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"Cover Up" - Monday 30 September 2013

KERRY INTRO

KERRY O'BRIEN, PRESENTER: Who can you trust if you can't trust the Reserve Bank? Welcome to Four

Corners.

The Reserve Bank is one of Australia's most important institutions with a reputation that has to be

beyond reproach. It has the power to determine the pace of our economy and impact on lives in the

most basic ways.

But during the 1990s, a decision by the Reserve to sell its revolutionary polymeric technology globally let

it into a shadowy world of bribery and corruption. Three years ago Four Corners aired allegations that

two subsidiary companies of the Reserve Bank, Note Printing Australia and Securency, had approved the

payment of commissions and bribes in other countries. Several former employees of Note Printing

Australia and Securency, and the companies themselves,** are now facing criminal charges for allegedly

paying kickbacks.

Tonight's story strongly suggests however, that former directors appointed by the Reserve Bank havenever been investigated for their oversight of such corruption-prone business activities over a ten year

period.

Tonight, two whistleblowers speak publicly for the first time, about their efforts to bring this bribery

scandal to the attention of their superiors, and the failure of corporate watchdog ASIC to investigate

seemingly untouchable directors of two allegedly corrupt RBA companies.

In this joint Four Corners/Fairfax media investigation, Nick McKenzie is the reporter.

**(Editor's Note: In 2011 Securency and Note Printing Australia were charged by the federal police with

bribery offences relating to the alleged payments to overseas officials. Court Orders prevent recent

developments regarding the charges against the companies being reported.)


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(Sound of car driving through Iraq desert, music and then fax machine)

VOICEOVER READING FROM FAX: Dear Mark, Please find attached my report. Visit to Iraq 17-19 May

1998.

Objectives - Identify decision makers, verify interest and gain a complete understanding of the

customer's requirement in order to proceed with a formal proposal, investigate potential showstoppers

and issues such as UN embargo and payment capabilities.

NICK MCKENZIE, REPORTER: In May 1998, two officials from Australia embarked on a secret and highlyillegal mission, codenamed Project Delta.

At the time UN sanctions made it illegal for any Australians to do business with Iraq.

But the pair's aim was to strike a business deal with none other than the brutal dictator Saddam

Hussein.

(Actors mimicking out actions of Australian officials meeting Arshad Yassim)

VOICEOVER READING FROM FAX: People Met - Mr Arshad Yassim.

(Arshad Yassim speaks in Arabic)

Married to Saddam Hussein's sister and first cousin of Saddam Hussein.

ARSHAD YASIM (ACTOR): Please sit.


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VOICEOVER READING FROM FAX: Extremely influential, he is willing to open all the doors for us.

OFFICIAL ONE (ACTOR): Thank you for agreeing to see us. I'd like to show you our polymer notes.

NICK MCKENZIE: The two men were trying to sell the special plastic bank note technology owned by the

Reserve Bank of Australia.

Not only was this illegal, but both men actually worked for the RBA - the very Australian agency

responsible for upholding the sanctions that the two men were so clearly breaching.

A secret Reserve Bank file obtained by Four Corners reveals the two RBA officials were busting to get

into bed with the dictator, with the help of Saddam's brother-in-law.

VOICEOVER READING FROM FAX: Arshad Yassin is critical, as all decisions on this project will be taken by

Saddam Hussein.

ARSHAD YASIM (ACTOR): Saddam has seen sample.

VOICEOVER READING FROM FAX: He has confirmed that Saddam Hussein has seen the polymer notes

samples and is keen to adopt our product.

OFFICIAL ONE (ACTOR): We can produce a new series of Iraq notes.

NICK MCKENZIE: The Reserve Bank of Australia had gone from sanctions cop to sanctions buster.

DR DAVID CHAIKIN, CORPORATE CORRUPTION EXPERT: Well, I think there's a very strong prima facie

case of a violation of international law.


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NICK MCKENZIE: Why should we care?

DR DAVID CHAIKIN: Well, we should care because we went to war with Iraq and the effect of this was to

give succour to the Iraqi regime. And that's why we should care.

NICK MCKENZIE: But the Reserve Bank officials did not appear to mind a bit.

VOICEOVER READING FROM FAX: Indications from Arshad Yassim's office are that Saddam Hussein's

office has already allocated $US65 million for the total project.

NICK MCKENZIE: One Reserve Bank official proposed that Saddam Hussein himself could personally

green-light the movement of funds through Jordan and on to the RBA.

VOICEOVER READING FROM FAX: I recommend we proceed with the proposal.

NICK MCKENZIE: The secret report on Project Delta was faxed to a prominent Australian businessmanMark Bethwaite.

The former Olympic sailor was appointed by the RBA to keep watch over its newly corporatised firm

Note Printing Australia.

The fax to Bethwaite spelt out that Note Printing Australia was going down a very corrupt path.

VOICEOVER READING FROM FAX: Canberra was not really keen to see high profile trade with Iraq at this

stage. This is something we will have to address in due course.

I hope the board meeting went well and look forward to meet with you back in Melbourne.


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(Actors playing officials and Arshad Yasim stand and go)

ARSHAD YASIM (ACTOR): I will wait for your proposal.

NICK MCKENZIE: The Reserve Bank firm Note Printing Australia's plan to make a mint in Iraq was

dramatically stopped six months later.

Australian diplomats uncovered its dealings with Saddam and warned that NPA's "informal meeting with

Saddam Hussein's brother-in-law… may have already breached Australia's obligations under

international law."

DR DAVID CHAIKIN: Given the clarity of such a violation of Australian law and international law, this

should've rung alarm bells to the highest levels of the bank, because what was happening was not only

in violation of the law, but was potentially would destroy and undermine the reputation, not only of

Note Printing Australia but its owner, the Reserve Bank.

Certainly they should've considered taking the matter further, potentially referring it to the Australian

Federal Police for the purposes of a criminal investigation.

NICK MCKENZIE: But Mark Bethwaite kept Project Delta a secret.

When Note Printing Australia or NPA went to Iraq, it was fully owned and overseen by the Reserve Bank.

NPA designs and prints bank notes using Australia's special polymer bank-note material.

This material is made by NPA's sister Reserve Bank company, Securency.


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The illegal Iraq trip was the beginning of an inglorious reign by the directors the Reserve Bank had

hand-picked on the boards of its two Melbourne firms.

Over the next ten years, these directors oversaw extremely corruption-prone business practices, tens of

millions of tax payer dollars sent to foreign agents, who allegedly used these funds to bribe overseas

officials to award lucrative bank-note contracts to the RBA firms.

DR DAVID CHAIKIN: This is the worst corruption scandal in our history, not because of the amount of

money that's been involved, because the most respected institutions of our country, see, have failed to

discharge their responsibilities to the public to make sure that their subsidiaries act in accordance with

the law.

NICK MCKENZIE: But board directors and Reserve Bank officials implicated in this scandal appear to have

been protected.

The federal police and, most critically, the corporate watchdog ASIC have failed to investigate whether

there was any breach of the corporate Laws which ASIC is meant to enforce.

DR DAVID CHAIKIN: If this was done in the, in the private sector and there was no governmentinvolvement or embarrassment, it would've been subject to the most rigorous investigation.

NICK MCKENZIE: But because it is part of the RBA, it's offered these directors a level of protection?

DR DAVID CHAIKIN: Well, absolutely. It means that to some extent there's impunity, unaccountability for

actions, which if it took place in the private sector then they would be subject to far more rigorous

investigations and potential prosecution.

NICK MCKENZIE: But tonight two high-ranking whistleblowers break their silence.

For the first time they reveal all of the RBA's dirty secrets and the ongoing attempt to cover them up.


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JAMES SHELTON, SENIOR SALES MANAGER, SECURENCY 2007-08: It makes me you know, disappointed

again in some of the authorities that are entrusted with enforcing the laws of this country.

BRIAN HOOD, COMPANY SECRETARY, NOTE PRINTING AUSTRALIA 2004-08: Certainly with respect to the

Board of Note Printing and some people at the RBA, very unaccountable, they appear to be

untouchable.

NICK MCKENZIE: When Brian Hood started his job as Company Secretary at the most secure and

secretive industrial site in Australia, he was excited.

(Nick and Brian stand outside Note Printing Australia)

BRIAN HOOD: It's got a great product, polymer bank notes are a very significant Australian invention,

there was a real buzz about the place. It's quite an unusual setting. The security is just an added feature.

The fact that we were dealing with bank notes and passports, the design of them, the security of them,

it's quite a different industry, it's quite unique, so there was a good feel about it and some pretty high

expectations.

NICK MCKENZIE: It was 2004 and Brian Hood had no idea of the dirty secrets he would soon uncover.

(Talking to Brian) So is this the first time you've been back to Note Printing Australia?

BRIAN HOOD: Yes this is the first time, since September 2008 I've been back here.

NICK MCKENZIE: How does it feel to be back?


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BRIAN HOOD: Not good, pretty, pretty uneasy.

It never ever entered my mind I would uncover such a series of events.

NICK MCKENZIE: Brian Hood's discoveries of alleged bribery and corporate misconduct would turn him

from an ordinary businessman into Australia's most important business whistle-blower, placing him on a

collision course with some of the nation's most powerful figures.

(February 11 2011, court)

GLENN STEVENS, RESERVE BANK GOVERNOR: No one in the Reserve Bank or on our board had ever had

put to us those allegations before that time.

BRIAN HOOD: Well it wasn't the truth, they were told in June 2007.

NICK MCKENZIE: At first, Brian Hood was pleased to be working under a board of directors handpicked

by the Reserve Bank and who, under Australian law, had to act with care and diligence to safeguard

Note Printing Australia from corruption.

Along with Mark Bethwaite was former Reserve Bank board member, and Caltex chairman, Dick

Warburton.

At the helm as chairman was Graeme Thompson.

Thompson is one of corporate Australia's most senior figures, having previously been deputy governor

of the Reserve Bank and the head of the nation's banking regulator APRA.

BRIAN HOOD: Graeme was the Chairman of both Note Printing and Securency, so quite powerful, he, he

headed both boards.


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NICK MCKENZIE: Graeme Thompson's ambition was to sell the RBA's polymer bank notes across the

world.

To do this, Note Printing Australia hired foreign agents to win bank note contracts.

NPA's most successful agent was in Malaysia.

But Brian Hood soon discovered he was no ordinary businessman.

BRIAN HOOD: It was commonly known that he had other business dealings in military arms, and at one

point I was wanting him to clarify just exactly what his dealings were, what, what products was he

dealing with, what customers, what did military arms mean? Because there was a concern that is he the

sort of person that's fit and proper to be representing Note Printing Australia and the Reserve Bank.

NICK MCKENZIE: Pretty odd for the RBA, an RBA subsidiary to be hiring an arms dealer, let alone paying

him multi-million dollars.

BRIAN HOOD: Well that was my concern, that it is, are his other activities in any way at all going to

embarrass Note Printing or the Reserve Bank? Is he a fit and proper person to be doing this?

NICK MCKENZIE: The arms dealer was Abdul Kayum, who claimed he held influence over the Malaysian

officials who would decide whether or not to sign a bank note contract.

In Malaysia, bribery is rife, so Brian Hood checked what Abdul Kayum and another Asian agent were

getting paid.

BRIAN HOOD: Millions of dollars, they were being paid millions of Australian dollars and again, that

didn't seem appropriate given the sort of role that they were playing, it seemed unduly generous. That


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grabbed my attention right from the start, that these guys are being paid an enormous amount of

money, what are they actually doing to earn that.

NICK MCKENZIE: What was your fear?

Brian Hood: Well after a few things had happened, the fear was that the money wasn't just staying with

the agent, that it was being dispersed to others.

NICK MCKENZIE: Brian Hood's concerns grew when the arms dealer asked for $600,000 to be wired into

another person's bank account.

In early 2006, Brian Hood told the board of Note Printing Australia that Abdul Kayum had been already

been paid more than $2 million in return for convincing Malaysian officials to award the Reserve Bank a

contract.

What's more, he was set to get another $950,000.

NICK MCKENZIE: Was the Board up in arms?

BRIAN HOOD: No.

NICK MCKENZIE: Was anybody saying why is so much money going to this person?

BRIAN HOOD: No.

NICK MCKENZIE: Why not?


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BRIAN HOOD: Good question, that's a question for the Board, um . . .

NICK MCKENZIE: It's obvious stuff isn't it?

BRIAN HOOD: I thought so.

BRIAN HOOD: There were lots of elements to that recipe that could have been and should have been

seen as being pretty risky, so rather than a light handed approach to governance by the Reserve Bank or

by the Note Printing Board, it should've been quite the opposite, it should've been very tight controls,

high level of scrutiny, lots of reporting, lots of diligence; but that wasn't the case.

Brian Hood became further alarmed when Abdul Kayum unexpectedly walked into his office at Note

Printing Australia.

BRIAN HOOD: It was an impromptu, unscheduled meeting. He came along and had a discussion with me

about the commission he was being paid, the amounts and the rate. And he was seeking to defend

those amounts and he explained to me that other people were involved, there was a network of people,

was the phrase he used, and that in his mind justified why he was getting paid so much and that the

payment of other people was the way things were done, the way business was done in his part of theworld.

NICK MCKENZIE: What did you take that to actually mean?

BRIAN HOOD: That he was paying other people in order for Note Printing to win contracts. That he was,

to use his terms, he was dispersing funds.

It hit me between the eyes that he was outright telling me that this is the way things were happening

and that he wasn't the only one retaining all of these funds.

NICK MCKENZIE: Brian Hood told Abdul Kayum he would not be getting another dollar.


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(Brian on the phone in his office)

BRIAN HOOD: Well that's the way it's going to be.

NICK MCKENZIE: But chairman Graeme Thompson had other ideas.

Thompson ordered that the Malaysian middleman be paid the $400,000 that Hood was refusing to hand

over.

BRIAN HOOD: I was absolutely dismayed, I was shocked at the decision, I was quite stunned by it, I was

quite angered by it. I can recall the, the meeting, the room we were in, the decision that he took, and I

was then forced to instruct the Finance Manager to release the funds. I was, I was gobsmacked by that.

NICK MCKENZIE: Is that appropriate for a Chairman to be giving $400,000 to an agent who was at that

point in your mind suspected as being corrupt?

BRIAN HOOD: Absolutely not

NICK MCKENZIE: Was there a risk those funds would be funnelled, used as bribes?

BRIAN HOOD: There was that risk. I was quite angry with that discussion; I was pretty stunned by the

decision to let the funds go.

DR DAVID CHAIKIN: Chairman's of the company are not supposed to get involved in operational matters,

particularly of the nature of making payments to agents. It's virtually unheard of that a chairman would

act in that way.


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(Nick visits Mr Thompson at his home)

NICK MCKENZIE: Mr Thompson, Nick McKenzie from Four Corners. Can we have a quick chat?

We've made repeated attempts to speak to Graeme Thompson, but he refuses to answer questions.

NICK MCKENZIE: Why can't we ask you questions about the Reserve Bank companies you were part of?

Just a quick a few quick questions please?

GRAEME THOMPSON: No thank you.

NICK MCKENZIE: We'd like to ask you about Abdul Kayum. Why did you pay Abdul Kayum $400,000 Mr

Thompson? Isn't fair you'd answer just a couple of questions sir?

Abdul Kayum wasn't the only overseas agent getting paid big bucks under the watch of Thompson.

(Nepal)

In Nepal, Note Printing Australia's agent was this man, Himalaya Pande.

(Himalaya Pande talking to gathering)

Pande had already been paid a quarter of a million dollars by Note Printing Australia. But he promised to

deliver another contract if he was paid more.

Brian Hood refused.


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BRIAN HOOD: We can't do that. That will not continue.

I said that's not going happen, so he wasn't happy with that, there was an argument about how much

commission he would be paid in future deals and he complained that his commission was too low and

that there wasn't enough left for him after servicing others.

NICK MCKENZIE: There wasn't enough left for him after servicing others, what do you take that to

mean?

BRIAN HOOD: That he was using some of his commission to pay other people, I asked him to elaborate

exactly what he meant by that extraordinary phrase, but he refused to elaborate, he said that's not

something I wish to discuss over the phone.


BRIAN HOOD: No, we will not do anything else. That's the way it will be.

NICK MCKENZIE: Brian Hood was now angering colleagues who believed he was risking big bank-note

contracts by taking on the foreign agents.

BRIAN HOOD: I was the black sheep, I didn't go with the flow, there was a lot of stress and harassment,

intimidation; a lot of hostility along the way, so it certainly set me apart.

NICK MCKENZIE: Were you ever told to leave the Company?

BRIAN HOOD: I was encouraged to leave on a couple of occasions, yes.


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NICK MCKENZIE: What was said to you?

BRIAN HOOD: Um you don't fit in, fuck off.

BRIAN HOOD: It was quite intimidating, no doubt about that, but on the other hand um it sort of

strengthened my resolve and it sort of empowered me in a way, in a in a strange sort of way, that I

thought well I'm not going to give in to these bastards; I'm hitting a raw nerve here, I can see that things

aren't right and I'm not just going to toddle off and walk away and sort of turn a blind eye. Wimping out

like that wasn't in my nature and I, I wasn't, I wasn't going to give in.

NICK MCKENZIE: One evening in April 2007, Brian Hood stayed up all night detailing all of his corruption

concerns for the next board meeting with Graeme Thompson, Mark Bethwaite and the other directors.

By now he had discovered that arms dealer Abdul Kayum was not only working for Note Printing

Australia, but was secretly working on the side with its sister Reserve Bank company, Securency.

Brian Hood's list of evidence was explosive.

NICK MCKENZIE: (talking to Brian) Did you put the bribery concerns in that paper?

BRIAN HOOD: Yes.

Nick McKenzie: Did you put the secret commissions in that paper?

BRIAN HOOD: Yes.

NICK MCKENZIE: Did you put the admissions by the agents they may have paid people off in that paper?


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BRIAN HOOD: Yes.

NICK MCKENZIE: Brian Hood's paper rocked the board.

They agreed to sack arms dealer Abdul Kayum and Himalaya Pande.

(Sound of plane taking off)

Brian Hood felt justice was finally coming. And when he was summoned to Sydney to give a thorough

briefing to then Deputy Governor of the Reserve Bank, Ric Battelino, he became even more confident.

NICK MCKENZIE: How would you rate your briefing to Ric Battellino?

BRIAN HOOD: Well again that that was a 10 out of 10, it's not every day in your career that you, you go

to somebody of that seniority to discuss matters like that.

NICK MCKENZIE: Did you tell them about the suspected bribes being paid?

BRIAN HOOD: Absolutely, that was the, that was the content of the conversation.

NICK MCKENZIE: Did you tell them about the admissions the agents had made about paying those

suspected bribes?

BRIAN HOOD: Yes, that, cause that was central to it all.

NICK MCKENZIE: This is criminal stuff that you're putting on the table.


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BRIAN HOOD: I was raising matters that were criminal offences, yes.

NICK MCKENZIE: Deputy Governor Ric Batellino asked Brian Hood to detail all of his concerns in a

confidential memo for Note Printing's owner the Reserve Bank.

BRIAN HOOD: He did indicate that my briefing paper perhaps would be shown to the Governor. Now,

that was the first time the Governor was mentioned and I thought well that's encouraging, it's actually

literally got to the top.

NICK MCKENZIE: Hood was now extremely confident of a full-blown investigation.

DR DAVID CHAIKIN: Boards of companies have not only a legal obligation to set out the corporate policy

and strategy of the company, but they've also got a legal obligation to ensure that it's implemented. You

can, just can't sit back when you learn about some violation of the law, and just ignore it.

BRIAN HOOD: I think it would've been the right thing to do for the Federal Police, to have been informed

of why the agents were terminated and what the concerns were, so that they could deal with it

properly.

NICK MCKENZIE: Rather than call in the cops, the RBA and board of Note Printing Australia asked their

corporate law firm, Freehills and the bank's auditors, to investigate.

But Freehills claimed they could find no evidence that any crimes had been committed.

NICK MCKENZIE: How did that leave you feeling?

BRIAN HOOD: Ah, pretty gutted, um I was pretty shocked. Even further alienated, the hostility internally

just grew, I was I was further out on a limb; it was a remarkable outcome after all of, after the all those


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months of work.

The message if you like was well, it's all done and over now, let's all get back to work.

DR DAVID CHAIKIN: It's quite clear; they wanted to keep it inside the fence. And it would've kept it inside

the fence, if there hadn't been a whistleblower.


BRIAN HOOD: Why would Securency be paying commission to Kayum?

NICK MCKENZIE: True to form, Brian Hood did not give up.

BRIAN HOOD: (on the phone) How much is the commission that's being paid?

NICK MCKENZIE: In late 2007, he discovered a further secret payment of $492,000, to the supposedly

sacked Malaysian arms dealer, Abdul Kayum, that was being made by both Note Printing Australia and

Securency.

Again, Brian Hood blew the whistle to the board of Note Printing Australia.

What followed was one of the most extraordinary board meetings in corporate Australian history.

Despite previously sacking Abdul Kayum for corruption concerns, the board agreed he should get the

additional $492,000.

They also agreed to cover up from the Nepali authorities secret payments made there.


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Graeme Thompson and Mark Bethwaite then stood down as the board applauded their ten years

helping sell the Reserve Bank's products across the globe.

What no one was counting on was the emergence of another whistleblower - in the same compound at

the RBA's other polymer bank note firm, Securency.

JAMES SHELTON, SENIOR SALES MANAGER, SECURENCY 2007-08: About the time I joined I think they

had about 25 or 30 central banks around the world that they were doing polymer currency deals with.

And they were looking to expand in the Asia/Pacific, South America, North America. I guess the plan was

to take the product worldwide.

NICK MCKENZIE: James Shelton used the very same entrance as Brian Hood, when Shelton began work

in 2007 as a senior sales manager at NPA's neighbour and sister company Securency.

Although they never met, Shelton immediately shared Hood's concerns about the use of foreign agents

to win contracts.

JAMES SHELTON: Pretty much in that first week we were told that's how business was done.

NICK MCKENZIE: And what were you told about how the business was done?

JAMES SHELTON: That, that there's bribes and commissions paid to overseas officials to get these deals

done, that's the way it is and it was almost like well, that's the way it is, if you don't like it um, you can

leave now. But it wasn't as simple as that.

NICK MCKENZIE: In your very first week?

JAMES SHELTON: Very first week.


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NICK MCKENZIE: Graeme Thompson may have left NPA, but he'd stayed on as chairman of James

Shelton's new employer.

And at Securency, the supposedly banished Abdul Kayum, along with a host of other agents, were still

on the books and still getting paid; all under the watch of Thompson.

JAMES SHELTON: Ultimately as a Chairman he's responsible for, for corporate governance, and auditing

and risk and all these, and all these other matters that for someone who, who'd got into the company

and very early on worked out that things weren't right, if he was chairman of that company for half a

dozen or ten years, how did he not see this?

NICK MCKENZIE: It took you a week to have concerns, in the first week; he was there for ten years.

JAMES SHELTON: That's right.

NICK MCKENZIE: In March 2008, after a decade at the helm, Shelton's chairman, Graeme Thompson

finally departed Securency. He was replaced by another Reserve Bank insider, Assistant Governor Bob

Rankin.

One of Rankin's first acts as the new Chairperson of NPA and Securency was to sign off on one last

payment to Abdul Kayum in Malaysia.

Meanwhile massive payments to other agents kept on flowing, to win contracts in countries like Nigeria.

(Nigeria)

JAMES SHELTON: Nigeria, a very high risk corruption country. What my main concern was when I was

told that the commission for that deal was going to be 20 to 25 per cent, which was, which, the reason


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for that was that there were lots of people feeding off it. Now that's, what that means in plain language

was that there's a very large bribe and it was going to be split up many ways.

NICK MCKENZIE: James Shelton was sickened by what he encountered.

JAMES SHELTON: If you don't think it's a, it's a problem go and live in Cambodia or go to Nigeria, and see

how those countries run. It's because of corruption, that's the reason.

The roads and schools and hospitals that need to be built aren't because money's getting siphoned off

to Switzerland and the Seychelles, for the private wealth of corrupt officials. It's, it's just not right and

it's also illegal.

NICK MCKENZIE: James Shelton agonised over what to do.

JAMES SHELTON: I would speak to family and friends and other contacts I had in government. I went and

saw a lawyer and eventually, you know, I ran out of options. I didn't have any faith of this being dealt

with internally.

NICK MCKENZIE: James Shelton decided to do what the Reserve Bank and its bank-note firm directors

had failed to do.

He went to the cops.

JAMES SHELTON: I basically had nowhere else to go than report it to the Australian Federal Police, who

were responsible for investigating this sort of crime.

NICK MCKENZIE: James Shelton says the AFP told him to liaise with them while he worked at Securency.

He was now undercover and under pressure.


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JAMES SHELTON: It can be really a, stressful thing to do. But if you're determined to do something and

to make a change, you have to see it through.

NICK MCKENZIE: Chairman Bob Rankin had no idea that Shelton had reported bribery allegations to the

police.

But he did have Brian Hood firmly in his sights.

BRIAN HOOD: I was offered a redundancy.

On the one hand the Board and the Reserve Bank are saying to me we, we value what you've done,

you've done the right thing, but on the other hand your job shrinks before your very eyes, you're further

out on a limb, and then you're made redundant. And that's not a great outcome; um it's very

unpleasant, very unnerving to be unemployed, over 50.

NICK MCKENZIE: Brian Hood was asked to the RBA in Sydney for a farewell lunch.

It finished unexpectedly, care of Deputy Governor Ric Battellino.

BRIAN HOOD: At the end of the, all the niceties and formalities, he did shake my hand and wish me well

and requested that, directed that I never mention the agents matter to anybody.

NICK MCKENZIE: Ric Battellino later told a parliamentary committee that he never told Brian Hood to

keep quiet about the use of foreign agents to win deals.

(November 30 2012, Parliamentary inquiry)


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RIC BATTELLINO, FORMER DEPUTY GOVERNOR, RESERVE BANK: There wouldn't not have been any point

of saying that, and it just was not on my mind. There was so much goodwill and gratitude towards Mr

Hood that really, you know, that wouldn't have been, that just wouldn't have been on my mind.

BRIAN HOOD: It happened, um it it was a significant comment by a significant person in a, in a very

senior role. And at the end of the lunch he made the comment to me, it wasn't across the, broadcast

across the dining room table, it, it was one on one, he looked me in the eye, shook me in the hand and

said now don't you ever mention the agents matter to anybody.

NICK MCKENZIE: Is it possible that you're mistaken Brian?

BRIAN HOOD: No, not at all, not, not on an event or a comment like that. It's clear to me, very clear to

me, I've, I've, I've said that in court, in giving witness, evidence. I've, I've said it at a number of times,

and a number of places; it absolutely happened.

NICK MCKENZIE: Brian Hood would suffer one final and unexpected indignity. He was marched out of his

office after his termination date was brought forward without notice.

BRIAN HOOD: The Human Resources Manager escorted me out to the front gate and I left that that day,a couple of weeks ahead of the nominated termination date. I didn't clear my desk, didn't say goodbye

to my staff or anything like that.

(Sound of a tram)

NICK MCKENZIE: James Shelton was also told Securency would not extend his contract.

Tired of waiting for the Federal Police to act, and concerned that Securency's overseas agents were still

paying alleged bribes; Shelton made a bold decision and visited The Age newspaper.

(Richard and James meet at The Age offices)


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RICHARD BAKER, AGE INVESTIGATIVE UNIT: Are you James?

JAMES SHELTON: Richard, yeah, how are ya?

RICHARD BAKER: Good mate.

RICHARD BAKER: Well my initial reaction was that James had a great story to tell but one that didn't

seem credible or, or believable at first because there's no way the RBA should be associated, or would

be associated with the things he was describing. Within a couple of days and punching some of the

names of the agents into Google, it was clear that some of them had been embroiled in previouscorruption scandals. They had very chequered pasts and once we were able to find the money trail to

some of these guys and the others, there were millions of dollars running offshore, often into tax haven

bank accounts and it was as clear as day that this was a deadest scandal.

JAMES SHELTON: The board didn't want to know, the AFP didn't want to know, others I'd spoken to

around government didn't want to know, but they did start to act when it was on the front page of the

newspaper.

RICHARD BAKER: The day we published they called the Federal Police in within hours.

NICK MCKENZIE: Suddenly, the Reserve bank was in the spotlight for all the wrong reasons.

Securency and NPA were at the centre of a bribery scandal and, crucially, the Reserve Bank's top brass

facing questions in Parliament about whether they knew about the allegations before they hit the press.

(February 11 2011, Parliamentary Inquiry)

GLENN STEVENS, RESERVE BANK GOVERNOR: The time at which we became aware of the allegations


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that were made by the newspapers was when they were made. No one in the Reserve Bank or on our

board had ever had put to us those allegations before that time.

NICK MCKENZIE: Glenn Stevens told Parliament, Ric Battellino's sitting next to him, that the first the

Reserve Bank of Australia knew about these matters was in 2009 when they were on the front page of a

newspaper. Was that an honest, accountable, truthful answer?

BRIAN HOOD: Well it wasn't the truth, they were told in June 2007.

I saw that evidence being put to economics committees and what have you, I, I was pretty bewildered

by that; I didn't know what to make of that, it, that was quite confusing.

(February 11 2011, Parliamentary Inquiry)

GLENN STEVENS: You know, a question would be is there any way that anyone in the RBA ever knew

anything about anything, and I'm pretty sure the answer to that is no.

BRIAN HOOD: So a number of Assistant Governors and their lawyer and their head auditor, are all aware

of it by September 2008. So for people to say in 2010 and 11 and 12 that it didn't exist, well clearly that's

not right. Now I don't know what the Governor was told, I don't know whether Battellino told the

Governor of my report at the time or its contents, I don't know what they did internally, but all of the

others knew. And yes, Battellino was sitting next to the Governor Stevens during some of those

Economics Committee hearings.

NICK MCKENZIE: RBA Assistant Governor Bob Rankin was one of those who knew of Hood's bribery

concerns.

And yet even in the months after the police launched their probe in May 2009, Bob Rankin oversaw the

wiring of yet more money to overseas agents. This time, $7 million dollars to a tax haven bank account

in the Seychelles.


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JAMES SHELTON: Well it simply beggars belief that whilst an AFP investigating the company for bribery,

that millions of dollars were still being approved to offshore bank accounts - Seychelles, Switzerland -

how this could be allowed to go on I just don't know.

NICK MCKENZIE: But time was now running out for the RBA's overseas agents.

In July 2011, acting on information Brian Hood had told the board of Note Printing Australia and Ric

Battellino years before, the AFP and Malaysian police swooped on Abdul Kayum.

(News footage of Abdul Kayum surrounded by cameras)

MALAYSIA KINI TV ANNOUNCER: Businessman Abdul Kayum Syed Ahmad has also been charged for

giving Daoud the bribe.

NICK MCKENZIE: The arms dealer was charged with paying bribes to Malaysian central bank bosses, in

return for them giving the Reserve Bank of Australia currency printing contracts.

(News footage of Abdul Kayum led by police)

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: In Australia, several of Brian Hood and James Shelton's former colleagues were also

charged over the alleged bribes paid by Abdul Kayum and, in Nepal, Himalaya Pande.

But Hood and Shelton were shocked to learn that investigators never probed Graeme Thompson or his

fellow directors for failing to act with the care and diligence required of them law.

JAMES SHELTON: Ultimately the board is responsible for corporate governance and is ultimately


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responsible for the company. They would have known the very large deals being done in very corrupt

places. They knew the business model; they put in an anti-corruption program that was fundamentally

flawed by any assessment. And it doesn't seem that any action's been taken against the board or the

former chairman or anyone.

BRIAN HOOD: The inaction by ASIC has been astounding. As I said earlier, the the parent organisation

and the Boards of Directors have all got their responsibilities, clearly there's been failings on that count

and they should be investigated.

NICK MCKENZIE: Last year, the federal police handballed the job of investigating whether directors failed

to act with care and diligence to corporate watchdog ASIC.

Under Australian law, directors are meant to face a raft of harsh penalties, including large fines or bans,

if they fail in their governance duties.

But ASIC's chief Greg Medcraft decided his agency would not conduct a formal investigation - and then

refused to explain why ASIC did not bother to conduct a single witness or suspect.

NICK MCKENZIE: Would you help ASIC out?

BRIAN HOOD: Absolutely.

NICK MCKENZIE: Have they called you?

BRIAN HOOD: Never.

NICK MCKENZIE: Emailed you?

BRIAN HOOD: Never.


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NICK MCKENZIE: Made any attempt to contact you?

BRIAN HOOD: No.

NICK MCKENZIE: Graeme Thompson and his fellow directors have walked away from what may be the

worst governance failure in recent history.

Under the watch of these now former directors, Reserve Bank firms got into bed with Saddam Hussein,

paid an arms dealer in Malaysia millions, covered up corruption here and overseas, and failed to call in

the cops when they were told time and time again that their overseas agents were allegedly payingbribes.

While ASIC has refused to investigate them, these directors have gone on to secure prestigious

directorships or government posts.

Graeme Thompson is at superannuation giant AMP, Mark Bethwaite's been appointed to the NSW's

Government's water catchment authority; Dick Warburton is a director at Westfield and Bob Rankin was

given the Reserve Bank's top European post.

JAMES SHELTON: It seems that their, they're a group of people that are untouchable, why I don't know.

NICK MCKENZIE: What message does it send corporate Australia?

BRIAN HOOD: There's two sets of rules, some people will be held accountable for what they do and

don't do and others may well be untouchable.

KERRY O'BRIEN: The Reserve Bank sold its half share in Securency earlier this year. Note Printing

Australia is still a subsidiary.


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We approached the Reserve Bank itself, as well as Graeme Thompson, Mark Bethwaite, Dick Warburton,

Bob Rankin, the AFP and ASIC for an on-camera interview. All declined.

The AFP, ASIC and Bob Rankin did provide written statements that can be seen on our website along

with additional material relating to Project Delta.

Next week on Four Corners, an inside account, minute by minute, of what it's like to find yourself in the

middle of a terrorist attack as Al Qaeda killers stalk you remorselessly, and having survived that, to then

face the bullets of your rescuers.

Until then, good night.

END

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