CBA backs its KKR due diligence

Despite allegations of misconduct against KKR, the private equity firm who acquired 55% of Colonial First State (CFS) from the Commonwealth Bank (CBA), the bank believes the partnership with KKR will bring significant benefits to its superannuation members. 

Answering a question on notice, CBA said it considered KKR as a future shareholder and the benefits KKR could offer CFS and its members were significant investments. 

The question from Labor’s Andrew Leigh pointed to: 

• The alleged misconduct relating to breach of fiduciary duties in its dealings with the public pension fund Kentucky Retirement System, currently before the courts in the United States; 
• Being charged by the US Securities and Exchange Commission with 'misallocating more than US$17 million ($21.93 million) in so-called "broken-deal" expenses to its flagship private equity funds in breach of its fiduciary duty' in 2015; and 
• Allegations of misconduct against KKR and a number of other large private equity firms, raised in an anti-trust lawsuit, settled in 2014.  

The answer from CBA said: “CBA believes the KKR partnership will bring significant member benefits through a commitment to invest in a range of transformation initiatives including: 

• A simplified product offering with competitive pricing and choice for members; 
• An improved service experience across multiple channels, including accelerated investment in digital channels; 
• Modernised technology system to deliver a market leading superannuation service to members; and 
• Better access to member education, support and self-service tools, to help Australians navigate the complexities of the superannuation and pension system”. 

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CBA also said it undertook its standard “buyer due diligence procedures” prior to the transaction including Anti-Bribery and Corruption, Know Your Customer/Anti-Money Laundering and Economic Trade and Sanctions checks. 

“The superannuation funds within Colonial First State are managed by a trustee with a majority independent board whose primary duty is to members of its fund. All super funds in Australia are strictly regulated under the Superannuation Industry (Supervision) Act.”