Bloomberg News

Australian Lawmakers Call for Probe of RBA Cover-Up Claims

October 05, 2011

(Adds analyst’s comment in fourth paragraph.)

Oct. 5 (Bloomberg) -- Australian lawmakers called on the government to investigate claims senior central bank officials suppressed evidence of corruption at the bank’s note-printing units that sought contracts in Nepal and Malaysia.

Treasurer Wayne Swan should establish a probe, Greens Party member of parliament Adam Bandt, whose vote the government relies on to pass legislation, said in a statement today. The deputy leader of the opposition, Julie Bishop, told ABC radio the government should hold a comprehensive investigation.

The allegations may increase scrutiny of the Reserve Bank of Australia after Swan said last month it will lose its sole power to set compensation for its board and executives for the first time. The Sydney Morning Herald reported today that RBA officials in 2007 and 2008 covered up information about secret payments to middlemen hired by RBA banknote-printing subsidiaries, a charge the central bank denies.

“The Reserve Bank is meant to be independent of the government but it has a whiff of scandal around it,” 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. “It could become an inflammatory political issue.”

‘Serious Allegations’

Deputy Governor Ric Battellino was among those aware of the corruption concerns, the newspaper said, citing internal documents at the RBA and the printing units, Securency International Pty and Note Printing Australia Ltd. Battellino didn’t respond to a request for comment today made through the RBA’s press office.

Swan “can no longer stand to one side,” Bandt said in his statement. “He must immediately establish an inquiry to get to the bottom of these serious allegations.”

“The bank categorically denies the allegations, which are based on inaccurate and incomplete facts,” the RBA’s press office said. “We do not seek to address the specific detail of your allegations since these matters are, or are potentially, the subject of court proceedings.”

Australian police said on July 1 they charged the two note- printing units and six people, including former managers, with paying bribes in Malaysia, Indonesia and Vietnam between 1999 and 2005. The Greens Party the next month demanded a parliamentary inquiry into the allegations.

Pending Case

The Australian Federal Police declined to comment today, saying that the investigation is continuing. A spokesman in the Treasurer’s office said the government won’t comment while authorities are investigating and court cases proceeding.

The Sydney Morning Herald said the documents in its investigation challenge a statement from RBA Governor Glenn Stevens in February that no one at the central bank knew of the corruption allegations before they were revealed in May 2009. There’s no suggestion that Stevens himself knew of the allegations, the newspaper said.

Securency is half-owned by the RBA, while Note Printing Australia is fully owned by the central bank. After the charges were presented in July, Stevens said “the Reserve Bank condemns in the strongest terms corrupt or questionable behavior of any kind.” No one at the RBA has been charged, the Sydney Morning Herald reported.

Brandt said in today’s statement that he would also request that RBA officials comment before the House Economics Committee on how the fresh allegations “sit with their previous evidence.”

The central bank has already endured criticism of its pay practices and relative lack of women on its board this year. Swan stripped the RBA of autonomy to set compensation for its board and executives after the treasurer wasn’t told until almost a year after the central bank chief got a A$234,000 ($223,000) raise in October 2008.

Prime Minister Julia Gillard said in an interview last month that the lack of women on the RBA’S board, which has had only three in half a century of existence, “is reflective of a problem we have with corporate boards around Australia.”

--With assistance from James Paton in Sydney. Editors: Patrick Harrington, Chris Anstey

To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net; Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Stephanie Phang at sphang@bloomberg.net


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