For a moment, the mood in the Melbourne court room grew more sombre as the assembled barristers and public-relations experts paused to contemplate, for ever so brief a moment, this harrowing reminder of the awful human suffering caused by their clients’ poor behaviour.

The McDowall testimony was a stunning vindication of Commissioner Hayne’s strategy of using case studies, not only to highlight banker misconduct, but also to probe what was driving it. As he wrote in his interim report, “when selecting the cases that were to be examined in the course of public hearings it was important to identify cases that might give some understanding of why the conduct had occurred”.

But it also demonstrated Commissioner Hayne’s finely honed sense of the theatrics of the courtroom. He knew that banker behaviour had barely been tempered by previous investigations and inquiries, or by the hundreds of millions of dollars they’d been forced to pay in compensation to their customers.

Harsher penalties

Commissioner Hayne’s genius lay in his recognition that a deep-seated emotional reaction was needed to galvanise the entire political class into supporting the introduction of much harsher penalties on financial institutions that break the law, and for backing regulators to adopt a much tougher line with corporate offenders.

For this approach to work, of course, he needed senior lieutenants who not only possessed formidable intellects, but who were also capable of conveying the full freight of the victims’ misfortune.

Senior counsel assisting Rowena Orr, QC, was outstanding on both counts. Orr was ruthless and unrelenting when it came to exposing bankers’ various attempts at obfuscation, but she also had the empathy to guide Mrs McDowall through her heart-rending testimony.

And it’s possible that the disastrous performance of Jack Regan, AMP’s head of financial advice who retired in December, was partly due to him being disarmed by senior counsel assisting Michael Hodge, QC, whose smile suggests an easy affability, with only the faintest trace of a sardonic edge.

Regan went into the witness box suffering from the same delusion that afflicted all of AMP’s top management and board: that although the wealth-management giant had charged customers fees without providing any service, it had been praised by the corporate regulator when it had handed over the supposedly independent report prepared by law firm Clayton Utz.

Commissioner Hayne’s genius lay in his recognition that a deep-seated emotional reaction was needed to galvanise the entire political class into supporting the introduction of much harsher penalties on financial institutions that break the law. Eddie Jim

Hodge milked the comedy out of Regan’s failure to keep track of how many times AMP had misled ASIC by presenting fee-for-no-service as a mistake, when there was a deliberate policy to keep charging customers for 90 days even when they were in a pool that received no advice.

“By my count this was the 14th false or misleading statement by AMP to ASIC? [Pause] You’re losing count”, said Hodge, prompting laughter in the hearing room.

“I’m in your hands in that regard, Mr Hodge”, the equable Regan responded.

But it was a dangerous trap that Hodge was laying for the unsuspecting Regan. By the end of the hearing, the revelation that AMP had misled the corporate regulator 20 times triggered calls from senior political and business figures for tighter regulation in the financial advice sector.

Senior counsel assisting Rowena Orr, QC, was ruthless and unrelenting when it came to exposing bankers’ various attempts at obfuscation. Supplied

Needless to say, the banks’ top barristers duly warned subsequent witnesses to beware falling under Hodge’s spell.

Certainly, Nicole Smith, who until last year was chair of NULIS, the superannuation trustee of National Australia Bank, was extremely chary Hodge suggested to her that NAB’s wealth management division was “hopelessly conflicted” when it came to recommending how to remediate super fund members who had been charged fees for financial advice, even though they had no adviser assigned to them.

After all, Hodge pointed out, NAB’s wealth division had been taking the members’ money, which had lifted its profits. Its revenue would be hit if it had to pay the money back to clients.

“I believe they [NAB’s wealth division] are in a conflicted position,” Smith replied. “I don’t believe it’s hopelessly conflicted.”

Michael Hodge, QC. His apparent easy affability might have disarmed Jack Regan, AMP’s head of financial advice who retired in December. webcast

Shattered the composure

This time it was Commissioner Hayne who himself shattered the composure of the country’s $2.7 trillion super industry by asking the witness whether she had contemplated the possibility of criminal proceedings, given that the NAB wealth business had deducted fees from clients’ super accounts without providing any service.

“Did you think to yourself that taking money to which there was no entitlement raised a question of the criminal law?” he asked Smith. “I didn’t,” the hapless Smith conceded.

Andrew Hagger, NAB’s former chief customer officer for retail customers, also adopted a defensive stance as Hodge grilled him about the delphic utterances he’d made to ASIC about the size of NAB’s fee-for-no-service problem.

Hagger, who left the Melbourne-based bank last September, offered a lengthy justification of his actions, but Hodge cut through with implacable logic. Why didn’t NAB simply tell the regulator that it would likely have to pay some $35 million in compensation, he demanded to know.

Representatives of the major financial institutions weren’t the only ones left squirming in the witness box. The commission heard how celebrity financial planner Sam Henderson had given a client advice so poor that, if followed, it would have immediately triggered a $500,000 financial loss. And the commission heard two tape recordings in which one of Henderson’s employees can be heard clearly impersonating the client in order to obtain details about her super.

But there’s no doubt that the episode that generated the most frenzied media coverage took place late last April, when Terry McMaster, the head of Dover Financial, one of the nation’s biggest financial planning networks, collapsed in the witness box.

Intense round of questioning

McMaster’s collapse came after an unflagging, intense round of questioning from counsel assisting Mark Costello, who suggested that Dover’s client-protection policy involved an “Orwellian” use of language, because the document in question offered no protection to clients and tried to ensure Dover had no liability for its advisers’ misdeeds.

Was the document, Costello pressed, consistent with a culture where customer complaints were “to be fought at all costs”? Shortly after denying this was the case, McMaster collapsed.

There’s no doubt that the scorching memories of the drama, the tears, the injustices, as well as the public outrage that’s been sparked by bankers’ unseemly stampede for profits will be front of mind for the Morrison government when it receives Commissioner Hayne’s final report today.

In the febrile pre-election period, it would be politically disastrous for either side of politics to rush to the defence of the banks, or to try to safeguard a legal and regulatory system that has allowed such widespread and dismal misbehaviour.

Already, Prime Minister Scott Morrison has signalled the government’s intention “in principle” to carry out all the recommendations it contains, although he’s sensibly decided to wait until he sees what they are before making a final decision. For his part, Labor’s shadow treasurer, Chris Bowen, has pledged to carry out all the report’s recommendations sight unseen, while arguing both sides of politics need a “very, very, very good reason” not to adopt any particular finding.

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