Undisclosed conflicts of interest worth $2 million within Catholic Superannuation were detailed at the financial services royal commission on Wednesday.
The revelations cast a pall over earlier evidence that the group had torpedoed a potential merger with an aligned fund over governance concerns.
Catholic Super deputy chair Peter Haysey told the commission the $16.4 billion merger with Australian Catholic Superannuation collapsed when his group could not get agreement on its preferred chair and CEO.
Mr Haysey said the board arrangements were a deal breaker.
“We’re talking about a fund with exceptional performance over a long period of time, and those financial best interests of members was our paramount concern.”
After being asked by Commissioner Kenneth Hayne, “Why does it matter which fund merges into which?” Mr Haysey gave a passionate response.
“We took the view, very strongly, that there would be no circumstances where the retirement savings of our members could be put at risk by not having the successful strategies that had been in place for a long period of time continuing.”
But it soon emerged that those strategies had holes in them. The commission heard that in 2015, Catholic Super’s institutional relations chief Robert Clancy reported a conflict of interest.
His wife, it emerged, held shares in an outfit called Australian Family Network, which had provided marketing services to Catholic Super to the tune of $2 million over five years. Catholic Super was not told of the conflict until the fifth year of the agreement.
AFN’s CEO is Paul Clancy. On July 18 this year Catholic Super discovered he is Robert Clancy’s brother.
“Before that time, Mr Robert Clancy had not disclosed that conflict to the board … had he?” counsel assisting Albert Dinelli asked.
“No, he had not,” Mr Haysey replied.
As far as the board knew, Catholic Super CEO Frank Pegan was handling things with Australian Family Network so as to prevent any conflicts.
But well before that, the brothers appeared to have a close business and personal relationship.
In August 2010, eight years before their conflict was declared, Paul wrote to Robert: “I’m suggesting that Catholic Super continue their sponsorship but to almost formalise the platinum sponsor status I have provided for the past two years.”
Robert responded: “This all sounds good. Are you suggesting $30,000 to $40,000 a year?”
“Yes, I can see that,” Paul said.
Robert Clancy is now on leave and the fund is investigating his use of a company credit card. Mr Clancy has since repaid $46,000 of spending he made on the card, Mr Haysey said.
Commissioner Hayne asked: “Perhaps if we can cut to the chase. What’s the consequence that then follows? The fund is investigating these matters?”
“Correct,” Mr Haysey replied.
“Has that investigation concluded?”
“The investigation has not concluded,” Mr Haysey said.
“So Mr Clancy has been placed on leave and there’s an investigation into this matter. And has the board formed any view about what it should do in response to the matter yet?” the Commissioner asked.
“The board has not finalised that view,” Mr Haysey said.
The full extent of financial dealings between Australian Family Network and Catholic Super was not resolved as the $2 million sum disclosed to the commission only went back to 2013, whereas the business relationship started in 2010.