obtained certain asset freezing and search orders to preserve available assets and relevant information.
The bank is continuing to investigate how this occurred including undertaking an external review.
Last week, the Westpac CEO Peter King said:
This is a complex issue, and we are working at pace to address it, including engaging with the police and regulators. At this preliminary stage, the potential fraud is sophisticated and appears to have been perpetrated externally.
Today's fraud update
The Australian Financial Review reported today that the big four ASX bank had not been able to find or contact Basile Papadimitriou, also called Papas. He is the man that is reportedly in charge of Forum Finance.
Mr Papadimitriou was also the president of the Sydney Olympic Football Club from 2016 until two hours after Westpac told the ASX it was suing Mr Papadimitriou and Forum Finance.
The newspaper also wrote about the auditor of Sydney Olympic, Rothsay Chartered Accountants and principal Frank Vrachas. The AFR also pointed out that Mr Vrachas has also audited Papas' corporate group, The Forum Group of Companies Pty Ltd, since at least 2015.
It was also pointed out by the newspaper that Rothsay's office was also noted as the Forum Group's address for its 2011 registration. As was the case with the registration of Forum Finance Pty Ltd, the vehicle Westpac has claimed was the shopfront for the fraudulent loan scheme.
The AFR reported:
Vrachas says Rothsay is not the auditor for all entities operating under the Forum banner, just Forum Group and its wholly-owned subsidiaries. Rothsay was alerted to the potential fraud by an external party and notified the regulator.
"Importantly, Rothsay is not implicated in any way in the alleged fraud. The alleged fraud does not appear to have taken place in any of the trading companies that we audit," said Vrachas. And no one's suggesting otherwise – Rothsay is not mentioned in the Westpac case.
Today's Westpac share price movement
The Westpac share price is up around 0.3% at the time of writing.
Time will what happens with this Westpac fraud case and how much the bank is able to recover.
At the moment, brokers have been more focused on the sale of its New Zealand Life Insurance business to Fidelity Life Assurance. It's also entering a 15-year distribution agreement for life insurance products to Westpac's New Zealand customers. The sale price was NZ$400 million and it will add 7 basis points to Westpac's common equity tier 1 (CET1) capital ratio.
