Senators told bank customer he was ‘blackmailed’

On Tuesday (29 May), the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry heard from hotel developer Michael Doherty, owner of Doherty Group.

Mr Doherty obtained a commercial loan facility totalling $50 million from Bankwest in 2006, used to finance his refurbishment of Hadley’s Hotel in Hobart, and to fund the purchase and mixed-use development of neighbouring land referred to as Inner Collins.

However, Bankwest would later revise its risk profile of the facility, increasing interest rates in 2010, and appointing investigative accountants to review the company’s profitability.

“We were getting exceedingly worried by the commentary that was coming back from the bank and the commentary was [misunderstanding] our account,” Mr Doherty told the commission.

Despite the bank’s concern over a perceived $5 million shortfall, the accountants found that Mr Doherty’s company was generating a profit of $3 million. Mr Doherty would also be left with accountants fees, which totalled over $200,000.

Mr Doherty claimed that the charges had a “crippling” effect on the company’s cash flow.

The hotel developer also claimed that the charges inhibited him from repaying $1.3 million in GST debt that the company owed to the Australian Taxation Office (ATO).

Mr Doherty would later be forced into bankruptcy, after failing to reach an agreement with Bankwest.

Bankwest subsequently appointed receivers in February 2012 and sold the properties in what Mr Doherty called a “fire sale”.

“We had no options. [We] were pushed into a very tight corner. We couldn’t pay the extra [$980,000] to get refinancing, so the best way was to do a bit of a fire sale ourselves and try and retrieve something out of the ambers,” Mr Doherty said.

Bankwest also later called in Doherty Group’s intercompany loans. Mr Doherty requested more time to refinance the loans; however, he was told by Bankwest that it would provide him with an additional six weeks if he signed an agreement, which stated that Bankwest “had done no wrong and the bank had acted always in a proper manner”.

Distressed by the proposal, Mr Doherty sent a letter to Nationals senator John Williams and former Greens senator Bob Brown.

Mr Doherty said: “We were very stressed by it. We sent copies of [the proposal] to Senator Williams and Senator Bob brown and the feedback was you have got nowhere to turn, you are being blackmailed, just take it up and someday it may come back in a later forum.”

CBA denies link to “Project Magellan”

Also appearing before the commission on Tuesday, the Commonwealth Bank’s chief credit officer, Peter Clark, denied that Mr Doherty’s case was linked to Project Magellan, a review undertaken by CBA following its acquisition of Bankwest that sought to reduce the bank’s exposure to commercial property.

Counsel assisting the commission Robert Dinelli asked: “Would it be fair to say that Project Magellan saw a significant shift in the attitude of the bank to risk generally and also specifically in relation to Mr Doherty?”

In response, Mr Clark said: “I wouldn’t agree with that comment. I don’t think Project Magellan resulted in any significant shift in risk. I think Project Magellan was a result of a perception or a concern that the risk had already shifted in the book that was being looked at.

“You will get much more fruitful evidence on Magellan, I suspect, from subsequent witnesses. But my broad understanding, I think there are a thousand-plus files reviewed in Project Magellan, which was, I don’t know, 10 or 20 per cent of the Bankwest portfolio. So, it wasn’t the entire portfolio, but there was a significant material part reviewed.”

The hearings continue.

The third round of hearings began on Monday (21 May) and focuses on loans to small and medium-sized enterprises, with responsible lending and unfair contract terms coming under the spotlight.

The hearings will consider the conduct of several of the leading banks in respect of their dealings with small and medium enterprises, in particular in providing credit to businesses

[Related: CBA’s ‘Project Magellan’ probed by RC]

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.