Nepal Killings Raised Note Costs, Not Bribes, Court Told

Photographer: Kuni Takahashi/Bloomberg

Nepalese rupee bank notes are arranged for a photograph in Kathmandu, Nepal. Close

Nepalese rupee bank notes are arranged for a photograph in Kathmandu, Nepal.

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Photographer: Kuni Takahashi/Bloomberg

Nepalese rupee bank notes are arranged for a photograph in Kathmandu, Nepal.

The Reserve Bank of Australia’s note printing unit raised prices on a Nepal contract to help cover higher costs including a redesign after the country’s king was killed in 2001, not to pay bribes, a court was told.

Note Printing Australia Ltd., the central bank’s wholly owned unit known as NPA, lost money on the A$3.5 million ($3.2 million) contract in 2002 to print Nepalese 10 rupee notes even after raising the price from A$68 to A$72 per thousand notes, Campbell Thomson, the lawyer representing the unit’s former chief executive, said at a hearing in Melbourne yesterday.

NPA put in a money-losing bid for the Nepalese contract as it sought to expand into India, Bhutan and other countries in the region because its plants had been idled by a lack of business in Australia, Thomson said. The lawyer cross-examined Raymond Cook, who was finance manager at NPA when it negotiated the Nepal deal, to counter prosecution arguments the unit overcharged the Nepalese government to cover costs of bribes and submitted dummy bids to make the process appear fair.

“You never suspected any NPA employee of being involved in acts of bribery?” Thomson asked Cook.

“No,” Cook replied.

John Leckenby, NPA’s former chief executive officer, Peter Hutchinson, the former chief financial officer, and former sales managers Barry Brady and Steven Wong are accused of paying secret commissions to overseas agents who bribed central bank officials in Nepal to win the contract.

The hearing on whether the state has enough evidence to warrant a trial is part of a broader probe that includes executives at Securency International Pty, the RBA’s formerly half-owned venture, and alleged bribery in Malaysia, Indonesia and Vietnam. It’s the first prosecution under Australia’s 2000 law prohibiting the bribing of foreign officials.

Royal Killing

Thomson presented dozens of e-mails between NPA executives and employees, contracts, tender documents and correspondence with agents and officials in Nepal to back his argument that changing circumstances, including the killing of Nepal’s king in 2001, pushed costs of printing the notes higher and warranted the rise to A$72 per thousand notes.

Nepal’s Crown Prince Dipendra killed nine members of the royal family, including King Birendra, and himself. King Gyanendra took over the throne, forcing the currency printing unit to redesign the note with the new king’s portrait. Changes in fonts on the note and inflation also pushed the price higher, Thomson said. Nepal became a republic in 2008.

In his statement July 22 to start the committal hearing, prosecutor Nicholas Robinson cited correspondence from NPA’s Nepalese agent Himalaya Pande that suggested inflating the price to A$72 per thousand, with part of the difference being used to cover bribes for central bank and government officials.

More Questioning

In October, RBA Governor Glenn Stevens testified at a parliamentary committee that he believed officials who reported to him acted appropriately, although there should have been more questioning and “skepticism.”

Three Securency International officials and another executive at NPA also face charges of bribing foreign officials. David Ellery, the former chief financial officer at Securency, separately pleaded guilty to one charge of false accounting and was given a six-month suspended sentence last August after agreeing to testify for the prosecution.

The cases are Australian Federal Police v Steven Wong. D10718980, Australian Federal Police v John Leckenby D10719656, Australian Federal Police v Peter Hutchinson D10719474, Australian Federal Police v Barry Brady D10719623. Magistrates’ Court of Victoria (Melbourne).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net

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