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The whistleblowers lost their jobs while the directors got off scott free

When arguing against the formation of a Federal ICAC, both major parties have used the reasonable proposition that there are already “multiple levels of integrity and assurance in place at the federal level”.

Except they don’t seem to work.

Take the Securency/Note Printing Australia case.

In 1998, two RBA officials made a secret trip to try to secure a contract with Saddam Hussein to supply polymer banknotes to Iraq.  This was highly illegal as Iraq was under strict trade sanctions at the time.

The Reserve Bank firm Note Printing Australia’s plan to make a mint in Iraq was dramatically stopped six months later.  Australian diplomats uncovered its dealings with Saddam and warned that NPA’s “informal meeting with Saddam Hussein’s brother-in-law… may have already breached Australia’s obligations under international law”, however no further action was taken.

The illegal Iraq trip was the beginning of an inglorious reign by the directors the Reserve Bank had hand-picked on the boards of its two Melbourne firms.

Over the next ten years, these directors oversaw extremely corruption-prone business practices, tens of millions of tax payer dollars sent to foreign agents, who allegedly used these funds to bribe overseas officials to award lucrative bank-note contracts to the RBA firms.  The allegations concern bribery of foreign public officials in Nigeria, Vietnam, Indonesia, Nepal and Malaysia.

The Securency/NPA case was initially rejected without investigation when a whistleblower first approached the AFP in 2008. An investigation began only after the company self-reported wrongdoing to the AFP in the following year after the whistleblower, frustrated by the lack of action, went to the press.

JAMES SHELTON, SENIOR SALES MANAGER, SECURENCY 2007-08: The board didn’t want to know, the AFP didn’t want to know, others I’d spoken to around government didn’t want to know, but they did start to act when it was on the front page of the newspaper.

RICHARD BAKER, AGE INVESTIGATIVE UNIT: The day we published they called the Federal Police in within hours.

In 2011, the AFP finally charged the RBA firms and several executives with bribing officials in Vietnam, Malaysia, Indonesia and Nepal in order to secure contracts for the Australian makers of polymer banknotes.

In 2012, the OECD Working Group on Bribery delivered a scathing assessment of how this case was handled.

The Securency/NPA case highlights the potential for miscommunication and a lack of coordination between the AFP and ASIC.

….the AFP stated that it referred the case to ASIC. ASIC stated, that it only considered (and eventually declined) charges against the companies‘ directors for breaches of duties [they did no interviews and no investigation]. It did not consider whether to charge the two companies with false accounting since it believed that the criminal charges against the companies sufficiently captured the alleged misconduct. In addition, the AFP stated that ASIC may give AFP authority to prosecute offences in the Corporations Act but this was not done in the Securency/NPA case. The AFP also charged an individual with false accounting under State laws, but did not do so against the companies.  In the end, neither the AFP nor the ASIC considered false accounting charges against Securency or NPA.

In June 2014, the Australian Government through Department of Foreign Affairs & Trade (DFAT) secured suppression orders seeking to protect the identity of various Asian political figures from being named as alleged participants in the Securency bribery scandal. The DFAT notice informing the Court of its application for a suppression order stated that its purpose was “to prevent damage to Australia’s international relations that may be caused by the publication of material that may damage the reputation of specified individuals who are not the subject of charges in these proceedings.” Quite why Australia should be concerned to protect the reputation of Asian-based politicians who can well look after their own reputation (and often do by suing for defamation and using national sedition laws to silence critics) is not entirely clear from the judgment (as the key evidence is redacted).

Wikileaks published the suppression order which lists 17 very high ranking officials (including Presidents and Prime Ministers) from Malaysia, Vietnam and Indonesia who specifically may not be named in connection with the corruption investigation.

The original suppression orders were made in 2011 on the basis that the former executives of the companies would soon be facing their own criminal trials and that public reporting of the outcome of the cases against Securency and NPA could prejudice jurors.

In 2011, the Malaysian police arrested Abdul Kayum, a Malaysian businessman, arms dealer and agent for both NPA and Securency who was charged with paying bribes to Malaysian central bank bosses, in return for them giving the Reserve Bank of Australia currency printing contracts.

In October 2011 Securency and NPA pled guilty to three charges each of conspiring to bribe foreign public officials and were ordered to pay penalties of $19.8 million and $1.8 million respectively.

By the next year, agents in Indonesia, Vietnam, Malaysia and Nepal had been arrested and nine former executives from Securency and NPA were facing committal for trial over charges of bribing foreign officials. David Ellery, who was the chief financial officer and secretary of  Securency, pled guilty in the Victorian Supreme Court to falsifying accounting for a commission to a Malaysian broker.  In return for pleading guilty and agreeing to testify in relation to broader allegations of corruption, Ellery was given a six-month prison sentence, suspended for two years.

In sentencing, Justice Hollingworth said “I also accept that you were acting within the culture which seems to have developed within Securency, whereby staff were discouraged from examining too closely the use of, and payment arrangements for, overseas agents.  Secrecy, and a denial of responsibility for wrongdoing, also seem to have been part of the corporate culture at Securency at that time.”

In May 2016 in London, former Securency sales executive Peter Chapman was found guilty of bribing Nigerian mint officials to secure banknote contracts.  In sentencing Chapman, Judge Michael Grieve QC remarked that Chapman had been placed under “considerable pressure by your superiors to achieve sales”.

Internal Securency emails revealed heavy pressure from Mr Chapman’s managers to increase polymer sales, including one that said “I would ask you all to focus on those essential markets to see if there are any ways in which we can bring forward orders… creative thinking is required and will be rewarded.”

Despite all this overwhelming evidence, the other executives remain free on bail.  The case has been endlessly delayed, in part due to the generous legal insurance policies afforded to several of the defendants courtesy of their senior roles within the RBA’s banknote arms which means they can afford the best lawyers and can initiate their own court actions.

And as for the directors….

Former Reserve Bank deputy governor Graeme Thompson, who is also a former chief of banking regulator APRA, was the Chairman of both Note Printing and Securency.  The directors sitting beneath Mr Thompson on the NPA board during this period were former RBA assistant governor Leslie Austin, corporate heavyweight and federal government adviser Dick Warburton, who is also a former RBA board member, and former Liberal Party treasurer Mark Bethwaite.  Mr Thompson, Mr Austin and British businessman Bill Lowther are among the directors who oversaw Securency in the period of the alleged offences.

When Thompson was informed by eventual whistleblower Brian Hood that Hood was refusing to provide funds demanded by an agent because he believed they were being used to bribe government officials, Thompson overruled Hood and insisted that the money be handed over.  Payments continued even after the agents’ employment had been supposedly terminated.

Mr Hood also revealed that Mr Thompson and other directors, including Mr Bethwaite and Dick Warburton, agreed to conceal from Nepali authorities the secret commissions that NPA had paid to an agent in Nepal.

NICK MCKENZIE, FOUR CORNERS: Graeme Thompson and his fellow directors have walked away from what may be the worst governance failure in recent history.

Under the watch of these now former directors, Reserve Bank firms got into bed with Saddam Hussein, paid an arms dealer in Malaysia millions, covered up corruption here and overseas, and failed to call in the cops when they were told time and time again that their overseas agents were allegedly paying bribes.

While ASIC has refused to investigate them, these directors have gone on to secure prestigious directorships or government posts.

Graeme Thompson is at superannuation giant AMP, Mark Bethwaite’s been appointed to the NSW’s Government’s water catchment authority; Dick Warburton is a director at Westfield and Bob Rankin was given the Reserve Bank’s top European post.

JAMES SHELTON: It seems that they’re a group of people that are untouchable, why I don’t know.

The two whistleblowers lost their jobs.


25 comments

  1. James Cook

    Good report Kaye, but how depressing. We are mugs….all of us. We are regarded as mugs and treated as mugs by those in power and/or with the money.

  2. Klaus Petrat

    Wow Kaye, not a good report, an excellent report. Your capacity to research details is astonishing. What will become of these really serious and criminal allegations. Nothing, as long as there is no independent federal ICAC.

    Unfortunately, I believe Labor has supported this subversive tactic but now, seem to be thinking about a federal ICAC, as long as past happenings are not dug up (I guess)

    Business as usual, nothing to see here.

    Well done, thank you

  3. 245179

    just another “iceberg tip” floating around. Not much surprises me anymore.

  4. babyjewels10

    My thoughts exactly, James.

  5. Frank Smith

    Seems to bear some similarities to the Australian Wheat Board (AWB) scandal with Saddam Husein, Kaye Lee. Great investigative journalism.

  6. Bill

    Thanks Kaye. Australia needs a Federal ICAC yesterday.
    That RBA sham however pails into insignificance compared to what is happening today, 24/7.

    For about 10 years our political ‘elite’ have basically dodged the issue of money laundering into Aust. Yet the volume of illegal cash being washed through real estate sales and the ASX is destroying the very fabric of our community.
    Who cares? Not our govt, who through inaction have placed an obstacle in the path of home ownership for the better part of a whole generation. All because our govt officials think turning a blind eye to money-laundering as a way to inflate RE prices is to their benefit. LNP, Labor and Greens are complicit. MSM has up until recently been muted on the topic. A start would be to expand AUSTRAC and do a forensic analysis of sales in prestige suburbs of Sydney and Melbourne going back 5 years.

    “ANZ Bank says a lack of political will has seen successive Australian governments fail to extend money laundering laws to cover lawyers, real estate agents and accountants.”
    http://www.abc.net.au/news/2017-07-13/should-australias-anti-money-laundering-laws-be-extended/8703354

  7. Kaye Lee

    Whilst the government points at “union thugs and welfare cheats”, corruption is rife at the top end of town.

    Whilst Peter Dutton tortures anyone who paid a people smuggler to help them flee war and persecution, our special investor visas have been identified as a way for high end criminals to buy citizenship.

    AUSTRAC, Australia’s financial crimes regulator, said in a report two years ago that the laundering of illicit funds through real estate was “an established money laundering method in Australia”.

    Crown Casino is a haven for drug traffickers and money launderers – their gaming chips have become a de facto currency among underworld figures. But a hefty political donation from James’ Packer’s mummy and lo and behold – Barangaroo. Even though Packer’s associates in various ventures have been jailed for bribery, under investigation for corruption, or jailed for soliciting gamblers, James accompanies our Prime Minister on world trips to be introduced to world leaders in government and trade.

    We give money to corrupt regimes for political purposes like hiding our refugees.

    On and on it goes – international organisations have sounded the warning to Australia countless times but our governments do not have the ticker to tackle high end corruption – too much money involved, too many high profile reputations to protect.

  8. Frank Smith

    You are quite correct, Kaye Lee – corruption in Government circles is rife and a Federal ICAC is urgently needed. Among the similarities between the banknote scandal and the AWB scandal I mentioned earlier (and which even generated the Cole Royal Commission) is the fact that no senior politician or Government official was ever charged or held responsible. In the case of the AWB scandal, investigations and possible charges by the AFP and ASIC were closed down “in the National Interest” – whatever that is. This in spite of the fact that it was clear to everyone that Senior Officers in the Dept of Foreign Affairs and Trade, from “Fishnets” Downer down, knew of the arrangements with the Iraqi Government and the Jordanese transportation company involved. This scandal which saw the AWB pay around $290 million dollars in “transportation fees” resulted in the AWB being revamped but only civil proceedings being brought against a couple of AWB Board members. Stronger action was recommended by a UN enquiry into this scandal at the time. Meanwhile the pollies and Senior bureaucrats involved hid behind “the national interest”. Today they hide behind “National Security” and “On-Water-Matters”. Yes, Kaye Lee, we have desperately needed a Federal ICAC for 20 years.

  9. Kaye Lee

    Then there is Downer and Woodside – bugging the government building we so generously built for Timor L’Este so a private company could gain financial advantage and for that company to then employ Downer as a consultant. For his role, Downer gets gifted the job of High Commissioner to the United Kingdom, as daddy was before him.

  10. George Swalwell

    Brilliant, Kaye for this detailed, almost forensic analysis of the laminated bank note scandal. Of course it’s not the technology we deplore, but the hidden corruption, bribery and cover ups. Thanks again.

  11. OPPOSE THE MAJOUR PARTIES

    persist with the way things are and the corruption will continue and worsen. the only solution is to OPPOSE THE MAJOUR PARTIES.

  12. Ill fares the land

    I read the comments of Bill with more than a little interest. Bill, you are spot on with your comments. Millions of dollars leave Asian countries on a daily basis and ends up in Australia – the bulk of this money comes from Chinese sources and involves a pretty simple arrangement – enlist numerous family members who each transfer $US$50,000 into Australia in a bank account of a family-member dispatched to Australia to study or work. Before you know it, the “plant” in Australia is sitting on a couple of million dollars and owns three houses. The simple answer is for the authorities here to look at how Asian immigrants get their money and advise the Chinese authorities. However, I suspect the government actually thinks the flood of money is a good thing and has no interest in putting a stop to it. In the same vein, the money flooding into real estate regularly purchases existing property – thus involving a blatant breach of the FIRB rules – but our government ignores that too.

    And it would seem that as as long as they can take a slice of the “action”, if not a big slice, our casino-owning billionaires are more than happy to assist foreigners launder money through Australia.

  13. diannaart

    Not sure if thanks are in order Kaye Lee, more; keep up exposing the real bludgers and leaners on society.

    Same as it ever was…. if you aspire to be a crim, better be an up-market one.

  14. Ricardo29

    Distressing and depressing, but another nail hit on the head Kaye Lee. Hope this gets wider reading.

  15. Wayne

    What ever happened to those guys from the AWB who tried to sell wheat to Iraq?

  16. Frank Smith

    Wayne, no criminal charges have ever been laid against any of the Government officials or AWB Board members involved. As indicated earlier, the ASIC and AFP investigations into criminal procedures were dropped because they were “not in the National Interest”. Civil charges were pursued against AWB Board members but all of those were also dropped, except for two. The whole saga took until April 2017 to be finalized and that resulted in Trevor Flugge, the prior Chairman of the AWB Board being given little more than a slap on the wrist for a scandal that involved hundreds of millions in kickbacks – he was fined $50,000 and banned from managing a corporation for five years. It is significant that after 10 years the sentencing judge noted:

    “It is relevant that Mr Flugge has been left to face the accusations of ASIC [Australian Securities and Investments Commission] almost alone, when many other AWB executives have avoided being proceeded against. The Australian community, however, has every right to be profoundly disappointed in AWB’s conduct and the ignominy that it brought on Australia and the damage suffered by its shareholders. Nevertheless, the court should be circumspect in not adding onto Mr Flugge the sins of others within AWB who have escaped being penalised.”

    A totally inadequate response to a major kickback and corruption scandal involving senior Government Officials and business leaders that significantly damaged Australia’s international reputation, our wheat marketing system and losses to AWB shareholders (Australian wheat growers). Perhaps this scandal and the banknote scandal could have been avoided had we had a Federal ICAC at the time to expose those responsible and bring them to account for the criminality they were involved in.

    http://www.abc.net.au/news/2017-04-10/awb-trevor-flugge-fined-banned-iraq-food-for-oil-scandal/8430032

  17. Dave

    When we allow whistle-blowers to be treated as criminals by the ruling class, we are ruled by criminals, and we are no better than criminals to allow it.

  18. crypt0

    Oz has plenty of corporate, business, financial and so on watchdogs out there …
    And executives, directors and so on thereof are extremely well paid, but sadly they do absolutely nothing …
    Except, perhaps, watch the on-going tsunami of white collar crime in this country.
    No wonder the white collar crooks never even pause for breath … why would they ?

  19. stephengb2014

    I really love your work Kaye Lee, but have to admit that articles like this are depressing for me.

    You see at 69, I am gob smacked at the level of corruption, racism and bigotry being exposed since the advent of John Howard, I feel powerless.

    I guess one silver lining under the cloud we currently live is the fact that the depth of corruption etc is in fact being exposed.

    S G B

  20. Kaye Lee

    In early March 2012, evidence of ‘possible illegality’ by senior Reserve Bank officials and business figures in connection with the banknote bribery case was referred by the AFP to ASIC. However, after having reviewed material from the AFP for possible breaches of directors’ duties under the Corporations Act 2001, ASIC decided not to proceed to a formal investigation.

    It took them less than a week to issue a statement on March 12 saying it had reviewed material ”from the AFP for possible directors’ duty breaches of the Corporations Act and has decided not to proceed to a formal investigation.”

    ”ASIC considers a range of factors when deciding to investigate and possibly take enforcement action … ASIC intends to make no further comment on this matter.”

    In evidence to a Senate committee on 11 May 2012, Mr Warren Day, ASIC’s Regional Commissioner, stated that ASIC does not ‘see itself as having a role as to integrity across agencies’ and that its role is to focus on alleged breaches of the Corporations Act ‘and no further than that’. He further noted that, ASIC does not have any direct powers in relation to bribery and corruption.

  21. diannaart

    …ASIC does not have any direct powers in relation to bribery and corruption…

    Of course not, the few remaining watchdogs after the removal of red tape to speed up business, have been neutered, defanged or bought off.

    Federal ICAC, Mr Shorten, if/when you win next election. Then I will believe you are for the people.

  22. diannaart

    We must keep up the pressure every which way we can, be it nepotism, corruption, unfair wages or tax evasion.

    https://actions.oxfam.org/australia/make-tax-fair/petition/en/

    It’s time for Australia to mandate transparency. Multinational companies operating in or from Australia must be required to make public, for every country in which they operate:

    Their sales, profits and taxes due and paid
    The physical assets they own, and
    Their number of employees

    It’s time to Make Tax Fair.

  23. Kyran

    So, what would happen if we had a set of principles for our ‘leaders’? Not just the pollies, but the senior bureaucrats, all of the decision makers. You know, something like;

    • To act honourably and fairly and solely in the public interest
    • To treat all citizens equally
    • To tell the truth
    • Not to mislead or deceive
    • Not to withhold or obfuscate information to which voters are entitled
    • Not to spend public money except for public benefit
    • Not to use your position or information gained from your position for your benefit or the benefit of a family member, friend, political party or other related entity

    We could call them the Fitzgerald Principles. We could ask a group, such as the Australia Institute, to survey our pollies on what they thought of them.

    “Fifty-three parliamentarians agreed to the Fitzgerald Principles of good governance, 36 declined to participate and the remaining 137 did not reply. Thirty-eight members of the ALP agreed to the Principles, including Opposition Leader Bill Shorten, Shadow Attorney General Mark Dreyfus, and Shadow Minister for Justice Clare O’Neil; 7 members of the Australian Greens agreed to the Principles; 4 members of the Nick Xenophon Team agreed to the principles, 1 member of One Nation, as well as 2 Independents.”

    http://tai.org.au/content/fitzgerald-principles-survey-results-released

    There is an imbedded link that is more detailed in the breakdown of the report.

    http://nb.tai.org.au/fitzgerald_principles_results

  24. Kyran

    Apparently, Mr Fitzgerald thinks an ICAC is a good idea. It’s not like the indiscretions of our leaders cost us too much. Ok, there was the currency thing, the wheat thing, the $1bill dutton’s department couldn’t quite account for and a few others. Defence is the one that seems to be excelling at the moment.

    “Last year, the Defence Department spent $8.3 billion on keeping its equipment in working order, known as “sustainment” in military jargon.
    Yet, the audit office found that despite small recent improvements, information about where that money went and whether it was being spent wisely was often unreliable or not available.”

    http://www.abc.net.au/news/2017-07-12/defence-spending-data-unreliable-not-available-report/8699498

    Woohoo. Can’t wait till they have the subs and the planes to maintain. And that is with three ministers sharing the portfolio.
    Thank you Ms Lee and commenters. Whilst it may be urgent, necessary and worthwhile to get an ICAC, I would not recommend holding your breath. Transparency International have been trying for a while now on several fronts. Take care

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