RBA Denies Stevens Misled Panel Over Corruption Allegations

Reserve Bank of Australia Governor Glenn Stevens
Glenn Stevens, governor of the Reserve Bank of Australia. Photographer: Ian Waldie/Bloomberg

The Reserve Bank of Australia denied Governor Glenn Stevens misled parliament over what officials knew of alleged corruption at a note printing unit amid media reports his former deputy was informed of potential bribery.

Then-Deputy Governor Ric Battellino was given a memo in 2007 raising concerns that employees of Note Printing Australia Ltd., a wholly owned subsidiary of the bank, were bribing foreign officials to win currency printing contracts, the Australian Broadcasting Corp. reported. Stevens testified to a committee of lawmakers last year that central bank officials were unaware of the alleged corruption until media reports in 2009, the ABC said.

“The bank rejects the implication that the governor or other officers of the bank have misled” the parliamentary panel, the RBA said an e-mailed statement today. Note Printing Australia had “responded appropriately” in addressing concerns of corruption, the central bank said.

Former managers and employees at Note Printing Australia and Securency International Pty, which is half-owned by the RBA, have been charged with bribing officials in Malaysia, Indonesia and Vietnam from 1999 to 2004 to win bank-note printing contracts. The RBA has previously denied allegations in the media of a cover-up, and the ABC report triggered a call from Greens Party lawmaker Adam Bandt for a public inquiry into the matter.

Stevens, head of the central bank since 2006, is scheduled to appear for his semi-annual testimony before a parliamentary panel in Canberra on Aug. 24.

‘Governance Standards’

“We need to have complete confidence that the highest governance standards exist in the RBA,” Bandt, whose vote Australia’s minority government relies on to pass legislation, said in a statement today. “This scandal touches the key financial institution in this country, as well as other arms of government. We need a full-scale inquiry to clear the air and remove the cloud hanging over the RBA.”

Note Printing Australia is governed by a board of directors appointed by the Reserve Bank. Securency’s board has three directors appointed by the RBA. The central bank said in its annual report last year that it had replaced its representatives on the two companies’ boards. The RBA said in November 2010 that it will sell its stake in Securency.

The Reserve Bank said it would contact Battellino, who retired from the central bank in February, to determine whether he wanted to comment.

‘Serious Deficiencies’

The document referred to by the ABC was compiled by a Note Printing Australia employee at Battellino’s request, according to the RBA statement. It was examined in 2007 by Freehills law firm, which had been asked by the unit’s board to investigate after an audit showed “serious deficiencies” in its use of sales agents, according to the statement.

Freehills concluded no Australian laws had been broken and the board “responded appropriately to the information it received and reasonably relied on the advice it received,” the RBA said.

The chairman of Securency asked the Australian Federal Police to investigate after the Age newspaper reported the allegations in May 2009, and authorities were given copies of the 2007 audit and Freehills report, according to the RBA statement. The document is now part of evidence in current proceedings before the court, the central bank said.

‘Ethical Obligation’

The RBA’s “senior management would’ve had, if not a legal obligation, at least an ethical obligation to have made a disclosure at an earlier stage,” said Anil Hargovan, an associate professor specializing in corporate law and governance at the Australian School of Business in Sydney, part of the University of New South Wales. “Because we’re dealing with a public body, the degree of accountability that’s expected is higher and, therefore, calls for a Royal Commission that have been made by some politicians appear to be appropriate.”

The former chief financial officer of Securency International was given a six-month suspended sentence on Aug. 20. David Ellery, 56, pleaded guilty to one charge of false accounting in the bribery probe in the Supreme Court of Victoria. Justice Elizabeth Hollingworth said that Ellery had cooperated with police and would be an important prosecution witness in any trial. It’s the first time anyone’s been prosecuted under anti-bribery laws enacted in Australia in 2000.

In testimony to a parliamentary panel in February this year, Stevens corrected an earlier statement and said Battellino had received a written briefing from a Note Printing Australia employee. He denied the central bank had tried to cover up the corruption claims.

“Let me be crystal clear that I unequivocally reject that,” Stevens told lawmakers. “That is not true. There is no basis for those claims at all.”

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