New evidence raises questions of RBA bribery response
Australian Broadcasting Corporation
Following our story on the bribery scandal centring on the Reserve Bank of Australia, new evidence raises questions about the RBA's response.
TranscriptLEIGH SALES, PRESENTER: The scandal over alleged bribery and corruption in companies owned by the Reserve Bank is deepening.
Explosive new evidence shows that RBA subsidiaries paid more than $3 million in commissions to a Malaysian arms dealer to secure bank note contracts in Asia. Even after the arms dealer was sacked for corruption, the payments continued with the RBA's approach.
The revelations pose serious new questions for Reserve Bank Governor Glenn Stevens about what the bank knew of Australia's worst corporate corruption case.
Nick McKenzie has this report, with Richard Baker of The Age.
NICK MCKENZIE, REPORTER: The bribery scandal that is engulfing the Reserve Bank of Australias has reverberated across the globe. Last year in Kuala Lumpur, the former assistant governor of Malaysia's Central Bank was charged with taking bribes in return for handing contracts out to two Reserve Bank subsidiaries, Note Printing Australia and Securency.
MALAYSIA KINI.TV ANNOUNCER: Mohamad Daud Dol Moin, a former assistant governor of Bank Negara Malaysia was charged today at the Kuala Lumpur sessions court for corruption.
NICK MCKENZIE: The Malaysian Central Bank chief was accused of taking bribes from a middle man: an arms dealer called Abdul Kayum. Kayum was also arrested last year.
MALAYSIA KINI.TV ANNOUNCER: Businessman Abdul Kayum Syed Ahmad has also been charged for [inaudible].
NICK MCKENZIE: Abdul Kayum is an arms dealer based out this office in Kuala Lumpur, where he runs a company called Aksavest. The company's former website shows Kayum worked for a Pakistani weapons supplier, Air Weapons Complex, which sells laser-guided bombs.
R. NADESWARAN, MALAYSIAN INVESTIGATIVE JOURNALIST: Kayum is one of the many thousands of middle men, agents - whatever you want to call them - who move around in these circles hoping to make a break, make one big killing and then share the loot with whoever they are fronting for.
NICK MCKENZIE: In 1999, the wholly-owned RBA firm Note Printing Australia hired Abdul Kayum to help it win contracts in Asia to turn the ringgit from paper to plastic. The five ringgit note was the first to go polymyer. And the RBA's second plastic bank note company, Securency, also put Kayum on their payroll.
R. NADESWARAN: He would've met someone in the political ladder, and he would've said, "Listen, I've got some ways you can make money, right. I've got this Aussie deal, I've been approached" or whatever it is, and then the other guy would've gone into the picture.
NICK MCKENZIE: Leading Malaysian investigate an reporter R. Nadeswaran has spent years probing the grubby crossover in Malaysia between business and politics. He says to make deals, Kayum used his connections in a powerful UMNO political party, including his partner, politician turned party operative, Abdullah Hasnan Kamaruddin.
R. NADESWARAN: A lot of these middle men are small-time players. You see, the big guys do not want their names sullied, or they don't want to be caught with their pants down. So they use people to front for them.
NICK MCKENZIE: The relationship between Abdul Kayum and the Reserve Bank companies has remained a mystery for years. But 7.30 can reveal that top Reserve Bank officials not only knew of Kayum's highly suspect dealings, but even approved payments to Kayum after he was sacked over corruption concerns.
ADAM BANDT, GREENS MP: If these revelations are true, I think it really strengthens the call for a full Royal Commission into who knew what, when, at the highest levels of the Reserve Bank. And it adds to, I think, the growing cloud over the Reserve Bank at the moment, in questions of corporate governance, that really needs to be lifted.
NICK MCKENZIE: The saga began when Note Printing Australia set up a closely guarded project codenamed Excocet to pay Kayum up to 20 per cent of the value of the multimillion-dollar contracts in won in Malaysia. Documents produced last month in a Melbourne court case reveal that some inside NPA considered his commissions to be "excessively high". Between 2003 and 2007, Kayum received more than $3 million from NPA.
In early 2007, a senior NPA insider, Brian Hood, raised concerns this money may have been used to pay bribes. In a secret memo revealed last month by 7.30, Hood wrote to Reserve Bank Deputy Governor Ric Battellino in June 2007, and warned that "the extraordinarily high commission paid to Kayum may have been used to make payments to others, including officials and politicians".
GREG BARNS, BARRISTER: Well, the Australian law since 1999 had said that corporations or individuals... and corporations or individuals who make payments with a view to getting a business advantage overseas are committing an offence under the Commonwealth criminal law. There is a limited defence for what's called "facilitation payments" where there are minor payments and you make a record of those payment,s but essentially the law is that you just don't make payments to overseas officials.
NICK MCKENZIE: In May 2007, after corruption concerns about Abdul Kayum were raised, NPA decided to sack him, and not to pay him another dollar.
The alleged bribery scandal has dogged Governor Glenn Stevens since it was first revealed in The Age in May 2009 in an expose which forced the Reserve Bank to call in police. Since then, in repeated parliamentary hearings, Stevens has insisted the RBA did not know of corruption in Securency until the allegations hilt the press in 2009.
GLENN STEVENS, RBA GOVERNOR (August 2012): There was no cover-up. The answers to the questions I gave about Securency and when I knew, I still believe are correct. And I believe what we've said about NPA is correct.
NICK MCKENZIE: But 7.30 has learnt that in September 2007, Note Printing Australia held a board meeting where a fresh corruption bombshell would be dropped. Those around the table included the Reserve Bank's assistant governor, Frank Campbell, and the dual NPA and Securency Chairman Graham Thompson - a former Reserve Bank Deputy Governor. The board heard that the RBA subsidiary Securency was planning to pay sacked arms dealer Abdul Kayum a secret commission hidden in an inflated bank note contract. The commission was worth $492,000.
GREG BARNS: I mean, a secret commission could constitute a bribe. I mean, if you are paying a person a secret commission and the role that that person has is to facilitate access to politicians so that you get some form of business advantage, for example, then that could certainly constitute the offence of bribery.
NICK MCKENZIE: Barrister Greg Barns says the revelation that the supposedly sacked Abdul Kayum was to get more funds as part of a shonky business deal should've shocked the board.
GREG BARNS: Boards need to be very careful that they steer well away from anything that looks like, smells like or probably is a bribe. And certainly when it comes to making payments to middle men overseas, it's generally, I think, thought to be bad business practice. One would've thought there wouldn't be many circumstances where you would approve such payments.
NICK MCKENZIE: But 7.30 can reveal that assistant RBA governor Frank Campbell and the other board members were advised by Chairman Graham Thomson that Securency would on the basis of legal advice received pay the agent Abdul Kayum the amount of commission hidden in the suspect business deal. This was despite the fact that the board had four months earlier resolved to sack Kayum over corruption concerns.
GREG BARNS: There needs though to be an examination of the governance arrangements at the RBA, because this all happened in circumstances where you had the board of the RBA and underneath it these subsidiaries. Effectively, you've got to look at the board's conduct, the subsidiary's conduct, and find out how it was that these quite huge sums of money were paid to people in circumstances which I think many would say were at least questionable.
NICK MCKENZIE: But Abdul Kayum wanted yet more money from his RBA benefactors. So two months later, Kayum got his partner, Malaysian political operative Abdullah Hasnan Kamaruddin, to write directly to the Reserve Bank. His letter to assistant governor Frank Campbell included a none-too-subtle reminder of why it was that the pair had been hired by the RBA firms in the first place.
ABDULLAH HASNAN KAMARUDDIN (voiceover): Dear sir, I managed to personally convince my Prime Minister, Finance Minister and the Malaysian Cabinet to accept and adopt polymer bank note technology.
NICK MCKENZIE: After this letter came yet another payment. In 2008, the sacked Abdul Kayum got a further $600,000 from NPA, which was paid yet again with the knowledge of senior serving and former RBA officials.
R. NADESWARAN: I always maintain that if there are no givers there will be no takers. So I think the giving was started by the RBA.
NICK MCKENZIE: As questions about the RBA's handling of the scandal continue to mount, Liberal MP Tony Smith is urging the Federal Parliament's House Economics Committee to urgently convene a special hearing to probe the affair.
TONY SMITH, LIBERAL MP: Glenn Stevens indicated a willingness to come before a specially convened, dedicated hearing. This must happen. It would be ridiculous if further questioning was postponed on this.
ADAM BANDT: It's a central economic institution nor this country, people should have full confidence that it acts according to the highest standards, and I think it's got to the the point now where so many questions are being asked that the only way we can clear the air and lift that cloud is through a full inquiry.
LEIGH SALES: The Reserve Bank sent 7.30 a statement in response to questions, saying the bank's executives acted in good faith and with integrity. Nick McKenzie reporting there.
Read the Reserve Bank of Australia's response to 7.30.