Tuesday, 27 October 2009
Economics References Committee; Reference
- That the following matter be referred to the Economics References Committee for inquiry and report by 4 February 2010:
- allegations of payments to overseas agents into offshore tax havens and corruption in securing note printing contracts and what the Reserve Bank, Austrade and the Australian Government knew about the alleged behaviour;
- any investigations conducted into those allegations;
- any actions taken to press charges against past and existing overseas agents; and
- action which may be taken to prevent improper dealings occurring again.
These are extraordinarily serious allegations which go to the behaviour of the Reserve Bank’s subsidiaries Note Printing Australia and Securency. Those allegations include corruption, bribery and the placement of multimillion-dollar sums into offshore tax havens for services that were being bid for by one or other of the agencies. I refer to a report by Richard Baker and Nick McKenzie in the Age newspaper of 23 May this year under the heading ‘Revealed: the RBA’s dodgy global deals’. It says:
The Reserve Bank of Australia has been involved in the payment of multimillion-dollar commissions to shady middlemen in its drive to win bank note printing deals with foreign governments.
Securency Pty Ltd, a Melbourne-based bank note supplier half-owned by the RBA, has made a substantial number of “commission” payments to agents, including some previously implicated in corruption scandals.
The company, which has supplied polymer material to print money in Australia and 26 other countries, is chaired by the RBA’s assistant governor Robert Rankin. Its board has another two RBA appointees, as well as executives from British firm, Innovia Films, owner of the other half of Securency.
Some of Securency’s agents are closely tied to government or central bank officials in countries ranked by Transparency International as highly corrupt.
Several agents have been named in official corruption investigations in Africa and Asia. At least one has a criminal conviction for fraud.
The Reserve Bank of Australia’s own annual report for this year, on page 41, says:
The Board of Securency has measures in place designed to ensure the maintenance of high standards of integrity …
Later on it points to the allegations that I have just enumerated, raised first in the Age. It says this:
The allegations were therefore treated very seriously, and when they were first raised the Board of Securency promptly requested an independent investigation by the AFP. This investigation began immediately and the Board has ensured that all possible assistance has been given to the AFP.
The Board of Securency also engaged an external accounting practice to undertake a thorough independent review of the company’s policies and practices in relation to the use of these agents, to ensure that they remain at best practice. At the AFP’s request, Securency delayed the start of this review until the AFP had completed its initial assessment of the allegations. The review, which is now in progress, is expected to take several months to complete.
In other words, Securency held off an external accounting exercise until after the AFP had completed its initial assessment of the allegations, but the board of Securency itself is now proceeding with a review—that is, an inquiry of its own—into the probity of the behaviour of at least some of its agents and officers. That inquiry is continuing to take place.
I know there is always in these matters some concern, where the Australian Federal Police have been brought in, that the parliament not cross over with investigations that are therefore taking place. I would agree with that. However, it is to be noted that no less than the Nigerian parliament—one of the countries in which Securency is said to have been working to get very highly profitable engagement—has and is undertaking a major inquiry. The Age in fact reported on the 23rd of this month, under the heading ‘Nigeria to act on RBA bribe claim’, the following:
Nigeria’s National Assembly is to investigate the country’s former central bank governor over allegations he was bribed to award a contract to a company controlled by the Reserve Bank of Australia.
Nigeria’s House of Representatives has passed a motion requesting the assembly’s banking and justice committees investigate the Central Bank of Nigeria’s previous administrators for “brazen cases’’ of corruption, money laundering, reckless spending and issuing of non-performing loans.
A resolution read by representative John Halims Agoda and supported by 46 others said: ‘‘The committees are mandated to ascertain the veracity or otherwise of the widely reported claims by the local and international media that a company, Securency, is believed to have paid millions of dollars in bribe money to Nigerian officials to secure the contract to print Nigeria’s new banknotes.’’
The Australian Federal Police has told The Age that it is investigating Securency for alleged bribery after the company paid millions of dollars to two British-based businessmen with high-level Nigerian political contacts to win a banknote contract.
Securency, which is owned by the RBA and British firm Innovia Films, has supplied Nigeria with almost 2 billion polymer strips with which to print the nation’s banknotes.
Nigeria’s main newspapers have recently accused former CBN—
that is, the Central Bank of Nigeria—
governor Chukwuma Soludo of being among those officials suspected of accepting the alleged bribes in 2006—
that is, the bribes from this subsidiary company of the Reserve Bank of Australia. This report goes on to say:
Professor Soludo, who finished his term as CBN boss in May and is now running for governor of a Nigerian state, has vehemently denied the allegations, describing them as “wild”.
Nigeria’s Economic and Financial Crimes Commission is also expected to launch a separate investigation into the bribery claims surrounding the Securency contract.
In other words, there is a parliamentary inquiry going at the same time as the relative crimes commission in Nigeria is considering undertaking an inquiry. I cannot recall, except in the quite different case of the Australian Wheat Board’s involvement in Iraq, a case of such enormous concern for Australian corporations regarding allegations of criminal activity overseas.
It is not just incumbent upon but the responsibility of this parliament and, through this motion, the committee system to investigate these extraordinarily serious charges. The only debate that I think could be held on the matter is whether or not the fact that the Federal Police are investigating these matters ought to make us cautious about the inquiry. However, as I have just put to the chamber, both Securency itself and now the Nigerian parliament are undertaking inquiries at the present time.
I will be very keen to hear submissions from the government and the opposition, who are of course important in allowing this reference to proceed. I would point out that if parts (b) and (c) of the motion present any problem for the government and/or the opposition I would be prepared to amend the motion to delete them. That is the section which would have the inquiry look into any current investigations which are underway.
I do not think it would be an exercise in probity for this parliament to wash its hands of these extraordinarily serious claims, which have now been running for five or six months from the investigative unit of the Age newspaper without countermand that I know of, about major subsidiaries of the Reserve Bank of Australia. There is comment in those articles about the damage being done to the international reputation of the Reserve Bank by inference about the relationship to the Reserve Bank, and I think we should be very sure that we are doing all we can to protect that reputation and that relationship. We in this place know that the worst thing you can do to protect such a relationship is to ignore very serious charges that are being made. I would urge both sides of the Senate to consider these extraordinarily serious accusations and allegations—backed up by a great deal of material, I might add—of misbehaviour, not just in Nigeria and South Africa but in several other countries around the world, by agents employed by subsidiary companies of the Reserve Bank. I point out that senior officials of the Reserve Bank sit on or preside over—or have presided over—the boards of those subsidiary companies.
I have endeavoured through other ways—for example, estimates committees—to have the Reserve Bank governor or other senior officers questioned about these matters, but that has not been possible. I am not prepared to allow the matter to simply rest. It is too serious for that. It is serious enough for every senator to consider it. I believe that an inquiry should be undertaken. We have been able in the past to keep well clear of in any way compromising police inquiries that have proceeded. For any senator who is thinking about the problem of there being a police inquiry concurrent to the Senate establishing an inquiry into these allegations against the subsidiaries of the Reserve Bank, I cite the fact that the collapse of Storm Financial and Opes Prime are matters that are being examined by the Joint Committee on Corporations and Financial Services at the moment while the matter is simultaneously being investigated by ASIC and the police. Forest managed investment schemes are being examined by the Senate Select Committee on Agriculture and Related Industries even though the matter is being simultaneously investigated again by ASIC and, according to media reports, the police could be investigating. The Privileges Committee is currently investigating a matter relating to Mr Grech while the police are also investigating matters pertaining to that person. In 1999, to go back a little, when a fraud of $8.72 million was committed against the department of finance, Senator Faulkner still questioned on the matter—and you can see how difficult it is to deal with such a matter while court proceedings are going ahead.
I think our committee is well able to steer clear of matters that the police might be looking at. We need to look at protecting the name of the Reserve Bank and the high esteem in which it is held. I do not think we can do that by ignoring these extraordinarily worrying charges and allegations that are now in the international press, not just the Australian press. I believe it is the duty, the obligation and the right of the Senate to undertake an inquiry and to try to ascertain the facts of the matter before the efflux of any further time.
I indicate at the outset that the coalition will not be supporting the reference proposed by Senator Bob Brown. Senator Brown has spent a fair bit of time talking about the involvement of the Australian Federal Police in this matter, and that is primarily the reason. Senator Brown has highlighted some matters concerning Senate inquiries concurrent with AFP investigations. I might even suggest that some of those might have even been politically charged or motivated. The Reserve Bank of Australia is something that we need to be very careful with and maintain complete independence from. We would suggest that the Australian Federal Police investigation into this matter is appropriate at this time. That would not prevent the matter from being revisited at the conclusion of the Australian Federal Police investigation. That might be a more appropriate time to look at whether a Senate inquiry into this matter is necessary.
There are some interesting factors with this that are slightly more different to some of the matters that Senator Brown mentioned. Firstly, the allegations which have been suggested in relation to this matter may be outside the scope of a Senate inquiry—in particular, with witnesses not being resident or domiciled in Australia. In fact, a number of witnesses—I would suggest most witnesses—might be outside the jurisdiction of the Senate. Therefore, the Australian Federal Police would be a far better organisation to be looking at this. That is notwithstanding any of the international treaties that we currently have. The opposition will not be supporting the reference for those reasons. We believe the Australian Federal Police at this point in time is the most appropriate and qualified agency to be investigating this serious matter.
The government also will oppose this motion. This motion should not be supported by the Senate for the very simple reason that it is not appropriate for the Senate to be investigating this issue while the police are conducting an investigation. I am aware of the continuing media coverage alleging impropriety related to Securency’s activities—in particular, its use of agents as its representatives in developing countries. I am advised that the board of Securency have treated these allegations very seriously. The Australian Federal Police are currently investigating a range of issues in relation to this matter. I am also advised that this investigation is ongoing and, as such, it would be highly inappropriate for ministers to be commenting on the investigation and related matters. Equally, others who are readily offering comment on this case should consider whether making such comment is in the interests of a fair and thorough investigation. This includes debating these issues within the Senate or referring this to a Senate committee, as it could prejudice the outcome of the AFP investigation.
In its trade promotion activities, the government makes it very clear that it will not condone, under any circumstances, illegal activities by Australian companies overseas. Australian law criminalises the bribery of foreign public officials in business transactions whether committed here in Australia or by an Australian anywhere in the world. On 14 September 2009 the opposition supported the government to vote down the Greens’ Senate motion to inquire about the commissions paid by NPA and Securency for the service of representatives. I call on the opposition to again support the government—as they are doing on this occasion. We appreciate their support in this matter.
I thank both the government and the opposition for their short contribution to this matter and I submit that they are both wrong. One only has to recollect the enormous and growing damage of the Wheat Board affair to know that. I also pointed out in my submission that the board of Securency itself has seen fit to hold an inquiry, but the government and the opposition say that the Senate should not. And the parliament of Nigeria is holding an inquiry, but the government and the opposition say that the Senate should not.
The opposition spokesperson says that he would not follow everything that the parliament of Nigeria does. I would suggest in response to that comment and the way in which it was pitched that I would expect better of the honourable senator opposite. I for one respect what the parliament of Nigeria and its members try to do and try to achieve.
I want to go back to some of the people who have been agents for the Reserve Bank subsidiaries, because I think that if we are not going to have a Senate inquiry we at least should have some public record of what it is that the members of the Senate—the Greens excepted—do not want to have inquired into at this time. One of those agents, according to the Age, is Mr Benoy Berry from Contec Global in London. Securency has paid millions of dollars to this London based businessman who heads a multinational technology firm, Contec Global. The firm has won large contracts across Africa, including in Sudan and Rwanda, but has also been implicated in a corruption inquiry in Uganda. In 2005, Contec Global was accused by Uganda’s internal security organisation of making a bribe of at least $1.8 million to a cabinet minister responsible for a national ID card tender process. In 2006, an inquiry by Uganda’s Inspectorate of Government found the finance minister, Isaac Musumba, favoured Contec Global’s bid even though it did not meet the selection criteria and was by far the most expensive. The office of Uganda’s President alleged Contec Global had promised Musumba a share in money gained from its inflated bid. Musumba has denied any wrongdoing.
Securency has had financial dealings with companies linked to businessman Mr Donald McArthur, who was the head of a major company involved in South Africa’s biggest-ever corporate failure in 1999. In 2005, McArthur was arrested by South African police and charged with racketeering, fraud and corruption and accused of improperly pocketing money borrowed from banks. Last year he did a deal with the prosecutors and pleaded guilty to fraud and reckless trading. He paid a substantial fine instead of serving a two-year jail term. He was also forced to pay money into the proceeds of crime fund. McArthur worked for Vivian Reddy in 2005. McArthur repeatedly denied any association with Securency when contacted by the Age, although Securency has said that he has been an agent. Mr Reddy, referred to there, is a South African casino tycoon who won the rights to promote Securency’s banknotes in Africa a few years ago and has more recently declared that he will push the notes across half the continent within a decade. One of his senior employees said that Mr Reddy’s relationship with Securency was over but would not say when or why due to ‘confidentiality and nondisclosure issues’.
Reddy is a controversial figure in South Africa due to his political connections and his bankrolling of the recently elected president, Jacob Zuma. The magnate was ensnared in the South African government’s aborted corruption trial against Zuma, who was alleged to have accepted a bribe from a French defence contractor seeking to build four ships for South Africa’s navy. In a related corruption case against Zuma’s now jailed former financial adviser, prosecutors alleged that the charitable trust account set up by Reddy was used to hide payments from French defence firm Thales to a company owned by the financial adviser and then to Zuma. Reddy’s lawyer has rejected the claims of corruption made by state prosecutors.
When we go to Cambodia, we find that Melbourne barrister Daryl Dealehr is Securency’s agent and the director of mining company Cambodian Resources Ltd. Dealehr has ties to the families of Cambodia’s late and notorious national police chief Hok Lundy and Cambodia’s controversial Prime Minister, Hun Sen. Human rights groups and former senior Cambodian officials accuse Lundy, who died last year, of being responsible for dozens of murders. ‘There is hardly anyone in Cambodia who has shown more contempt for the arm of the law than Hok Lundy’, Human Rights Watch said.
Dealehr told the Age he was surprised he had not yet landed a banknote deal for Securency but said Cambodia’s reserve bank was conservative and wedded to paper banknotes. Dealehr said that he had been duped and that he had very good contacts with bank officials and had been Securency’s agent for many years. He was unable to speak further about Securency’s affairs due to private causes. In 2007, Dealehr’s mining company won the rights to develop iron ore, gold and so on in Cambodia.
Next door, in Vietnam, in 2002, as Vietnam switched from paper to plastic banknotes, Securency teamed up with Hanoi firm CFTD and its subsidiary Banktech. In early 2002, Banktech’s deputy director was Le Duc Minh, the son of the State Bank of Vietnam’s then governor, Le Duc Thoy, who was in charge of the deal. The bank governor denied his son was involved, but Banktech documents reveal they were the ‘exclusive suppliers’ of bank printing materials for Vietnam. Securency was listed as one of its ‘overseas partners’. In 2007, a Vietnam government inquiry reportedly found irregularities and weakness through the banknote project. It found that the bank governor had failed to include a comparison of the polymer banknotes in his submission to the Prime Minister. The inquiry concluded that the involvement of his son had created a lot of suspicion, affected the transparency of the project and damaged the governor’s reputation. Securency has paid millions of dollars in commissions to CFTD directors who are connected to Vietnam’s political personages.
We can go to many other matters, some of which I have raised before in this place. But, needless to say, when we hear the litany of connections with dodgy dealers, with corrupt officials, with shady persons, with people who have criminal records and with people who are involved in multimillion-dollar international deals, which include money being passed from agencies of the Reserve Bank to offshore tax havens for payment, we have to be very alarmed. This Senate and this parliament have to be very concerned indeed.
I have seen no comeback from the Reserve Bank or its subsidiary which substantially or effectively moves to answer these accusations. This is a case of the fourth estate—in this case, the investigating unit of the Age newspaper—writing front-page stories in relation to dealings of the Reserve Bank’s subsidiaries overseas with very questionable people. It has raised an alarm which the parliament is bound to respond to. I do not accept the argument that because it is a matter now put into the hands of the Australian Federal Police this parliament should not be looking at the probity with which the Reserve Bank board has viewed its subsidiaries. I remind the Senate that the deputy of the Reserve Bank board has been the president, the presiding officer, of one of the subsidiaries I am talking about. It is a matter of very great concern to me, and ought be to every senator, that we have had no response to this matter from the Reserve Bank. I would expect that even this debate ought to give rise to a rejoinder from the Reserve Bank of Australia to this parliament. That would be reasonable and expected on matters as major and concerning as this.
I think the government and the opposition are wrong. I think we are seeing in play here a respect for office—that is, for the Reserve Bank itself—which confuses the behaviour of people who might abuse that respect which the country and the body politic give to the Reserve Bank. The very fact that it is allegedly at arm’s length diminishes not one whit the responsibility of this parliament to ensure that its handling of matters are not only in the best interests of the nation but lawful in this nation and lawful anywhere else in the world. On the face of it, that is not the case with these subsidiaries.
The opposition and the government are in grave danger of preventing the process of clearing the air on these matters of great concern. I think they have made a mistake; nevertheless, these are matters that I will continue to pursue, and they are matters that I have no doubt the Prime Minister himself is very aware of. Inaction at the highest levels of government on this matter is something that may well come back to haunt those who have failed to take action. I do not know of any action that has been taken by the government. I would expect that the Treasurer and the Prime Minister have taken a very close interest in these extraordinary allegations of corruption infecting subsidiaries of the Reserve Bank of Australia. If not then there is something wrong with the way the government has looked at these accusations. If so then I think that the Prime Minister and/or the Treasurer ought to have reported to this parliament.
I have a great sense of unease about the inertia with which the government has greeted the terrible news that is unfolding about the dealings of some of the people that the Reserve Bank subsidiaries have been involved with—and which, we must presume, the people on the board of the Reserve Bank knew about, to some degree, quite some time ago. I know that Securency did a review and stopped certain activities as far back as 2006, but we deserve to know why the parliament was not acquainted with that, why we have not heard of further action since then and why the accusations continue to roll without there being a response from the government. The government should come to the parliament with an explanation as to what it knows about these dealings which have involved members of the board of the Reserve Bank and do what it can in the current circumstances to clear the air.
That the motion (Senator Bob Brown’s) be agreed to.