The following is an article from the Sydney Morning Herald on 27 January 2021. Please read the article and then answer the four (4) questions relating to the fraud affecting National Australia Bank.

Former NAB chief of staff sentenced to eight years' jail over kickback scheme

January 27, 2021 2.11pm

A former chief of staff to National Australia Bank CEOs will spend more than four years behind bars after fraudulently approving inflated invoices in return for kickbacks worth more than $5 million.

Between 2013 and 2017, Rosemary Rogers accepted payments from Human Group chief executive Helen Rosamond bankrolling lavish domestic and international holidays for herself and her extended family, along with the purchase and renovation of a holiday home, plus two boats and a luxury car.

She pleaded guilty last year to multiple charges of dishonestly obtaining financial advantage by deception and being an agent corruptly receiving a benefit.

In the NSW District Court on Wednesday, Rogers was sentenced to a maximum of eight years in jail, with a non-parole period of four years and nine months, after what acting Judge Paul Conlon described as a "particularly difficult sentencing exercise".

In sentencing, Judge Conlon ran through the details of 64 charges against her, including 27 counts of corruptly receiving a benefit, each of which carries a maximum sentence of seven years in prison, and which bore a total value of $5,540,600.

Rogers was able to commit the fraud in her role as chief of staff to former NAB bosses Andrew Thorburn and his predecessor Cameron Clyne, whereby she approved invoices from the Sydney-based events and human resources company Human Group without scrutiny from NAB.

The invoices were prepared by Ms Rosamond, whom Judge Conlon said had developed such a close relationship with Rogers that they would meet frequently for lunch despite living in Sydney and Melbourne respectively. In texts, the women used the phrases "bestie" and "sister from another mother" to refer to each other. They would also exchange gifts, including jewellery.

Then there were the bribes. Among them, a $1.5 million cheque went towards a $3.8 million luxury home in Williamstown, an upmarket suburb in Melbourne's inner-west. The funds from that cheque came from a $2.2 million invoice Rogers approved ostensibly for the on-boarding of former NSW premier Mike Baird, who joined the bank in 2017, six weeks after stepping down from his role as the state's top politician.

The court heard the actual cost of on-boarding Mr Baird was $60,000. Human Group "had nothing to do with the on-boarding of Mr Baird and the offender knew that," Judge Conlon said.

The judge said it was "absolutely staggering" that such fraudulent invoices "were not detected by some appropriate system for internal auditing by NAB".

All it took was for Human Group to submit invoices that were "devoid of detail" and "the offender would merely approve courtesy of her delegated authority," he said.

Instead of meaningful detail, the invoices would be assigned with often obscure project names. The $2.2 million invoice was labelled "Project Eagle", in reference to the code name given to Mr Baird during his recruitment process.

Payments covering holidays to the United States and Europe for Rogers and her extended family were labelled "Project USA" and "Project Europe", while a $4000 birthday celebration in Sydney was titled "Project Outlaw".

More than $620,000 was paid to Rogers for a holiday to the US with eight others - covering their flights and accommodation, chartering a private jet, luxury cruises and chauffeurs during stops in New York, Washington and Hawaii. During the Europe trip, Ms Rosamond covered more than $180,000 worth of expenses.

She also paid for a $46,000 boat in 2014, and later, in 2016, its $115,000 replacement - with the original boat traded in for $30,000.

A $172,000 BMW SUV was paid for, as was a $91,000 caravan.

It took a letter from an anonymous whistle-blower in December 2017 for NAB to discover and begin to pursue Rogers. In the meantime, Human Group had made more than $44 million out of its contract with the bank, which was its only client from 2015 onwards.

The court heard that while members of Rogers' family had reimbursed her for some of the US trip, she did not pass that money back to Human Group. The same occurred when Rogers' family paid her back for parts of other trips bankrolled by Ms Rosamond.

Judge Conlon said it was clear from Rogers' spending that it was indicative of "greed, personal gain and self-gratification".

But while he said Rogers' offending was above mid-range in its seriousness, he accepted her expressions of remorse "are indeed genuine" and found her good prior character and prospects for rehabilitation constituted exceptional circumstances.

NAB chief legal counsel Sharon Cook said the bank had assisted police throughout the investigation and is "pleased this part of the matter is now resolved".

Since becoming aware of the issue, NAB has "made changes to strengthen controls in our organisation, including changing delegations and introducing additional checks on expenses," she said. "We are taking court action to recover the proceeds of the alleged fraud."

Ms Rosamond will face atrial next year involving separate charges for her alleged involvement. Neither Mr Thorburn, Mr Clyne nor Mr Baird is accused of any wrongdoing.

Questions:

(a)From the information provided in the article, explain how the fraud actually worked

(b)Discuss what the fundamental control problem was at National Australia Bank

(c)Aside from the controls NAB is implementing, i.e., changing delegations and checks on expenses, suggest and describe two further controls to avoid this fraudulent situation happening again.

(d)For each suggested control in (c) above, indicate whether it is preventive, detective, and/or corrective in nature.