Four Aussie Home Loans mortgage brokers forged documents to ensure their clients got loans while building up millions in trailing commissions, according to evidence given to the royal commission on financial services on Friday.
The commission heard evidence from Aussie executive Lynda Harris detailing behaviour of four brokers who were sacked by the group, three of whom were prosecuted and one permanently barred.
Aussie Home Loans is now owned by the Commonwealth Bank.
Ms Harris told the commission that Aussie was incapable of identifying likely fraudulent broker activity and relied on lenders to pick up dodgy practices.
“We are outsourcing it to a third party,” Ms Harris said.
This raised eyebrows with counsel assisting the commission, Rowena Orr QC, asking “do you think you ought develop that expertise within your business?”
One broker, Shiv Sahay, submitted false documentation for 17 clients who applied for loans worth a total of $7 million from Bank West and Suncorp. The dishonest dealings included 13 false statements, 23 false bank statements and 26 false applications.
Mr Sahay was a highly successful broker who transacted $70 million worth of loans in 259 deals that were due to earn large amounts in trailing commissions over their lifetime.
Mr Sahay was eventually convicted on three fraud charges and sentenced to 350 hours of community service.
He was terminated by AHL in 2014 and convicted the following year.
Another former AHL broker, Emma Khalil, made a number of loan applications for clients using letters of employment, which were accepted by Westpac, as the only source of income documentation and which proved false.
“The letters of employment … were all in a very similar format with similar font and they all had very similar detail,” Ms Orr said.
An internal investigation found that some of these letters included applicant names spelt incorrectly, in some cases the name quoted was actually the name of another client who had received a loan, and the same corporate logo had appeared on three different company payslips submitted in support of loans.
“The employer noted for three of the letters is a customer in his own right and works for someone else,” the commission heard.
Another AHL broker, Madhvan Nair, was eventually convicted of 18 charges. He also falsified loan application documents and the commission heard that: “We have detected five applications with an employer owned by the same entities …
“All have payslips in identical form with the same yearly income of $75,000 a year.”
The applicants had a range of different jobs, from tradespeople to company secretaries, but all had the same pay.
A fourth broker, Bernard Meehan, was terminated after “engaging in practices that … could potentially bring Aussie Home Loans into disrepute.”
A review of his practice found 22 files containing payslips with no supporting documentation “to assist in proving the salaries are legitimate, let alone of the client is in fact employed …”
AHL also was loath to tell clients of fraudster brokers and why they had been terminated, preferring instead to tell them just that their broker had moved on.
Ms Harris was asked whether Ms Khalil’s clients were told why she had been sacked and responded “that is what I hope would [have] happened – hope.”
That raised the ire of Commissioner Kenneth Hayne.
“Because it is forensically convenient to you, sitting in the witness box, to take the answer that I earlier suggested to you?”
She responded, “Yes”.
Commissioner Hayne replied: “Let me just say … if anyone has a conversation with me in these situations, the advice I give them is to say that the contract was terminated.”