National Australia Bank denies legal action against brokers

National Australia Bank (NAB) has denied reports that its is planning to take legal action against interdealer brokers BCG International and Icap for their roles in a foreign exchange trading scandal that was uncovered in January 2004. An NAB spokesman told RiskNews there is no such plan for legal action.

However, he said the bank will continue to press for compensation exceeding A$539 million ($402 million) from Icap and another broker as stated in letters of demand that were issued to them in September last year. Recent media reports claim that NAB is planning legal action against the two brokers if negotiations to recover the losses fall through.

The NAB spokesman also told RiskNews that of the A$539 million that it is seeking in compensation, A$360 million is attributed to the loss of expected profit resulting from disruption to foreign currency options trading services. The remaining A$179 million is attributed to capital expenses, legal fees and the cost of the investigation.

The bank arrived at these numbers following a forensic investigation – which took more than a year – as well as using evidence raised during enquires by the Australian Prudential Regulation Authority and PricewaterhouseCoopers.

A BGC spokesman said: "BGC doesn't accept it was responsible for the huge losses caused by the NAB traders and the documented failings of NAB management."

An Icap spokesman said the inter-dealer broker's position has not changed since last November when it issued a statement saying: "Neither Icap Group nor TFS-Icap accept any responsibility for these NAB FX trading losses and intend to vigirously context any claim which may be made against them in this matter."

An investigation conducted by the Australian Securities and Investment Commission in December 2004 found that the traders had put false information into NAB's accounting systems to falsely inflate the profits results of the foreign exchange options desk. The scandal prompted the resignation of Frank Cicutto, NAB’s chief executive at the time.

Last week, an Australian court found former NAB foreign exchange options trader Vince Ficarra and ex-chief dealer David Bullen guilty of all charges for their roles in unauthorised currency trades between September 2003 and January 2004. The pair pleaded not guilty.

Two others have been convicted for their involvement in the scandal. Luke Duffy, their former boss, was sentenced to 29 months in June 2005 and former trader Gianni Gray was sentenced to 16 months in April 2006.