The money men
MYLES Curtis was seething as he drove into work, past the high, barbed fences, CCTV cameras and the signs warning potential trespassers not to enter the high-security site.
It was Saturday morning, May 23, 2009, and the The Age andThe Sydney Morning Herald had splashed their front pages with a report revealing how Securency International - the company Curtis ran on behalf of the Reserve Bank of Australia - had funnelled multimillion-dollar payments to shady foreign middlemen to help win banknote supply contracts from central banks around the globe.
Soon after, the normally unflappable Curtis was in a rage as he paced the floor of the fortress-like headquarters in Melbourne's north that Securency shares with another RBA firm, Note Printing Australia.
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''He was off his nut,'' recalled a staff member. ''He was going on about 'how the f--- do they know how our business operates … they have got it all wrong'.''
The newspaper reports had caused alarm elsewhere as well. Within hours of the papers hitting the stands, Curtis's bosses at the RBA, the venerable pillar of Australia's financial system, called in the Australian Federal Police to investigate the allegations.
Curtis assured the chairman of Securency and Note Printing Australia, RBA assistant governor Bob Rankin, that the police would find nothing. Police investigation or not, it would be business as usual for the company Curtis had led since it was formed in 1996 as a joint venture between the RBA and Belgium pharmaceutical giant UCB (whose stake was later bought by Britain's Innovia Films).
Curtis and his team would continue promoting Australia's unique polymer banknote material around the world. NPA would keep trying to win the rights to print other countries' banknote designs on Securency's special plastic.
Rankin and his superiors at the RBA, including governor Glenn Stevens, must have hoped the charming and persuasive Curtis was right. The consequences were dire if he was not.
The Reserve Bank owns half of Securency and all of NPA, and controls both boards. Rankin's predecessor as chairman on both companies was former deputy RBA governor and Australian Prudential Regulation Authority chief Graeme Thompson.
If one or both the companies were found to be engaged in overseas bribery, Australia would be facing one of its worst corruption scandals and the Reserve Bank's reputation would be severely tarnished.
The RBA men were not the only ones hoping the AFP would quickly clear Securency. Many in Canberra were nervous. Securency and NPA had received special treatment from respective Coalition and Labor governments, as well as strong support from the nation's diplomatic and trade corps.
The Securency story had the potential to become another AWB scandal.
Back at head office, Curtis told concerned staff that there was nothing to worry about. What's more, he said to one staff member, the Fairfax press would soon have to pay for its temerity.
Yet observant staff at Securency also noticed that Curtis was, at least from a distance, acting strangely.
Curtis and his right-hand man, company secretary John Ellery, began taking long walks around the barbed perimeter fence at the company's headquarters. There were rumours that the federal police might be bugging the premises.
Staff also noticed that sensitive files regarding Securency's overseas deals had been moved to a secure room. A short time later, some of the files had disappeared. Staff at NPA now began talking about disturbing things they had seen in the past involving the company's overseas agents in Malaysia, Indonesia and Nepal.
Those worried about the federal police inquiry - which at that stage was a precursory examination with minimal resources and staff - may have been heartened by the fact that, in 2009, the AFP had never prosecuted anyone using laws passed 10 years before that outlawed paying kickbacks to overseas officials in order to gain a business advantage.
The AFP's failure to prosecute wheat exporter AWB and its executives over the $290 million in kickbacks paid to Iraqi dictator Saddam Hussein in contravention of United Nations sanctions had raised eyebrows internationally, most notably at the Paris-based Organisation for Economic Co-operation and Development.
If Australia claimed to be one of the ''cleaner'' countries when it came to bribery, it was rated poorly by the OECD when it came to catching and punishing those who paid kickbacks. Corruption experts claimed Australia was all talk, no action.
Government sources aware of the early days of the AFP inquiry into Securency say there was pressure on the police to consider how a nasty corruption scandal could seriously damage the reputation of RBA and the Australian government. But for the AFP, a failure to properly investigate the RBA firms would only magnify its image in international policing circles as an agency unwilling or unable to go after corruption cases.
Six months passed and, despite continuing Age revelations about Securency and NPA's questionable overseas dealings, there was no word from federal police about whether the inquiry was progressing. Then, a few weeks later, in November 2009, a senior AFP investigator, Rohan Pike, was quietly appointed to the AFP's overseas bribery team.
Yesterday, 769 days after the RBA's Rankin called in the AFP, Pike's team of agents arrived at Curtis's door and placed him under arrest for his involvement in what has become Australia's biggest bribery case.
Along with Curtis, federal police arrested former NPA managing director John Leckenby, former NPA chief financial officer Peter Hutchinson, former Securency chief financial officer Mitchell Anderson, former Securency sales executive Ron Marchant and former NPA sales executive Barry Brady.
The former banknote executives yesterday appeared in the Melbourne Magistrates Court on a range of bribery charges, including allegedly conspiring to bribe senior central bank officials in Indonesia and high-ranking politicians and central bank figures in Malaysia via more than $10 million paid to their in-country agents.
IN THE case of Indonesia, where Securency and NPA won a 1999 contract to print half-a-billion 100,000 rupiah polymer banknotes, their middleman was golf-loving Jakarta businessman Radius Christanto. He was paid about $US4.9 million in commission.
It is alleged that in Malaysia, where NPA printed the 5 ringgit polymer banknote to begin circulating in 2004, the company worked through arms broker Abdul Kayum Syed Ahmad and a former ruling United Malays National Organisation political party MP and official, Abdullah Hasnan Kamaruddin. Securency also used the pair.
Securency's executives were also charged with bribing Vietnam's former central bank governor, Le Duc Thuy, by providing a scholarship to his son to study at England's Durham University.
Vietnam is the scene of Securency's biggest deal to date, a five-year contract to switch the country's entire currency from paper to polymer. The agent for the deal was well-connected businessman Anh Ngoc Luong and his company, CFTD.
Australia's trade agency, Austrade, suggested Securency hire Luong in 2002. The problem with this was that Luong was a colonel in Vietnam's internal spy agency, the Ministry of Public Security. CFTD also had as directors and shareholders Vietnam's representative to the United Nations and relatives of senior Communist Party figures.
As such, Austrade's recommendation put Securency on a collision course with Australia's foreign bribery laws.
In a significant step, the AFP also charged Securency and NPA as corporate entities with bribery offences, making both liable for fines of at least $1.5 million. The companies are due to face court on July 27.
Although AFP Commander Chris McDevitt yesterday made clear that no past or present board members of either company were involved or aware of the alleged bribes, he would not comment on questions about the performance of the Securency and NPA boards in terms of corporate governance or whether they should be referred to the Australian Securities and Investment Commission for investigation.
The RBA learnt of the seriousness of the charges that were to be laid against Securency and NPA about six weeks ago.
For governor Stevens and his associates, the extent of the corruption at their banknote companies was staggering. It was not just the few bottles of single-malt whisky that some had thought was the nature of the so-called bribes to overseas officials. It was millions of dollars.
In a statement yesterday, Stevens expressed regret: ''The Reserve Bank deeply regrets that the governance arrangements and processes in the companies at that time were not able to prevent or detect the alleged behaviour.''
He made a point of highlighting how the AFP had not accused any past or present RBA appointees to the Securency or NPA boards of wrongdoing in terms of being aware of the alleged bribes. What Stevens did not address was the failure of both companies' boards to pick up on many warnings signs over the years that suggested Securency and NPA were doing business with a distinct lack of transparency.
Yesterday's events, in particular the charging of the RBA companies with offences, raise serious questions about the level of supervision applied by both boards.
What on earth was the RBA's Graeme Thompson - the companies' chairman during the period when the bribes are alleged to have occurred- thinking in 2007 when he stopped NPA from using overseas agents due to corruption fears but allowed Securency to continue paying millions of dollars to arms dealers and convicted white-collar criminals it was using as middlemen?
Why did his successor as chairman, Rankin, allow Securency to wire millions of dollars to a front company in the Indian Ocean tax haven location known as the Seychelles in August and September 2009 - months after he called the AFP in to investigate?
Such questions will only be answered if the Gillard government decides to hold an inquiry into the RBA's stewardship of its banknote printing firms. Greens leader Bob Brown yesterday made clear his intention to hold a parliamentary inquiry into the banknote affair.
Ominously for the RBA, the federal police yesterday signalled they were not yet done with Securency and NPA. Britain's Serious Fraud Office is also closing in on Securency's highly suspect deals in Nigeria, which involved the payment of $20 million to a
network of dubious middlemen. ''The AFP anticipates that further charges will be laid,'' AFP's McDevitt said.
Despite the prospect of more work ahead, the 20 federal agents involved in the banknote inquiry could last night pause and reflect on their history-making investigation, code named Operation Rune.
Rune began to heat up in November 2009, six months after the AFP began its initial inquiry.
On November 19, senior investigating officer Pike led a series of raids on the Securency head office and the Melbourne homes of Curtis and Ellery. Computers and other material were seized.
The raids dashed all hopes at the RBA that the federal police were looking to clear Securency and its executives of any crimes. Just the opposite: they were looking for evidence.
The reaction to the raids at the RBA was one of panic. An emergency meeting of the Securency board was held. Curtis and Ellery were stood down indefinitely. Interaction with foreign agents ceased.
The police action also sparked concern in Canberra, especially within the foreign affairs department and Austrade. Both had gone to great lengths to help Securency and NPA clinch deals overseas.
By late 2009, despite the evidence clearly showing the RBA itself and Austrade had questions to answer over their supervision and assistance to Securency, no Labor or Coalition politician dared utter a word about the scandal.
Senior Rudd government ministers who were so vocal in opposition about the Howard government's involvement in the AWB scandal - not the least Kevin Rudd himself - were silent on Securency.
In opposition ranks, where a corruption scandal involving government agencies is usually seen as a gift, there was also silence. The reason for this was that most of Securency's alleged misdeeds happened on the Howard government's watch.
The only politician to raise legitimate questions about the RBA and Austrade's role in Securency's affairs was Greens leader Brown. He tried repeatedly to get the Senate to examine the issues in a way that would not affect the AFP inquiry. Each time, Labor and Coalition senators joined forces to kill Brown's motions.
But the political games in Canberra were of minimal concern to the federal police working on Rune. They were having enough trouble understanding the secret world of the banknote printing industry that Securency and Note Printing Australia belonged to. Their starting point was a rare copy of a book called The Brotherhood of Money by US writer Murray Bloom. His 1983 expose of the dirty secrets of the world's great banknote printing companies provided a template for understanding how Securency and NPA operated.
To land a banknote deal, a company needed to have the right connections. And in many parts of the world, these connections came at a price. The key, according to Bloom, was having the right agent or middleman: someone who had access to the decision-makers in central banks and finance ministries.
Someone who knew how to move money in ways that were difficult to detect. Securency and NPA had amassed many such men and paid them more than $60 million since 1996.
But an old book, however instructive, was not enough for the federal police team to land a blow on Securency. Persuasive evidence was needed. It was found in the hard drives of the computers seized in the November 2009 raid.
''The majority of the evidence has been taken from written electronic communication between the suspects,'' the AFP said in a statement to The Saturday Age.
These computers showed the federal investigators another thing: Note Printing Australia, wholly owned by the RBA and printer of the nation's money, was also up to its neck in the alleged bribery of officials in Malaysia and Indonesia.
The RBA had been careful back in May 2009 to only refer Securency to the federal police. But now the AFP was faced with evidence that gave it no choice but to expand its investigation to include NPA. It brought the scandal another step closer to the Reserve Bank, which appointed all NPA's board members.
A hint at the nature of correspondence the AFP found buried in Securency's computers emerged in May last year when The Agereceived a bundle of faxes and emails sent to Securency and NPA executives by their Jakarta middleman, Christanto, between 1999 and 2005.
Though the documents did often not include replies from Securency and NPA, they clearly showed both were in deep discussions with Christanto about paying $US 1.3 million to a handful of Bank Indonesia officials who had ensured that they won a 1999 tender for a major banknote supply contract.
Christanto's faxes were often sent directly to Curtis and Leckenby. They were blunt about the reality of the deal, using terms such as ''unofficial payments'' and ''commissions'' for ''our VIP friends''.
''As you know there are some reorganisation from time to time, our friends do not feel secured by being high-ranking officers, they realise they can not hold the same position forever. They did ask the big amount up front,'' Christanto explained in one fax.
The Age gave the Indonesian faxes to the AFP. It is believed they were an important breakthrough.
Written electronic communication aside, the other evidence-gathering technique employed in Operation Rune was reaching out to law enforcement agencies in the countries where the RBA firms are alleged to have paid bribes. This has proved a difficult task with varying degrees of success. Malaysia's Anti Corruption Commission has been the most helpful, by making arrests and providing evidence to the AFP. Authorities in Vietnam have been far less active to this point and unwilling to expose the corrupt in their ranks.
Still, the AFP has not given up hope of future co-operation.
For all the shock of what happened yesterday, worse news is yet to come for the RBA and its moneymakers.
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