ASIC calls in former WiseTech directors to provide evidence

@Bear77 interesting progress on this issue.

It would appear in terms of what has been substantiated, that RW has allowed personal relationships with staff and supplier personnel to create conflicts of interest which he did not disclose. However, it appears that there is no evidence that he did anything against the financial interests of the company, nor is there any evidence of wrong doing towards the indviduals involved, despite the allegations that have been made, and which may yet be resolved through the Courts.

Apart from appearing to act as though certain comany rules on personal conduct, delegations/separation of responsiblities, and disclosures of conflicts of interest, did not apply to him, the big issue is that he was insufficiently candid with the Board in the early stages of the Review process. If my reading is correct, this led the Board to issue updates to the market that were not fully informed by everything known to RW - apparently because RW considered at the time (and again on my reading, continues to consider to this day), that these were personal matters and so he close not to be fully candid. Reasonably, these were red-lines for the Non-Execs, and in their positions, I'd probably have done the same.

RW acknowledges his role in shaping the company culture (and by implication, he must admit his conduct has harmed that culture, even though he does not say as much). But, as it stands today, the company does not appear to be taking any further sanctions against him. This seems pretty clear to me in that he was appointed Executive Chairman after the report came to light. (My earlier straw on this was titled "Ownership Trumps Governance"... and that seems to remain the case today.)

This whole debacle has exposed governance weaknesses: $WTC has been unable to properly govern and control its founder, former CEO and major shareholder. It raises the importance of completing the Board Renewal process, in order to comply with ASX listing Rule 12.7, and implementing enhanced controls.

Based on my understanding, while the ASX rules do not impose any mandatory timeframe for companies which, through a director resignation, fall out of compliance of Rule 12.7, the expectation is that $WTC comes back into compliance "as soon as is reasonably practicable". So, they need to find a new director willing to sign up knowing now what is in the Investigation Report. I would have thought a condition of such a Director signing up would be their satisfaction with the governance improvements to be implemented. In fact, if I was that Director, I'd want sight of the detailed changes in their final form, and make my contract conditional that the changes are adopted in full.

I agree with the various press statements that, were the Executive or Director involved here anyone other than the founder and largest shareholder with an almost unparalleled track record of value creation, they'd have been sent packing - certainly on these latest allegations of misleading the Board.

Furthermore, it appears that the "Shareholder Survey" has both called for goverance improvements while recognising RW's value to the company. So it sounds like key shareholders want him to stay. It will be interesting to see how many change their mind after today's revelations.

Personally, I think the whole series of events - both those disclosed and perhaps others that remain buried - make clear that RW's blind spot was a belief that somehow rules that normally apply to executives of public and even private companies, did not apply to him. And that he got away with this behaviour for many years,... until he didn't anymore.

But having said all that, he never did anything to harm the company.

But of course, he did harm it. The unique role of the CEO and Board is to set the culture of the company. And through his conduct historically and even during this investigation, he has demonstrably failed in that role. His statement points towards that recognition. However, he does not appear to be contrite. (Is that ego that prevents this?)

So where do I land as a shareholder of $WTC?

I believe that RW has been hugely chastened by this whole debacle. And he will now be much more careful about his personal conduct. He has had a long overdue schooling in what is acceptable and not acceptable in a publicly-listed company. And everyone in the company has been able to share in that "education program."

But ultimately, it appears that there is no evidence of wrong-doing (in terms of laws broken). That was my red line. And it appears that it has not been crossed, based on what we know today.

On the failure to instil a culture of good governance from the top, I believe redemption is possible. Unlike many corporate governance failures, in the case of RW and $WTC, those failures appear not to have led to any wrong doing (which has often been the case elsewhere.)

So provided $WTC puts the necessary improvements in place and gets on with executing its strategy, I am happy to remain a shareholder.(I will not be so forgiving if the execution does not pick up in FY26!)

It is inevitable that RW is going to have to account for this in his own words to shareholders (AGM?), and I have no doubt that he will. I will listen with great interest.

Ironically, $WTC is the gift that keeps on giving. Whether 1) a market over-reaction to a Short Report, 2) an over-reaction to temporary margin compression following acquisitions, 3) or now a governance debacle. It continues to offer opportunities for me to sell when I find it over-valued, only to be able to buy back when the SP is fallen very significantly, as it has again.

I don't mean to sound flippant about the goverance risk. To be crystal clear, I hold only 50% of the shares in $WTC than I otherwise would. My perception of risk has changed and it will take years for that to be fully undone. For many, it will be a step too far, and I understand that. However, for me, the thesis of "$WTC=Global Logistics-OS" remains robust and one that I believe will deliver outsized returns for many years to come.

Disc: Held in RL only

Good points there @mikebrisy and a great summary of the situation at WTC. I would only add that according to the media (specifically the AFR, as I haven't read any other media coverage of RW lately outside of the AFR), the four independent directors resigned over RW refusing to allow them to release (make public) the Herbert Smith Freehills and Seyfarth Shaw report / review of their investigations of the various allegations against RW. Presumably this included discussing publically or making any announcement regarding the content of that report or review.

If this is the case, the obvious step for independent directors who recognise and value their own corporate governance responsibilities to take was to resign from the Board, which is what they immediately did. My comment - or question really - is: How do we know that RW's actions did not impact the company directly if we don't get to read the review or get to hear from those who have read the review?

My only other comment would be that as long as those independent directors have not signed any confidentially agreements, they can presumably now discuss the findings of the review because they have all now quit the WTC Board. We know they're discussing the review with ASIC; I wonder what flows from that?

One more comment from me @mikebrisy - you said: "The unique role of the CEO and Board is to set the culture of the company. And through his conduct historically and even during this investigation, he has demonstrably failed in that role."

Agreed - and the reports of bullying and intimidation of WTC staff by RW are testament to that, which even extended to the Board members, with Christine Holman quitting the WTC Board in 2019 over (alledged) bullying and intimidation by RW.

No matter how succesful RW and Wisetech have been and how well he has steered WTC over the years in terms of company growth, he has not done a good job at all as CEO in terms of creating and sustaining a positive culture within the business; he has in fact fallen well short of what is expected by somebody in that role in an ASX50 company. You may be able to get away with that sort of behaviour in a private company, although you shouldn't, but it should certainly NOT be tolerated in a public company that is supposed to have that additional level of governance in place, the Board, and the relevant policy framework, backed up by ASX and ASIC rules and regulations (hence the ASIC interest in WTC currently).

By the way, I'm not arguing with @mikebrisy here, I'm agreeing with him, but hopefully giving some additional context to explain my own POV, which is similar but the main difference is that I have now decided not to hold WTC (or MIN) because of the lack of governance and the pattern of poor CEO/MD behaviour. For one thing you just can't trust White or Ellison now - they both knowingly and intentionally lied to their own Board, and were found out, and both seem to think they are above the rules that apply to everybody else. When you can't trust the guy or gal running the company, that's enough for me to stay on the sidelines.

Interesting perspectives @Bear77, and I'd like to make a few comments in response.

Director disclosures

Directors continue to be bound by their fiduciary duties, even after they've resigned. The investigation findings reported today reveal no evidence of wrong-doing by RW.

Failing to follow a company procedure, exceeding a delegated authority, or failing to report a conflict of interest need not pass the bar of wrong-doing. There is a lot of space between goverance shortcomings and wrong-doing (i.e., breaking a law or a regulatory non-compliance.) The independent investigators did not reach findings of wrong-doing. Even making incomplete disclosures to the Board is not wrong-doing, because in a legal sense, as far as I can tell, RW was not compelled to tell the truth, the whole truth and nothing but the truth. If that was the standard for every day public life, then I think all of our political class would permanently be in the dock!

Therefore, any further public disclosure by a former director might expose that individual to legal liability. Generally speaking, what is discussed within the boardroom is considered confidential, with the Board of Directors signing off on all onward communications. Any former director who chooses to make any additional disclosures beyond what the Board has approved would be putting themselves in legal jeopardy. (I am not a legally qualified person, but that is my layman's understanding.)

This is one reason why Boards have a Company Secretary, usually a legally qualified individual, who is responsible for recording what is discussed and agreed in the Board discussion, ensuring proper records are kept, and that the content of agreed Board communications are formally documented and auditable.

In addition, the investigating legal firm would most likely have made all recordings, notes, minutes and reports relating to the investigation legally privileged - which is a formal, higher level of protection from disclosure.

ASIC

The investigation by ASIC is a different matter altogether. Whether ASIC can get their hands on the complete report depends on whether it was prepared for the Board under Legal Professional Privilege (LPP). I'd fully expect that all of the Investigation notes, drafts and final report were stamped with "Legal Professional Privilege". In that case the Board and the Legal firm can refuse to disclose the full report or any evidence gathered under the investigation to ASIC.

It is my understanding that ASIC would need to go to court to get a Court Order to compel the Board or the legal firm to hand over the report or any evidence gathered via the investigation under legal privilege. The Court would need some reasonable grounds to grant such a Court Order. I don't know if there are any reasonable grounds here, as that's beyond me. However, it is not obvious there are.

So, in interviewing the former directors, these directors would likely have had to have taken advice on what they can disclose to ASIC and what information they have gained via their roles on the Board is subject to LPP. These will be important discussions, because ASIC has powers to compel the Directors to give evidence under oath. So, I imagine the Directors will be taking their lawyers along with them!

It is also not clear to me that any public interest is being served by ASIC pursuing this. What harm has been done? What loss has been suffered? What potential crime has been committed?

The only thing I can think of is whether RW was in possession of information material to the share price, which was not available to other shareholders, when he made one or more of his share selldowns last year. ASIC can probably pick through that simply by tracking the timeline of the investigations and RW share dealings.

"Reports of Bullying and Intimidation"

It is important to highlight that these are reports and allegations only. There have been no findings or establishment of fact of either. One person's bullying is another person's robust conversation. One person's intimidation is aother's due exercise of authority etc.

Insofar as such behavioural allegations were raised in the current round of matters being investigated, the independent investigators found no evidence to substantiate them. That much is clear.

Shareholders Getting to See the Report

I don't think we will. We have no business seeing the details of what is in the report. It is probably subject to LPP. Why? The report could well include detailed allegations from one party, that are not substantiated through the course of the investigation. Or they might provide details of personal behaviours or actions that have not bearing on issues relevant to the company. If these were shared indiscriminately, the Board might be exposed (rightly so) to a claim of spreading defammatory material.

I am perfectly content to see the findings on each matter as prepared by expert and indepedent counsel. I don't believe I have the right and I don't have any expectation to see any more.

My Own Disclaimer - I am not legally qualified. I am just drawing on my own experience of many years working with Executive Teams, Boards, and more laywers than I care to remember on confidential and privileged matters. Most of that experience is outside Australia, but generally, jurisdictions based on English law have more in common than is different. My point is that I am certain that a lot of effort, thought and professional advice has gone into every word that has been released. Of course, therein lies part of the problem in that this continues to be a massive distraction for the WTC Board, including RW, even though he is obviously recused from any of this and is hopefully freer to get on and run the company!

OK @mikebrisy Thanks for that thorough clarification. To be clear, in your opinion, did RW lie to his own Board, or was he just economical with the truth? It seems strange that he isn't required to tell them the whole truth.

I know this thread is about Wisetech, but would you agree that Chris Ellison lied to his own Board according to statements that the Board made? - such as in the MinRes-Update-on-corporate-governance,-leadership-succession-(4-Nov-2024).PDF - see excerpt below:

Conclusions in relation to Mr Ellison’s conduct Taking into account these broader allegations, as well as the matters noted above in relation to FEEHL, the Board has formed the view that:

• While he has co-operated with the current investigation, over the lifespan of the matters being investigated, on some matters, Mr Ellison has failed to be as forthcoming with the Board as he should have been.
• At times, Mr Ellison has not acted with integrity, which sits at the core of the Company's values.
• Mr Ellison has not fully appreciated the importance of transparent and timely disclosure of matters that could give rise to a potential or actual conflict of interest, in particular with respect to related party transactions.
• Mr Ellison has not placed sufficient separation between his personal interests and the interests of the Company as a whole.
• These matters have adversely impacted MinRes' reputation and called into question the confidence of its shareholders and other stakeholders in its leadership.

Although many of the events in focus are historical, the Board accepts and recognises the need for leadership accountability around these matters and to further enhance its governance processes.  

--- end of excerpt ---

You could say the same thing here that CE wasn't required to tell the whole truth and nothing but the truth all of the time, so therefore there has been no wrongdoing. Is that how you see it?

Actually @mikebrisy - I'll bring it back to Wisetech, in terms of no evidence of wrongdoing.

Source: From page 1 of today's Update-on-Board-Review.PDF

Firstly, the statement by the Board that I've pointed to with the green arrow suggests to me there has been wrongdoing, i.e. the conduct is not acceptable and must not be repeated. Next, the paragraph in the blue box indicates that three matters remain under investigation, and may involve potential legal procedings, and two of those three matters involve "Person A" who is the subject of item 4 and "Person B" who is the subject of item 5 in the Appendix.

Below, I've copied some parts of that appendix relating to Person A and Person B, both of whom refused to ("elected not to") participate in the WTC Board review so were not interviewed by HSF & Seyfarth (during their investigation that was commissioned by Wisetech), which may well be because their lawyers (Person A's and Person B's lawyers) advised them not to participate, possibly because they had either already initiated legal action against either WTC or RW (or both) or were/are considering doing so, and therefore had little to gain by participating in the WTC review and investigation.

The conflicts of interest findings in the red box and the finding in the orange box that RW did not have the authority to make that commercial arrangement as well as Wisetech never receiving anything substantial from that "supplier" strongly suggests to me that RW was funnelling some of WTC's cash to somebody who he was in - or had been in - a personal relationship with, without Wisetech receiving any benefit from that arrangement, despite Wisetech paying for it.

So this is the evidence that RW's action directly and adversely impacted Wisetech financially.

Of course, matters relating to Person 1 and Person 2 (items 4 & 5 in the appendix) are still ongoing investigations as detailed on page 1 of the announcement today (reproduced above) so more may come out of this yet, however, to me, the WTC Board, who are all friends and supporters of Richard White now, have already detailed what looks a lot like wrongdoing to me.

I would further point out that while they state above that they found no evidence that Mr. White obtained personal financial benefit from the arrangements with the supplier, they make no such claim about any non-financial benefits that Mr. White may have obtained. He didn't do it for no reason, and since Wisetech obtained no benefit from the arrangement, who did? - apart from the supplier?

And Richard's response to that was:

He doesn't even admit that he ripped Wisetech off with that contract with Person B, he instead summarises all the matters as being personal, and says he would have handled the contracting process differently with the benefit of hindsight.

You would expect that he would never enter into a contract on behalf of the company he was CEO of with a lover or former lover where the company never receives anything of material value from that person ("supplier") for the money that they are paying them.

I think that goes well beyond not strictly following a company policy.

Just my thoughts.

@Bear77 to clarify (and I was unclear), my test for passing the bar of "wrong-doing" in previous posts is breaking the law or a breaking a regulation. Not following a company procedure and not being fully candid with the Board falls below my threshhold.

To your earlier question, yes, it appears clear that RW lied to the Board. Knowingly making an "inaccurate statement" is lying in other words.

Possible motivations for the lies appear to be concealing matters RW considered to be personal, however, they might also include attempts to conceal non-compliances with company procedures on a conflict of interest, and quite possibly both. It is perhaps another case of the attempted cover-up being worse than the actual act.

So they are serious short-comings, certainly setting a bad example. For employees including Executives, such acts would normally be grounds for dismissal. All that can be true, without a crime being committed.

But - as is always the case in business - when sanctions for misconduct are considered, decision-makers take into account wider factors. The Board (ex-RW) has the discretion to do this. That is their job. Of course, they would not have the same discretion had crimes been committed.

The former Board were clearly divided on this point. Those (who for shorthand we can call "RW's Mates") found on balance they wanted to keep him in the driving seat. Those Non-Execs who left, considered a red-line had been crossed. To re-cap, based on what I know, if I was a Non-Exec, I would also have resigned, even though as a shareholder I follow a different path. But that's because the role of a Director is very different from the role of an Owner.

As to whether RW has "ripped $WTC off" in his dealing with Person B, your interpretation is supported by the findings, however, it does not necessarily follow. I think the findings are more murky and less clear on this count. The Independent Investigator will have gone as far as the facts reasonably supported.

So what have I concluded?

1. RW has not done anything to personally gain financially from his dishonesty
2. He may well have gained "non-financial benefits" from a non-compliant commercial relationship with the supplier, with whom he had a personal relatoinship that created a conflict of interest, and it seems likely that he did
3. It is unclear whether $WTC gained the intended benefit from the supplier (through RW or otherwsie), however, absence of evidence is not the same as evidence of absence.
4. He lied to the Board in an attempt to conceal aspects of the timing and/or nature of the relationship for one or more potential reasons.

On point 3. service dlivery is often intangible. For example, as a former business consultant, if I was asked to provide evidence of the value delivered to my clients as a result of specific contracts and to prove that the deliverables directly arose from my efforts, I have to be honest and say that in some cases, it would be hard to do that. I don't mean to be stubbornly blind to what appears to have gone on at $WTC. I am just being careful in the conclusions I am drawing.

In plain language, it seems likely that RW may well have exchanged an advantageous, non-compliant contract with the Supplier for "personal favours" from Person B. And if I am pressed, my sense is that this is more likely than not.

It appears obvious to me that RW now has a Board that, so far at least, have been highly accommodating of his behaviour. It would appear they have done that because

1) There is no evidence of legal or regulatory non-compliance; and

2) while there is evidence of procedural non-compliance and dishonesty, when weighed with the overall picture of shareholder interests and long-term value creation, the balance comes down on the side of retaining RW.

Every shareholder has to make their own decision when presented with the evidence. I've made mine.

On $MIN, I'll not fully answer your question about CE, because I haven't given that case the same depth of analysis and consideration as I have the case of $WTC, for the obvious reason that I am not a shareholder of $MIN and am currently not considering becoming one. In that case, from my limited understanding, CE lied to the Board about transactions leading to personal financial gain. I don't know enough to offer any thoughts about the legalities in that case, although clearly there was non-compliance in timely disclosures of income to the ATO, so I think we are dealing with a very different kettle of fish there.

Thanks for that @mikebrisy - I understand your position. I agree with most of what you've said there, and what I don't agree with is because we are interpreting a couple of things differently, which is fine; as you say, every shareholder (or potential shareholder) has to make their own decision when presented with the evidence, and I would extend that to interpreting the evidence also - we are not all going to arrive at the same conclusions.

I'll just make one final point and I'll leave it there (I promise) - you said this morning: It is unclear whether $WTC gained the intended benefit from the supplier (through RW or otherwise), however, absence of evidence is not the same as evidence of absence.

The wording used in their Appendix yesterday in relation to that was "Other than Mr White, WTC has not been provided with access to the material components of the work-product of the supplier at this time". (see below)

So they are not saying that there is an absence of evidence, they are saying that there is evidence of absence; there is evidence that supports Seyfarth Shaw's finding that Wisetech has not received what they paid for [5C(c)] under the terms of that contract that was arranged and entered into on behalf of Wisetech by their CEO at the time (RW) without involving anyone else within the company [5B(a)], the contract did not adequately protect WTC's interests [5C(b)], RW did not have the authority to arrange that contract [5C(d)], and Wisetech did not have visibility or control over what the contract was supposed to provide to Wisetech [5C(a)]. The key being that Wisetech has still not received or been given access to the material components of the work-products or intellectual property that a contract of this type is supposed to deliver for them. Evidence of Absence. And the contract is clearly not an ongoing contract now, so if they have NOT received anything substantial from the contract yet, and that's what they are telling us, they're not going to in the future either.

So, again, this is probably down to how I interpret that being different to how you interpret that, so I'll leave it there.

At least until the next update, seeing as there are three investigations that remain ongoing, including matters relating to Person B (the "supplier").

@Bear77 I don't think we actually disagree about what went on here, specifically with the Supplier/Person B.

I just don't think that at any time RW did anything that represented a material risk to $WTC or resulted in any measurable financial loss to the company.

Therefore, I am pleased that so far the response has not been disproportionate. Of course, the SP reaction has been, but I believe that will recover over time (and I aim to profit from that).

I'm also pretty confident that, in future, the Executive Chairman will be a role model of complying with the company's processes! Moreover, all employees will have learned valuable lessons of the personal price you might expect to pay if you fail to separate your personal and business affairs.

RW has delivered an unintended MasterClass in behavioural expectations at $WTC that will have been dissected over every watercooler and coffee machine conversation recent days. (Maybe he could record a training video for new employee inductions!)

More ESG pressure on WTC…

“AustralianSuper has sold its entire $580 million stake in WiseTech Global and accused the logistics software giant run by billionaire Richard White of failing to meet its expectations of proper corporate governance.” (AFR, 5.36pm 26/03/25). https://www.afr.com/technology/australiansuper-sells-580m-stake-in-wisetech-takes-swipe-at-board-20250326-p5lmqq

Not held.

what more bullish indicator do you need? i pointed out that industry funds may exit WTC in this thread somewhere. i have low regard for the industry funds' decision-making as a group. one project they all seem to have done is invest in huge DEI/ESG divisions that have sat around doing not much, all of a sudden, something to do, a reason for being!! You must realise this may not be the PM's or investment team's decision, this may be made for them (no admission of this of course). Im a holder but not much, and historically have not been a cheerleader of WTC, but this "forced" selling is getting my interest. All you need is a longer time frame and the biz to continue to deliver.

@Solvetheriddle I couldn’t agree more. ESG-exits explain the high volumes and price pressures of the last few weeks as you had indeed predicted.

Eventually business performance and outlook will become what matters, and RW will have a board that meets expectations of remaining major investors.

All assuming there are no major new developments as the remaining “matters” are closed out.

I remain a massive $WTC bull as I have been for the better part of 8 years. And with the SP once again significantly below my low case valuation point, the only question that remains open is when do I consider the governance concerns to have cleared sufficiently to be willing to plough back the 50% of my targeted position I have been holding back.

Interesting points at Solvetheriddle.

 One look at their some of these superannuation websites, board composition and as an example say “Hesta’s super with impact” marketing tells you all you need to know about the ASX investment opportunity awaiting.

 Invest in your future | HESTA Super Fund

In relation to governance, clearly the ladies at Hesta still have more work to do on the issue of gender diversity. I note there are still 4 males remaining on the 12 member Board. Their appropriate target I can only assume is zero

All excellent points here on ESG and governance

When I look at governance, I like to refer to the dreaded QAN (Qantas) as a base case on what should happen.

In QAN, a near complete cleanout occured with the removal of Alan Joyce. But here this has not happened yet.

Not only that, the "experts" on finX/fintwit/social media were calling Qantas clear short due to all the industrial relations issues going on, upcoming CAPEX issues, management uncertainty and potential ACCC action with airport slots and flight routes. And of course all the risks of running an airline (faulty planes, weather, oil,, maintenance etc)

All the ingredients to pile in.

Here WTC it's a bit uncertain due to RW not leaving. But the big plus is you don't get the risk of running an airline where you have a software platform which still sees customer demand.