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Saturday 25 August 2012

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The Queen is said to be very upset after her corgis gotinto a vicious scuffle with Princess Beatrice’s Norfolkterriers at Balmoral castle in Scotland. One of theprincess’ pets, Max, had to be taken to the vet afterhe almost lost his ear and suffered bite wounds.

ARTS PAGE 13COMMENT & DEBATE PAGE 11EDITORIALS, LETTERS PAGE 10LOTTERIES PAGE 2MINDGAMES PAGE 14

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Memo warned RBAchiefs of bribe fearsTHE 2011 DENIAL

THE 2007 WARNING

‘‘The time at which we became aware of theallegations that were made by the newspaperswas when they were made [in 2009]. No one inthe Reserve Bank or on our board had ever hadthose allegations put to us before that.’’RBA governor Glenn Stevens to a parliamentary committee, February 2011.

Memo from Note Printing Australia company secretary Brian Hood to the bank’s deputy governor, Ric Battellino, June 2007

Glenn Stevens (left)and Ric Battellino

OVERPAYMENTSTO AGENTS‘‘The rates ofcommission . . .greatly exceededwhat I understand tobe industry averages.’’

LACK OFDOCUMENTATION‘‘Communicationsare inappropriatelyinformal, via mobilephone and textmessages, and arenot documented.’’

KEEP YOUR NOSEOUT OF ITThe CEO ‘‘asked meto ‘back off’, and notto ‘push’ too hardwith investigations’’.

THE MALAYSIANAGENTAbdul Kayum ‘‘madepaymentsto others —including officials. . . and politicians’’.

THE NEPALESEAGENTHimalaya Pandecomplained ‘‘therewas little left for himafter servicingothers’’.

Cut welfare to boost jobs: bankerBy PETER R. KERR

WELFARE payments could becut to encourage workers tomove to labour-starved butbooming mining states as partof a radical rethink of how Aus-tralia overcomes its high-costeconomy, according to ANZchief executive Mike Smith.

Mr Smith said pressure onthe economy would only grow,given he expected the Australiandollar to hit at least $US1.10 inthe foreseeable future.

This was hurting tourism andmanufacturing, while minerswere paying big wages to attract

labour, undermining their globalposition. ‘‘One of the issues youare going to have with the highdollar is global competitive-ness,’’ Mr Smith told The WestAustralian in Perth.

‘‘So how do you reduce thatcost base? Surely one of the waysto do that is you put labourwhere it is needed, rather thanfly-in, fly-out, or compromise aswe do at the moment.’’

Mr Smith said talks withresource industry leaders hadconvinced him welfare reformshould be on the table to dealwith the two-speed economy.

‘‘I think that is something we

should consider. Instinctively,mobility in Australia feels lowcompared with, say, the US. Inthe US if you don’t move, yourhouse goes and you don’t eat. Sothat is the difference,’’ he said.‘‘The welfare net [in Australia] issuch that it doesn’t provide anincentive for people to move.’’

Mr Smith this weekannounced that he would take apay freeze. He earns about$26,000 a day, almost $10 milliona year.

A Senate inquiry is looking atwhether dole payments shouldbe boosted from $245 a week.

While the ACTU wants an

immediate $50 increase, there isstrong resistance from thosewho say it would be a disincent-ive to find work.

When asked for the federalgovernment’s position, a spokes-man for Employment MinisterBill Shorten referred to a govern-ment submission to the inquiry.

The submission argues thatincreasing the dole would havethe ‘‘distinct disadvantage ofreducing employment incent-ives’’.

Mr Shorten has said in thepast higher dole could hurtefforts to get the long-termunemployed jobs. WEST AUSTRALIAN

Seven, Ten seek to hook Nine for six

Continued PAGE 2

EXCLUSIVEBy JON PIERIK

Nine’sveterancricketcommentatorRichieBenaud.

AS CHANNEL Nine celebrates itscricket history with a mini-seriesabout Kerry Packer, bitter rivalChannel Seven has emerged as aserious threat for cricket’sbroadcast rights.

Channel Seven sources say ithas met Cricket Australia at leasta dozen times in the past year,discussing buying one or all ofthe free-to-air rights to the threeformats — Tests, one-day inter-nationals and international anddomestic Twenty20 cricket.

It has also emerged thatChannel Ten is interested, withone executive declaring the net-work wanted to again have ‘‘big-time sport’’ after losing the AFLrights.

Cricket Australia’s seven-yeardeal with Nine runs until March.That deal was worth between$315 million and $350 million,but the return could double thistime, in part due to the successof Twenty20.

Seven and Ten have yet tolodge a formal offer becauseCricket Australia has yet to spe-cify how it wants to carve up therights, but the networks say talks

will intensify from November.Seven West Media has debts of$1.44 billion but insists it has themoney to buy premium sportingcontent.

Seven has discussed severalscenarios with Cricket Australia,and is particularly excited thatthe first year of any deal wouldbe an Ashes summer.

It also is interested in nightTests.

Cricket Australia chief exec-utive James Sutherland andhead of media rights StephanieBeltrame have made it clear theyare open for business.

DON’T TELL MEA court has heard

that John Leckenby, the former chief

executive of Note Printing Australia,

told staff not to email him details

of commissions paid to overseas

agents.PAGE 2

By NICK McKENZIEand RICHARD BAKERAGE INVESTIGATIVE UNIT

Continued PAGE 2

A SECRET memo sent to the“Deputy Governor RBA” fiveyears ago detailing bribery andcorruption within a ReserveBank subsidiary was withheldfrom the police, Federal Parlia-ment and the government.

The revelation of the five-page “private and confidential”memo ties RBA governor GlennStevens and his recently retireddeputy, Ric Battellino, to one ofthe worst corporate corruptioncover-ups in Australian history.

The 2007 memo shows thatalmost two years before abribery expose by The Ageforced the RBA to call in police,Mr Battellino was given adetailed and explosive memocataloguing bribery and corrup-tion inside Note Printing Austra-lia, a wholly owned and super-vised subsidiary of the bank.

The memo, details of whichhave remained secret until now,was addressed to ‘‘Deputy Gov-ernor RBA’’ and written by asenior executive of NPA, whichalong with sister firm Securencywas charged last year by Austra-lian Federal Police with bribing

foreign officials via overseasagents in order to win contracts.

It is illegal to give a benefit toa foreign official to obtain abusiness advantage.

The memo contradicts sev-eral statements made by MrStevens to a federal parliament-ary committee in 2011 that theRBA did not know of bribes andcorruption inside its subsidiar-ies before the 2009 reports byThe Age.

This year, after initially tell-ing a parliamentary committeethat the RBA was never givenany written corruption warning,Mr Stevens corrected his testi-

mony to say that a documenthad been provided to his deputy.

The memo reveals that inJune 2007 Mr Battellino was toldin writing that:■ “Extraordinarily” large pay-ments made by NPA to itsMalaysian agent had been usedto make “payments to others —including officials . . . and politi-cians”.■ The Malaysian agent hadadmitted that such payoffs were“the accepted way of doingbusiness in that part of theworld”.■ The same agent asked for theRBA firm’s funds to be directed

to an ANZ account of a mystery“nominated individual” whose“position” the lobbyist refusedto disclose.■ A Nepalese agent admittedspending the RBA firm’s fundson “servicing others” and thatthe RBA firm knew he gave‘‘donations’’ to Nepalese politi-cians.■ When the memo’s author firstraised corruption concernsinside the RBA firm, he was toldby his boss to “back off” and“not push too hard”.

In a speech to Federal Parlia-ment on Monday night, LiberalMP Tony Smith called on Mr

Stevens to table the 2007 memoto Mr Battellino when he frontsthe House of Representativeseconomics committee on Friday.

‘‘As this issue has unfolded,serious questions have beenraised in the media about thegovernance practices at thehighest levels of our ReserveBank,’’ Mr Smith said.

The memo also deals withNPA’s sister firm Securency —which is half-owned and super-vised by the RBA — revealingthat both plastic banknote firmshad on their payrolls a poten-tially corrupt Malaysian agent,arms dealer Abdul Kayum.

In July 2011, NPA andSecurency were charged by fed-eral police with channellingmultimillion-dollar bribesthrough agents in Malaysia,Nepal and other countries. Thepolice inquiry began in May2009 after The Age exposed thescandal.

The author of the memo toMr Battellino is senior businessexecutive Brian Hood, who inJune 2007 was NPA’s companysecretary. He left the firm in2008.

In his memo, Mr Hood warnsMr Battellino that the payments

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BUSINESSDAY

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Power surgeEven fixed-price electricity billsare not what they seem.Consumers need to check, anddouble-check, everything,writes Lesley Parker. PAGE 4

WORLD

America warns SyriaPresident Barack Obama haswarned that any use of chem-ical or biological weapons maytrigger US military interventionin Syria. PAGE 7

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FYI

VICE-REGALThe Governor presided at a meeting of the ExecutiveCouncil at the Old Treasury Building. The Governor,accompanied by Mrs Chernov, visitedChristadelphian Heritage College, The Basin. TheGovernor received Mark Birrell, chair, VicHealth.LINK: governor.vic.gov.au

FAITHMuslim Prayer TimesF: 5.28 S: 6.55 D: 12.24 A: 3.26 M: 5.51 I: 7.14Text for TodayYea, though I walk through the valley of the shadowof death, I will fear no evil; For You are with me; Yourrod and Your staff, they comfort me. Psalm 23:4

LAW LISTView the law list at theage.com.au/lawlist

LOTTERIESSuper 7’s Oz Lotto (draw 966): 5, 35, 18, 33, 36,32, 44. Supplementaries: 4 and 39.Monday Lotto (draw 3166) dividends: Division 1,$1million; division 2, $3959.35; division 3,$488.20; division 4, $25.05; division 5, $12.45;division 6, $10.30.

OPINION

Nick Dal Santo on a footyseason without finals‘No doubt there will betimes over the next sixweeks I will be thinkingabout what might havebeen.’ SPORT, PAGE 24

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Currency boss: ‘Don’t email me directly’Court told of executive meetingBy MARIS BECK

John Leckenby

‘‘WHAT are you guys trying todo, put me in jail?’’’ asked a red-in-the-face John Leckenby, theformer chief executive of NotePrinting Australia, according toa witness in court yesterday.

The witness, a former NPAvice-president of marketingEdward Joseph Davis, said in hispolice statement that Leckenby‘‘was strongly making the pointto all present that he had beenemailed directly regarding thelevel of commission for a con-tract . . . He subsequently went

on to say to all present words tothe effect of, I do not want thistype of information to be sent tome directly.’’

Leckenby is one of eight for-mer executives facing commit-tal in the Melbourne Magis-trates Court, accused of falseaccounting and conspiring tobribe foreign officials to getbusiness for two Reserve Banksubsidiary companies.

The prosecution is question-ing ‘‘commission’’ paymentsmade to overseas agents, whichit alleges were destined for thecoffers of government officials

in Malaysia, Indonesia and Viet-nam.

Mr Davis, who said he hadnot believed bribes were beingpaid, maintained under cross-examination that the questionwas ‘‘a quote’’ from Leckenby,who shook his head at the alle-gation.

Richard Patterson, opera-tions manager for NPA, toldpolice in a sworn statement thatagents’ commissions were dis-cussed at a meeting in which hewas told the ‘‘approval process’’for obtaining banknote supplycontracts included the PrimeMinister of Malaysia.

At the reported time of themeeting, ‘‘about 24 January2003’’, the country was led by its

longest-serving prime minister,Mahathir bin Mohamad.

In his statement Mr Patter-son said he ‘‘never had anyknowledge or suspicion of actsof bribery’’. But he was critical offormer colleagues, saying thatformer Securency managingdirector Myles Curtis ‘‘seemedto have all the attributes of aused-car salesman’’ and formerSecurency sales executive Chris-tian Boillot, whose ‘‘failure to doany kind of paperwork [was]legendary’’, had once harassed asecretary and followed herhome.

Mr Patterson said Boillot hadtold him that ‘‘NPA’s main com-petitor, [British security printingcompany] De La Rue, was able

to invite government officials touse the hospitality of its mar-quee at Wimbledon, to haveeducation of their children atBritish schools paid for, or evento accept a ‘brown envelope’under the table at an expensiveluncheon’’.

‘‘Compared to such blatant‘bribery’, Boillot argued, a fee toan agent who might very wellprovide some genuine facilita-tion was relatively innocuous.’’

Legal counsel for Boillot,Adam Chernok, argued it was acompetitive industry in whichaggressive sales techniques,‘‘chest-beating and aggrandise-ment’’ were common. But it‘‘wasn’t necessarily reflective ofany impropriety’’, he said.

Mr Patterson said in hisstatement: ‘‘There was alwaysan aura of secrecy surroundingthe [Reserve-Bank appointedNote Printing] board and manyof the papers that were submit-ted to it. The only possibleexplanation that I could reachwas that there were mattersabout which the board did notwant its senior managers tohave any knowledge or involve-ment.’’

The hearing before themagistrate, Phillip Goldberg,continues. The accused includeMyles Curtis, Mitchell Ander-son, Clifford Gerathy, RognvaldMarchant, Christian Boillot,John Leckenby, Peter Hutchin-son and Barry Brady.

Memo warning RBA chiefs of corruption withheld from police

theage.com.auRead the RBA’s full statement

From PAGE 1

‘They have clear evidence . . . that corrupt conduct washappening on their watch.’ HOWARD WHITTON, ethics adviser

that NPA was giving its overseasagents “greatly exceeded”industry standards and thatthose agents had admittedpaying off officials.

But Mr Battellino, whoretired as deputy governor inFebruary, and Mr Stevens didnot take the Hood memo to fed-eral police in 2007, nor did theytell then treasurer Peter Costelloabout it.

Instead, the corruption mat-ters were referred to law firmFreehills to investigate whetherAustralian laws had been bro-ken. The RBA says a report byFreehills, which it will not makepublic, found no evidence ofillegality.

In a statement to The Age lastnight, the RBA said ‘‘a statementby an NPA employee’’ wasexamined by Freehills in 2007.

‘‘This document is part of theevidence in current proceedingsbefore the court. The ReserveBank is prohibited from disclos-

ing it pursuant to the normalrules of court and an order ofthe Supreme Court.

‘‘Whether it will become partof the public record as currentcommittal hearings progresswould be a matter for thecourt,’’ it said.

Two corruption expertsinterviewed by The Age andshown the memo, Sydney Uni-versity’s David Chaikin and eth-ics adviser Howard Whitton,said it should have been imme-diately given to police.

‘‘No question at all [thatpolice should have been called].They have clear evidence from aresponsible official who has alegal duty to advise the RBA asthe parent of Note Printing Aus-tralia that corrupt conduct,criminal conduct, was happen-ing on their watch, and it seemsto me that it is obvious the AFPshould have been called in atthe point,’’ Mr Whitton said.

It is also understood thatwhen the AFP probe began inMay 2009, Mr Stevens and Mr

Battellino also failed to immedi-ately hand over Mr Hood’smemo. It took months for policeto obtain the memo.

Neither Mr Stevens nor MrBattellino has detailed thememo’s explosive contents inseveral parliamentary commit-tee hearings at which they havebeen quizzed about their know-ledge of the scandal before themedia expose in 2009.

Mr Stevens also made no

mention of the Hood memowhen writing to TreasurerWayne Swan in 2010 to detailthe bank’s knowledge of thescandal before 2009.

Instead, Mr Stevens told MrSwan that the bribery allega-tions aired in 2009 “were com-pletely unexpected”.

In 2011, Mr Stevens told thejoint parliamentary committee

on economics that, in responseto the question of whether “any-one in the RBA ever knew any-thing about anything” to dowith the bribery scandal beforethe 2009 media expose, “I ampretty sure the answer to that isno”. At the same committee, MrStevens said: ‘‘The time at whichwe became aware of the allega-tions that were made by thenewspapers was when theywere made. No one in the

Reserve Bank or on our boardhad ever had those allegationsput to us before that.’’

Mr Battellino received theHood memo 23 months beforeThe Age’s May 2009 report.

Mr Hood’s memo states thatwhen he made inquiries aboutthe “extraordinarily high” pay-ments to the Malaysian agent, asenior colleague conceded that

“the agent made payment toothers — including officials [inMalaysia] . . and politicians”.

“During a visit to Melbourne,the agent sought to reassure methat dealing through such net-works was the accepted way ofdoing business in that part ofthe world,” the memo says.

Kayum was charged last yearby Malaysian authorities withpaying bribes to officials usingthe RBA firm’s funds.

Mr Hood’s memo reveals thatNepalese agent Himalaya Pande“complained there was little leftfor him after servicing others”with the commissions hereceived from NPA.

“When questioned, he [theNepalese agent] refused to elab-orate as it was a matter he didn’twish to discuss over the phone.”

Mr Hood’s memo reveals heraised his concerns aboutbribery in early 2007 with ChrisOgilvy, whom the Reserve Bankhad appointed as both themanaging director of NPA and adirector of Securency.

But in his memo to Mr Bat-tellino, Mr Hood states that MrOgilvy told him to “back off andto not push too hard withinvestigations’’.

Mr Ogilvy did not returncalls.

Mr Hood also told Mr Battel-lino that the RBA firm hadeffectively lied to Nepaleseauthorities about the huge com-missions it was paying theNepal agent. NPA had paid thelobbyist commissions of “9.5%and 7.5%” but then misledNepalese authorities by claim-ing “that it was paying commis-sion at the rate of 2%”.

Mr Battellino did not informAustralian authorities or theNepal central bank of thesesecret commissions after helearnt of them from Mr Hood.

According to parliamentarytestimony, after probity issueswere raised in 2007 with the RBAand the board of NPA, the noteprinting firm sacked its agentsand ordered an audit.

Last night the Reserve Bank

responded with a statement,saying the memo in questionwas ‘‘examined at the NPAboard’s request by [legal firm]Freehills in 2007 as part of itsinvestigation. The documentwas a statement by an NPAemployee, compiled at therequest of Ric Battellino . . .

‘‘This document is currentlypart of the evidence in proceed-ings before the court. TheReserve Bank is prohibited fromdisclosing it or its contents.’’

The statement said that anaudit it requested in 2007showed ‘‘serious deficiencies’’ inthe use of sales agents, and‘‘when the NPA board receivedthe audit report, the NPA boarddecided to terminate the use ofsales agents immediately’’. Free-hills was to advise if Australialaw had been breached. It said ithad not. ‘‘The question of areferral to the AFP therefore didnot arise.’’

Seven, Tenseek to hitNine for six

From PAGE 1

Nine has always had the exclu-sive rights to the three forms ofthe game, but any new deal maysee up to three networks hand-ling the different formats.

‘‘The AFL is split over twochannels, why not cricket?’’ oneexecutive said.

Channel Ten chief executiveJames Warburton has metCricket Australia, while FoxSports, which cannot bid locallyfor the international rights,wants to retain its hold on thedomestic Twenty20 Big Bash.The Big Bash could also be splitbetween pay TV and free-to-airtelevision.

Nine is determined to retainthe rights but has major debtissues. It needs to refinance$2.8 billion in debt by February.

A Seven source said: ‘‘Thishas been a closed negotiationfor more than 30 years. Therelationship with Seven and CAhas probably never been asactive.

‘‘We have so much regularcontact. These rights will benegotiated over the Christmas-New Year period because ofcontractual windows with Nine.

‘‘There has never been a timewhere another network hasgenuinely put in a bid sinceKerry Packer revolutionisedcricket.’’

Mr Packer won the rights in1979 when peace was declaredbetween the cricket establish-ment and his breakaway WorldSeries Cricket.

The Big Bash has emerged asa lucrative component of dis-cussions after its average televi-sion viewing audience per gamelast season rose 82 per cent,from 155,000 to 282,000.

CA is also negotiating newbroadcast deals in Asia, NorthAmerica and England.