Papers refute RBA chief

NEW documents have contradicted parliamentary testimony by Reserve Bank governor Glenn Stevens that the bank knew nothing about the Securency banknote scandal before it became public in 2009.

Key parts of Mr Stevens' testimony about the RBA's knowledge of the scandal - he has claimed bank officials knew nothing of Securency's alleged corruption before The Age's expose of the scandal in 2009 - conflict with newly uncovered documents.

The scandal involves RBA companies Securency and Note Printing Australia, charged last year with bribing foreign officials to win banknote contracts.

The documents that contradict Mr Stevens' parliamentary testimony, and raise further questions about the governance standards at the RBA and its subsidiaries, come from the central bank's files.

They show that in 2007:

■ Reserve bank assistant governor Frank Campbell was told how Securency engineered a dodgy business deal to hide a $492,000 payment to an allegedly corrupt Malaysian arms dealer.

■ The arms dealer's company wrote to Mr Campbell demanding further payments and stating it had convinced the ''prime minister and the Malaysian cabinet'' to give out contracts.

■ RBA auditor John Klincke allegedly queried a Securency manager about payments to an agent working for Vietnam's spy agency, and was told in response: ''Well, if I asked you if you worked for ASIO, you wouldn't tell me, would you?''

The Age can also reveal the RBA - unwittingly or otherwise - hampered the federal police bribery inquiry by failing to inform police for several months in 2009 of incriminating documents it held regarding its subsidiaries' activities.

At the same time RBA was withholding crucial documents, senior RBA officials approved Securency transferring millions of dollars offshore in payments that authorities now suspect included large bribes.

British authorities are still investigating if the money sent offshore by Securency after the federal police began its probe was used to pay bribes in Africa.

In response to 18 questions from The Age, the RBA released a statement saying: ''The Bank has sought to deal appropriately with all the issues that have arisen. It has co-operated fully with the legal authorities, notifying them of the existence of relevant documents and providing documents when requested. There has been no attempt by the Bank to hide information from the authorities.

''Even if it were ultimately to be concluded, with the benefit of hindsight, that incorrect conclusions were drawn from the various investigations, the Bank and the NPA Board relied on the information available at the time and external legal advice. The Bank's executives acted in good faith and with integrity. It is completely without foundation to suggest otherwise.''

The fresh revelations have sparked further calls for an inquiry into the RBA's handling of the bribery scandal.

Liberal MP Tony Smith, who has questioned Mr Stevens at hearings of parliament's economics committee, said his fellow committee members must take up the governor's recent offer to make a special appearance to answer questions and table documents.

''This must happen. It would be ridiculous if further questioning was postponed on this,'' Mr Smith said.

Committee chairman Labor MP Julie Owens declined to comment on the prospect of recalling Mr Stevens for a special hearing.

Prime Minister Julia Gillard and Treasurer Wayne Swan have refused to comment on the scandal and have supported Mr Stevens' handling of it.

But Greens MP Adam Bandt has repeated his call for a royal commission on the bribery scandal to uncover ''who knew what when at the highest level of the RBA''.

Independent senator Nick Xenophon said a full parliamentary inquiry was required ''given the apparent inconsistencies between statements given by those at the Reserve Bank's most senior levels''.

Mr Stevens told the committee last month that the RBA did not know of the corruption concerns involving Securency until they were exposed in the media in 2009 and that the RBA had given relevant documents to the AFP in a timely manner.

However, confidential RBA files reveal that during 2007 RBA assistant governor Frank Campbell was told that Securency artificially inflated a contract to hide a secret $492,000 to a Malaysian arms dealer, Abdul Kayum, who had earlier been sacked over corruption concerns.

Records show the issue was also raised at a Note Printing Australia board meeting in September 2007 attended by Mr Campbell and dual NPA and Securency chairman Graeme Thompson, a former RBA deputy governor and inaugural chief of the Australian Prudential Regulation Authority. This revelation follows another in The Age last month, of an explosive bribery memo sent in June 2007 to the central bank.

That memo was written by NPA company secretary Brian Hood and sent to RBA deputy governor Ric Battellino. It revealed Kayum was working for both NPA and Securency and allegedly paying bribes to win contracts.

Mr Stevens told the committee last month he could not recall when he first had read Mr Hood's memo.

Kayum was charged in July last year with paying bribes. Several former Securency and NPA executives have been charged with bribery.

There has been no inquiry into the conduct of RBA officials, including those on the boards of Securency and NPA, in connection to the scandal.

Despite Mr Kayum having been sacked over corruption concerns, Mr Thompson advised the board meeting that ''Securency would, on the basis of legal advice, pay the agent [Kayum]'' the commission hidden in the inflated contract.

In November 2007, Mr Campbell was sent a letter by Kayum's company demanding hundreds of thousands of dollars in outstanding commissions. The letter was sent almost six months after Mr Campbell was warned that Kayum may be paying bribes and that he was to be sacked.

RBA statement in response to 18 questions from The Age

The Reserve Bank is committed to transparency on these matters with the community and the Parliament through the House of Representatives Economics Committee.  In his Statement to the Committee on 24 August, the Governor said that the Bank was taking steps to seek the permission of the Court to allow the Bank to table a broad range of relevant documents.  This work is progressing. It is important that the legal process is respected and that the release of any documents is done in a way that does not jeopardise the right of the accused to a fair trial.

The Bank has sought to deal appropriately with all the issues that have arisen. It has cooperated fully with the legal authorities, notifying them of the existence of relevant documents and providing documents when requested. There has been no attempt by the Bank to hide information from the authorities.

Even if it were ultimately to be concluded, with the benefit of hindsight, that incorrect conclusions were drawn from the various investigations, the Bank and the NPA Board relied on the information available at the time and external legal advice. The Bank's executives acted in good faith and with integrity. It is completely without foundation to suggest otherwise.

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