A former executive at AustralianSuper has accused top officials at the country’s largest superannuation fund of pressuring him to funnel investment into a union-linked property trust despite conflicts of interest.
The fund’s former head of property Jack McGougan made the accusations in a multi-million-dollar Federal Court action launched this week against AustralianSuper.
Mr McGougan claims he was forced out of his $500,000 a year job for opposing moves by chief investment officer Mark Delaney and director Brian Daley to invest in industry-fund controlled developer ISPT.
He alleges that when he raised concerns over the fund’s poor management of conflicts of interest in relation to ISPT AustralianSuper chief executive Ian Silk told him “you have to drop this”.
ISPT is an unlisted property fund and developer set up in 1994 by former ACTU assistant secretary Garry Weaven and co-founded by AustralianSuper.
The allegations thrust the $140 billion industry super fund into the spotlight just as the Hayne royal commission called on more than 30 superannuation funds to appear in hearings next month to examine governance issues.
Mr McGougan was made head of property in 2011 and drove a strategy to invest members’ funds in property offshore. He was given authority to buy and sell assets up to $200 million.
However, he says that from 2012, Mr Delaney, the fund’s CIO and deputy chief executive, and Mr Daley, AustralianSuper director and the capital stewardship officer for the Australian Council of Trade Unions, “pressured” him to invest in ISPT.
ISPT is an unlisted property fund and developer set up in 1994 by former ACTU assistant secretary Garry Weaven and co-founded by AustralianSuper. Its board includes senior current and former Construction, Forestry, Mining and Energy officials.
Both Mr Daley and Mr Delaney were also directors of ISPT during Mr McGougan’s time at AustralianSuper, with Mr Delaney only recently stepping down from the board.
Mr McGougan alleges in the Federal Court action that when he raised concerns over the fund’s poor management of conflicts of interest in relation to ISPT AustralianSuper chief executive Ian Silk told him “you have to drop this”.
However, despite a “standing conflict of interest declaration”, neither Mr Delany nor Mr Daley absented themselves from AustralianSuper’s investment committee decisions involving ISPT, according to court documents.
‘Not a team player’
From 2015, Mr McGougan started raising concerns over governance issues at the investment committee, including conflicts over investing in ISPT and other industry fund-owned collective investment vehicles.
In November 2016, he told the committee he wanted AustralianSuper to turn off its distribution reinvestment plan for the ISPT core fund.
AustralianSuper head of property Jack McGougan is seeking damages of $491,000, plus end of term bonus.
But a week later, Mr Delaney allegedly accused him of not being a “team player” and that he was planning a restructure that would see Mr McGougan report to the head of mid-risk assets Jason Peasley.
Mr McGougan complained the “demotion” was intended to stop him going to investment committee meetings and making recommendations over ISPT.
In a meeting with Mr Silk over his concerns in January 2017, Mr McGougan alleged Mr Delaney and Mr Daley were engaged in a “deliberate and concerted effort” to force him out for persistently raising concerns over conflicts of interest.
Mr Silk allegedly responded that “we want you back at AustralianSuper but you have to drop this”.
‘Offer of separation’ refused
Mr McGougan said he also made his complaints heard in a meeting with fund chairman Heather Ridout in October, where he accused Mr Daley of criticising the performance of the fund’s international property assets because Mr McGougan had refused to universally direct money to the “union controlled collective vehicle, ISPT”.
By March, AustralianSuper allegedly decided it was best Mr McGougan “separate” from the fund because he wasn’t “a team player”.
It allegedly made him an offer of separation but Mr McGougan refused it and was subsequently terminated.
McDonald Murholme lawyers, representing Mr McGougan, has alleged adverse action and breach of contract, and is seeking damages of $2.17 million, based on $544,215 annual salary for his four years to retirement, as well as end of year bonus at 80 per cent of his salary and compensation for humiliation, pain and suffering. It also wants $491,000 for breach of termination notice.
Fund governance is expected to be a major theme in the royal commission, specifically the legal obligation for directors to act solely in the best interests of members, not unions, employer groups or shareholders.