RBA brass put their side of the Securency affair

Management of the Reserve Bank of Australia first learned of the allegations of bribery and corruption at its Securency affiliate when the matter was raised by reporters from The Age, in May 2009, RBA governor Glenn Stevens told a hearing of the economics committee of the House of Representatives yesterday.

Stevens appeared at a special hearing of the committee along with assistant governor Frank Campbell and former deputy governor Ric Battelino to address their knowledge of the allegations of corruption at the firm (which is half-owned by the RBA) and also at its wholly owned subsidiary Note Printing Australia.

Both NPA and Securency are defendants on criminal charges relating to the alleged payment of bribes to foreign officials. Eight people are also facing charges, with the committal hearing recently being concluded in the Melbourne Magistrate's Court.

David Ellery, the former chief financial officer of Securency International, received a six-month suspended sentence in August, following a guilty plea concerning his role in fostering the payment of bribes to foreign sales agents.

Stevens used the hearing to outline the RBA's efforts to review the use of sales agents at the two firms, a process dating to 2006 and motivated by issues arising from the controversy over sales practices at the AWB (which led to a Royal Commission).

The RBA conducted audits of both NPA and Securency (which lacked its own board audit committee at the time). This led to a reform of sales practices and to the termination of some dealings with agents.

Stevens said that while the RBA realised the payment to sales agents at NPA were used in some cases to pay bribes to foreign officials NPA and RBA did not consider this represented a breach of Australian law or warranted a reference to police.

Around the same time, Battelino said he was aware of tensions among the management team at Note Printing Australia, including hostility toward NPA's company secretary, Brian Hood.

One feature of that hostility was pressure from NPA's management, through its board (headed by former APRA chief Graeme Thompson), to patrol independent contact between Battelino and NPA staff, including Brian Hood.

The detail of Hood's interactions with RBA's management, in 2007, has become one of the central issues in recent media and political discussion of its conduct during the affair.

Battelino confirmed details of a highly confidential briefing provided in 2007 (at Hood's request). In many media accounts Hood is the "whistleblower" in the affair.

Hood's disclosures at the time led to further reviews, by the law firm Freehills, though these did not lead to the discovery of all of the matters at Securency later exposed by The Age newspaper.

Stevens told the committee yesterday that when "these things appeared in the media [it] was quite contrary to what we knew or thought we knew at Securency."

"That's why the first reaction [by new NPA chair and RBA assistant governor Bob Rankin] was shall we get KPMG to come and get a forensic audit or call the police, and, in the end, we did both."

Another detail of yesterday's hearing which attracted interest is the "he said, then he said" over conversations at the end of a farewell lunch for Brian Hood at the RBA, in 2008.

Hood told a different parliamentary committee last week that Battelino warned him from talking about the controversies over sales agents.

Battelino said the conversation did not take place at what was a friendly lunch that was free of work talk.

Stevens said he'd spoken to the other four people at the lunch and none remembered the comments alleged by Hood.

Hood is in dispute with the RBA and is seeking a top-up to his final payments.