The two remaining former FX options traders accused of rogue trading and covering up AUD 360 million losses at National Australia Bank (NAB) have been found guilty by the Victoria County Court.
Hopes that this may bring a curtain down on the sorry affair appear unfounded with reports circulating that NAB is now to target two broking firms for compensation for their alleged part in the affair.
David Bullen was found guilty of 18 out of 20 charges and Vincent Ficarra of all 13 charges he faced. Both men were remanded in custody and will appear at a pre-sentencing hearing next month.
Their conviction follows those of former head of the FX options team, Luke Duffy, and London-based trader Gianni Gray, who earlier pleaded guilty. Duffy was sentenced to a minimum 16 months imprisonment and Gray was sentenced to a minimum of eight months.
Speculation over NAB following through with threats of a civil suit against two brokers have been fuelled by evidence given during the trial of Bullen and Ficarra, which revealed the alleged role played by Icap and BGC, which was then part of Cantor Fitzgerald.
In September 2005, NAB issued letters of demand against Icap and Cantor for AUD 539 million, claiming "a strong case to seek compensation from the parties involved in the foreign currency options trading losses". The bank added that while it would prefer to resolve its claims against those parties by negotiation," it may be necessary for it to bring legal proceedings against them to enforce its rights" (see Squawkbox, November 14, 2005).
During the trial of Bullen and Ficarra, the Australian Financial Review (AFR) cites evidence from witnesses that Icap and BGC supplied the NAB traders with incorrect revaluation rates that distorted their P&L and led to them claiming bonuses to which they were not due.
During the trial the AFR reports that both Bullen and Ficarra claimed that supplying incorrect revaluation rates was a common practice. This reinforced earlier claims that the four accused traders had entered their desired revaluation rates on a spreadsheet and sent this to the brokers. The rates were duly re-branded and returned to NAB, thereby giving the appearance of independence, it was alleged.
The Australian Securities and Investment Commission (ASIC), which brought the charges against the four, expressed satisfaction in a statement issued by Jeffrey Lucy, chairman of ASIC. "This result shows that senior employees who breach their duties as officers of a company can cause significant damage to the company’s interests and shareholder value. ASIC will not tolerate dishonest conduct by company officers, and as yesterday’s decision by the jury demonstrates, the community will not tolerate dishonest conduct either."
Although NAB has not confirmed it is to launch legal action, local market sources expect it to be a matter of time. Equally they expect the two firms to fight any action vigorously.