ANZ Bank reviews Satyam links

ANOTHER major local bank is studying the impact of its exposure to Satyam Computer Services' $1 billion corporate scandal.

ANZ Bank has around 100 Satyam contractors who support IT projects. They're mainly based at the bank's Indian subsidiary which employs under 2000 people. 

Last week, the bank told employees that it would develop a contingency plan although its relationship with Satyam was "modest". 

"The relationship involves a number of Satyam staff who support development and testing on information technology projects. This means there is no effect at all on ANZ's day to day IT operations," David Cartwright, ANZ operations, technology and shared services group managing director, said. 

"(As) for the technology development projects that Satyam contract staff are supporting, we are currently assessing key person dependences and developing a plan for how we manage through the situation," Mr Cartwright said. 

"While there is some work to do on this, it's clear that we will be able to take the issues at Satyam in our stride and largely get on with business as usual given the depth of our own IT resources and our relationships with a range of IT vendors globally." 

Unlike other blue-chip companies such as National Australia Bank, Telstra and Qantas, ANZ doesn't have any long-term contracts with Satyam. 

Most local customers are assessing their contractual obligations with Satyam. 

A multi-million-dollar software facility being built on Deakin University's campus in Geelong is also under a cloud as the future of Satyam remains uncertain. 

Satyam's world came to a crushing halt when the company's founder and chairman B. Ramalinga Raju admitted to overinflating the value of cash and bank balances by 50.4 billion rupees ($1.44 billion). 

In scenes out of a Bollywood movie last Friday, Mr Raju, Satyam's former chairman, was arrested with B. Rama Raju, his brother and co-founder, on charges of criminal breach of trust, criminal conspiracy, cheating, falsification of records and forgery. 

Satyam chief financial officer Srinivas Vadlamani was arrested on Saturday. 

The high-profile case has forced the Indian Government to appoint three members to the board of Satyam after it dismissed the incumbent board. 

PricewaterhouseCoppers, which has been auditing Satyam's books for nearly a decade, said it adhered to “applicable auditing standards and (was) supported by appropriate audit evidence”. 

The Australian | Fran Foo | January 12, 2009

Impersonation - Identity theft

Impersonation isn't new. In 1556, a Frenchman was executed for impersonating Martin Guerre and this week hackers impersonated Barack Obama on Twitter. It's not even unique to humans: mockingbirds, Viceroy butterflies, and the mimic octopus all use impersonation as a survival strategy. For people, detecting impersonation is a hard problem for three reasons: we need to verify the identity of people we don't know, we interact with people through "narrow" communications channels like the telephone and Internet, and we want computerized systems to do the verification for us.

Traditional impersonation involves people fooling people. It's still done today: impersonating garbage men to collect tips, impersonating parking lot attendants to collect fees, or impersonating the French president to fool Sarah Palin. Impersonating people like policemen, security guards, and meter readers is a common criminal tactic.

These tricks work because we all regularly interact with people we don't know. No one could successfully impersonate your brother, your best friend, or your boss, because you know them intimately. But a policeman or a parking lot attendant? That's just someone with a badge or a uniform. But badges and ID cards only help if you know how to verify one. Do you know what a valid police ID looks like? Or how to tell a real telephone repairman's badge from a forged one?

Still, it's human nature to trust these credentials. We naturally trust uniforms, even though we know that anyone can wear one. When we visit a Web site, we use the professionalism of the page to judge whether or not it's really legitimate -- never mind that anyone can cut and paste graphics. Watch the next time someone other than law enforcement verifies your ID; most people barely look at it.

Impersonation is even easier over limited communications channels. On the telephone, how can you distinguish someone working at your credit card company from someone trying to steal your account details and login information? On e-mail, how can you distinguish someone from your company's tech support from a hacker trying to break into your network -- or the mayor of Paris from an impersonator? Once in a while someone frees himself from jail by faxing a forged release order to his warden. This is social engineering: impersonating someone convincingly enough to fool the victim.

These days, a lot of identity verification happens with computers. Computers are fast at computation but not very good at judgment, and can be tricked. So people can fool speed cameras by taping a fake license plate over the real one, fingerprint readers with a piece of tape, or automatic face scanners with -- and I'm not making this up -- a photograph of a face held in front of their own. Even the most bored policeman wouldn't fall for any of those tricks.

This is why identity theft is such a big problem today. So much authentication happens online, with only a small amount of information: user ID, password, birth date, Social Security number, and so on. Anyone who gets that information can impersonate you to a computer, which doesn't know any better.

Despite all of these problems, most authentication systems work most of the time. Even something as ridiculous as faxed signatures work, and can be legally binding. But no authentication system is perfect, and impersonation is always possible.

This lack of perfection is okay, though. Security is a trade-off, and any well-designed authentication system balances security with ease of use, customer acceptance, cost, and so on. More authentication isn't always better. Banks make this trade-off when they don't bother authenticating signatures on checks under amounts like $25,000; it's cheaper to deal with fraud after the fact. Web sites make this trade-off when they use simple passwords instead of something more secure, and merchants make this trade-off when they don't bother verifying your signature against your credit card. We make this trade-off when we accept police badges, Best Buy uniforms, and faxed signatures with only a cursory amount of verification.

Good authentication systems also balance false positives against false negatives. Impersonation is just one way these systems can fail; they can also fail to authenticate the real person. An ATM is better off allowing occasional fraud than preventing legitimate account holders access to their money. On the other hand, a false positive in a nuclear launch system is much more dangerous; better to not launch the missiles.

Decentralized authentication systems work better than centralized ones. Open your wallet, and you'll see a variety of physical tokens used to identify you to different people and organizations: your bank, your credit card company, the library, your health club, and your employer, as well as a catch-all driver's license used to identify you in a variety of circumstances. That assortment is actually more secure than a single centralized identity card: each system must be broken individually, and breaking one doesn't give the attacker access to everything. This is one of the reasons that centralized systems like REAL-ID make us less secure.

Finally, any good authentication system uses defense in depth. Since no authentication system is perfect, there need to be other security measures in place if authentication fails. That's why all of a corporation's assets and information isn't available to anyone who can bluff his way into the corporate offices. That is why credit card companies have expert systems analyzing suspicious spending patterns. And it's why identity theft won't be solved by making personal information harder to steal.

We can reduce the risk of impersonation, but it will always be with us; technology cannot "solve" it in any absolute sense. Like any security, the trick is to balance the trade-offs. Too little security, and criminals withdraw money from all our bank accounts. Too much security and when Barack Obama calls to congratulate you on your reelection, you won't believe it's him.

This essay originally appeared in The Wall Street Journal.

by schneier

Another FSBO Portal: buymyplace.com.au

November 30, 2008 by Emma Sorensen 

buymyplace.com.au is the latest For Sale By Owner (FSBO) portal to hit the market.

buymyplace.com.au is a privately owned company based in Melbourne, and at the moment the portal only covers the state of Victoria.

Currently in beta form, the company plans to hold an Australia-wide launch in early 2009, and have big hopes for the site’s growth, saying:

“Buy My Place is an online real estate advertising company that represents the future of real estate Australia. They provide you with the choice of selling your own home online without the worry of paying high agent commissions.”

“Just as eBay changed the way ordinary people buy and sell goods, Buy My Place will change the way real estate is bought and sold in Australia.”

buymyplace.com.au might look slick, with illustrated cartoon style characters, and well-thought out design, but it’s not the first in the Australian market. It will face competition from existing FSBO portals likeowner.com.au, smartvendor.com.au, onthehouse.com.au, and zeroagents.com.au.

Behind the website are a team of industry professionals from real estate, marketing, technology and customer service.

As well as FSBO property listings, market value information, and a customer service team, the website also contains a knowledge centre with resources for owner sellers and buyers alike.

Peter Butterss

 it is a great concept and one that has taken off world wide, indeed we are well aware of the importance of being top of mind for buyers and sellers.
come end of February buymyplace wont be hard to remember!

Telstra, NAB stunned by $1.8b Satyam Computer Services rort

CORPORATE Australia's push to export IT jobs to India is in disarray following a $1.84 billion fraud involving one of the world's key outsourcing companies.

Telstra, Qantas, Coles, National Australia Bank and Suncorp are among scores of Australian companies affected by the scandal. 

The fraud, involving Hyderabad-based Satyam Computer Services, also throws into doubt plans for a $75 million software laboratory at Deakin University's Geelong campus. 

The laboratory, a joint venture between Satyam, Deakin and the State Government, was slated to create 2000 jobs and inject an annual $175 million into the Victorian economy within the next decade. 

Satyam Australia, which employs about 1700 local staff, has headquarters in Collins St. 

Calls to Satyam's Melbourne office yesterday were answered by a recorded message. 

Shares in the Mumbai and New York-listed business crashed after company chairman B Ramalinga Raju, the company's chairman, confessed to falsifying the earnings and assets of India's fourth-largest software and outsourcing services provider. 

Raju's criminal activities surfaced when shareholders blocked his bid to sell two companies to Satyam in order to plug a 50.4 billion rupee ($A1.84 billion) hole in the company's balance sheet. 

Confessing to the crime in a letter to directors, Raju acknowledged that he had inflated company profits over several years. 

Satyam shares slumped 78 per cent in Mumbai trading and in New York its American depositary receipts plunged 90 per cent before the NYSE intervened and halted trading. 

Apart from its Australian clients Satyam provides outsourcing services for the giant Citigroup and Japan's Nissan Motor Corp among other big corporates. 

Worldwide more than 53,000 people are employed by the company, mostly in Bangalore, Chennai and Hyderabad. 

Qantas, which signed a $71 million software development and maintenance contract with Satyam two years ago, said yesterday that if necessary it could activate alternative arrangements. 

An airline spokeswoman said the situation would be monitored daily until resolved. 

She said Qantas could activate alternative internal and external arrangements to ensure a seamless change in contractors. 

Telstra employs Satyam as one of its four major IT contractors. 

Spokesman Martin Barr said the telco was actively reviewing the arrangement and planned to cut the number of contractors to two.

National Australia Bank has outsourced at least 500 positions to India after engaging Satyam and other providers over the past three years.

NAB spokeswoman Kerrina Lawrence said the bank was monitoring events and was reviewing the arrangement with Satyam.

"NAB is closely reviewing the Satyam matter but for the time being the company is continuing to meet its contractual obligations," she said. "NAB has contingency plans in place to ensure continuity of service."

BusinessDaily also learned that a team of Satyam IT consultants from India were deployed last year to work on a technology project at Medibank Private's headquarters in Melbourne.

Medibank spokesman James Connors told said yesterday that there were contingency plans in place if the Satyam staff needed to be flown back to India.

Wesfarmers subsidiary Coles also has Satyam staff working at its Melbourne head office.

"Coles engages only a small number of Satyam employees who help support some legacy systems, and this work has been performed satisfactorily to date," said Coles spokesman Jim Cooper.

"We are obviously aware of the events unfolding with Satyam, and we are having discussions with the company.

"These developments do not pose any significant issues for our business and we will be taking these events into account as we evaluate future IT support requirements."

At Geelong yesterday, Deakin's acting vice-chancellor John Rosenberg declined to write off the software laboratory project.

"At this stage we don't know what is happening and we are still hoping that it can go ahead," Professor Rosenberg said.

Last night, the State Government was in talks with Satyam about saving the jobs of the company's Victorian employees and about the plans the company had for future expansion.

Herald Sun | George Lekakis, Geoff Easdown

January 09, 2009 12:00am

India's Satyam scandal hits local big guns

QANTAS, Telstra and National Australia Bank have been rocked by a major accounting scandal that hit their IT services supplier, Satyam Computer Services, and all have vowed to take action.

A multi-million-dollar facility being built on Deakin University's campus in Geelong is also under a cloud as the future of Satyam remains uncertain.

Australia's largest companies have been caught in the dragnet of corporate fraud at Satyam, where its founder and chairman B. Ramalinga Raju has admitted to overinflating the value of cash and bank balances by 50.4 billion rupees ($1.44 billion).

Satyam Australia is a $200 million company and provides a range of IT-related work to some of the largest corporations in the country.

Its major customers said they were reviewing the situation and some, their contracts, with Satyam locally.

Telstra is in the midst of trimming its IT suppliers from four to two. They include EDS, IBM, Infosys and Satyam.

"We expect to finalise our new arrangements early this year and, obviously, will take the current issues into account," Telstra spokesman Martin Barr said.

NAB spokeswoman Kerrina Lawrence said the bank was closely reviewing the matter, but was quick to add that Satyam has been meeting all its contractual obligations so far.

"We have a contingency plan in place," she said.

Hundreds of NAB technology functions have been sent to India as part of the bank's offshoring campaign -- the main beneficiary being Satyam.

Satyam's contract with NAB expires in 2011, but it is understood that the bank is reviewing its early termination clause.

Qantas has also ensured adequate backup is in place in case Satyam goes under.

Qantas has five years remaining on a seven year contract under which Satyam provides IT application maintenance and support.

Ovum Australia IT analyst Jens Butler believes that any contracts up for renewal with Satyam in the near-term may be at risk of being handed to another provider.

In Victoria, Deakin University acting vice-chancellor John Rosenberg is keeping his fingers crossed that the 10-hectare, eight-year project continues as planned.

The project, in co-operation with the Victorian Government and Geelong City Council, will create at least 2000 new jobs in the Geelong region. If Satyam goes into administration, it is unclear if the Victorian Government would bail out the project.

Satyam declined to comment on the local impact of the scandal but a spokesperson said "it's business as usual".

The Australian | Fran Foo | January 09, 2009

Financial Scandal at Outsourcing Company Rattles a Developing Country

Question. Are any Australian banks outsourcing to Satyam?

NEW DELHI — Ramalinga Raju was contrite, sort of.

In an emotionally charged four-and-a-half page letter, Mr. Raju, the chairman and co-founder of one ofIndia’s largest outsourcing companies, described to his board on Wednesday how a small discrepancy had mushroomed into one of the biggest scandals in Indian corporate history.

“What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of company operations grew,” he wrote. “It was like riding a tiger, not knowing how to get off without being eaten.”

In the end, the scandal threatened to gobble up not just Mr. Raju, who resigned, but his company, Satyam Computer Services. Far beyond Satyam, it raised fears that similar problems might lurk in other Indian companies, particularly in its vaunted outsourcing industry.

“One only hopes that with the kind of scrutiny and the kind of focus this brings, everybody doesn’t end up being painted with the same brush,” said Lakshminarayana, the chief strategy officer for Wipro Technologies, which competes with Satyam.

The long-running fraud, which is being called India’sEnron, also raised questions about the vigilance of regulators in India and the United States.

Satyam serves as the back office for one-third of the Fortune 500, including some of the largest banks, manufacturers, health care and media companies in the world — handling things like computer systems and customer service for companies that include General Electric, Nestlé, Ford Motor, Cisco and the United States government.

In some cases, Satyam even acted as clients’ outsourced finance and accounting departments.

The fraud will make “people even more nervous about investing” in India and other developing markets, said Jacob Rees-Mogg, the lead manager with Somerset Capital Management, a fund that specializes in emerging markets.

India needs foreign investment more than ever. Though it has enjoyed 9 percent growth a year recently, that is expected to slow to 7 percent, at best, as the global economy cools. Housing prices are down, the country’s major stock index, the Sensex, is half what it was a year ago. And India’s government has little financial leeway for giant stimulus packages like those in China and the United States.

Outsourcing and information technology are crucial parts of the Indian economy. They provided local companies with $64 billion in revenues in 2008 and employed more than two million people directly, and millions more indirectly.

Mr. Raju said he had regularly falsified Satyam’s accounts as the company expanded from a small family-run firm into a back office giant with 53,000 workers in 66 countries.

Some of India’s biggest conglomerates started out as family-run companies, and analysts fear the taint of corruption from Satyam — poor governance, lax accounting controls and a lack of transparency — could sully any of those big companies for investors and customers.

Relatives often hold crucial management positions and sizable stakes in the companies. Foreign investors have begun to push for more outside representation on boards, and for families to give up controlling stakes they hold.

A huge piece of Satyam’s finances was a fantasy. Of the 53.6 billion rupees in cash and bank balances the company listed as assets at the end of its second quarter, 50.4 billion rupees ($1 billion), were nonexistent, according to Mr. Raju’s letter. Revenues for the quarter ended Sept. 30 were actually 20 percent lower than the 27 billion rupees reported, and the company’s profit for the quarter was just 10 percent of what it reported at the time.

Many analysts said it was unthinkable that Mr. Raju had acted without accomplices, and regulators in India, Europe and the United States were likely to take action against Satyam for false accounting. In addition to being listed in India, its shares have traded on the New York Stock Exchange since May 2001, and on Euronext since January 2008.

Satyam’s auditor, PricewaterhouseCoopers, which has audited the company since its NYSE listing, said it was “examining” Mr. Raju’s statement and could not comment further.

Many Satyam clients said they were studying the situation. Cisco said it did not expect any “material impact.”

The revelations could lead to a major shake-up in India’s outsourcing industry, as a nearly cashless Satyam struggles to meet payroll and other expenses. Satyam may be shut down, sold off in its entirety or broken into pieces, they say.

John C. McCarthy, an analyst with Forrester Research in New York, said Satyam’s clients were scrambling to find out “whether the fraud is intermingled” with their operations, and what their liabilities are.

“This happens like clockwork in the high-tech business,” he said. “Every three to four years there’s some financial scandal. It is because high-tech has traditionally been viewed by the financial analysts as a growth industry. There are huge pressures to maintain that growth, and not all companies have the management wherewithal to survive under those pressures.” In the short term, many Satyam clients will migrate to competition like Infosys and TCS, said analysts with Religare Hichens Harrison.

News of the scandal sent the Sensex index down 7 percent on Wednesday. Shares in Satyam fell about 78 percent. Trading in Satyam on the NYSE was suspended until further notice.

Though Mr. Raju’s announcement shocked most of the world, there had been signs for months that something was wrong at the top of Satyam.

The company came under close scrutiny after an October report on Fox News that it had been banned from World Bank contracts when spy software was installed on some computers. Satyam denied the accusation, but in December the World Bank confirmed it had been banned for giving improper benefits to bank staff, and for not accounting for all its fees.

In December, Satyam investors revolted after the company proposed buying two firms with ties to Mr. Raju’s sons.

On Dec. 30, analysts with Forrester Research warned that corporations that relied on Satyam might ultimately need to stop doing business with the company.

“Firms should take the initial steps of reviewing the exit clauses in their current Satyam contracts,” in case management or direction of the company changes, Forrester said.

Four of the company’s directors resigned recently and the company hired Merrill Lynch for strategic advice, a move that is generally a precursor to a sale.

On Wednesday, Merrill Lynch sent a letter to India’s stock exchanges, saying it had terminated its relationship with Satyam after the bank “came to understand that there were material accounting irregularities” at the company. Merrill Lynch officials declined to comment further.

Mr. Raju wrote in his confessional letter that neither he nor the managing director (his brother B. Rama Raju) had “taken one rupee/dollar from the company.” He said the board, his brother and their families had no knowledge of the situation, seeming to leave open the possibility that someone else did.

SEBI, India’s securities regulator, said it would investigate trading in Satyam’s shares. Mr. Raju could face up to 10 years in jail and fines of $5 million in India for the accounting fraud.

NYT Claire Cain Miller contributed reporting from San Francisco.

Australian connections

Satyam specialises in application services outsourcing (for example, Oracle and SAP) and has built a strong customer base in Australia with names like Qantas, Unilever and Coles Myer. The vendor has around 950 consultants servicing the Australian market, with some of those located in Sydney and Melbourne centres and others in their Indian headquarters. Source ZDnet

10,000 hours

by Seth Godin

It's not surprising that Malcolm Gladwell's new book has made a splash. All his thought-provoking writing does and deserves to.

The argument of Outliers:

• Where you're born and when you're born have an enormous amount to do with whether or not you're successful.
• Becoming a superstar takes about 10,000 hours of hard work.
• Both of the bullet points above are far more important than the magical talent myth.

Bill Gates, the Beatles, Beethoven, Bill Joy, Tiger Woods--do the math, 10,000 hours of work.

In some ways, this is a restatement of the Dip. Being the best in the world brings extraordinary benefits, but it's not easy to get there.

For me, though, some of the 10k analysis doesn't hold up. The Doors (or Devo or the Bee Gees) for example, didn't play together for 10,000 hours before they invented a new kind of rock*. If the Doors had encountered significantly more competition for their brand of music, it's not clear that they could have gotten away with succeeding as quickly as they did. Hey, Miley Cyrus wasn't even 10,000 hours awake before she became a hit.

Doc Searls and Scoble didn't blog for 10,000 hours before they became the best, most important bloggers in the world. Molly Katzen didn't work on her recipes for 10,000 hours before she wrote the Moosewood Cookbook either.

*(There were bar bands in Buffalo, where I grew up, that put in far more than 10,000 playing mediocre music... didn't help. Hard work may be necessary, but not sufficient).

Here's my take on it:
You win when you become the best in the world, however 'best' and 'world' are defined by your market. In many mature markets, it takes 10,000 hours of preparation to win because most people give up after 5,000 hours. That's the only magic thing about 10k... it's a hard number to reach, so most people bail.

Yo Yo Ma isn't perfect... he's just better than everyone else. He pushed through the Dip that others chose not to. I'm guessing that there are endeavors (like being CEO of a Fortune 500 company or partner at a big law firm) where the rewards are so huge that the number is closer to 20,000 hours or more to get through the Dip.

But, ready for this? The Dip is much closer in niche areas, new areas, unexplored areas. You can get through the Dip in an online network or with a new kind of music because being seen as the best in that area is easier (at least for now). You can get through the Dip as a real estate broker in a new, growing town a lot quicker than someone in midtown Manhattan. The competition is thinner and probably less motivated.

Yes, it matters where and when you were born. It matters that you get lucky. And it matters most of all that you saw the Dip, realized how far away it was and chose to push through it.

Conveyancing ‘Online in 09’

A colleague came up with this new year resolution

Conveyancing ‘Online in 09’

Conveyancers threatened with further layoffs

THE bottom has fallen out of the previously lucrative conveyancing industry, with a prediction of more retrenchments nationwide this year.

Australian Institute of Conveyancers president Pauline Barrow said a tightening of bank-lending practices, a reluctance of owners to sell and employment uncertainty by buyers had seen business fall in some instances by up to 40 per cent. Losses varied between states.

In the previously buoyant West Australian property market, conveyancing had experienced up to a 40 per cent drop in 12 to 18months.

Jillian Nelson-Coulon, the institute's WA president, said some businesses had laid off staff and many had shut over Christmas.

In South Australia, transfer lodgements for November had fallen from 5885 in 2007 to 3673 last year, a 38 per cent drop.

The institute's chief executive in South Australia, Geoffrey Adam, said the state's property market was already slowing when the global financial crisis hit.

Ms Barrow said the exception was conveyancing of home and land packages where there had been some respite because of the federal Government's first-home owners' scheme.

Ms Barrow said more retrenchments in the conveying industry were expected in coming months.

Gold Coast solicitor Alison Hiscocks said the number of conveyancing contracts in her sole practice went from up to 50 a month to just 15 settlements.

"I had anticipated we would experience a drop off in conveyancing of about 20 per cent, but in May-June it was like somebody turned the tap off," she said.

"That happened in the space of a month -- that's before people started to talk about it (an economic downturn). I'm not aware of a firm on the Gold Coast which either hasn't put staff off or cut everybody's hours back."

She said that before the increase to the first-home buyers' scheme, business had dropped 40-60 per cent from 12 months before. Now the figure was 30 per cent.

Adelaide-based conveyancer Jeff Stevens said the market in commercial and industrial conveying had also "dropped away", with banks increasing the equity required in property from about 25 per cent to 35 per cent.

Ms Barrow said banks previously had lent up to 110 per cent of valuation in just days; now they took up to a month to finance a purchase.

Additional reporting: Gavin Lower

The Australian Chris Griffith and Debbie Guest | January 03, 2009

Survey: for best bank / mortgage processor of 2008

House sales slump 25%

• Ben Schneiders-The Age
• December 20, 2008

BUYERS kept their hands in their pockets in 2008, scarred by a worsening economy, volatile interest rates and concerns about poor levels of housing affordability.

The number of sales tracked by the Real Estate Institute of Victoria is down 25 per cent on the same time a year ago — returning sales to 2006 levels — while the number of auctions has fallen nearly 8 per cent.

There will be a final rush today and tomorrow — the last big selling weekend of the year — with the REIV expecting about 200 auctions and 500 private sales.

If recent weeks are a guide, sales are likely to be poor. After averaging 82.5 per cent in 2007, clearance rates have averaged 63 per cent this year, and have been barely above 50 per cent in recent weeks.

There are signs the upper end of the market is in sharp decline, while cheaper property has been in more demand, helped by a boost to the Federal Government's first home buyers' grant and a steep fall in interest rates.

The ANZ Housing Snapshot for December said 15 of the top 20 growth suburbs in the September quarter were in suburbs where prices were below Melbourne's median.

Most surveys point to a small fall in prices during 2008, although REIV research has indicated a bigger fall.

The ANZ's head of property and financial system research, Paul Braddick, said the Melbourne market was in for another choppy year in 2009.

He warned that prices could fall by as much as 5 per cent in the first half, but when the financial crisis settles, prices could rise solidly.

"We are reasonably confident that once the overall macro (economic) situation becomes clearer and the uncertainty passes, that prices could recover quite quickly," he said.

Helping the market to recover is a housing shortage and a fall in interest rates.

The Reserve Bank has cut rates from 7.25 per cent in September to 4.25 per cent. This had helped housing affordability — which was at record lows for most of 2008 — return to 2002 levels, Mr Braddick said.

That is still much less affordable than the mid to late 1990s, but a vast improvement. The big unknown for property in 2009 is the depth of the economic slowdown.

Mr Braddick said the difference between his forecasts and those of economists such as Steve Keen, the University of Western Sydney academic tipping a 40 per cent decline in prices, centres on their different views on the economy.

Associate professor Keen has warned of a downturn of Great Depression-style dimensions, while most market or bank economists are forecasting a sharp slowdown or shallow recession.

"That's probably one of the biggest risks out there," Mr Braddick said. "How many people do find themselves unemployed."

SHAPE OF THE MARKET
                                2007         2008

Clearance rate        82.5%        63%

Sales                       56,189       42,465

Auctions                  29,909       26,600

Median price           $485,000   $435,000*

SOURCE: REIV (*Compares December 2007 with September 2008)

Property Transaction Volumes down 20-30%

The Property Services business delivers valuable services to its clients through the quality of its people, industry best practices and industry leading technology. These services include information brokerage, property enquiries and settlement services to leading financial institutions and legal clients. The domestic property and lending markets are a key driver of activity for the business. These markets have experienced a decline in activity as a result of the turbulence in global and local financial markets and broader economic slowdown, where the volume of transactions is, by most measures, 20-30% below activity levels of a year ago. Espreon is not sheltered from the impacts on these markets. The Australian Government has implemented a range of economic stimulus initiatives and the Reserve Bank has lowered interest rates substantially in recent months. In October 2008, housing finance posted its first increase in 9 months, although there remains uncertainty within the community about the future and there appears to be a lack of consumer and business confidence. As we move into 2009 it is hoped confidence begins to turn around. Espreon’s revenues have been impacted by the economic downturn but not to the same extent as the overall market decline. Through this difficult period Espreon has maintained its overall market position and secured new business. It is now well placed to increase its level of business in the event of an improvement in market conditions or a further increased flow of work from clients and improve profitability over the long term. Iain will cover this in more detail shortly. In addition, opportunities exist for the extension of services to current clients and for growth through strategic acquisitions and new product innovation.

Source Espreon Chairman's Address

Pilot of online bank settlement process

Hayton Kosky Lawyers is seeking support from conveyancing practitioners to pilot an online sharing software aimed at improving the bank settlements process. It incorporates an ‘online shared workspace’ and the ‘National Settlement Booking Exchange’ designed to replace the current time-consuming process of booking settlements.
Members who are interested in attending an information session or in participating in the pilot program should contact Brett Hayton. brett at 247legal dot com dot au

View more information

Source Law Institute Victoria LIV eLegal

Property and Environmental Law Section

Conveyancer skims stamp duty

PENSIONERS Rob and Judith Walters are living in a caravan in a barn because of the greed of disgraced conveyancer Ellen Hocking.

Mr Walters, 70, is reduced to tears recalling the forced sale of his home after being fleeced by Hocking.

He and 65-year-old wife Judith are among 17 victims from throughout the Mornington Peninsula and Frankston area who were ripped off by the conveyancer.

In July, Hocking, 45, admitted to 17 counts of deception totalling about $250,000, but police fear this is just the tip of the iceberg.

Now living in Frankston, she operated in both Somerville (from 2002 to 2004) and Mornington (2003 to 2006).

She will be sentenced at Melbourne’s County Court on December 10.

The Walters have now moved from a four-bedroom, two-storey home to a caravan in a barn and will have a small home built on a relative’s property later this year.

Mr Walters said he was forced to borrow money to pay for the stamp duty of $25,000 that was stolen by the conveyancer.

“Then we were forced to turn around and sell the property we had just bought to pay out what we owed,” he said tearfully.

“The title couldn’t be transferred to our name until the stamp duty was paid - for us a second time.

“The stress has resulted in me having a stroke.

“I have now lost so much confidence I cannot drive by myself.

“I have lost my faith in humanity and find it difficult to trust people. “It upsets me just to think about it,” Mr Walters said.

Sen-Constable Scott Hanley said although the couple had paid their stamp duty to Hocking, it had to be repaid to the State Revenue Office.

Somerville developer Paul Devaney lost $73,000.

The money was skimmed off property deals and home owners have been warned to check their property title to make sure their name is on it.

Frankston Leader newspaper

JP Morgan Chase cuts 500 jobs

JP Morgan Chase & Co. is cutting almost 500 jobs from the Washington Mutual mortgage processing operation in Florence.

The job cuts are among the 9,200 positions JP Morgan plans to eliminate as part of its takeover of Washington Mutual Bank. JP Morgan acquired WaMu in September for $1.9 billion after WaMu became the nation’s largest bank to falter as a result of the credit crunch.

The operation in rural Florence currently employs 876 people and is one of the community’s largest employers.

JP Morgan plans to keep the center open for the foreseeable future after reducing its staff to about 380 — a nearly 60% cut — JP Morgan spokeswoman Nancy Norris said.

On or before Monday, 126 employees received a 60-day notice, Norris said. An additional 370 employees will remain on the staff in a transitional role, with their jobs to be eliminated in phases throughout 2009.

Employees who were laid off already will receive pay at least through February, plus a severance package. Transitional employees will receive double their salary until their jobs are eliminated, plus severance, Norris said.

JP Morgan is working with the laid-off employees to help them find other jobs, she said.

The bulk of JP Morgan’s layoffs were in Seattle, where WaMu was headquartered. Some 3,400 employees are being cut, largely from administrative and back-office support positions that provided services JP Morgan already offers. The rest of the layoffs are scattered at payment and mortgage processing operations across the country.

link

Duty to be paid in 14 days not 3 months

Parliament of Victoria

 

Duties Amendment Bill 2008-12-05

 

9 Reduction in period for payment of duty after

liability arises—Chapter 2

(1) In section 14(2) of the Duties Act 2000, for

"3 months" substitute "14 days".

(2) In section 14(3) of the Duties Act 2000, for

"3 months" (where twice occurring) substitute

"14 days".

(3) In section 15(1) of the Duties Act 2000, for

"3 months" substitute "14 days".

(4) In section 16 of the Duties Act 2000, for

"3 months" substitute "14 days".

(5) In section 22B(4) of the Duties Act 2000, for

"3 months" substitute "14 days".

(6) In the note after section 57M(2) of the Duties Act

2000, for "3 months" substitute "14 days".

(7) In section 69C(2) of the Duties Act 2000, for

"3 months" substitute "14 days".

COAG continues regulatory reform

COAG agreed that a national electronic conveyancing system would be implemented, which will establish a single electronic system for completing real property transaction and lodging land  title dealings.

NECS  is one of five initiatives announced at the meeting for the delivery of a seamless national economy.    The Commonwealth committed to provide funding of $550 million over five years for the implementation of these reforms. 

Arrangements in relation to funding allocation and progressing the initiatives are currently being finalized by COAG senior officials. The communiqué states that this must be completed no later than 12 December 2008.

Soaring stamp duty hits home buyers

Growing stamp duty bills on residential properties are impeding Australian home buyers' ability to enter the housing market, according to a new report.

The inaugural bankwest (bankwest) Residential Stamp Duty Report found stamp duty on the typical home has soared 59 per cent over the past five years, almost double the rise in household income over the same period.

Almost $53 billion in stamp duty receipts, both residential and commercial, has been paid to state and territory governments over the past five years.

Annual stamp duty revenues have increased 77 per cent over that same period.

The research found struggling home buyers were forced to set aside at least 20 per cent of their annual household income to pay stamp duty bills in four out of eight capital cities in July 2008 - Sydney, Melbourne, Adelaide and Perth.

This compared to only two cities - Sydney and Melbourne - in 2003.

Home owners in Sydney and Melbourne would need almost three months of their salaries to pay stamp duty.

Brisbane has the lowest stamp duty bills, with home owners only having to work an average of one month to pay stamp duty for median priced properties.

The rate of stamp duty charged on a property purchase increases as the property's value passes through thresholds.

The data was sourced from state government revenue offices and the Australian Bureau of Statistics.

AAP

Caveats - Black v Garnock

WARNING - PURCHASER LOSES PROPERTY

In more recent times purchasers of real estate have not, with ordinary course, seen the need to lodge a caveat on the vendor’s title. Caveats put the world on notice of a purchaser’s interest but they also largely place an embargo on a vendor dealing with his or her own land prior to completion of the purchase.

The Case: Black v Garnock (2007) 237ALR1

However on 1 August of this year, the High Court delivered a short, sharp jolt to standard  conveyancing practice in the decision of Black v Garnock, reminding purchasers to take steps to protect their interests. In Black v Garnock, the Appellants (Mr Black and others, a firm of accountants), obtained a judgment in the District Court for a sum of money against Mrs Smith, the vendor. Rather than being bankrupted by the Appellants, Mrs Smith promised them she would sell her farmland to raise funds to satisfy her debt to them.

A few months after the District Court judgment, Mrs Smith entered into a contract for sale of her farmland with the Garnocks and the Luffs, as purchasers. Upon being informed by Mrs Smith that they were likely to receive only a small sum from the proceeds of sale of the farmland, the Appellants obtained a Writ of Execution against her. The Writ was in favour of the Sheriff and empowered the Sheriff to sell Mrs Smith’s farmland to satisfy the debt to the Appellants. Notably, the purchasers were not put on notice that the Appellants intended to register the Writ. However, the purchasers’ solicitors were aware that the Appellants’ solicitors intended somehow to “stop the sale.”

In accordance with normal conveyancing procedure a title search was carried out by the purchasers’ solicitors on the morning of settlement, although a couple of hours before actual completion. Noting no prior encumbrances, the purchasers went ahead with completion of the sale. However, after settlement, the purchasers were unable to register their transfer because the Appellants had registered their Writ in the time between the purchasers’ final search and completion.

The High Court ultimately had to weigh the effect of the Writ of Execution which was registered by the Appellants on the Torrens Title for the farmland against the rights of the purchasers who settled with no knowledge of the Writ.

In a 3:2 decision, the majority of the High Court held in favour of the Appellants, adopting slightly different reasonings.

Two of the majority judges held that although the recording of a Writ did not create an interest in land, it is capable of registration and therefore gives the Sheriff rights to deal with a property subject to any encumbrances on the register. As no caveat was lodged on behalf of the purchasers, the Sheriff’s interest prevailed over the purchasers’ interest and the Sheriff was entitled to sell the property to obtain his money. It was not relevant that the purchasers had exchanged contracts for sale of the land prior to the issue of the Writ. 

The third majority judge noted that the purpose of the Torrens Title system of land is simplification of conveyancing. The system effectively allows anyone to deal with a property entirely on the face of what is recorded on the Register.  Put simply, the Torrens Title system is based on the principle that what is recorded on the Register is, “the first and last word on all relevant titles and interests.” The judge emphasised that the purchasers could have lodged a caveat, and had they done so, it would have prevented the later registration by the Sheriff as well as having served as a notice to all of the prior interest of the purchasers.

Lessons for Purchasers & Lenders

The decision may seem unduly harsh from a purchaser’s perspective, particularly given that the Appellants and the Sheriff were aware at the time of registration of the Writ that the purchasers had contracted to buy the land. However, it was open to the purchasers to take steps, by way of caveat to secure their position. 

If it seems harsh for a purchaser, spare a thought for a lender. A lender has no caveatable interest prior to settlement, so it cannot lodge a caveat. The authorities need to find a solution to this dilemma. And quickly.

The Property Law Committee of the Law Society of NSW is currently engaged in discussions with the Department of Lands and the Attorney General’s Department regarding the practical implications of Black v Garnock. However, in the meantime, the case highlights the need for a cautionary approach to conveyancing transactions.    

Purchasers who do not wish to suffer the same fate as the purchasers in Black v Garnock should take the following steps:-

• Ensure a caveat is lodged immediately after exchange; and
• Ensure a final search is carried out as close as possible to the time of settlement.

In the case of lenders, it is recommended that they do final searches immediately prior to settlement and register immediately after settlement.

Failure to follow these steps will be at the peril of the incoming parties, including lenders.

Source Pigott Stinson

 

More from the Opposition - no holding back David Davis

12 November 2008 COUNCIL

---

INFORMATION AND COMMUNICATIONS TECHNOLOGY: GOVERNMENT PROJECTS

Mr D. DAVIS (Southern Metropolitan) -- I am pleased to be able to make a contribution to the debate on the motion that has been brought to the chamber today by Mr Rich-Phillips, and I compliment him on his timely and balanced motion. It is a motion that does draw openly and directly on the work of the Auditor-General over the recent period. I want to put on the record my compliments to the Auditor-General for the very important series of reports that have come down that deal with these areas of ICT (information and communications technology) project implementation by this current Labour government. Nine years into this government and we have an enormous list of projects, and I do not need to detail them all. Mr Rich-Phillips and others have looked at particular details in those projects. But it is important to note that today we do not see the Minister for Information and Communication Technology in the chamber; we see the Acting Minister for Information and Communication Technology, who is trying to get a grip on this portfolio, trying to get a grip on this out-of-touch area of government activity that has cost the community an enormous amount of money. The motion of Mr Rich-Phillips is timely, balanced and sensible, and points to a major area of government failure over the last nine years. Again I put on record the importance of the Auditor-General's work in forensically ensuring that these matters come to public and parliamentary notice.

My comments today, beyond what I have just said, will be restricted to the electronic conveyancing issues, which I have raised in the Parliament on a number of occasions previously.

The Acting Minister for Information and Communication Technology will know that in his other role as Minister for Environment and Climate Change he has responsibility -- and I am sure some days he rues the fact that he has this responsibility -- for electronic conveyancing.

To be fair to him, he inherited this white elephant, and I say advisedly it is a white elephant. It is worth putting on record that this project is now tens of millions of dollars -- in all probability more than $40 million -- in the red. It has been mismanaged comprehensively by the department, and there are real questions of probity as to how this process has been undertaken.

I have indicated in the Parliament before that there are serious questions about the involvement of Ajilon, which is indeed a major international contracting company that has, in my view, an unhealthy position in the way it is operating with the Department of Sustainability and Environment.

I make the point that Mr Rick Dixon from that firm is sitting in a position where not only is he in a managerial role in the department but he is also involved with the Ajilon firm, which is a successful tenderer to that department as well. It is hard to think of a more difficult position to be in in terms of avoiding the appearance of a conflict of interest, and it would be hard to avoid the appearance of a conflict of interest in such a situation where you are both in a managerial role and also a contractor for a major contract with that section of the department.

I note that the decisions that have been made by the Council of Australian Governments (COAG) to move towards an electronic conveyancing system nationally are important. I believe this is the way to go nationally. There are enormous transaction costs that can be reduced by the implementation of a successful electronic conveyancing system that is compatible across jurisdictions.

To implement such a system you need to have major buy-in from the stakeholders in the transactions involved in conveyancing -- in this case, hopefully, electronic conveyancing -- and they are the banks particularly, but also building societies and credit unions as well, and solicitors and conveyancers.

The truth of the matter is that this government has not been successful in winning the confidence of the banks in this country, it has not been successful in winning the confidence of the Law Institute of Victoria and solicitors, and there are major concerns about the liabilities that may arise from transactions that occur where there is no satisfactory insurance behind them. The advice to many solicitors is 'Do not take part in the Victorian system because of the insecurity of your legal indemnities and your insurance support in particular'. That is a major concern. The government has not got these factors right. It is important in implementing these systems to ensure that you have the support of the major players.

Ultimately the system will only be used in the way that we would all desire if it does have support across major industry groups.

What is the government's solution to that? It is to belt those who have to pay conveyancing costs across the head. It says, 'We're going to lift the price of paper conveyancing, although we know that there is only one transaction in Victoria that has occurred as a full electronic conveyance transaction' -- one! -- 'at a cost of $40 million for the project'. What a white elephant, what a disaster, and what a disgrace. The minister now has two hats with which to manage this responsibility -- as Acting Minister for Information and Communication Technology on the one hand and as Minister for Environment and Climate Change on the other.

He is now in a position where he can certainly intervene to stop this remarkable merry-go-round of activity where consultants order more work from a consultancy with which they are connected, they grow richer by the day, the money is pumped in by the community and there is no output. One transaction -- $40 million! What a disgrace. The minister should hang his head in shame. Let me just ask the minister how many things he could have used that $40 million for. Health, education or transport? Which of those would have been better to have spent the $40 million on?

Let me now move to the national system. That same group of consultants who have got their grip and their teeth into the department in Victoria -- some might say it in a more prosaic way than I have explained it, and God knows what transactions have transpired outside the department on this matter -- now want to get their teeth into the national system as well. It is a disgrace, and it should be stopped.

The Council of Australian Governments has said we are going to go to a national system, and that is supported. There should be a national e-conveyancing system, as the national newspaper and others have indicated very strongly, but it should be a clean system. It should not be a corrupt system, it should be a system that is seen to be clean, and it should be a system that the community in all states can have confidence in. I, for one, do not have confidence in the system in Victoria, and that is a very sad fact, given the expenditure of more than tens of millions of dollars of community money.

That same group of consultants now wants to try to ramp the department up to go into bat at the national level. They now want to get their mitts on the money across the nation.

Let me tell you -- and I think some of my federal colleagues have begun to make this point clearly too -- that it is unlikely that the national system will jump at such an offer. I do not think the state governments around the country and the national government are going to be willing to fund at a national level an expansion of a system where only one transaction has been delivered for $40 million.

I think it is worth quoting very briefly the editorial in the Weekend Australian of 12-13 July 2008, and then I will conclude. The heading is 'Nation building' and the subheading is 'Lessons from Victoria's wasted conveyancing efforts'. I will quote several paragraphs from this because I think it is important. It points to the transaction costs that can potentially be saved and the benefits for the national economy. It reads:

The decision of the Council of Australian Governments to build an electronic conveyancing system that spans the nation is by no means glamorous. But history will see it differently.

This is the modern equivalent of the nation building projects of previous generations. It might not have the cachet of a Snowy Mountains scheme, but just like that great project of the 1950s, electronic conveyancing will benefit all succeeding generations.

Industry groups estimate that if this single initiative is implemented properly, it will cut the cost of buying and selling homes by $250 million a year.

That is not just for one year; it is for next year, the year after that and the year after that.

Economic efficiency is about lowering the transaction costs in the economy, and that can be successfully done with an electronic conveyancing system, but not a white elephant like we have got in Victoria. The editorial goes on to say:

The Victorian government appears to have wasted $40 million by building a system that does not comply with the basic requirements of the main players in conveyancing ...

This is the direct result of two mistakes that should be avoided by those who build the national system.

The first mistake was the refusal to accept that conveyancing is primarily a commercial transaction, not a filing procedure for land title bureaucrats.

Those at Land Victoria have a lot to answer for on this.

This is a long-term blunder in management of land procedures that should have been done correctly.

The second mistake was to cede control of the system to private consultants. The Victorian experience shows that those skilled in computer technology are of most value when their role is confined to implementing public policy decisions -- not making them. Responsibility for the national system must remain in the hands of those who are responsible to voters, not shareholders.

To avoid the fate of the ECV --

Electronic Conveyancing Victoria --

the national system should be designed around the business needs of the private sector.

By endorsing the principle of a single national system, COAG's working party is off to a flying start.

I agree. It is something that should be supported, but there are traps for young players. In Victoria this government -- the Bracks and Brumby governments -- has fallen deep into the pit.