Three of Australia's biggest banks may have cost their shareholders hundreds of millions of dollars after they rejected a secret offer from the WA Government to settle the long-running dispute over the collapse of Alan Bond's Bell Group.
Westpac, National Australia Bank and Commonwealth Bank are part of a syndicate of 20 of the world's biggest banks that has been fighting the liquidators of Bell Group for two decades.
WestBusiness has learned that the banks rebuffed an offer from the Government's Insurance Commission of WA in 2009, which is the lead funder in the case.
ICWA managing director Rod Whithear would not confirm the proposed settlement amount.
However, it was said by sources to be well under $1 billion, compared with the banks' current liability to pay the liquidator more than $2.7 billion. That amount stems from the syndicate's latest loss in a WA Court of Appeal case in August.
The syndicate is now seeking leave to appeal that decision in the High Court, in a case analysts have described as a last-ditch exercise in damage limitation.
If successful in having the case heard, the banks will argue they should not be liable for compound interest at higher commercial rates, which brings the total bill to more than $2.7 billion. They say they should pay about $700 million using a simple interest formula.
The irony that they may have been able to settle for even less will not be lost on WA taxpayers, who have waited for 20 years for a pay-off from the WA Inc era case.
While not confirming the fine details of the 2009 negotiations, Mr Whithear admitted ICWA had tried to resolve the impasse
"Despite not being a party to the litigation, and in light of more than $200 million being required by the liquidator to prove the claims against the banks, in 2009 the commission sought to bring the stakeholders together to settle all issues and end the liquidation," Mr Whithear said. "Despite garnering wide ranging support from creditors, the proposal failed and the litigation continued. It is now clear that the securities taken by the banks in 1990 are invalid and the banks must refund the money they took with interest."
He said ICWA would continue to support any "reasonable" settlement initiatives by the parties.
The High Court is not expected to hear the banks' application for special leave to appeal until February at the earliest. After the banks stripped Bell Group of its assets in 1991, nothing was left to pay other creditors and ICWA held $150 million in junk bonds. Bank representatives declined to comment.