A truck driver who told his managing director he “dribbled f-cking sh-t” has won an unfair dismissal case against his employer, after the Fair Work Commission decided his comments fitted with the workplace culture.

The decision differs from a similar case last year, which saw the commission reject an unfair dismissal bid by a swearing wharfie because it found his comments amounted to aggressive behaviour towards his colleagues.

John Smith was dismissed from his position as a truck driver for Tasmanian-based waste management company Aussie Waste Management in October last year, following three heated phone conversations with the managing director, Henrick Coombes.

Smith claimed he had experienced mechanical and fuel problems with a truck he was given to drive on that day, when Coombes sent him a text message advising him that he was taking longer on his round than usual.

Coombes then rang Smith on his mobile, although the exact content of the three conversations was disputed.

The commission heard in one of these phone calls, Smith told Coombes, “You dribble shit, you always dribble fucking shit.”

Smith was terminated for speaking to Coombes in an unacceptable manner and using bad language on October 3.

But Deputy President Nicole Wells found his dismissal for swearing was unfair, given any use of swearing must be considered in the context of the workplace.

“There is no doubt that workplaces are more robust in 2015, as they relate to the use of swearing, than they were in the 1940s,” said Wells.

Wells found Smith’s conduct had not amounted to misconduct, as it had not involved occupational violence, breaches of health and safety policies or regulations, fraud, stealing or intoxication in the workplace.

Smith’s compensation is yet to be determined as a hearing to determine the amount is still before the commission.

Employment lawyer and M+K Lawyers partner Andrew Douglas told SmartCompany when the commission is considering misconduct, it has to look at whether the conduct is common in the workplace.

“It is not misconduct if the conduct is common for the workplace,” says Douglas.

In regards to swearing, Douglas says the commission will consider if what was said was threatening, if it was heard by anyone else and if it could be seen as intimating and bullying,

Douglas says small business employers need to be aware of people within the business that may take offence to swearing, racist jokes or similarly offensive behaviour. He says these people may not openly show they have taken offence.

“The lesson for SMEs is there is actually no place for rude behaviour in the workplace,” he says.

“The real answer is leaders are the people who need to stop using bad language, introduce a discussion to stop the use of that language and build structures that say, this is not acceptable in our workplace.”

SmartCompany contacted Aussie Waste Management but the company was unable to comment as the legal matter was still ongoing.

The operator of a small New South Wales advertising business has been handed a 15-month jail sentence after scamming eight mining companies out of $124,500 for ads in magazines that didn’t exist.

Appearing in the Parramatta Local Court last week, Peter Noel Anthony Sorensen became the first person to be jailed for an offence under the Australian Consumer Law in New South Wales, after resurrecting a scam he was convicted of in October 2013.

At the time, Sorensen was fined $40,000 and ordered to pay $96,000 in compensation after he pleaded guilty to 32 charges of “asserting right for payment for unsolicited services” through a company called Commerce and Resource Productions.

Twenty-five charges related to Australian Consumer Law and seven charges were brought under the Fair Trading Act.

Sorensen had distributed hundreds of fake invoices to companies in the mining sector, asking for payment for advertisements in around 20 trade magazines that did not exist, including The National Mining Review, Australian Mining and Resource Journal and Australian Energy and Resources Journal.

According to New South Wales Fair Trading, the fake invoices carried a purported authorisation of an officer of the mining company and requested payment by electronic funds transfer.

If the payments were not made within 14 days, the accounts departments of the mining companies were contacted by a man who threatened the company with disclose and recovery actions if the bill was not paid.

More than 100 companies are estimated to have been caught in the scheme by the time New South Wales Fair Trading began to investigate.

But just five companies agreed to assist the prosecution, the rest were too embarrassed and keen to avoid any negative publicity. The five companies that did take part had been scammed out of close to $100,000, with one business handing over $59,629 to Sorenson’s company.

NSW Fair Trading commissioner Rod Stowe issued a public warning about the scheme in June, urging individuals and companies not to deal with Sorensen and his two companies.

But despite the order to repay his corporate victims – and only handing over $2200 in compensation – Sorensen was found to have resurrected the scheme in June last year, using a new business name, Mining & Resource Media, but the same Australian Business Number.

This time, he sent fake invoices to eight mining firms, seeking $124,500 for advertisements that he claimed appeared in magazines. Again, the magazines did not exist.

The NSW Minister for Fair Trading, Matthew Mason-Cox, said in a statement last week Sorensen’s jail sentence “sends a clear message to anyone who repeatedly flouts the system that they may end up behind bars”.

“In sentencing Mr Sorensen, the court took into account that he continued to scam businesses after being sentenced for his first offences, and he failed to pay a compensation order by the court,” Mason-Cox said.

“Businesses should always ask for proof of an advertisement before paying and check the invoice carefully, ensuring bills are from legitimate entities and payments are made for real service or products.”

Michael Schaper, deputy chair of the Australian Competition and Consumer Commission, told SmartCompany the consumer watchdog received just over 3500 reports of false billing scams in 2013, the last year for which the ACCC has statistics on scams.

Of the reports, around 12% resulted in losses of around $750,000.

“Although 3500 is not a huge number out of the 2.1 million small businesses in Australia … 12% means around 350-360 businesses still lost money,” Schaper says.

Schaper says he takes some heart in the fact that, although the number of reports of scams is growing, the proportion of reports that involved money lost declined from around 20% in 2012. And most of the reports the ACCC receives about scams are from business owners who want to warn others.

While not commenting on Sorensen’s case in particular, Schaper says most fake invoice scams involve unordered advertising, stationery and office suppliers and domain name registrations.

“They are the kind of things that slip through the net,” he says. “A small business owner may think, I might have ordered that stationery and they are busy, so they pay the bill.”

He says it is becoming increasingly easy for scammers to replicate legitimate invoices, with the majority of bills and financial transactions now sent to businesses online.

Schaper’s five tips for SMEs to guard against fake invoice scams:

1. Have a clear system for checking and paying invoices. “If a particular bill comes once a year, it’s a good idea to diarise it,” Schaper says. He also recommends having a standardised payment system and asking the same team to oversee the payment as it means they will become familiar with the payment cycle.

2. Limit who can approve payments. In an ideal situation, Schaper says a small business would have one person doing the paperwork and another checking the payments before they are made. It eliminates some of the pressure involved with receiving late payment notices, which are often paid without the proper checks.

3. Get to know the companies that bill you. Schaper recommends familiarising yourself with the companies that send you regular bills, even to the point of knowing what their email address and bank account details look like.

4. Verify, verify, verify. If you receive an invoice that looks like it is from a regular supplier but they are asking you to deposit the money into a new bank account, Schaper says it’s time to pick up the phone and have a conversation. If it’s a new supplier, search online to make sure their business address and phone numbers match up. And don’t simply reply to the email address you’ve received the invoice from – you might end up verifying the scammer’s details, not your supplier’s.

5. Invest in security software and keep it up to date. Schaper also recommends backing up your accounts system and records of past payments in case you are the subject of a ransom ware attack.

The Fair Work Commission has ruled a truck driver was unfairly dismissed by his employer, who was upset the employee contacted the Fair Work Ombudsman about his workplace rights.

Isaac Leef had worked for Riordan Grain Services as a full-time driver since October 2009. The company stores, packs, transports and trades grain, fertilisers, malt and other commodities.

Jim Riordan, managing director of Riordan Grain Services, told the Fair Work Commission he made a decision to sell two of the company’s older trucks in June 2014 in a bid to reduce operating costs and free-up working capital in the face of a downturn in the market.

The truck Leef drove was one of the two to be sold and Riordan said he advised Leef to take six weeks’ leave, telling him he could return to work if the company decided to purchase another truck. But after reviewing the business, Riordan said he decided to make Leef redundant in August.

Leef argued he was forced to take the six weeks’ annual leave and believed his decision to contact the Fair Work Ombudsman about his rights under the Road Transport (Long Distance Operations) Award 2010, as well as occupational health and safety issues in the workplace, was the real reason he was fired.

In particular, Leef referred to a phone call in which Riordan allegedly said if a hearing with the Fair Work Ombudsman goes ahead, his “future with Riordan is over”.  The employer chose not to cross-examine Leef on this evidence and therefore the commission accepted the conversation took place.

While Fair Work Commission deputy president Greg Smith found Riordan Grain Services did face “commercial considerations which warranted the selling of a prime mover and as a consequence of this, creating a reduction in the workforce”, Smith said there was “clear irritation” on Jim Riordan’s behalf that Leef had contacted the ombudsman.

Smith ruled Leef’s termination was harsh, unjust and unreasonable, also taking into account his good performance record and the lack of consultation with Leef about alternatives to redundancy.

A hearing to determine whether Leef should be reinstated or compensated is scheduled for March 5. Jim Riordan declined to comment when contacted by SmartCompany as the case is still before the commission.

Andrew Douglas, workplace relations principal at M+K Lawyers, told SmartCompany Riordan Grain Services “can thank its life the employee didn’t bring an adverse action claim”, which is triggered when an employer takes an adverse action against an employee because of a workplace right.

While Douglas says an application for unfair dismissal was the quickest determination to assist Leef, it’s likely an adverse action claim would have resulted in a higher level of remuneration if successful.

And Douglas believes an adverse action claim from Leef would have succeeded in light of his contact with the Fair Work Ombudsman and his concerns about OH&S, as the “reverse onus of proof on the employer would have been fatal”.

“The employer was quite fortunate in a way as the application was at the lowest level of risk and costs,” he says.

However, Douglas says this case was primarily decided on the obligation under all employment awards and agreements for employers to consult with employees around significant change to the business.

“If a decision is made by a business that could lead to termination or shifting employees, it triggers an obligation to consult with employees and in some cases, the union as well,” he says.

“That didn’t occur in this case.”

“For SMEs, the lesson is incredibly simple. If you are looking at redundancies, it is likely to trigger the consultative requirements of significant change and redundancy shouldn’t be seen as a quick way of getting rid of a troublesome employee,” Douglas says.

“The second thing is if an employee raises a workplace right, you need to be acutely aware that triggers a number of responsibilities under the Fair Work Act. Employers must be careful to document reasons [for the termination] that don’t include that workplace right and be seen to be fair.”

“If you don’t do that, you are opening yourself up to unknown litigation and costs.”

An Adelaide pizza shop owner, who was caught by police with $11,000 in cash inside a wallet and a Rolex watch, has been sentenced for money laundering.

Pantaleo Capoccia had previously pleaded guilty to dealing with money reasonably suspected of being the proceeds of crime after he was arrested in February last year as he boarded a flight to Sydney carrying flashy signs of his wealth, according to the Adelaide Advertiser.

A police search of his home later uncovered a further $94,950, as well evidence Capoccia had splashed out on Louis Vuitton products and French champagne.

Capoccia was yesterday sentenced to 15 months’ jail time, but South Australian District Court judge Jack Costello suspended the sentence upon Capoccia entering a $500 good behaviour bond. The judge also required the 25-year-old be under the supervision of a probation officer for 18 months.

Capoccia started his pizza shop business in the eastern suburbs of Adelaide after being awarded a $470,000 payout for a car accident in 2010, according to the reports.

In his sentencing, Judge Costello said there was a need for strong and effective laws for the confiscation of proceeds of crime was clear.

“The purpose of such laws is to discourage and deter crime by reducing profits, to prevent crime by diminishing the capacity of offenders to finance future criminal activities, and to remedy the unjust enrichment of criminals who profit at society’s expense,” said the judge.

Gary Gill, head of forensic accounting at KPMG, told SmartCompany the restaurant industry has been “well known” for having the potential to money launder.

“A number of businesses where cash is involved have a high risk of money laundering,” says Gill.

Gill says financial institutions have a number of checks and balances in place to alert authorities about suspicious amounts of cash and other assets.

“Before someone can open an account with a financial institution, they must go through a lengthy know-your-customer process,” he says.

Gill says banks and other financial institutions monitor transactions and have reporting requirements for any suspicious dealings, which they will alert to authorities such as Austrac, the Australian Transaction Reports and Analysis Centre. Austrac is alerted about any cash transaction that exceeds $10,000.

Brett Warfield, chief executive of forensic accounting firm Warfield & Associates, agrees Austrac and the Australian Taxation Office are likely to be the first to be tipped off about money laundering.

“The ATO is a big source of intelligence [for money laundering]. Often people are worried about the ATO because they know if they come in and go through books, they’ll be caught,” says Warfield.

“Of course a whistle-blower is also a good source of initial source of correspondence for police,” he says, pointing out a tip off from someone with a motive against the money launderer is often their undoing.

“If someone is jealous of you, you’re in trouble.”

The Australian Competition and Consumer Commission has called on the Federal Court to hand Coles a penalty of over $5 million for misleading consumers over the freshness of its bread products, with independent supermarkets calling for an even bigger fine.

In June 2013, the ACCC commenced proceedings in the Federal Court against Coles, alleging the supermarket giant had engaged in false, misleading and deceptive conduct in regards to various Cuisine Royale and Coles Bakery branded bread products.

The ACCC claims Coles promoted its bread as "Baked Today, Sold Today" and "Freshly Baked In-Store" when the bread was actually partially baked and frozen in Ireland then transported to Coles stores and "finished" in store.

In September last year, Coles was slapped with a three-year ban on advertising its bread as being freshly baked.

In the latest twist in the case, Fairfax reports the ACCC called for a penalty of at least $4 million to $5 million over the Australian consumer law breaches during a penalty hearing in the Federal Court this week.

According to the report, Coles’ legal counsel responded by arguing against the idea it should be handed a large penalty because it is a large company.

But Jos de Bruin, chief executive of independent supermarkets association Master Grocers Australia, told SmartCompany a $5 million penalty is not enough for a major retailer such as Coles.

“For a multi-billion dollar company like Coles, it’s just a little slap on the wrist,” says de Bruin.

“They’ll most likely pay the fine because they know their reputation is worth far more than $5 million and so they’ll probably just pay the fine to get the legal action over with.”

While SmartCompany contacted a spokesperson from Coles, he would not comment on the matter citing ongoing legal proceedings.

However, in a statement issued at the start of proceedings, Coles said it would vigorously defend against the accusations.

“In talking to customers about the ‘par-baked’ bread range we certainly never set out to deliberately mislead anybody but we completely accept that we could have done a better job in explaining how the products are baked,” Coles said at the time.

A spokesperson for the ACCC told SmartCompany the watchdog would not comment until the judgment on penalties is made.

While not speaking directly about the case at hand, Small Business Minister Bruce Billson told SmartCompany “the government has provided more than $80 million in extra resources to the ACCC to ensure a competitive environment”.

“And that includes taking very seriously providence and quality claims so consumers aren’t ripped off,” Billson says. 

Small Business Minister Bruce Billson is calling on Coles and Woolworths, as well as Aldi and Metcash, to sign up to a supermarket supply code of conduct that is set to be enacted later this week.

Billson’s calls come after the Australian Competition and Consumer Commission took legal action against Coles in October of last year, alleging the supermarket giant engaged in unconscionable conduct against its suppliers.

The supermarket giant was accused of trying to broker deals with suppliers for “profit gaps” on a supplier’s goods, being the difference between the amount of profit Coles had wanted to make on those goods and the amount it had achieved.

Coles was also accused of trying to make suppliers pay Coles, both retrospectively and prospectively, for amounts it claimed as “waste” on a supplier’s goods which occurred after Coles had accepted the goods. Coles agreed to pay a $10 million penalty to resolve its ongoing court battles with the ACCC in December.

Against this background, Coles and Woolworths have joined with the Australian Food and Grocery Council in negotiating a voluntary code of conduct with the federal government.

In its final form, the code of conduct will seek to regulate standards of conduct in the supply chain, while building trust and cooperation between supermarkets and suppliers. It includes a dispute arbitration process and a full evaluation of its performance and effectiveness will be carried out in three years.

Bruce Billson told SmartCompany he hopes to see full industry participation, including from Coles, Woolworths, Aldi and Metcash.

“This is a significant and substantial step forward in ensuring egregious and unwelcome conduct in grocery supply arrangements isn’t repeated into the future,” Billson says.

“After a fully-engaged process of consultation, the code is finalised and good to go. It’s an opportunity for supermarkets to opt in, and once they opt in, it’s binding and overseen by the ACCC.”

“The regulation enactment process will be completed this week, and I urge [the major supermarket chains] to sign up at the earliest opportunity.”

Jos de Bruin, chief executive of independent supermarkets association Master Grocers Australia, told SmartCompany the code is between suppliers and large stores, and therefore independent supermarkets won’t directly be a party to it.

“However, we’ve been concerned about anti-competitive pricing pressure Coles and Woolworths have been applying to extract the maximum possible discount from suppliers,” de Bruin says.

“My belief is that if the code is not enforced, then it’s not worth the paper it’s written on. And likewise, if the big supermarkets can just opt in and opt out when they like, it’s not going to make much of a difference.”

According to de Bruin, smaller retailers and suppliers have limited access to the market. Meanwhile, Coles and Woolworths are penetrating further into rural and regional areas, putting more pressure on local retailers and suppliers.

“For suppliers, one decision to not go ahead with a promotion or not carry a product can put them out of business. That’s something we shouldn’t see in this country,” he says.

Coles declined to provide a comment about the code, while no response was received from Woolworths prior to publication.

Following last week’s release of a draft “three strikes” scheme by Australian ISP and telecommunications industry body Communications Alliance, the issue of online copyright infringement is again up for debate.

The draft proposal was prepared at the request of Attorney General George Brandis and Minister for Communications Malcolm Turnbull. The government has set a deadline of April 8 for ISPs and copyright owners to agree to the content of the graduated response, failing which the government has threatened to implement its own scheme.

The draft scheme is not a final agreed position with copyright owners, with some significant matters yet to be resolved between stakeholders.

How would the scheme operate?

Under the proposal, ISPs would send escalating copyright notices to customers detected by copyright owners as engaging in online copyright infringement. Based on past litigation in overseas jurisdictions, it’s likely copyright owners will focus their enforcement efforts on users participating in peer-to-peer file sharing.

The set of escalating notices, named “education”, “warning” and “final” notices, would advise subscribers that their IP address may have been used to infringe copyright. The education notices would provide links to a copyright information website detailing ways of accessing authorised content, avoiding copyright infringement online, and ensuring that subscribers’ Wi-Fi connections are secure from unauthorised access and use. The scheme would apply only to sufficiently large residential fixed internet ISPs, and would not apply to mobile internet users nor business subscribers (such as coffee shops which provide Wi-Fi internet access to customers).

The system includes some safeguards, including an independent audit and certification scheme. If a subscriber believes a notice has been sent in error they can challenge it in writing before an independent adjudication panel.

If within any 12-month period a subscriber is detected infringing copyright on three separate occasions and receives an education, warning and final notice their IP address will be included on a “final notice list”. Copyright owners participating in the three strikes scheme will be able to request that list of IP addresses and may lodge an Application at the Federal Court to obtain the identity and contact details of the subscribers on the list from their ISP. If such an application is lodged the ISP must act reasonably to assist and facilitate it, and if it is successful the ISP must comply with a final court order to disclose the account details to the copyright owner. With the subscribers name and contract details the copyright owner will be in a better position to either proceed in a copyright infringement lawsuit against them, or seek to settle the dispute.

If no final notice is sent to a user within 12 months from the date of receipt of the initial education notice, then the scheme resets, and the total number of infringement allegations against a user reverts to zero. Some reports have suggested this reset feature will permit Australian users to download infringing material twice a year with minimal risk of copyright litigation, by downloading material until they have received an education and warning notice and then stopping until the 12 month period is over. But the three strikes scheme does not change the general rights and remedies of copyright owners, who may attempt to commence litigation regardless of whether or not copyright notices have been sent in relation to a particular act of infringement. The scheme only makes it easier for copyright owners to obtain the names of alleged copyright infringers by requiring ISPs to co-operate in court actions to obtain subscriber details.

Indeed, the release of the draft scheme occurred in the same week as several Australian ISPs appeared in an Australian Federal Court resisting an application by the copyright holder of the film Dallas Buyers Club to obtain the customer data over 4,000 internet users allegedly detected torrenting the film. ISPs are concerned film owners might follow a trend from overseas jurisdictions and send letters demanding excessive and speculative damages from the subscribers. In the United States, lawyers for the copyright owner of Dallas Buyers Club have sought US$5,000 from each person alleged to have shared the film through a peer-to-peer network.

How does the scheme compare internationally?

Other countries have considered or implemented similar three-strikes or graduated response schemes. Some of these schemes have been implemented by government (including a scheme in New Zealand and one in France which has since been discontinued), whereas others have been negotiated directly between copyright owners and ISPs and implemented voluntarily (including US and UK schemes).

The proposal by the Communications Alliance is more limited than those contemplated in other jurisdictions: under the current proposal ISPs will not disclose the identity or contact details of their account holders at any stage of the scheme “unless there is a court order or written permission from the account holder expressly authorising such disclosure of personal information”, whereas other schemes permit the disclosure of subscribers’ names without this safeguard.

The focus of the proposed notices is educative, and ISPs are not required to take punitive steps towards their customers such as bandwidth shaping, play-penning or internet disconnection, which are features of other countries’ schemes. Such an approach may be favoured by Australian creators who, accordingly to Professor Melissa de Zwart, tend to prefer educating consumers that “infringement [is] not in fact a victimless act” rather than suing end users for infringement.

While copyright owners claim that such three strike schemes are successful at copyright reducing infringement (for example, pointing to a 16% reduction in peer-to-peer file sharing use after the introduction of the New Zealand scheme), others are more sceptical. Monash University academic Dr Rebecca Giblin has argued in a recent paper that “[t]here is no evidence demonstrating a causal connection between graduated response and reduced infringement”. There has also been international concern that graduated response schemes which cut off internet access raise freedom of expression issues and are generally not proportionate.

Who will pay?

It should be noted however that a number of areas of disagreement still exist between rights holders and ISPs over the proposal, including the way that the scheme will be funded. This is a significant remaining area of dispute as the costs of such systems can be very high. In the UK copyright owners have reportedly agreed to pay up to £750,000 to each ISP as a set-up fee, and up to £75,000 annually for ongoing administrative costs, reflecting the significant costs involved in establishing and operating graduated response schemes. In circumstances where the effectiveness of such schemes have been called into question, the prospect of such costs being passed on to consumers (either indirectly by copyright owners or ISPs) is a matter of concern.

Still, while there remains the possibility of changes before the 8 April deadline, the graduated response scheme as drafted is significantly less burdensome on Australian internet users than might have been expected. Whether such a scheme with a predominately educative focus is capable of changing the behaviour of Australian copyright infringers remains to be seen.

This post is an edited version of a blog post written by the author for a UK intellectual property blog, The IP Kat. This article was originally published on The Conversation. Read the original article.

Pet food manufacturer Nestle Purina PetCare is facing a class action lawsuit in the United States over allegations one its dog food products has killed thousands of dogs.

Frank Lucido, a California man whose English bulldog died in January after allegedly eating Purina’s Beneful dry kibble dog food, has filed a lawsuit against the company and is now seeking class action status for the litigation.

The suit, which was filed in San Francisco, claims Beneful contains substances that are toxic to animals and that have resulted in the serious illness and death of thousands of dogs.

Beneful dry dog food is available to purchase within Australia through a range of different retailers, including Woolworths.

Lucido claims Beneful was responsible for making three of his dogs sick, alleging a vet’s post mortem of his dead bulldog revealed signs of internal bleeding in the dog’s stomach and lesions on his liver. He claims his two other dogs, a German Shepherd and Labrador, are still sick.

Lucido is seeking unspecified damages and restitution, but claims he is not the only one whose dog has fallen victim to the pet food.

“In the past four years, consumers have made more than 3000 online complaints about dogs becoming ill, in many cases very seriously ill, and/or dying after eating Beneful,” according to the lawsuit.

“The dogs show consistent symptoms, including stomach and related internal bleeding, liver malfunction or failure, vomiting, diarrhoea, dehydration, weight loss, seizures, bloat, and kidney failure.”

The Facebook page of Purina, a company owned by multinational conglomerate Nestle, has since been hit with a flood of comments and further allegations. Many have posted pictures of their dogs, claiming they died after eating Beneful.

“This beautiful, sweet girl was my dog who I loved very much, who for no apparent reason one day in June woke up vomiting and spent the next few hours throwing up, that night she passed away,” reads one comment by Michigan woman Kim Seegraves.

“Up until that day she was perfectly fine, I had recently switched her to beneful food due to finances at the time. I replayed that day over and over again, what did I miss? What didn't I see?” Seegraves continues, saying the recent lawsuit led to her revelation.

“Now I know what I missed, I was unknowingly poisoning my dog! She was only 8 years old. I hope you have severe consequence for your poor judgment. I sure did for trusting your product.”

Marketing expert Michelle Gamble, from Marketing Angels, told SmartCompany the issue had “gone beyond” merely replying to Facebook posts.

“It’s a runaway train,” says Gamble.

“This type of thing is something that could destroy an entire brand, so they have to be very careful what they say right now.”

Purina issued a statement in response to the lawsuit – which it linked to on its Facebook page – saying the claims were baseless and the company intends to vigorously defend itself and the brand. It said there were “no quality issues with Beneful."

"Beneful had two previous class action suits filed in recent years with similar baseless allegations, and both were dismissed by the courts," said Purina.

SmartCompany contacted Purina Australia but the company did not respond to requests for comment or information about the Australian-sold products prior to publication.

Gamble says Purina’s statement clearly shows the company is working off legal advice and is likely going through due processes to test and investigate the products.

She says small businesses facing similar issue should seek legal advice as priority.

“I don’t think they can do anything to recover if there is evidence dogs have died,” she says.

“At that point, it's not a question for marketers.”

The business run by the family of deceased trucking magnate Allan Scott has been hit by a $7.1 million fraud allegedly perpetrated by two employees.

Transport business K&S Corporation notified the market of the fraud in its half yearly results statement to the Australian Securities Exchange yesterday.

Read more: Australian businesses have lost $373 million to fraud

The fraud follows a $22 million fraud which was perpetrated by the former financial controller of K&S, Craig Telford, over a decade ago.

Telford was sentenced to jail for 14 years after admitting to 60 fraud offences driven by his gambling obsession. 

Rich Lister Scott died in 2008 at the age of 85 with an estimated fortune of $350 million. However, his family continues to run the business he founded. 

In the statement to the ASX, K&S says the fraud spans a seven-year period from 2007 to 2014 and $400,000 of the fraud occurred in this financial year. 

K&S has a “comprehensive” crime insurance policy and the fraud was uncovered in a preliminary report by forensic accounting firm McGrathNicol.

As a result of the report K&S has commenced the process of recovering from its insurer.

“Victoria Police have arrested and charged two former employees and their investigations are continuing,” the statement says.

SmartCompanycontacted K&S, which was unable to provide further details of how the fraud occurred at this stage.

A spokesperson for K&S says the latest fraud is unrelated to Telford’s $22 million fraud.

Brett Warfield, forensic accounting specialist and chief executive of Warfield & Associates, told SmartCompany there are four steps businesses can take to protect themselves from crime. 

1. Supervision

“One of the main things is to have an effective process of supervision so you have people checking other people’s work,” he says.

“It doesn’t matter what level they are in an organisation. Often these things happen through false invoicing or collusion.” 

2. Internal audit

Warfield also recommends a robust internal audit process.

“The internal auditors need to get around to all the parts of a business on a regular basis and conduct independent reviews,” he says.

3. Whistleblowing policy

“You need to have an effective whistleblowing policy that is implemented across the whole business so staff, contractors and suppliers can contact the company if they see anything unethical,” Warfield says.

4. Crime insurance policy

Warfield says like K&S he advises businesses to have a crime insurance policy.

“It is likely that K&S will get a lot of that back under the policy,” he says.

“It is important as if you don’t have a crime policy a large fraud could cripple a smaller business.”   

The Federal Court has dismissed the Australian Competition and Consumer Commission’s allegations that pharmaceutical giant Pfizer misused its market power and engaged in exclusive dealings in relation to the supply of cholesterol-lowering medication Lipitor.

The ACCC had alleged Pfizer offered pharmacies significant discounts and rebates on the sale Lipitor if they acquired a minimum volume of up to 12 months’ supply of Pfizer’s generic atorvastatin product.

But Justice Flick dismissed the watchdog’s case, finding that while Pfizer had taken advantage of its market power, its market power was no longer “substantial” at the time the offers were made in January 2012.

“The ACCC brought this case because it raised important public interest issues regarding the conduct of a patent holder nearing the expiry of that patent and what constitutes permissible competitive conduct,” ACCC Chairman Rod Sims said in statement.

“The ACCC will carefully consider the judgment.”

King & Wood Mallesons partner Caroline Coops told SmartCompany the decision will have a broader impact on competition law.

“The judgment will be of interest to patent holders and others in the pharmaceutical industry, as it applies competition law to defensive conduct engaged in by a patentee when a patent is due to expire,” Coops says.

Qantas posts $203 million profit

Qantas Airways appears to have pulled off a successful turnaround of its fortunes, announcing a $206 million profit after tax for the first half of the year.

The result is the best performance by the airline since 2010.

Qantas last year revealed an underlying loss before tax of $646 million and a statutory loss after tax of $2.8 billion for the full 2013-14 financial year.

Chief executive Alan Joyce said in a statement the boost in profits was down to the successful implementation of the Qantas Transformation Program, which included cost cutting in several areas of the airline’s service. Low fuel prices and the axing of the carbon tax are also believed to have boosted the airline’s bottom line.

The results led to a jump in Qantas shares this morning, which were trading at $2.95 at the time of publication.

Shares down on open

Aussie shares have traded lower this morning, off the back of modest gains on Wall Street overnight.

According to Tristan K’Nell, local investors have been focused on the “sea of company reports” released this morning. However, K’Nell says lower-than-expected fourth quarter Capex data has also been a cause for some caution in the market.

“Private capital expenditure date [came in ] well below expectations, [with] fourth quarter Capax coming in at -2.2$ versus expectations of -1.6%,” K’Nell said in a statement. “The Australian dollar dropped off the back of the data.”

“This is a very important piece of data and does give the RBA further ammunition to cut rates again next Tuesday. The data added to other negative elements such as growing unemployment, low wage growth, low inflation, ending mining cycle and slowing trading partners.”

The S&P/ASX200 benchmark was down 27.3 points to 5917.6 points at 12.11pm AEDT. On Wednesday, the Dow Jones closed 15.38 points higher, up 0.08% to 18224.6 points.

With the struggle by law enforcement agencies to keep pace with new technologies has come calls by the agencies for additional investigatory powers.

The call for communications service providers to retain two years of their customers’ metadata is simply the latest round in this debate. While much of the current discussion has centred on consumer data and policing agencies, the proposal also covers the communications of businesses, and the Australian Securities and Investments Commission (ASIC) is one of the agencies seeking access.

Analysing two years’ retained metadata about your communications would give any law enforcement agency enormous insight into your life and, potentially, leverage over you. Using the data they could easily identify completely legal but otherwise embarrassing confidential events in your life, such as whether you have, for example, had an affair, an abortion, called a suicide help-line, a brothel or alcoholics anonymous.

Having the power to analyse two years’ retained metadata about a business’ communications creates different risks: for example, knowing whether the senior executives of a listed company are talking often with a bankruptcy advisory firm or an investment bank’s mergers/acquisitions team could create enormously valuable trading opportunities prior to the release of that information to investors and the general public.

The benefits of granting additional powers designed to increase the efficiency of law enforcement agencies need to be balanced against a range of risks, including the need to protect civil liberties and the possibility of unintended consequences.

What ASIC wants

The government’s current plan for data retention law includes provisions which would limit which law enforcement agencies could gain warrantless access to the retained metadata. In its submission to the Parliamentary Joint Committee for Intelligence and Security Inquiry into Data Retention, ASIC argued the proposed Bill would reduce its existing powers to access telecommunications data and stored communications for the purposes of investigating white collar criminal activities, such as insider trading, market manipulation and financial services fraud.

Over the last five years, ASIC has secured convictions against 129 people for serious offences under the Corporations Act (including sentences of more than 13 years’ incarceration in some instances) and 2404 people for less serious offences, though it did not specify how many of these convictions depended upon evidence gained from metadata.

ASIC currently has access to telecommunications data under sections 178-179 of the Telecommunications Interception Act. It claims it has used that information in over 80% of its insider trading investigations, including in the Lucas Kamay (NAB) and Christopher Hill (ABS) case.

ASIC uses a variety of techniques to investigate white collar crimes, including data analytics of trading patterns. It also receives reports of suspicious trading activities from industry participants and the general public.

Metadata is particularly useful for ASIC when seeking to identify potential suspects (and their accomplices) and their methods/patterns of communication, so that further surveillance of ongoing behaviour can be undertaken. While metadata itself does not definitively prove the identity of who was talking on a particular phone, typing a text message or sitting behind a keyboard, it can suggest who was most likely to have been doing those things (i.e. in many cases, the registered owner of the account). The actual identities of the participants can then be confirmed through follow-up surveillance.

Metadata can provide information on the methods that two or more people are using to communicate (whether by landline, mobile phone, SMS, Skype, etc). It can also provide a rich history of both patterns of communication (which devices are in contact with which other devices, when and how often) and interruptions to such patterns of communication, such as ceasing to communicate by mobile phone or changing phone SIMs, which could indicate the suspects believe they are under surveillance.

In some trials, evidence of the timing of communications can be critically important. For example, when NAB trader Lukas Kamay received confidential information from Christopher Hill about yet-to-be-released Australian Bureau of Statistics’ data, Kamay was able to profit by placing leveraged foreign exchange trades on the value of the Australian dollar. ASIC only became aware of this activity after it was tipped off by Kamay’s forex brokerage firm, Pepperstone Financial, and while access to metadata played a small part in the investigation, it was traditional surveillance which resulted in the convictions of Kamay and Hill.

Access to retained metadata would grant ASIC the ability to search the history of patterns of conduct between suspects, such as whether they were repeatedly communicating and trading just prior to the announcement of market-sensitive information, even in situations where ASIC only became aware of the possibility of illegal activities well after they had actually occurred. It may also assist them to identify additional co-conspirators.

A new honeypot?

To be able to undertake such analysis, ASIC would need metadata to be retained from businesses as well as from individuals. Under the Bill, such metadata would be stored by communications providers, such as mobile phone companies and ISPs. This poses a risk for some businesses as their communications metadata contains highly valuable confidential information.

In its drive to increase the effectiveness of its fight against white collar crimes, it is possible ASIC and the government may unintentionally increase the risk of such crimes occurring while also making them harder to detect.

Communications service providers forced by the proposed legislation to store metadata are likely to provide security sufficient to protect against unauthorised access based upon the risk profile of their average customer, rather than for their most-at-risk customers. This raises the possibility of third parties seeking to gain unauthorised access to businesses’ financially sensitive information through their retained metadata, whether third party hackers using zero-day exploits, or trusted public servants (like Hill) looking to supplement their government pay cheques.

Insider trading and market manipulation may become harder to detect because third party hackers will no longer need to directly attack listed companies and their advisers, but instead could indirectly gain information by attacking metadata repositories. If a communications service provider pooled all of its customers’ metadata into a single database, then this may represent the equivalent of an inadequately secured goldmine for white collar criminals.

We should not rush to implement a system of metadata retention before all of the costs and benefits of such a proposal are fully considered.

This article was originally published on The Conversation. Read the original article.

A small business in Melbourne is being forced to shut down after a long-running dispute with the local council over the location of its compost bin.

Brothl – Melbourne’s first waste-free café – has been served an eviction notice because it refused to pay the City of Melbourne $12,500 to store its compost bin in the laneway adjacent to the business.

The business was set up in 2012 with the aim of creating a sustainable café. Last year it changed its name from Silo to Brothl and began to specialise in serving soup using bones and cuts of meat left over from high-end restaurants.

Café owner Joost Bakker told SmartCompany his business’s compost machine has been stored outside for two years. However, a recent crackdown from the local council saw the council trying to get him to accept liability for the compost bin and pay a $12,500 fee to keep it in the laneway.

He refused on the grounds the compost bin took up as much room as a wheelie bin and the council was in fact saving money because the café did not use one.

“The contract was so open ended that it made me liable for unknown costs associated with the cage, including the council’s cost, and I just couldn’t do that,” he says.

“It came to a head in January this year when the council said they were taking us to VCAT and then my lease had to be renewed. I just thought, ‘could I deal with this for another three years?’ So we made the decision to close.”

Bakker says the cafe will close its doors next Saturday (March 7). However, he is “really proud” of what the business has been able to achieve in its three years of operation.

“You should be rewarded for not having a truck that turns up to your business to collect rubbish,” he says.

“If this becomes mainstream in Melbourne it would benefit the whole city – the biggest complaint from residents is smelly bins from hospitality businesses. I’m hoping what is going on at the moment will change the processes that council make people do.”

Bakker will be taking a break from entrepreneurship after the café closes. However, he says this won’t be the last Melbourne will see of him.

“I can’t stop coming up with new ideas and trialling new things,” he says.

“So I think we’ll be back with something bigger and better in the future.”

Peter Strong, executive director of the Council of Small Business Australia, told SmartCompany it was disappointing to see a small business having to close its doors.

“What the local council is doing is destroying a person’s life potentially,” Strong says.

“You get some councils that are really small business friendly, but then you get some others where it’s their way or the high way and they really don’t get small business.”

“$10,000 in the run of things is not a lot of money for the council – but for this bloke it’s an awful amount of money.”

Strong says small businesses often “bend over backwards” to overcome red tape and he would encourage any Victorian businesses that have a dispute with their local council to take the matter to the Small Business Commissioner.

“I’m interested to know if he [the café owner] saw the small business commissioner in Victoria,” Strong says.

“If they haven’t, then they really should be going there and talking to him.”

Red tape is a constant battle for small businesses across Australia. Last month a takeaway shop in Adelaide was threatened with a $20,000 fine for a flashing “open” sign that had been displayed in the shop’s window for the past 13 years.

At the time, independent senator Nick Xenophon described the incident as “bureaucratic madness and mindless red tape”.

In a statement, a spokesperson for the City of Melbourne told SmartCompany the council had been working “for some years” with the operators of the restaurant in question to install a dehydrator located on a laneway adjacent to its premises.

“A planning permit was issued for the dehydrator which included a condition requiring an agreement covering the occupation of the lane and ensuring that the restaurant was responsible for any liabilities that might arise from its operation,” the spokesperson said.

“Two years later, that condition has still not been complied with. If there has been an eviction notice issued, as claimed in the media, it has not come from council.”

*This article was amended on February 27, 2015 at 3.57 AEDT to add comment from the City of Melbourne.

The Federal Court has found Etihad Stadium was justified in sacking its former commercial officer for using free tickets to concerts at the venue “like currency” to pay for a range of personal items.

The court’s full bench yesterday ruled the stadium had fairly dismissed senior executive Nicholas Sautner, throwing out a previous decision made by the County Court that awarded him more than $150,000 in a redundancy payout from the Melbourne venue.

The full bench found Sautner had used his fringe benefits “like currency”, trading concert tickets for items including new locks on his house, a new car battery, “mates rates” for repair work to his house, “family and friends” rates for a gym membership, vouchers for Bunnings and flowers.

Tickets to the concert of pop star Lady Gaga were the most popular, according to Fairfax.

The five judges found while Melbourne Stadiums Limited (MSL), owner of Etihad Stadium, had made the tickets available for “personal use”, they were not intended to provide supplementary income to staff.

“While tickets allocated to staff for ‘personal use’ could undoubtedly be given to friends, family and acquaintances as the staff member saw fit, it is inconceivable that [Etihad] contemplated that by ‘personal use’ a staff member would treat the tickets as the equivalent of cash and use them to barter for goods and services from third parties,” said the judgment.

The court also found Sautner had made “disparaging, disrespectful and derogatory comments” about the chief executive of Melbourne Stadiums Limited and had taken photographs of him asleep after a work function without his consent.

The judges ruled Etihad does not have to pay Sautner any redundancy payout or the costs of the appeal of the former judgment.

Fraud expert Brett Warfield of Warfield and Associates told SmartCompany payments in kind and contra benefits such as free tickets were very common in many industries and can be difficult for companies to monitor.

“A pool of tickets that are intended for promotional or marketing purposes are a bit difficult [to monitor] because they are freebies and give-aways anyway,” Warfield says.

“The bigger the company the more difficult it can be.”

Warfield says the distribution of such freebies should not be left up to a single person’s discretion and a company should have internal processes that allow the benefit system to be audited.

“A registry should be set up as to where they go, so there can be an internal audit,” he says.

Warfield also warns SMEs about the dangers of gift vouchers, which he says he has seen many clients run into trouble with.

“You really need to have strong internal controls about how gift vouchers are issued and who they are issued to, to make sure they are not abused,” says Warfield, recommending a numbering system be put in place to track all outgoing and incoming vouchers.

A Qantas pilot who massaged the breast of a female co-worker while intoxicated has lost his unfair dismissal bid in the Fair Work Commission.

Steven Gregory had worked for the airline for nearly 20 years when he was dismissed for serious misconduct in February last year.

On February 8, 2014, Gregory was the first officer on a Qantas flight from Sydney to Santiago, Chile, alongside three other crew members including one woman, who was named in court documents as “S/O x”.

Upon arrival in Santiago, the crew was put up at the Intercontinental Hotel for a two-night stopover before the return flight to Sydney on February 10.

On the evening of the 8th, the four crew members went out for dinner and ended up at an Irish pub. During the time at the pub, Gregory separated from the other crew members and disappeared for around half an hour.

Shortly after he returned, the other crew members noticed a significant change in Gregory’s demeanour and behaviour, alleging he had become rowdy, uninhibited and unintelligible, and had even attempted to grab the bottom of one young woman at the pub.

Deciding his behaviour was making them uncomfortable; the three crew members told the commission they decided to take Gregory back to the hotel. On the way to the hotel in the taxi, Gregory allegedly massaged the left breast of S/O x, despite her leaning forward and twisting around in an attempt to put herself beyond his reach.

The next morning, the flight’s captain decided to stand down Gregory so that he would not form part of the flight crew for the return trip the next day. Gregory was remorseful and apologetic, and claimed his drink had been spiked while he was away from the group for the half hour period.

On return to Australia, Gregory submitted to a drug test where it was found he had cannabinoids (the chemical compound contained in cannabis) in his system. After the completion of an investigation, he was terminated with five weeks’ pay in lieu of notice.

Gregory maintained his actions were a result of his drink being spiked, but Commissioner Ian Cambridge found Gregory was not an innocent victim of drink spiking.

“The significantly more plausible proposition which is most strongly supported by the totality of the evidence is that the applicant separated from his colleagues as a deliberate act in the pursuit of imbibing cannabis, or a cannabis derivative, or some other substance,” said the commissioner.

“Whatever may have been the precise reason for his elevated level of intoxication, the applicant took a decision which had clear risk attached to it,” he added.

“Unfortunately for the applicant that risk was realised and therefore personal culpability for his subsequent sexual harassment misconduct must follow.”

Commissioner Cambridge found Gregory’s long-standing unblemished employment record did not diminish the serious nature of the misconduct.

Employment lawyer and M+K Lawyers partner Andrew Douglas told SmartCompany an employer can stand down an employee for serious misconduct for two reasons.

“The first is when the nature of the conduct is so serious that it requires the person to be stood down for the matter to be investigated, however it is highly likely a termination will be the end result,” says Douglas.

“The second is when there is any reasonable belief that allowing the person to attend work will affect the result of the investigation,” he adds pointing to possible issues of the employee tampering with evidence or intimidating witnesses.

Douglas says in this case, Gregory’s conduct was clearly very serious and Qantas has a responsibility to provide a safe workplace for the victim of the sexual harassment.

He also says the case serves as a reminder to employers that the definition of a workplace is expanding.

“It’s worth reminding workers and employers, where a worker is specifically required to stay somewhere between work which is paid for by the employer, is probably going to be seen as a workplace.”

A spokesperson for Qantas told SmartCompany the incident shows the airline has a zero tolerance approach when its standards of conduct are breached in this way.

“All of our employees are made aware of our standards of conduct, which outline that employees are expected to behave in a professional manner and treat other employees with respect,” sais the Qantas spokesperson.

“These standards are reinforced regularly,” they added.

A Bakers Delight franchisee in New South Wales has signed an enforceable undertaking with the Fair Work Ombudsman after an audit of its stores found it had underpaid 26 employees nearly $40,000.

The latest action by the Fair Work Ombudsman follows a string of similar cases by bakery chains short-changing staff. In January last year, Breadtop made an agreement with Fair Work Ombudsman to ensure its 800 plus employees are receiving their full entitlements.

This was followed in September by Tasmanian bakery Daci & Daci Bakers that back-paid staff almost $80,000 after an FWO investigation found it had failed to pay its employees the correct rates. The FWO has also started legal proceedings against the owner of Harold’s Glass and Hardware and the adjacent Rhythm & Vines café claiming an employee was paid just employee just $1.35 an hour.

In the latest investigation, the FWO assessed time and wage records for employees for the period between January 2, 2014, and February 5, 2014, for the Bakers Delight stores in Bateau Bay and Wyong in regional New South Wales. The franchisee was a company called JCMA Pty Ltd at the time of the investigation.

The investigation found 26 employees were underpaid a total of $39,626.20, with the franchisee failing to comply with a number of conditions set out in the relevant award, the General Retail Industry Award of 2010.

Award conditions not met included the apprentice base rate of pay, Saturday ordinary rate of pay, Sunday rate of pay, public holiday rate of pay, early morning shift allowance, Saturday shift allowance and Sunday shift allowance.

The individual underpayments ranged from $104 to $3672, with three staff underpaid by more than $3000, four by more than $2000 and seven by more than $1000.

Following the investigation, the franchisee signed an enforceable undertaking with the Ombudsman on December 17, giving it 14 days to rectify the underpayments and provide evidence of payment.

The undertaking also required the franchisee to provide written details of the systems and processes it has implemented to the FWO within 28 days, and to sign up to the FWO’s My Account portal.

Bakers Delight spokesperson Michelle O'Farrell told SmartCompany Bakers Delight has been in touch with both the franchisee and FWO in order to rectify the situation.

“We are working with FWO to ensure this is remedied and systems have been put in place to rectify the situation. We do regret and apologise sincerely to the employees who have been affected by this,” O'Farrell says.

In a statement, a Fair Work Ombudsman spokesperson told SmartCompany enforceable undertakings were introduced by legislation in 2009. FWO has been using them to achieve strong outcomes against companies that breach workplace laws without the need for civil court proceedings.

“We use enforceable undertakings where we have formed a view that a breach of the law has occurred, but where the employer has acknowledged this and accepted responsibility and agreed to co-operate and fix the problem,” the spokesperson says.

“The Fair Work Ombudsman has a variety of tools available to assist bakeries and small businesses who may be unsure of their obligations. Online tools are available at [the FWO website] including PayCheck Plus, which determines the correct award and minimum wages for employees, templates for pay slips and time-and-wages records and a range of Best Practice Guides.”

The spokesperson also says it is common practice for the FWO to consult with industry stakeholders, such as Bakers Delight, when undertaking education and compliance campaigns.

“In this particular circumstance, the Bakers Delight franchisor was one of the key stakeholders consulted on the recent Victorian retail bakeries campaign,” the spokesperson says.

“The Fair Work Ombudsman is very keen to work with industry organisations and large franchisors as part of its efforts to build a culture of compliance with federal workplace laws. You will find a number of large franchisors who have signed Proactive Compliance Deeds (PCDs) with us on our website.”

The latest investigation comes after the FWO randomly audited 81 bakeries across Victoria, with Bakers Delight consulted as one of the key stakeholders.

That investigation found only 63% of bakeries were fully compliant with their record-keeping and pay-slip obligations and only 53% were paying their employees correctly.

SmartCompany contacted both Bakers Delight outlets but received no response.

The consumer watchdog has instituted proceedings in the Federal Court against best-selling property investment author Rick Otton and his business We Buy Houses for alleged breaches of the Australian Consumer Law.

Otton is the author of How to Buy a House for a Dollar, which was rated as one of the Top 10 Most Popular Business Titles for 2013 by Money Magazine and Dymocks.

The Australian Competition and Consumer Commission claims Otton made representations to consumers that by attending seminars and boot camps they would be able to buy a house for $1; buy a house using little or none of their own money; and build property portfolios without their own money invested and without new bank loans.

The seminars and boot camps range in cost from $2997 to approximately $17,000 for a mentoring program. 

The ACCC claims the strategies do not enable consumers to buy a house for $1 but rather involve consumers acting as middlemen to facilitate property transactions between third party sellers and third party buyers.

The alleged representations were made in a number of mediums since at least  January 1, 2011 including in published materials, on websites and during various events such as seminars and “boot camps”.

Otton is travelling so was unable to answer SmartCompany’s questions but provided a statement defending his business and book.

“It seems that the ACCC thinks that the public are fools, that they will take the title literally and think that they only need a dollar to buy a house,” he said.

“It’s a sad day when the ACCC thinks the Australian public is that foolish that they don’t understand that the dollar is just the start of the process.”

Otton claims the expression is often used in business that you can buy a business for $1, that is, for the value of the debt owed by the business.

Otton says the We Buy Houses “technique” involves buying a property where the loan repayments on a house are creating hardship for the owner, and the loan amount is so high that the owner cannot sell the house for enough money to pay out the loan.

“Why wouldn’t the owner welcome someone new who can step in, agree to buy the house and pay out the loan down the track?” he says.

“The ACCC is taking a literal interpretation of the title, it’s like saying the book Fifty Shades of Grey is misleading because it’s not about paint colours, or that David Niven’s memoirs, The Moon’s a Balloon, isn’t about the moon.”

ACCC chairman Rod Sims said in a statement that the watchdog is concerned the strategies promoted by We Buy Houses and Otton “target vulnerable consumers who don’t qualify for bank loans or who are having difficulties meeting their mortgage repayments”.

Otton came under scrutiny in 2013 when his seminars in Western Australia were banned by the Department of Commerce on the basis of misleading advertising. 

The matter is listed for a directions hearing in Sydney on April 1, 2015.

Insurance giant Allianz Australia has been caught up in the collapse of payday lender The Cash Store, agreeing voluntarily to refund $400,016 in insurance premiums to consumers after the payday lender was found to have acted unconscionably in selling Allianz insurance products.

The Cash Store was placed into administration on September 16 2013, with Bentleys Corporate Recovery appointed as administrators. The company had over 60 stores, and was one of the largest businesses of its kind in Australia at the time of its collapse.

In September last year, the Federal Court ruled The Cash Store and an associated entity called Assistive Finance Australia breached consumer credit laws and acted unconscionably when selling insurance products.

Earlier this year, the court handed down a record $18.97 million fine, the largest civil penalty ever obtained by ASIC.

Judge Jennifer Davies found between August 14, 2010 and March 16, 2012, The Cash Store engaged in unconscionable conduct contrary to s 12CB of the ASIC Act in connection with the sale of consumer credit insurance (CCI).

The policies included cover for death and dismemberment, disablement due to accidental bodily injury, cancer, heart attack or stroke, involuntary unemployment and catastrophic illness. The period covered by CCI ranged from one to 36 days with a median term of 13 days.

In total, The Cash Store sold CCI to 182,838 customers for a total of $2,278,404 in premiums for cover. From this, 43 claims were paid to consumers, totalling only $25,118.

SmartCompany understands that of that total, $400,016 was through an agent that resold Allianz products, with the balance made up of the products from another insurance company.

The agent had allegedly told Allianz it was terminating its relationship with the insurance giant in July 2010. Despite this, from October 2012, the agent resold the insurance giant’s products through The Cash Store without its knowledge.

ASIC is still pursuing legal action against the agent.

In the decision, Judge Davies was scathing of The Cash Store and said the insurance policies were “very unlikely to be of any use to” the company’s customers.

“I accept ASIC’s submission that CCI was unlikely to be of any use to customers for a payday loan and certainly useless for those who were unemployed, a fact that must have been known to [The Cash Store],” Judge Davies said.

“[The Cash Store] collected over $2 million from customers in insurance premiums during the period when it sold CCI and paid out claims worth about $25,000. Sales of CCI by [The Cash Store] are characterised by moral obloquy and the opprobrium of unconscionability.”

Allianz ‎Australia’s general manager of corporate affairs, Nicholas Scofield, told SmartCompany he is disappointed with how ASIC presented his company’s involvement in the case in its official press release on the matter.

“Allianz is extremely disappointed in the way ASIC has chosen to present how Allianz was unknowingly embroiled in the unconscionable selling of consumer credit insurance (CCI) policies in its name through The Cash Store, which was done without Allianz's knowledge or agreement,” Scofield says.

“The CCI policies sold through The Cash Store were designed and distributed outside of the authority granted to our agent and without Allianz being made aware that was being done.”

“The selling of those CCI insurance policies through The Cash Store commenced three months after Allianz had accepted a 1 July 2010 Notice of Termination from its agent and continued for a few months after that relationship actually ceased on December 31, 2010.”

“When ASIC first raised the issue with Allianz in October 2014, we launched an immediate investigation, which confirmed that the policies had been sold though The Cash Store without Allianz’s knowledge or agreement.”

“Although Allianz received only a small part of the insurance premiums collected by The Cash Store, Allianz promptly decided to make payments to affected customers of all premiums paid by them plus interest.”

In a statement, an ASIC spokesperson told SmartCompany businesses, including small businesses, that are arranging or providing credit and offer add-on products, need to consider whether those products provide value to consumers.

“Especially where the cost of the product is inflated by high commissions (potentially driving down the benefits to consumers) they need to have robust compliance and supervision arrangements  to ensure they are not engaging in unconscionable conduct, and at risk of action by ASIC,” the spokesperson says.

Consumer Action Law Centre senior policy officer David Leermakers told SmartCompany a common theme in a lot of his organisation’s casework is consumers saying they didn’t realise they had been sold an add-on insurance product.

“Even in this case, there was some evidence that people within The Cash Store were being trained to add the cover automatically instead of presenting it as an add on,” he says.

According to Leermakers, aside from payday lenders, such product slamming is also a common practice among door-to-door salespeople and in car yards.

Another common complaint, where a consumer is aware they are taking on an insurance product is being added on, is that they are left unsure of the cost or what it covers. In some cases, it is presented by salespeople as being a complementary part of a package rather than an additional cost.

“My advice for small businesses is before you sell [an insurance] product, if you really believe in it, make sure you explain it to the consumer so they know what it is and what it costs,” Leermakers says.

Scandals involving Australia’s financial advice sector and the regulation of it have continued into another month, the latest chapter of which has involved NAB’s financial advice division.

But this is not the first time NAB has attracted attention for its behaviour and the oversight of it.

There was the time when the Australian Investments and Securities Commission (ASIC) allowed NAB to review and massage ASIC’s own media statement about NAB malfeasance.

And the controversy when it was discovered senior lawyers from NAB had been allowed into ASIC, to work, observe, and no doubt given the chance, to advise, caution and warn. Followed by ASIC stating, on the record, that no NAB lawyers were allowed to infiltrate and contaminate its policy development branch. Only to be made fools of by their own evidence, that in fact NAB lawyers were present and working in the policy formulation space at ASIC.

Only when the problems at NAB were revealed was the public informed NAB had sacked 37 senior advisers for “failing to meet standards”.

ASIC captured?

ASIC’s remit is to enforce proper market conduct and ensure consumer protection. ASIC has failed to do this, seemingly working to accommodate the perpetrators of consumer abuse – banks - at the expense of their victims – bank customers. ASIC’s documented failings are now so numerous that it can be argued, I think compellingly, that this is part of a pattern of “regulatory capture”.

Regulatory capture gave rise to the market misconduct and consumer abuse that was rampant in the United States, in the lead-up to the sub-prime disaster. The sub-prime industry was the one that gave us those market misconduct gems: “low-doc”, “no-doc”, “LIAR” and “NINJA” loans. The sub-prime disaster then metastasised into the global financial crisis, the repercussions of which are still being felt.

We have our own troubled crop here in Australia, sowed by bad seeds, that have left the financial advice industry bereft of credibility, and in crisis. When failed ethics were not profitable enough, financial advisers committed outright forgery. And when whistleblowers told ASIC, it did nothing. In fact, only when these scandals were reported on by Fairfax journalist Adele Ferguson, did ASIC start to take serious steps. This is regulatory capture preceding regulatory forbearance.

Why does all of this matter? Because good financial advice is vital for the efficient allocation of savings into the most deserving investments, which in turn is the best way to ensure economic growth and the prosperity of Australia and its people. This industry is too much in the national interest not to function properly. And if need be it must be protected from itself.

Actions stemming from parliamentary oversight – calls for a Royal Commission - have been neutered, and fallen prey to party politics. The Senate’s report into ASIC and Commonwealth and Macquarie ran to over 600 pages. It came down strongly in favour of a Royal Commission. The dissenting opinion ran to six pages – 1% of the report. It was the dissenting view that the Abbott government adopted, when it declined to appoint a Royal Commission.

Fixing the problem

One potential solution to this Gordian Knot – an enfeebled, suborned and possibly collusory regulator, answerable to a legislature crippled in its responses by party politics – is the proposal by the Financial System Inquiry for the establishment of a Financial Regulator Assessment Board (FRAB).

A similar body - the Financial Policy Committee - was established in the UK, in response to the disastrous failings of the UK’s financial regulators. Is it a success? It’s too early to tell.

The FRAB would be a council of the wise, not connected to ASIC (or APRA – the FRAB would cover both), and whose job it would be to evaluate ASIC’s and APRA’s performance, and make recommendations for improvements. The beauty of the proposal is that the board, not beholden to government, would evaluate the performance of the two regulators, and offer ongoing guidance as to where they fall short.

The FSI report states:

“The Assessment Board should have a diverse membership to avoid being unduly influenced by a particular group; … and suggesting that the Board be supported by a separate secretariat within Treasury. A diverse membership would also help ensure a balance of views and deal with potential conflicts involving individual members.”

Such a board, operating at arms length from the major protagonists, wouldn’t fall within their zone of influence or intimidation. It would be capable of steering, in this case ASIC, into confrontation with the industries it regulates, if confrontation is needed – as surely with hindsight, it was.

Most of the details in the proposal are sketchy. There will be pushback from the industry and, as suggestions have it, there already is from both regulators. But if that pressure can be resisted, then the government could clean up the cleaners, and in the process remove responsibility to an independent board of oversight. And if that is achieved, there is a better chance of ensuring the efficient functioning of this vital part of the economy.

What is pretty much assured is that an ongoing system of “watching the watchers” has a strong potential to improve what we have now. The Brits recognise this, we should too. Certainly, it couldn’t make things any worse.

This article was originally published on The Conversation. Read the original article.

The Nurofen products in question (Image: ACCC)

The consumer watchdog has launched legal action against pharmaceutical giant Reckitt Benckiser Australia over its Nurofen Specific Pain Products, alleging the packaging of its four “identical” pain products is misleading.

The Australian Competition and Consumer Commission alleges claims made on the packaging of Nurofen products that each product targets a specific type of pain are misleading because each pain reliever actually contains the same active ingredient, ibuprofen lysine 342mg.

The ACCC alleges Nurofen Specific Pain Product packaging appears to claim each product is designed and formulated to treat a particular type of pain; has specific efficacy in treating a particular type of pain; and solely treats a particular type of pain.

The four products in question – Nurofen Back Pain, Nurofen Period Pain, Nurofen Migraine Pain and Nurofen Tension Headache – have all been approved by the Australian Register of Therapeutic Goods as being suitable for treating a wide variety of pain types.

The retail price of the Nurofen Specific Pain Products is significantly more than comparable pain relieving products, including Nurofen’s standard pain relievers, according to the watchdog.

“Recent price sampling conducted by the ACCC revealed that these products are being sold at retail prices around double that of Nurofen’s standard ibuprofen products and standard products of its competitors,” said ACCC chairman Rod Sims in a statement.

The ACCC is seeking declarations, injunctions, an order for the publication of corrective notices, penalties and costs from Reckitt Benckiser. The international conglomerate, based in the UK, also owns brands including Durex condoms, Dettol and Strepsils.  

Rohan Harris, principal at Russell Kennedy Lawyers, told SmartCompany any company that makes a claim on its packaging needs to be able to substantiate it, even if it is comparing the products against other products in its own portfolio.

“Generally speaking, if you are going to make claim that your product is more superior and specialised, you have to be able to substantiate it,” says Harris.

“If you make a health or scientific claim about a product, you need some sort of medical or scientific evidence.”

Harris says the ACCC has new powers to issue substantiation notices to compel a business to provide evidence for any claims they make about their products.

“If you make a claim, you have to be prepared to produce evidence and be ready to back up that claim,” he adds.

A Melbourne woman has been awarded more than $4000 by the Fair Work Commission after being unfairly dismissed from a company that specialises in renting out adult entertainment buses.

Diana Menabue, an administration assistant at V Bus in Altona, was sacked after she cancelled a booking for an end-of-school trip for high school students in years seven and nine in December 2013.

The company has buses fitted with pole-dancing poles and adult imagery and signage. The school’s teacher originally asked for two “normal buses” and four “party buses”, thinking the party buses were fitted with balloons.

However, when Menabue called to confirm the booking the teacher was horrified to learn that the buses she had ordered were for adult entertainment and usually booked for bucks parties and hen’s nights.

The booking was subsequently cancelled, and when this came to the attention of the business owner he claimed Menabue had “just cost me $6000” and she needed to “get that job back”.

Menabue was then handed a letter of termination a short time after with one sentence which said “this services as a notice to terminate your employment as of 5th December 2013”. The company argued, however, that the termination occurred because Menabue was attempting to sabotage the business by cancelling bookings. 

According to the Small Business Fair Dismissal Code, it is fair for an employer to dismiss an employee without notice or warning when the employer reasonably believes the employee’s conduct was “sufficiently serious” to justify a dismissal.

However, Fair Work Commissioner Nick Wilson said in his ruling that he was not satisfied there was a valid reason for the woman’s dismissal, labelling it “harsh, unjust and unreasonable”.

“The evidence is clear that the employer, through its directors, Mr Wang and Ms Liu, held a belief at the time of Ms Menabue’s dismissal that her conduct was sufficiently serious to justify immediate dismissal,” Wilson said.

“However, it is not the case that the belief was based on reasonable grounds, gathered through a reasonable investigation into the matter carried out by V Bus Pty Ltd.”

While Menabue was seeking reinstatement with the company – claiming she liked the people she worked with and “would love to go back” if she had the opportunity – Wilson ruled this was inappropriate given the lack of trust between the two parties.

Instead the commission ruled Menabue should receive six weeks’ projected lost income, meaning she was awarded $4,338.37 in compensation.

Employment lawyer Peter Vitale told SmartCompany the case highlights the need for business owners to follow due processes and conduct a proper investigation if they suspect misconduct has occurred.

“In cases where an employee is dismissed for serious conduct the employer has to have a reasonably based belief that the conduct occurred,” Vitale says.

“That puts an onus on the employer to conduct some reasonable investigation.”

Vitale says while he would not criticise the ruling itself, the case was overall “another example” of the failure of the Small Business Fair Dismissal Code.

“What it does demonstrate is there is no advantage in terms of process for small business because the employer – and the employee for that matter – still had to effectively run the whole case in order to answer the question of whether the small business fair dismissal code had been complied with,” he says.

“So it sort of defeats the purpose of creating a more streamlined process for small business.”

V Bus was contacted by SmartCompany but refused to comment on the Fair Work Commission’s ruling.