when banks go bad final v1.1

8/3/2019 When Banks Go Bad Final V1.1

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When Banks Go Bad Page 1


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Contents

Preface 3

1. Westpac a broken bank 6

2. Penalty fees 11

3. Errors and Mistakes 21

4. Small Business Scandal 28

5. Burger Gate 31

6. OGME v Westpac 42

7. Taking it to the board 53

Part 2

The Big Picture

8. Where does money come from? 61

9. Where did all the money go? 71

10. So Where to now? 78



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Preface

Let us possess the public confidence so long only as, by a faithful discharge ofthehonourable trust reposed in us, we may show ourselves worthy of it.

Whenever any one man may say with truth the bank has broken faith with us be thenour ruin and ours only, the immediate consequence.

Inscription on the early Bank of New South Wales bank notes (with thanks to EdnaCarew)

Note to Gail Kelly CEO Westpac.Dear Gail,Here stands one man and I say in truth the bank has broken faith with usShall you work to restore our faith or shall ruin be the consequence?Your reaction to the claims in this book will tell.

Yours Sincerely,Craig Harwood,On behalf of the hundreds of thousands of customers who believe Westpac has failed to

act honestly and within the laws of Australia.



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This book is about the lies, corruption, greed and hubris that have dominated Australian andworld banking systems in recent years.

From simple things like excessive fees through to the arrogance of believing themselves to be

above the law, the attitude is evident throughout our banking system and it is this attitude thatis now leading to the collapse of many of the worlds banks. Australias banks are notimmune to collapse and we may have already seen at least one of our banks go ifit had notbeen for the support of the government using taxpayer money.

Now that the Australian taxpayer is propping up these companies, we should startdemandingthat regulations are tightened and banks are made more accountable to the taxpayer. If not,

why then should the taxpayer prop them up?

No book about banking rip offs can really begin without establishing the corruption thatexists in our system of creating money, because it is that faulty system that creates theopportunity for the greedy to control us and to ensure that no matter how much you earn andhow much you can buy you will never be able to purchase anything of real value.

Many books have been written about our money system and why it is destined to fail, manyhave predicted the crash of 2008 and the oncoming financial crisis.

At the end of the book you will find resources where you can learn about the Fiat Moneysystem and what may best be described as an out of control Fractional Reserve Bankingsystem, the two structural factors that have guaranteed we will experience the greatestfinancial pain since the great depression. What surprises me is the lack of willingness by ourpolitical leaders to address these issues and the way in which politicians of all parties havewalked away from their responsibility to the Australian people leading us down the path tofinancial ruin.

As voters we should be clear. We should expect our politicians and regulators touphold thelaw and ensure our banks are operating honestly and fairly, this is simply not happening.Banks have become untouchable, able to sit above the law in Australia.

Politicians and regulators will continue to refuse to act until the pressure from the publicbecomes unbearable. Bankers will continue to get away with as much as they thinkthey can

until the pressure builds to an extent that they are forced to stop. It is thiscycle of greed andremorse that we see happening continuously in our economic cycles, creating boom


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s and thenrecession as greed builds a house of cards destined to collapse.

It is within this flawed system that our banking practices and in particular Westpacspractices, some of which are detailed in this book, have developed, however abusing

customer trust and operating outside the law are not excusable just because thesystem letsyou get away with it and ultimately the public will want to see those responsible pay theprice.



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What is contained in this book should make you angry, it should also serve as awake up call.In order to survive and prosper over the coming years you are going to need to educateyourself about money. You may need to challenge many of the things that you believe were

right and look for new ways of securing a future for yourself and your family.

This book is just a starting point, once you understand where you at this pointof time its somuch easier to decide where you want to be and how to get there.

Now I must make this clear.

I am not making any specific accusations of Illegal activities by Westpac, theirstaff orDirectors. I am not seeking to harm the reputation of the bank, its employees ordirectors

in any way. I am not offering any financial advice.

To do so would land me in court and see this book banned. What I seek to do is present thefacts as they are known and let you make the decisions Do you believe the actions werelegal or morally correct?

Read on and make your own decisions.



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"The whole profit of the issuance of money has provided the capital ofthe great banking business as it exists today. Starting with nothingwhatever of their own, they have got the whole world into their debtirredeemably, by a trick.This money comes into existence every time the banks 'lend' anddisappears every time the debt is repaid to them. So that if industry

tries to repay, the money of the nation disappears. This is what makesprosperity so 'dangerous' as it destroys money just when it is mostneeded and precipitates a slump.There is nothing left now for us but to get ever deeper and deeperinto debt to the banking system in order to provide the increasingamounts of money the nation requires for its expansion and growth.An honest money system is the only alternative."

-Frederick Soddy, Nobel Prize Winner

Chapter 1.

In the 1980s Westpac was Australias success story, riding high on the successes oftheboom, Westpac was going to be Australias bank on the world stage.

By 1992 Westpac was a broken bank, facing bankruptcy. The proud history of the Bank ofNew South Wales had been destroyed by executive greed and a lack of control by directors.

There were losses of Billions of Dollars, the share price dropped to the mid twodollar level,the corrupt and illegal activities of the bank were exposed along with the infam

ous Westpacletters and their efforts to silence former staff members, politicians and groups of customersduped in the foreign loans scandals.

Within a few months seven directors were gone and the bank had to go to the market to pleadfor capital to continue operating.

Several great books detailing this time are Westpac The Bank that Broke the Bank byEdna Carew (Doubleday) and Bankers and Bastards by Paul McLean (Hudson Publishing)

The bank just survived and went on to rebuild itself with an aggressive businessmodelconcentrating on the domestic market and gaining growth through its own networkandthrough acquisitions, to the point just 16 years later, when it was able to takeover St GeorgeBank to become Australias largest bank.

The recovery was achieved by bringing in an experienced American banker Bob Jossandestablishing many of the practices that today link the American and Australian b

anking



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industries. With Joss leading the way at Westpac our other banks kept close watch taking onpractices that worked well for Westpac.

So the current banking model in Australia developed with Westpac recovering fromnear

dead and the others adopting many of the tactics and practices that proved successful forWestpac and other banks around the world.

The recovery has been extraordinary however were the lessons learned? You be thejudge.

One feature of the management model that has lead to this recovery is incentivisingexecutives and branch based staff based on short term performance goals.

Executives were required to make profit and performance targets, consisting of h

uge bonuses,were given when they reached these profits. In order for these targets to be achieved it wasgoing to be necessary to incentivise all front line staff. Branch staff were educated in salestechniques and turned from customer service personnel into sales staff with targets for sellingcredit cards and loans. Branch managers became business managers and millions was spenton developing sales and profit reporting systems that could be used to determinethecontribution to profit of individual sales staff.

To be successful in this process it was going to be necessary to redefine theirentire purpose,Debt became a new product that could be manufactured cheaply and sold to customers atevery opportunity.

Of course the average consumer doesnt want to buy debt, so marketing campaignsconcentrated on the things that you could get with this debt, the new house, theholiday, thePlasma TV, the computers, cars, Jet skis, the list was endless. It could have stopped therehad someone not thought of selling you your own future. What you really needed wasinvestments for the future so that you can have a passive income, retire early and never needto work again.

Anyone with cash in the bank or equity in their house became a potential targetfor the banksfinancial advisors. These top flight sales people would earn significant incomes forthemselves but even greater windfall for the bank.

In house financial planners could show you how to use the equity in your home tocreate

more debt and invest in managed funds. The financial advisor could show you howtoleverage investments into the stock market, whilst buying a few negatively geare


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In order to gain sales they had to be competitive on price, that is interest rate, they also foundthat if they would lend a customer more it had a twofold effect

1. They would be selling more debt to the customer (more sales) and2. By offering the customer a higher loan amount they could attract more custome

rsBecause the sales and marketing process was all about selling the customer on what theywould be using the debt for example buying a new home, a holiday or car etc. Thecustomerfeels like the bank is giving them more. Phrases like, with your income you dont have tosettle for a small home, we can lend you XXX dollars that will buy you a biggerhome andyou can afford to have a pool and you could buy a new car and wrap it all into ahomeequity loan became common.

The ability to create more product (debt) at will with almost no production costwas a dreamcome true. It did present however a small accounting issue. Australian banks arerequired tokeep a proportion of their assets (the debt they sell to consumers is their mainasset) with thereserve bank. Since banks manufacture debt not cash, the cash to be deposited with thereserve bank must come from borrowings or from raising capital.

There was another answer that could greatly increase the flow of money yet not require the

capital to support it. If the loans that had been made were bundled up and soldoff for a shareof the interest component the asset (debt) could be moved off the balance sheet.It was evenpossible to create new entities to hold and trade these parcels of debt all offthe balance sheetand away from the eyes of the regulators.

Thus creativity meant there was no limit to the amount of debt that could be created. Thebank did not actually need to have the money in the vault to lend it out again,it could justcreate an entry in the computer and presto the funds were available for you to buy whateveryou wanted.

This was the new style of banking and Westpac was good at it.

Of course this easy supply of credit does amazing things for consumers, we can buy almostanything with 2 years interest free, new products are created for consumers flush with debt,the economy booms and anyone who wants to buy a home or investment property can.

The old problem of having to save 20% deposit for a house is taken care of withmortgageinsurance so now you can borrow 100% of the house value, but wait theres more why


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notthrow in the legal costs and stamp duty as well and you can borrow 105% of the purchaseprice. Property is always going to go up in value, isnt it? So soon your house isgoing to beworth more. Brilliant!

Back just a few years ago a young married couple could only borrow from the bankto buy ahouse if they could prove their income was enough to pay the mortgage. This could becalculated using about 30% of the couples income (discounting the womens income by50%



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in case she became pregnant). In such a short time we went from this incrediblyconservativeapproach to the other extreme. The Low Doc and then the No Doc loan meant that anyonecould qualify.

Westpac even teamed up with real estate sales people who spruiked the new economic marvelreal estate goes up in value 10% per year, so you can buy this investment property now andin two years refinance and buy another one, then in another two years refinanceboth buyanother two properties, just keep doing that and in no time you will be truly wealthy.

The new economic miracle meant that a property marketer could add thirty thousand dollarsto the price of a property and the bank would still lend on it, it was easy mone

y for theproperty marketer and even easier money for the bank.

No one had to be left behind, Ive even seen a bank sell credit cards to bankrupts, the push forsales had few limits.

While Westpac was really good at this, the great United States of America was even better.With an underclass of poor and migrants much bigger than in Australia they werekeen tomake sure that everybody was able to share in this new found method of creatingprofits.

This debt frenzy was never going to last at some point the bubble gets so big that it bursts, wehear the phrase now of the housing bubble and somehow we are supposed to believe thatthe world financial crisis was caused by a bunch of low doc loans given to poorpeople inAmerica that could not afford them.

More enlightened observers however point to the dramatic increase in debt. Debtmanufactured at little cost and flogged to the public in order to gain bonuses,profits andshare deals. Caught up in trying to achieve their monthly targets, those peopleflogging youthe debt by the bucket load couldnt see the big picture, they couldnt see that living thedream was going to be come a nightmare for lots of people.



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Source: Prof Steven Keen 2008.

The graph above shows Australias debt to GDP ratio. GDP is the Gross Domestic Product, itis the dollar value of how much is produced in Australia. Imagine if your household was the

only one in Australia, then GDP would be the total income into your house. Effectively as acountry it is how much has been borrowed compared to the countrys income. The twoprevious peaks were just before Australias two depressions 1890s and 1930s. To giveyousome perspective on this the two small drops in the graph in the 1970s and the early 1990sshow our last two recessions as the debt pressure from an overheated economy wasreleased.The debt pressure now makes these recessions look like childs play.

Now to be fair not all economists agree with Prof Keen that debt is a major problem (butmany more are now starting to consider his point of view seriously) and time will tell wetherthe Australian public can ever actually pay for the success of our banks sellingstrategies.

If you are interested in this area theres lots of great reading on the web. A great place to startis Steven Keens blog http://www.debtdeflation.com/blogs/ and his book.http://www.debunkingeconomics.com/

Having now established how this push for selling debt and creating maximum profi

t fromeach account came about, lets look at some of the unfair and illegal practices that werecreated in this rush for profits, how you have been ripped off by your bank andmostimportantly what you can do about getting your money back.

Chapter 2 Penalty Fees.



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Generally consumers see interest rates as the cost of the money they are borrowing to have allthose great things that were on offer.

With the need to gain the maximum market share and increase the sales of debt the banks

wanted to keep interest rates as low as possible to encourage people to borrow yet at the sametime they needed to get as much profit as possible out of every customer .

One way to do this is to create fees and charges that are not really seen as part of the cost.What was a great idea to gain a little bit extra soon became a huge source of income for thebanks.

New fees and charges were created with lots of different names for lots of different things,

making it hard to compare the banks products with each other, the game became one of tryingto appear to have the cheapest loans for the consumer while getting the most profit out ofthem with back door fees and charges.

At the same time fees on deposit accounts meant that most of the money the bankborrowsfrom customers costs them nothing.

The fees appeared in contracts or the terms and conditions booklets that come with yourcredit cards, loans or accounts but were not easily calculated or added into the

cost of theproduct.

The reserve bank only started keeping data on fees and charges in 1997, partly in response toconsumer complaints, by then the banks had already been able to create fees worth over 4Billion Dollars (thats four thousand million dollars)

This strategy was a massive success for the banks. Income from fees for Australian bankswas over 10.5 Billion Dollars in 2007-its not much if you say it quickly how about Tenand Half Thousand Million Dollars, or write it out with all its zeros $10,500,000,000.

You can also look at it as about $525.00 per year for every man women and childin Australia(including babies in nappies) your going to need the baby bonus just to cover bank fees.



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Source: Reserve Bank of Australia

Some of these fees appear to be legal and some are not. Some fees the banks arequite withintheir rights to charge and if you agreed to the terms and conditions then you have to pay them

however, the big issue is that in their excitement the banks couldnt stop themselves and theydecided to create fees that werent exactly legal.

This issue has become a big one and it could be that Australian banks owe theircustomersrefunds of fees that would amount to many Hundreds of Millions of Dollars.

So what makes a fee legal or illegal?

This is a challenge as no cases have actually made it to court to get a definiteruling. The

banks are settling claims outside court to avoid a decision going against them.If a precedentwas set in court then the banks would have little choice but to refund all the illegal feescharged for the last 6 years, which would be devastating for them.

Now the banks have known this for quite a while and they have just kept it quiet. When itwas revealed in 2004 Rich report that many of the Penalty Fees charged by bankswereprobably illegal it did not stop them, in fact Westpac lead the charge to increase the fees evenfurther.

One of the greatest disappointments is that the regulators are all unwilling todo the job thatthey are entrusted with.

The Ombudsman, ASIC, the ACCC and APRA are simply refusing to investigate and run atest case. Our prime minister can say that we have one of the best regulated bankingindustries in the world, but how can this be true when the regulators simply refuse to act onclear breaches of the regulations?

The basis of the claim that these fees are illegal stems from the thorough investigation of theissue carried out by Nicole Rich in 2004 (the rich report) and you can downloada copy ofthat report from the resource page on our web site.



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It was found that under contract law some of these fees could amount to penalties. Undercontract law penalties can only be used to recover the actual losses incurred when someonebreaches the contract. The true cost to the bank of you breaching your contractand paying

your credit card bill a few days late is a couple of cents at the most and in any case you willbe charged additional interest that will more than cover any losses.

As I said none of these cases have actually made it to court as yet, if you complain you willhave a good chance of your bank refunding your money, if they dont refund it youneed totake the next step of the legal process by lodging a claim against the bank in the relevantsmall claims tribunal in your state. This will almost certainly result in the bank refunding

your money.

As far as we can tell every claim has been settled by the banks in this matter,they have notdefended a single case.

One interesting case is Adam Schwab Vs Citibank. Although Citibank had repaid MrSchawbthe forty dollars he was claiming plus costs of $135.00 prior to the hearing thetribunal madea point of issuing a decision that found:

The late fee was a Penalty and Unenforceable andThat the term in the contract that imposed the fee was unfair.At last there was a ruling from the legal system that these fees are unenforceable and that thebanks terms and conditions in their customer contract breach the Fair Trading Act. Tribunalrulings do not set a precedent for higher courts however if you chase your claimin smallclaims tribunal it will definitely be used as a guide.

You would think with that the regulators would have to act, unfortunately they are still failingto do their jobs. ASIC, The Ombudsman, ACCC and APRA are all refusing to take onthebanks. Our banks are able to act outside the law and our regulators sit on theirhands and donothing.

Compare this with the example in England. Consumer action in the U.K. on this issue wasstronger than here, the reality is Australians are too easy going and we will stand by while weare being robbed and do nothing about it. In 2005 British consumers revolted against the

banks and started taking the banks to court to claim their money back. It becamebigger andbigger, with the banks settling out of court in thousands of cases, so that ther


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e was no bindingdecision against them. The banks handed back over 100 Million pounds in one 12 monthperiod alone.

It became such a big issue that the UKs Office of Fair Trading eventually had toact. They

intervened and set the maximum credit card late fee at 12 Pounds and launched acase againstthe banks on the other fees. The result was a mixed ruling but the courts were clear that thefees were unfair. There is now a process going on to set fair fees. This will allow the banks torecover true costs without ripping off consumers.



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It is clear that in Australia our regulators will not take the first step. The ACCC, ASIC andAPRA have completely failed in their duty, our banks are not well regulated andtheregulators are going to leave it to you to sort the law out for yourself.

The ruling from the Victorian Civil and Administrative Tribunal put the directors on notice,they are most probably breaking a number of laws including sections of the corporations actand federal laws punishable with jail terms. But hey, do they care? Its worth $10.5 Billion tothem.

This is my personal opinion, but I expect that if a person robs a bank and theygo to jail, asthey should, we should also expect that when a bank executive robs the customersthe bank

executive should be charged and jailed as wellWhat do you think?

For 18 months I have been running a free service assisting people with the information theyneed to recover these fees. On the following pages youll find all you need in terms of draftletters etc. to claim your fees back. This is your money, you are entitled to it, claim it back.

Start with the letters to your bank, be polite and please remember when writingor talking tobank staff, its not their fault, they didnt make these decisions and they probablydont agree

with it either. The fault lies clearly with senior executives and the board.

If you dont get satisfaction change banks and lodge a claim with the small claimstribunal inyour state.

We have been assisting people reclaim thousands of dollars of fees from banks, buildingsocieties, finance companies and credit card companies. It only takes a small amount of workto get it underway, so tonight have a look through your bank and credit card statements. Youcould be surprised just how much has been taken out of your account that you areentitled tohave back.

Fees you should contest

Inward cheque dishonour fee -Probably Illegal

Most banks have cut it out but consumers and particularly small businesses needto be awarethat these fees are probably not legal and you can request a refund for fees taken from youraccount up to 6 years ago.

Over-limit fee -Unenforceable


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This fee is probably unenforceable and you should challenge this. Banks have theability tostop you going over your limit by rejecting the transaction but allow it so theycan pick up thefee. They are should only charge a fee to recover their costs (which they are getting in interestanyway)



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Late payment fee -Unenforceable

Again this is unenforceable and should not be charged. Claim the fee back from your creditcard provider or bank.

Honour / Dishonour Fees -Unenforceable

Again these fees are unenforceable and should not be charged. It has been the banks decisionwhether to honour or dishonour a transaction and any fee should only be to recover costs.Claim the fee back.

"Late" payment fee for being early -Unenforceable

This is a tricky one, you are going to be away when your credit card statement comes so you

pay it early before you leave. However if you pay it before the billing cycle you will havetwo payments in one cycle and nothing in the next, so they charge you. As with the latepayment fee they are only allowed to cost recover in this case no cost to them.Request thatthe fee be returned to your account.

Fees they can ChargeDischarge fee

Lenders charge a fee for handling all the paperwork when the loan is paid out. Usually these

can not be contested unless they have been raised significantly during the period of your loan.

Annual mortgage service fee

Again the fee is legal and you should be aware of how much it is before you signthedocuments generally unless an increasing fee is included within the contract terms it shouldnot be increased during the life of the loan.

Foreign currency conversion fee

The fee has increased by around 150% over the last 5 years even though costs have probablygone down, still there is nothing illegal about the fee.

Annual credit card service fee

Be careful when selecting a credit card and look at the fees. Often these Cardsare loadedwith extras that appear to be good value but come with fees attached. Decide ifyou reallyneed those extras or are you better off with a basic card.

Overseas ATM charges

As with charges to use other banks ATMs here, fees are legal, but you should plan


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aheadwhen travelling and know what fees your going to pay before leaving.



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Early termination fee

These fees are generally found in Mortgage contracts ( but sometimes on fixed length loanagreements such as Car loans / leases as well) and will specify that if the loanis paid out

early or within a set time the borrower will pay a penalty. Provided they are reasonable andare not set up specifically to trap a borrower these fees are usually legal. Youshould look atthese fees when taking out a mortgage. What would happen if your circumstances change? Inthe case of fixed rate mortgages ensure that you are willing to be committed tothat interestrate for the amount of time specified in the contract.

So dig out those statements and join the thousands of other people claiming their money

back-its yours -you deserve to have it back.

Update:

We have had a major victory and the banks have reduced or in some cases eliminated unfairpenalty fees. However you are entitled to take action to recover unfair fees charged over thelast 6 years. In many cases it will be well worth your time going back over yourstatementsand taking the banks on with your claim. The bank may initially deny your claimbut overand over we see that if you take your claim to the small claims tribunal in our

state then theysettle prior to the case being heard. They simply dont want another ruling against them.



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Penalty fees charged by your Bank, Credit Union or Building Society or other serviceproviders may be illegal and should not be charged.

You can use this template to draft a complaint to the bank or company charging the penalty

Just fill in the sections in blue then when you finished filling in the sectionschange all thetext to black and delete this section before printing and sending.

Dont forget to keep a copy yourself and follow up if you have not received an answer in 21days.

[Insert your contact address][Insert Todays Date]

[Insert Name of your Financial Institution][Insert Address of your Financial Institution]

Dear Sir/Madam

Your NameAccount Number: [BSB and Account No or Credit Card Account No]

Default fees charged to the above account

I have been charged a number of default fees in relation to my account with [Ins

ert Name ofyour Financial Institution]. The total amount of the default fees charged to myaccountbetween [INSERT Date of First Fee] and [INSERT Date of Last Fee] is $[Insert Total Amountof the Fees you are challenging].



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The default fees were

Date Fee Description Amount $

[list the fees and the dates you were charged them on your statement eg periodicpayment

and direct debit dishonour fees; cheque dishonour fees; overdrawn account honourfees;deposited (inward) cheque dishonour fees; credit card late payment fees; creditcard overthe-limit fees and the date of each charge].

These fees are excessive and I therefore write to make a formal complaint aboutthecharging of these fees. I ask that you repay the entire amount of these fees tomy account inresolution of my complaint.

My complaint and request for repayment is based on the following grounds.

First, the fees are out of all proportion and unconscionable in comparison withthe losssuffered by you in processing my defaults. The fees you charged me were between$[Insertamount of lowest fee] and $[Insert amount of highest fee]. I do not believe thatyour costs indealing with my defaults were even close to these amounts. However, I am willingtoconsider any evidence you can provide me to the contrary.

Secondly, there is a clear difference in bargaining power between [Insert name o

f yourFinancial Institution] and me as an individual consumer. As you would be aware,I had noopportunity to negotiate the terms of my account contract with you and, in any case, wouldhave no ability to change any of the terms imposing fees and charges. In thesecircumstances, it would be unconscionable for you to enforce the fees.

Given the above, the default fees you have charged to my account are penalties, inaccordance with the well-established legal principle set out in cases such as DunlopPneumatic Tyre Co Ltd and ODea v Allstates Leasing System (WA) Pty Ltd. This makesthem void, meaning they could not be enforced against me in court. As they are void andunenforceable, they should not have been charged to my account and should be repaid.

The issue of Penalty Fees has been tested in the Victorian Civil and Administrative Tribunalwhere Credit card late fees were found to be unenforceable at law and the termsimposingsuch fees to be unfair under the fair trading act 1999. A copy of the VCAT decision is

attached.

Further, it is also possible that by enforcing the terms of my account contract


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imposing theseexcessive fees on my account, [Insert name of your Financial Institution] is engaging inunconscionable conduct within the meaning of section 51AB of the Trade PracticesAct1974, particularly because of my lack of bargaining power relative to you and the fact that

the terms imposing these fees are not reasonably necessary for the protection ofyourlegitimate interests.



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Accordingly, please refund the total amount of these fees to my account, being $[Insert TotalAmount of the Fees you are challenging].

I look forward to receiving your response within 21 days of the date of this letter. If I do not

hear from you, I may take further action to recover the amount of these fees without furthernotice to you.

Yours sincerely

[Sign your name here]

[Insert your Typed Name here]

This form is supplied courtesy of www.WhenBanksGoBad.com

This form was modified from the original supplied by Choice, and The Consumer Action LawCentre, Victoria.



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"The era of trusting the banks has long gone."

Justice Clarke, New South Wales Supreme Court.

Chapter 3

Mortgage Errors

Another Disclaimer:

Im not suggesting that Australian banks are intentionally allowing errors or mistakesto occur in mortgage calculations. If they were intentionally being allowed to occur theywouldnt be errors or mistakes would they? and that could be fraud.

Im not suggesting that there is a reason that banks put in writing that you should check your

statements for errors. Im not suggesting that commercial laws accepting that errors and

omissions occur could be used as a convenient cover for ripping off consumers. Iwouldntsuggest those sorts of things it could land me in court.

Could calculation errors and mistakes be another way of increasing profits?

Obviously it would be naive to think that the banks never make mistakes. If youthink yourstatements must be error free just because you are dealing with a bank, you couldn't be morewrong. We are prompted to ask though why almost all the errors are in the banks

favour?You would think that genuine errors over time and over a number of accounts would end upbeing about 50% in the banks favour and 50% in the customers favour.

Us Australians are very easy going lot we can live with occasional errors, we would beannoyed that these errors were there but as long as they were small and it was roughly 50 / 50we could all just blame computers and get on with working our buts off to pay the mortgageso one day we could retire and do what we really wanted to do with our lives.

But what if I told you that the occasional errors are something more than occasional, like overtime 98% of mortgages have errors in them? What if I told you that 84% of errorsfavour thebank thats 84% for them and 16% for you. Hmm interesting.

Over the last five years we have seen tens of thousands of refunds given back tocustomersfor mistakes made by the banks. You normally dont hear a lot about it because commonpractice is that as part of the settlement customers are required to not disclose the details.



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An often quoted survey in a Sydney newspaper contained some staggering statistics. Thisstudy looked at 200 monthly mortgage statements across 18 different lenders. Thekeyfindings of the study were ..

54% of individual statements contained errors

84% of errors favoured the banks

The average monthly error was an amazing $242

That is just monthly errors, how much could that be costing you a year, let alone over the lifeof your mortgage? It's frightening isn't it? You could be in the exact same situation of asMillions of other Australians and have lost thousands and thousands of dollars to bankingerrors

and not even know it.

So if this is true and we know that banks have hundreds of millions of dollars to spend on the

best computer systems in the world, why wouldnt they just fix this problem?Well remember our banks that were short of profits in the early 1990s and remember howclose Westpac was to being bankrupt? Remember how to gain more sales they had tobecompetitive and look like they had low interest rates but somehow they had to extract moreprofit from each sale?

Have a look at what a few little mistakes or errors could do for a banks profits. Letjustwork through the numbersAnnual statements: 12Statements with errors: 6 (12 x 54%)Mistakes in lenders favour: 84%Number of statements with errors in banks favour: 5 (6 x 84%)Average monthly statement error: $242

Yearly error in banks favour $242 x 5 = $1,210.00Not bad but as your maths teacher could have told you, its all about leverage. It costs nomore to make mistakes in all your mortgages than it does in one. So if a bank was holding say1 million mortgages the extra profit would be

$1210.00 x 1,000,000 = $1,210,000,000Thats right a few errors here and there could add an extra 1.2 Billion dollars tothe profit forthe year each year. And remember they are also collecting additional interest onthatamount as well so that gives them even more and its straight profit.



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Now if senior executive bonuses are related to profit or share price there wouldnt be a greatincentive to track down these nasty little errors would there?

Those figures are just too big to mean much to the average person going to workeveryday to

pay off their mortgage. But taking those figures again lets look at what it canmean to theaverage person.

Annual statements: 12Statements with errors: 6 (12 x 54%)Mistakes in lenders favour: 84%Number of statements with errors in banks favour: 5 (6 x 84%)Average monthly statement error: $242Yearly error in banks favour $242 x 5 = $1,210.00On a twenty year Mortgage $1210.00 x 20 = $24,410.00But it gets even worse remember youre paying interest on the outstanding amount i

ncluding

the errors. You are also paying interest on the interest as the errors and interestcompound.To make the calculations a bit easier lets say the error was only averaged $100.00 a month.Monthly amount of errors: $100Life of Loan: 20YearsInterest Rate:7.5%Total amount of errors: $24,100Total amount of additional Interest: 31,719.15Total Extra you pay $55,819.15Plus it will add years to your repayments.

Have you ever wondered why your mortgage seems to go down so slowly?So where do these errors happen and how do the lenders manage to get away with it?Well they arent always that easy to find by just looking at your statement or going over itwith a calculator to see if it ads up, but below you will find a list of mistakes found in



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monthly statements. The following is an overview of the most common ways that lenders canovercharge you on your loan.

Mistakes by financiers have been discovered or are likely in the following areas;

The Original Calculation of your Repayment amount is incorrect.e.g. a clients repayments were $19.00 per month more than it should have been for22 years(if not discovered this could have resulted in the customer paying an extra $15,800 based onan interest rate of 9% p.a.).The Incorrect Interest Rate is Applied.e.g. 7.75% used instead of 7.25% (if not discovered this would have resulted inthe customerpaying an extra $9,760 in additional interest).The Interest was charged at least one day earlier than it should be charged.This could cost the customer thousands of dollars in extra interest.

The Interest Charge was calculated on an Incorrect Balance.E.g. the loan balance used was $110,000 but the loan balance should have been $101,000;this could cost the customer an extra $20,000 +Interest Rate Changes: The New Lower Rate was applied one month late; theNew Higher Rate was applied one month early.This could cost the customer extra thousands of dollars in additional interest a

nd must bewatched during this time of continually changing interest rates.

A Payment was Credited at least one day late.This would cost the customer extra thousands of dollars in additional interest over the life ofa loan.

Bank Charges are too high or include extra charges.Customers have discovered extra fees of up to several thousand dollars incorrectly charged totheir accounts.

Leap Year: 365 days is used by the financier instead of 366 days whencalculating interest.The financiers reap an additional $80 million + from accounts every four years andthenlend it back to customers.

Incorrect Dates are used when calculating interest.The Interest Debit calculated on the daily balance one or two days prior to the da

teappearing on the statement, i.e. the financier charges additional interest, orthe Interest Credit calculated on the daily balance one or two days after the date


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appearing on the statement, i.e. the financier pays less interest.

An Incorrect Amount is Credited (Debited) to the account.When Banks Go BadPage 24


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E.g. $17.50 is credited to your account instead of $175.00 or $2,050.00 is debited to youraccount instead of $205.00.Your Repayment Amount is Credited to someone elses account.This kind of mistake can happen very easily. Simple typos happen all the time, w

hy wouldyou think it wouldn't happen at the bank?

Payout Figure is too High.The Balance Outstanding is too high. An incorrect Penalty Formula is applied. The date ofpayout is included for calculation, this results in an extra days interest beingcharged.

Offset Accounts' (e.g. Savings) include Incorrect Transactions.

Thebalance

in the savings / offset account is too low.

Offset Accounts' Interest Earned Calculation is Incorrect.The interest offset against the home loan interest is not enough.

Removal of funds from an Account.The financier transfers funds from the customers deposit account to the customersloanaccount without the customers approval, or mistakenly transfers funds from one customersaccount to another customers account.

Changing (ignoring) the Rules.Bank treats Principal & Interest Loan as an Interest Only Loan without informingthecustomer.

Charging Interest after every Transaction.Instead of charging interest to the customers account at the end of the month many of thefinanciers are now charging interest to the account whenever a deposit is made e.g. weekly orin some cases daily. This negates most of the benefit of making weekly paymentson yourhome loan or making extra payments. It increases the financiers effective interestrate onthe loan!

So, how do we find all these mistakes? Unlike Penalty Fees, which are quite simple to find,for most of these errors you need to use some dedicated software designed to find these errorsand recalculate the statement.

We have looked at available software and can recommend just one. While it performscomplicated calculations, its really easy to use you dont need any accounting expe


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rience.Its been checked and certified, so that the bank shouldnt be arguing about calculationmethods etc. and it has a proven track record with thousands of people already getting theirmoney back.



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Update: We thought it was so good we went to the creators of the software and havenegotiated a special offer for our friends. So that you can check your mortgagewe havearranged for a 30 day free trial period of the software for you (there is a verysmall postage

and handling fee to send it out). You can get the software and check your mortgage statementand if there are no errors just let them know and you will not be charged for the software.Thats a great deal there is absolutely no risk, you either find errors or dont payfor thesoftware. So Just go to www.mortgagewatchdog.com.au/loanchecker to get the special trialdeal.

So if the software is so good and the mistakes so common what have others found?

"[In accounts for over 20 of my clients] I have discovered overcharges in approximately75% of cases. The total of all mistakes, including overcharges of interest, feesand otherirregularities amounts to over $500,000"

Joe Naggy former Citibank executive now runs Midmark Financial ServicesThe bank statements are never clean, [citing the experience of some 350 clientssinceIRB opened in 1994]. "Significant errors" occurred in 90% of statements.."-Roy Brown Managing Director of IRB

A recent survey of bank statements conducted by The Interest Savers for Sydney MorningHerald readers showed an error rate of 54%, ....... The Herald's switchboard wasjammedfor a week by callers wanting their statements checked.-Journal of The Institute of Chartered Accountants in Australia

"Thanks everyone. I've just found $1,100.00 over the last 3 years owing to me from mybank in overcharged interest on a home and investment loan. They were totally shockedwith being caught.Steve Atkin -Port Macquarie. NSW



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Knowing what you now know, you have to make an important decision -how you are goingto deal with it.

I hope that Ive been able to make it a no brainer.

We know that these Mistakes are thereWe know that just about every mortgage holder has mistakes in their accountsWe know that the banks are making Billions of Dollars in extra profits and you are paying forit

And now we know how to check your mortgage for errors and get your money back.

Plus remember with the special deal we have organized you get the software fee for 30 daysto check your accounts so no risk, if you dont find errors you dont have to pay for the

software.

This is the only outside service you find me promoting within this book and itsherebecause I believe checking your loans for errors is essential if you want to keep bankshonest. Along with that the software producers have agreed to give readers a great dealand a huge guarantee.

Just click on the following link or copy and paste the following into your browser

http://www.mortgagewatchdog.com.au/loanchecker



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Chapter 4 -Small Business Scandal

There are literally thousands of stories from Small business owners who have been treatedharshly, probably illegally and certainly immorally by their banks. In most cases it leads to

the person being emotionally destroyed, there are many suicides, marriage breakdowns andfamilies destroyed. The devastation and social costs is enormous.

This is a very dark side of business banking that very few want to talk about.

There is no available mediation or ombudsman service for most of these people. There aregaps in legislation that mean many small business owners can not be protected byconsumerlegislation and they are unable to afford to take on banks with almost unlimitedlegal funds in

a court of law.

Small business is the life blood of Australia providing the majority of the countriesemployment and wealth yet when dealing with the finance sector and the big fourbanks inparticular they are left hung out to dry, fair game for a banking sector that has come to treatboth the law and fairness as a game.

There is an urgent and immediate need for the government to legislate to protectsmall andmedium size businesses from predatory behaviour by banks, liquidators, receivers

andadministrators.

Over the next few years we are going to see a huge increase in failures of smallbusinessesthrough the recession. Many of these will be dealt with in ways that either areor should beillegal but there will be nothing that they can do about this.

Most loans to small businesses are backed up by personal guarantees and mortgages on theowners home or other property. The bank will require that the directors / ownersof thebusiness have enough personal assets that can be sold to meet any shortfall fromthe sale ofthe business and its assets if something goes wrong. The bank will want to gainaccess to asmany assets as possible.

The loan documents / guarantees and mortgages will also usually include the terms fixedand floating charge. This is a killer, what it means is that not only are you libel for theamount borrowed you can be liable for any amount of other costs that the bank can put

against the account. It is common for banks to load in huge fees, penalty interest rates andlegal costs so that the amount to be reclaimed from assets can end being up bein


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g much morethan the amount of the original loan.

I personally will never agree to a fixed and floating charge again.



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Most loans to small businesses are on a on call basis, meaning that the bank can call in theloan at any time and you have to come up with the cash to repay them or they will exercisethe right to call on the Guarantees.

Alternatively some banks may be in the habit of inserting escape clauses in thecontracts. Onesuch escape clause is requiring the borrower to do something obscure in the documents butnot bringing it to their attention. One example of this would be including in the documentsthe requirement to supply full copies of accounts promptly each quarter for review by thebank but never actually asking for the accounts or acknowledging the clause. Thefine printwill say that if these terms are not met the bank may then at any time in the future recall the

loan without notice.

The process by which this usually happens is that the bank will call in loans orrefuse to rollover loans for businesses that they deem to be problem accounts. It can be subtle, a tighteningof terms and the banker saying that we are reducing our exposure in this market segment, sowe no longer want to finance your business to giving notice that you are in breach of one ofthe many hidden terms and conditions in your finance agreement and that all loans are to beimmediately repaid.

If you are ever in the situation of having a business fail and the bank call onassets you arereally between a rock and a hard place. If the bank decides to take control of those assets theyare able to have those assets sold off at a fraction of their real value. Even though there arelaws intended to prevent it, there are ways for them to avoid getting a fair market value, theycan avoid selling at a public auction or even advertising them for sale.

But you would wonder why on earth a bank would not want to recover the maximum amountfrom the sale of assets. The reason goes back to having personal guarantees andmortgages onthe Directors personal assets.

Assume that the bank knows it has done something wrong, or that there may be reasons abusiness owner could contest the bank calling in the loans. The best option thenis for thebank to bury the business owner. That is, not only take the assets of the business, but also theassets of the owner as well, and if at all possible bankrupt them. Its clean, there are no

arguments or court cases and the bank can wash its hands of the matter and moveon.


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You see once the bank has sold up the persons assets, they will have no money tosue thebank in a court of law. Even better, if you bankrupt them, then even if they areable to raisethe money from a family member to go to court, bankrupts are unable to sue anybody.

This is one of the areas where small business plays on such an unlevel field, the conditionsfor large businesses and public companies are very different. Large businesses dont have toback up their loans with the assets of the directors. Public companies only risktheshareholders money.



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In many cases banks dont even hold mortgages or charges over the assets of theselargerorganisations, this is why companies like ABC learning and Allco can borrow hugesums ofmoney and when it goes bad there arent enough value in the assets to back up theloans.

In my opinion it is absolutely essential, for all small business people with bank loans toreview their loan documents, business and personal asset structures with someonewho canprovide sound specialist legal advice in this area.

Knowing the best ways to protect your assets and following through with it couldsave yourbusiness and your home. Well structured assets protection is often only used bylarger ormore entrepreneurial businesses but without getting this right you are incredibl

y exposed.

The next chapters will give case studies of business affected in this way. Readthrough thecase studies and make up your own mind if the banks acted legally and ethically.

In each case these business owners expected that their bankers were honest and would actwith integrity and within the law. They didnt structure their businesses and assets to take intoaccount all possible events including that their banking relationships might notbe what they

thought they were.

One last point, business owners are not exempt from the issues raised in the last chapter onMortgage errors. I have found similar errors in business loan accounts, transaction andoverdraft accounts it is essential that you have these checked, either by yourself or your bookkeeper. The mortgage Checker software can be used to check loan accounts as well. Clickhere to read more about the software and a free 30 day trial.



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Chapter 5 Burger Gate

Disclaimer:

Lets be clear here. Im not accusing Westpac of deceptive and misleading conduct orof

fraud or obtaining money by deception that would land me in court however I canshowyou copies of documents submitted to parliament on the public record.

I have to be careful here Im not repeating or adding any weight to allegations made byothers that could land me in court as well, however I will present publicly availabledocuments that anyone could find via Google and let you be the judge.

Size matters with banks and if you control large sums of cash flow then banks will do

amazing things to secure that cash flow and keep it away from competitors.

The larger your business the higher up the management structure of the bank youhaveinfluence. To involve a bank acting in a particular way across several operational areas, evento the extent of creating special purpose property trusts and capital raisings you would haveto be negotiating at a very high level within the bank. As a shareholder I thinkitsinconceivable that directors would not or should not know about deals of this nature.

As Ive described before normally things are cleaned up fairly well, the victims of a sting areburied, discredited or silenced through the legal system. But every now and thensomethingreally big leaks out, often it happens in the form a few good bankers who can nolonger livewith what they are seeing happen and are prepared to turn whistleblower.

It happened with Westpac in the early 1990s with the foreign loans scandal and theWestpac letters which they fought so hard to prevent from being made public. I have afeeling that the following may be just as damaging.

There is much more that I would like to say about Burger Gate and I hope in time morewill be made public in the form of a Royal Commission into banking practices butuntil thenthe following documents and letters will serve to lift the curtain on the sort of high level dealsthat are done in boardrooms by our banks.

There is just one more thing to point out.

Im told of the 40 or so franchisees that were affected in this debacle there have

been twosuicides along with many divorces, families ruined and lives destroyed.


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The following information has been supplied by one of those victims. I can say Ihave beenproud to meet the Rampling family and I have huge regard for their stand on trying to achievejustice not just for themselves but for many others.

The fight has come at a huge cost for them also. There has been incredible financial loss tothe family, there is no doubt that Rick and Sues children have been affected in so manyways. Ricks health has suffered, but to their credit the family has hung togetherand notgiven up the good fight.

The following pages are copies of Ricks submission to the South Australian Governmentsinvestigation into franchising which provided Rick the opportunity to get this story into the

public arena.

For legal reasons, I can not comment on these letters or on the matter directly,but I think thatthese documents will tell the story well enough.



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Lobban, PaulFrom : Sent: Friday, 22 FebruaryTo : Lobban, PaulSubject : RAMPLING SUBMISSION FOR SA INQUIRY INTO FRANCHISINGImportance : High

Good morning Dr . Lobban,Thank you for your time on the phone yesterday and granting us permission tolodge our submission for your inquiry into franchising . Below is our submission.

Background13/05/2008Hungry Jacks alias Jack Cowin trades in Australia, so-called successfully, plushas his fingers in

many other pies. Hungry Jacks had expanded from Western Australia eastward . Burger KingCorporation then decided that they wanted a piece of the action in Australia andwanted allCowin's restaurants to be re-branded to the world-wide recognised brand of `Burger King' .Burger King then started advertising for franchisees to come on board put forward sites and theyput a stop on Hungry Jacks expanding in Australia . Apparently in 1996 litigation started in theSydney Supreme Court between Burger King Corporation and Hungry Jacks Pty Limited/JackCowin . Meanwhile, even as these actions were taking place, Burger King was merr

ily signingup franchisees and if approved to be a Burger King operator, was asking for $100k per franchisefee . Many of the Burger King franchisees were totally unaware that there were any courtproceedings taking place between Burger King and Hungry Jacks . Burger King still took theirfranchise money. Many Burger King franchisees found sites throughout NSW, VIC and QLDand were now starting to invest many hundreds of thousands of dollars on securing their sitesand developing them .Enter Westpac Banking Corporation -Introduced to many of the Burger King franchisees by theGeneral Manager and Franchise Development Manager at Burger King as being the 'preferredlender' . (Let me point out that Westpac was heavily involved with the Hungry Jackscorporation . In other words, Westpac was well aware of what was going on, on both sides of thefence.)

This is how our story began

SUBMISSION FOR STATE INQUIRY INTO FRANCHISINGWHERE DID BURGER KING DISAPPEAR TO ? ? ?


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We owned a number of hotels in NSW and had decided to build a Burger King restaurant on thefront block of one of our hotels in Sydney. We had already been approved as a Burger Kingfranchisee but had still not been informed about the litigation between Burger King & HungryJacks. (At no time was this litigation disclosed to us -not when we first approa

ched BurgerKing in July 2000, nor at the time of signing up as a Burger King franchisee andpaying our feesin 2001 .) Rumours were around that these two companies were fighting, but of course thisinformation was kept closely guarded by the Burger King hierarchy . After our restaurant wasapproved to be constructed at a cost of close to $2million we too, were introduced to Westpacas being the 'preferred lender' for the franchisees . At this stage, our hotelswere financed



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through HostPlus Superannuation Fund and we were seeking only the finance for theconstruction/fit-out of our Burger King restaurant. On our first meeting with Westpac'srepresentatives, they informed us that we would be far better off if we moved into 'mainstream

banking' seeing as we were building the Burger King restaurant and suggested, after lengthydiscussions about our asset holdings, that they finance our whole group which consisted ofclose to $29million worth of assets with a gearing of less than 50%. Sue and I were quite waryof placing all our eggs in one basket, but the Westpac representatives assured us emphaticallythat this was the best direction for our group.

They were furnished with our extremelymultifaceted memorandum stamped "Private & Confidential", as you would expect, a

s we wereborrowing around $13.2million . After receiving our second approval letter fromWestpac, wewere visited by Ms Jill Baptist, who headed the Franchise Division of Westpac atPenrith, andshe was overjoyed to have us on board and excited at the prospect of moving forward with ourplans to expand and grow our businesses .

News Flash. We finally found out that Jack Cowin wins law suit against Burger King . Heinforms Burger King that he wants all the restaurants rebranded to his Hungry Jacks plus the

total amount awarded to him by the Supreme Court -in excess of $70million . To say this newssent shock waves through the Burger King franchisee community was an understatement! Wewere totally disgusted in Burger King for the repetitive lies and for the misleading and deceptiveconduct that they had entered into by 'sucking in' innocent franchisees to fundtheir expansion inAustralia . At this stage Jack Cowin and Burger King were at loggerheads with each other and Iimmediately called for a meeting with Mr Cowin and the hierarchy of Burger Kingin Sydneyalong with another Burger King franchisee who was also in the process of investing close to$2million for his store. I said to Mr Cowin and the Burger King hierarchy that both of thesecompanies had operated in a misleading and deceptive manner and that many of thestoreswould become unviable (unprofitable) if this form of merger was to take place. Iwas basicallytold to get lost, they were not interested in anything I had to say, and I continued to be extremelyoutspoken about it . (How can any company cause so much damage to so many innocentpeople offering them no compensation, no support or back up while they manoeuvre

dthemselves for their own greed????) First problem -our store was under construction ;


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franchisees were experiencing major problems with erratic supplies, suppliers and financialdifficulties occurred because internal information was being passed between Westpac, BurgerKing &Hungry Jacks which destabilized the financial future of the franchisee andtheir

investment .

The $100,000 .00 franchise fee was supposed to give us support through all theissues of setting the business up (not to mention our royalty fees as well) butI can assure youthat we had very little, if any, help or support of any kind . In 2002 we had only 2 franchiseemeetings -one in March and the other in November. Burger King themselves were indamagecontrol and we believe that when they entered this country they were insolvent.(At that stagethey were owned by Diageo in England who later sold out to Texas Pacific Group .

) Thehierarchy and people employed by the Burger King brand were like rats abandoninga sinkingship -thus leaving us to deal with new people who had no background of our particularsituation. Jack Cowin/Hungry Jacks stood by and saw the damage done to the innocentfranchisees and did nothing to rectify the situation, hoping that he could pickup restaurants fornext to nothing. To this day Mr Cowin has never offered any kind of compensationto any of thefamilies who were greatly affected through no fault of their own. In fact, he stood by and

watched most of them go to the wall .

After Burger King lost their appeal, they were making arrangements to exit the country asquickly as possible; the Burger King franchisees had no idea as to what was going on. In July2002, Burger King brought in TPF Restaurants from New Zealand to take over as the masterfranchisee. At the November 2002 meeting when franchisees were informed about TPFRestaurants and all met for the first time, we learned that sales were down considerably andthings were looking bleak. TPF Restaurants told us that "they were going to leadus into thefuture". All the while, Burger King constantly informed us that Hungry Jacks would be 'out of thepicture' and Burger King would keep expanding. (In 2004 or 2005 TPF RestaurantssuedBurger King Corporation for misleading and deceptive conduct.) We also met the new GeneralManager of Burger King who, we later found out, was a director of both Burger King and HungryJacks -how can this be when the two separate companies are competitors?? Anotherproblemfor Burger King -their branded restaurants had to be handed over to Hungry Jacks

as part ofthe 'deal' between them . Burger King then decided to do so-called 'operationalaudits',


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unannounced, on the franchisees' stores with the hierarchy walking in and automatically shuttingthem , in full view of customers, (no breach notices issued allowing time givento rectifybreach) for minor/bogus breaches or, on some occasions for no reason at all, with the specificaim to disrupt the franchisees' cash flows which would have a flow on affect to

hurt themfinancially. (Isn't this type of bullying behaviour [unconscionable conduct] from the franchisordetrimental for the brand you are trying to sell and what was the purpose of doing it???) Manyof the franchisees, before they opened, were told by the Burger King hierarchy of projectedsales they should achieve. As it turned out, these figures were physically unattainable oncetheir restaurants opened. So, many of them, including ourselves, were having difficulties inmeeting financial obligations. The Burger King hierarchy further involved themse

lves in thefranchisees' businesses by telling various suppliers that the franchisee was infinancial difficultywhich 'spooked' suppliers who took the view that they would not be paid if theyprovided stock.In our case, the Burger King hierarchy also phoned our hotel suppliers telling them that we werenot 'financially sound' after we refused to pay royalty fees due to lack of advertising, support andbackup . (We were not the only ones who refused to pay royalty fees at that time.) Again, whatwas Burger King's reasoning behind all this??

NOW LET ME DROP A BOMBSHELL AND I HOPE THAT YOU, AS AN AUSTRALIAN, ARE ASDISGUSTED AS US TO LEARN HOW WE WERE TREATED BY WESTPAC BANKING



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CORPORATION AND BURGER KING AND HUNGRY JACKS. Whilst we were building ourrestaurant in Sydney, and of course being told constantly by Burger King that there would be nomore Hungry Jacks restaurants built in Australia, out of the blue, 6 kilometresdown the roadfrom us, a Hungry Jacks restaurant begins construction . This restaurant was own

ed by a MrBarry Hammond who worked extremely closely with Jack Cowin in the expansion of the HungryJacks empire. Even before opening our restaurant, we had asked to be bought outby eitherBurger King or Hungry Jacks, as we no longer wanted to deal with people that hadproblemstelling the truth .

Approximately 6 months after opening our restaurant, again, out of the blue, I was contacted byMr Barry Hammond, a prominent HJ's franchisee, who asked for a private meeting w

ith me . MrHammond said he had been sent by Jack Cowin to see me and asked whether I wouldlike tosell my restaurant . I said that I could be interested providing I got back the$2million that I hadinvested in it . We chatted for a while, never reaching a decision, and I then escorted MrHammond to his car. It is here that he informed me that my personal files, banking informationand loan application which was stamped "Private & Confidential" and which contained extremelymultifaceted and sensitive information about ourselves, our companies and our future plans,

were handed over to him in a meeting in the Westpac's Offices in Sydney and thatthesuggestion at this meeting was that my funding 'be pulled' . I believe this wasdone to make it asdifficult as possible for me as a BK franchisee to make my business succeed . Sonow we havea major Australian Bank involving themselves in corrupt activities with my competitor. To giveyou an update on this, we are in the middle of negotiations with Westpac for compensation .They have asked us not to talk to any authorities, media or police until they conduct their owninternal investigations . Our latest email from them (09/01/08) said that they were "interviewingpeople who appear to be involved in the matter" and will get back to us shortly. This hasdragged on now for almost 6 months. We believe that Westpac's 'internal investigation' is asham as they have shut down communication and not responded to recent phone calls oremails . We have also asked for help from the ACCC, ASIC and the Privacy Commission fortheir immediate assistance in our case.

We have since come across an internal Westpac document which we will quote direc

tly from:

"Hammond is a Hungry Jacks man (as opposed to a Burger King man), has regular di


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aloguewith Jack Cowin and often mixes with other Hungry Jack franchisees (eg those we've funded atChatswood RBC are regularly mentioned) and he obviously knows the fast food gamevery well.

We've talked about where the industry is going. Yes, it is a mature industry and

we know theBank has some concerns (your email this week re the Victoria experiences refers)about thefuture . Barry Hammond believes that, following the recent court ruling againstBurger King'sappeal in the Jack Cowin case (refer attached 11/99 Age News item for background) a shakeoutwill result. Hammond's and Cowin's view is that the ruling may see Burger King considerquitting Australia resulting in closure of poorly located/ performing Burger King storeswith those left to be re-badged Hungry Jacks and offered (firstly) to existing H

ungry Jacksfranchisees such as Hammond. All very much conjecture but indicative that a shakeup in theindustry maybe imminent."Signed by J D Titmarsh employee of Westpac Bank dated 10/08/01 .

This J D Titmarsh is the same Westpac employee who handed over my personal bankingdocumentation to Mr Barry Hammond. (As per Mr Hammond's statement which is supported byanother statement from an ex-Westpac director) Mr Hammond informed us that all theinformation that he attained at this meeting was passed onto Mr Cowin at Hungry

Jacks .(Acceptable business practice -we think not!!) For Mr Hammond to come to us withthisinformation would have taken a lot of guts on his part seeing as he was our competitor. Also, let



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us inform you that Westpac was going to most of the other Burger King franchisees asking forreductions in their LVR's (Loan to Value Ratios) even before some of them had started trading.Of course many franchisees were not able to do this and consequently their restaurants were

put into receivership; their restaurants never went to public auction and were basically boughtback by the then master franchisee -Hungry Jacks -for minimal cost while the banks took allthe franchisees' personal assets and if they didn't have enough personal assets,bankruptedthem. (The best method used to silence a franchisee.) Westpac were told that Burger Kingrestaurants would be surplus to the needs of Jack Cowin therefore making Westpacquick tomove on all Burger King restaurants that fitted the scenario outlined above. Itis also interesting

to note newspaper articles published on April 11, 2002 where Jack Cowin states he is going tobuy all the Burger King restaurants and then changes his mind later on, on April25, 2002. (Asper copies from the Sydney Morning Herald) Then on June 05, 2002 it is announcedthat JackCowin has set up the Westpac Family Restaurant Property Trust -he has sold a group of hisrestaurants to Westpac for $47.5million of which $20.16million is raised as equity (to purchasethe Burger King restaurants at bargain basement prices when all the franchiseeshave gonebust) -very innovative says Westpac. (As per copy of Archive Media Release)

A lot of these statements, articles and documentation can be provided . The setting up of theWestpac Family Restaurant Property Trust needs to be thoroughly investigated andother issuesinto the Hungry Jacks/Burger King takeover also need to be thoroughly investigated by therelevant authorities. To any layman it would appear that collusion between Burger King, HungryJacks & Westpac was rife .We have contacted Jack Cowin and asked him if he has ever seen our personal banking filesand if he has, we would appreciate them to be returned . He continues to have bouts ofamnesia; says that he never discussed anything with Westpac about the Burger King/HungryJacks/Westpac debacle, but here we have it quoted in an internal Westpac document that hebelieves many stores will become unviable after the merger. We have also asked him whetherhe is prepared to offer compensation to all the franchisees that went `bust' through this wholedebacle and of course, he denies any wrongdoing -I mean, what a joke! We believethat itshould be compulsory for the companies involved, as well as the bank, to attenda Federal

inquiry so that we can get to the bottom of what really happened . We believe that allparticipants in this debacle have a case to answer to and it never ceases to ama


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ze us that thisparticular fiasco has been able to avoid any investigations or inquiries from any of our so-called`watchdogs' . The cost to innocent franchisees in this debacle -anywhere from $50million plusand this is a conservative estimate . Also I think that this points out that this proves that churning

took place, and at this stage many of the restaurants that went into receivership from WestpacBank are now being operated by Hungry Jacks while the poor franchisees that owned thesestores have been thrown out into the street .We find it amusing that Mr Cowin now seeks the help of the West Australian Government to helpin his KFC issue with Yum Foods especially when he finds it difficult to answerpertinentquestions into the Burger King collapse and Westpac's involvement in the whole debacle. Ithink that you would now have an idea as to how fraudulent, unconscionable, misl

eading anddeceptive this whole industry can be. We have not been silenced by any `confidentialityagreement' like most other franchisees who leave the system and are happy to attend theinquiry to furnish signed statements and documents that will corroborate and verify ourallegations.We have tried to keep this as simple as possible. Our Burger King restaurant wasonly open andtrading for a period of 13 months and the devastation it caused us has been horrendous, to saythe least. We have ended up with nothing but the clothes on our backs and even s

ome of thosewe have sold to live on . We're certain it confirms that churning definitely occurs ; it also confirmscollusion between Westpac Banking Corporation and the franchisors ; we believe that we are theonly ex-franchisees who actually have written documents proving our case. As forfranchising,we believe that it should be stopped until appropriate measures can be put in place to ensurethe safety and the financial security of these poor families who have been abused by this



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system.

PS . A further update. The reason for the delay in submitting this is due to thefact thatCompetitive Foods Australia Limited attempted to enter into mediation with us with what we

believe to be the sole purpose of stopping us in lodging our submissions to theSA & WAinquiries. We were told that if we attempted to lodge any of our submissions, that the mediationwould cease immediately. If this is not blackmail, I don't know what is .Westpac were asked by CFAL to attend this mediation and declined.We were constantly told that Burger King would like to attend this mediation aswell, but ofcourse, they didn't .We hope this gives you an insight to our dilemma and again, we offer our assistance to theinquiry if needed .

Please advise receipt of this email . If you require any further information orclarification, please do not hesitate to contact us anytime.Yours faithfully,Rick & Sue Rampling

Lobban, PaulFrom:Sent : Tuesday, zo rebruary 2008 12:00 PMTo: Lobban, PaulSubject : Addendum to Rampling Submission for SA Inquiry into FranchisingImportance : HighGood morning Dr . LobbanHaving re-read our submission we felt it necessary to clarify the introduction o

fthe New Zealand Group, TPF Restaurants into taking over as master franchiseefor the Burger King brand in Australia .In 2001 the NSW Supreme Court awarded damages to Hungry Jacks/Jack Cowin(Competitive Foods Australia Limited) in its fight against Burger King regardingthe Development Agreement between the two corporations . In the damagesfigure an amount of around $26million was allocated as compensation to 3rdparty franchisees -not one red cent of this compensation has been paid to anyfranchisee .In April 2002 Burger King appealed the courts decision .In July 2002 TPF Restaurants was brought over to Australia to operate asmaster franchisee for the Burger King brand . (TPF Restaurants is the BurgerKing master franchisee in New Zealand and operates over 60 franchises)In May 2003 TPF Restaurants high-tailed it back to New Zealand (less than 12months in operation) .In 2004 or 2005 TPF Restaurants sued Burger King Corporation for misleadingand deceptive conduct and won .Franchisees were unaware of TPF Restaurants' existence until the franchiseemeeting in November 2002 . We thought that this was a very strangeoccurrence and did not understand the reasoning behind this appointment norwere we told why TPF Restaurants were appointed . In hindsight it is all veryclear -Burger King were stalling handing the restaurants over to Hungry lackswhilst they sought appeal in the NSW Supreme Court to overturn the 2001 courtdecision .

This caused a massive de-stabilization within the Burger King franchiseecommunity -as if there wasn't enough going on already -and more problemsfor the franchisees . At this November 2002 meeting the franchisees were


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informed by TPF Restaurants that their projected figures for the July-Octoberperiod were down by $4million for the same period in the previous year. Thisalso reflected in the de-valuing of the Burger King franchisees' restaurants .

The following is from Westpacs web site and is a copy of their press release on the set up of

the Westpac Family Restaurant Property trust and the raising of money to purchase theserestaurants from Jack Cowins company and lease them back to his company. Approx $20Million was raised from an unsuspecting public by Westpac.

Archive media release

5 June 2002

Bite size. A take away slice of the fast food market.

The new Westpac Family Restaurants Property Trust literally gives investors thechance totake a bite out of the fast food market.

Instead of the usual commercial properties, the closed end unlisted unit trust will own 36Hungry Jack's and KFC family restaurants across Australia. Competitive Foods will be thelessee of the properties.

The trust will raise $47.5 million, of which $20.16 million will be raised as equity. WestpacInstitutional Bank is the arranger and underwriter to the issue.

Director at Westpac Property Advisory, Arthur Psaltis said: "We're always looking at newand innovative ways of doing business and this was something that struck us straight away asbeing a good solution for both Competitive Foods and investors."

Almost all of the properties would be leased to Competitive Foods via 'triple net leases' forperiods of 12 years with two, five year options . Triple net means that this isnet cash flow,where all property expenses and capital expenditure is funded by the tenant, inthis caseCompetitive Foods.

"Competitive Foods adopts a detailed selection criteria when it originally purchases itsproperties. It has sought long term leases, as it believes that these propertiesare instrategically valuable locations. This demonstrates Competitive Foods' view of the long termviability of the restaurants," Mr Psaltis said.

Under the leases and master contract of sale, Competitive Foods will pay rent, with a

minimum annual escalation of 3.5%, all outgoings, expenses and capital expenditure, andany charges or fines imposed on the trust due to the nature of the properties.


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Westpac Funds Management Limited is the responsible entity (manager and custodian) of thetrust. The properties will be purchased at independent valuation and have been subject to duediligence.



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"An investment in the trust should provide investors with an attractive investment as the trustaims to provide stable and growing income distributions," said Mr Psaltis.

"The first year yield for the Trust is forecast at 8.77%, with a first year taxdeferred

component of 70%. Minimum investment is $10,000 and then increases in multiplesof$1,000. Westpac will continue to grow these types of offerings as part of its Wealth Creationstrategy for its customers.

"Applications for units in the trust may only be made on the application form attached to theProduct Disclosure Statement dated 3 June 2002. Westpac Banking Corporation doesnotguarantee the performance of the trust.," he said.

Competitive Foods

Competitive Foods is Australia's largest franchisee of family restaurants and has over 32years experience in the industry. It holds franchise agreements for 165 Hungry Jack'srestaurants nationally and 45 KFC restaurants in Western Australia and the NorthernTerritory.

Competitive Foods commenced operations in December 1969 when it acquired the KFC(then Kentucky Fried Chicken) franchise rights for WA. Since then the company ha

sremained the sole franchisee in that state and is the third largest franchisee of KFCrestaurants in Australia.

The company acquired the Australian Burger King franchise in 1971 from the Burger KingCorporation and commenced business in Western Australia under the Hungry Jack'strademark.

Competitive Foods principal is Mr Jack Cowin who is majority owner and founder of thecompany. Competitive Foods has operated family restaurants on the properties that willmake up the Trust for an average of 15 years.

Australian Family Restaurant Market

Australian Family Restaurant retailing, or the fast food sector, generated salesof $7 billionin Australian in the 2001 financial year. This represented over 11% of total food retailing forthe year.

Historically, growth of fast food retailing has averaged 5.5% pa over the 1986 t

o 2001period. There are significant entry barriers to this highly competitive industry.


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Release ends.

A second trust the Westpac Family Restaurant property trust No2 was also set upunder thesame type of arrangement with Westpac raising more money from investors that was

channelled back in the same way.



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Whether it was part of the plan originally or the result of other circumstancesWestpacappears to have had a change of heart in 2008 and decides to tell the investorsthat this is notsuch a good deal after all and we should sell the properties and close the trusts.

The following information was released.

Westpac Banking Corporation is likely to sell off 64 Australian fast food properties worthabout $100 million because of tougher refinancing and retail conditions.

The bank has called meetings of two of its unlisted property trusts, which ownspropertiesoccupied by Hungry Jack's, KFC, Red Rooster Family Restaurants and others.

Westpac has warned that the trusts -the Westpac Family Restaurants Trust and the

WestpacFamily Restaurants Property Trust No.2 -will "face difficulties" if the restaurants are notsold. It cited increased refinancing costs and lower capital growth in future years, madepossible by a softening retail property market.

Lessees of the properties have the first right of refusal to acquire the properties in the trust.

The first trust owns 36 Hungry Jack's and KFC stores, which it bought in 2002. The secondtrust's 28 properties comprise 19 Red Rooster restaurants, nine Chicken Treats,

threeDomino's Family Restaurants, one Subway Family Restaurant and one delicatessen.

End of release.

Of course these buildings are n

when banks go bad final v1.1

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