The corporate regulator’s head of enforcement, deputy chairman Daniel Crennan QC, has resigned after it was revealed he received almost $70,000 in rental payments that may have exceeded public sector pay limits.
Concerns about the payments to Crennan, which were to help him relocate from Melbourne to Sydney, and $118,000 the Australian Securities and Investments Commission paid KPMG to give tax advice to the regulator’s chairman, James Shipton, were raised with treasurer Josh Frydenberg in a letter from the auditor general last week.
In a statement, Crennan said he had been intending to retire in July – a move that would have brought his time at Asic to three years.
“However, in the circumstances, I have decided that it is in the best interests of Asic for me to resign now,” Crennan said.
“I have therefore tendered my resignation to the treasurer with immediate effect.”
He said he would be available to “facilitate the orderly transfer of work to my successor”.
Crennan was the main driver of a new, tougher stance towards corporate wrongdoing developed by Asic after the banking royal commission revealed widespread misconduct in the financial sector, usually at the expense of customers.
The strategy, dubbed “why not litigate”, was designed to combat a widespread perception that Asic’s pursuit of wrongdoing lacked teeth and the regulator too often pursued settlements with the big end of town rather than taking the risk of going to court.
Crennan’s resignation will increase pressure on chairman James Shipton to follow. Shipton on Friday said he would “stand aside” while Treasury investigates the $118,000 paid to KPMG to advise him on tax.
The investigation, to be run by Vivienne Thom, a former inspector-general of intelligence and security, is expected to be finished by the end of the year.
Frydenberg overruled Asic by ordering an external inquiry, documents tabled in parliament on Monday show.
In a 16 October letter to Frydenberg, Shipton proposed setting up an investigation in consultation with Treasury and the Australian National Audit Office.
However, on Friday, Frydenberg wrote back to Shipton and said it was “more appropriate that the review be conducted under the supervision of the Treasury”.
The documents also show that Asic initially believed the payments to Shipton were exempt from public service pay rules under rules that allow commonwealth agencies to pay the relocation expenses of officers.
In a paper attached to Shipton’s 16 October letter to Frydenberg, Asic said it had legal advice supporting this position.
However, it also said it acknowledged that “the processes supporting the approval of expenses paid in relation to the chair’s relocation were inadequate”.
The response also shows that Shipton disputed some of the auditor general’s allegations about the work KPMG did for him.
He said that, contrary to the draft findings of the auditor general, Grant Hehir, KPMG did not prepare his Australian and US tax returns for the years 2017 and 2018.
Shipton said that “tax support had been offered to him previously and its nature and extent was determined by KPMG and Asic” and “KPMG consulted with Mr Shipton regarding his circumstances before KPMG suggested the services be provided”, Asic told Frydenberg in the letter.
“Mr Shipton also notes that he did not receive tax support from KPMG in relation to the 2016/17 Australian tax year,” Asic said.
Shipton became chair in 2018, joining the regulator from Harvard University, where he was executive director of the international financial system program at the university’s law school.
Before that he worked as a regulator in Hong Kong and for global investment bank Goldman Sachs.
Last week, he said he believed that he had “acted properly and appropriately in this matter”.
The opposition frontbencher Andrew Leigh said the Morrison government should have investigated Crennan’s pay much earlier.
“The Morrison government knew over a year ago that Daniel Crennan was paid more than the chief justice, something that should have put up a red flag immediately,” he said.
“This issue only came to light because of the auditor general, whose budget is being cut by the Morrison government.
“The treasurer has questions to answer about when he knew of the auditor general’s investigation, why he is taking over two months to inquire into the Shipton issue, and whether his cuts to the auditor general’s budget are aimed at deliberately stymieing investigations of this kind.”
Frydenberg said the government accepted Crennan’s resignation.
“The government thanks Mr Crennan for his service and the important work he has undertaken during his time as deputy chair,” he said.
In his statement, Crennan said he originally accepted the job at Asic on the understanding he would be based in Melbourne.
“In October 2018, I agreed to a request from the Asic chair that I move to Sydney because of the higher number of commissioners based in Melbourne,” he said.
“Asic agreed to pay me a relocation package which included a rental allowance.
“I was told the payment of this allowance was consistent with Asic policy.”
He said that in September and “early October” he was told about external advice over the payments and the concerns of the auditor general, Grant Hehir.
“I requested that Asic cease paying me the rental allowance,” he said.
“I also offered and agreed to repay the rental allowance Asic has paid to me.”