THE classic political scandal, as Rodney Tiffen writes in Scandals: Media, Politics and Corruption in Contemporary Australia, involves the media and the parliamentary opposition working in tandem. A newspaper or broadcaster unearths a case of scandalous behaviour and, if it’s embarrassing for the government, the opposition pursues the issue under the protection of parliamentary privilege. The media reports the parliamentary debates and keeps digging, and the opposition uses new revelations to intensify the political pressure.
What happens, though, when a newspaper unearths what seems like scandalous behaviour – bribery by a company half-owned by the Reserve Bank, for example – but the rest of the media largely ignores it? Combine that with a reluctance to pursue the issue on both sides of parliament and you’re left with a scandal that isn’t. Or at least not until this week, when Four Corners covered the story of Securency, the company that markets Australia’s polymer banknotes, in a report presented by the Age’s Nick McKenzie.
Over the past twelve months MacKenzie and another member of the Age’s investigative team, Richard Baker, have published a series of articles detailing serious allegations of bribery carried out overseas by people acting on behalf of Securency, which is owned jointly by the Reserve Bank and the British company Innovia. The allegations were first published in a feature-length article in the Age (and a shorter version in the Sydney Morning Herald) on 23 May last year. Securency staff were alleged to have paid “multimillion-dollar commissions to shady middle-men” in a campaign to win banknote printing contracts from foreign governments. (A fully owned Reserve Bank company, Note Printing Australia, is also alleged to have been involved in paying foreign “commissions” in the past.)
The reaction of the other media was puzzling. The Australian covered the main points of that first Age story in a short piece published on the same day, crediting Fairfax papers as the source. As the coverage continued over the next few days in the Age and the SMH, the Australian published two more short pieces, and then fell silent. Despite new and significant information in over a dozen articles by Baker and McKenzie based on research in Africa, Europe and Southeast Asia, despite the launch of an investigation by the federal police in June, and despite the suspension of two senior Securency executives in November 2009 and their departure (the Reserve Bank wouldn’t say whether they resigned or were sacked) in March this year, the Australian published no coverage whatsoever until this week, almost a year later.
Even more perplexingly, the Australian Financial Review, stablemate of the Age and the SMH, showed no more interest in this story of business ethics and the Australian central bank than did its News Ltd rival. The AFR published a single paragraph on 25 May 2009, not a word until 23 November, nothing more until 31 March this year, and then a longer news article on the morning after the story was taken up this week by Four Corners.
Meanwhile, ABC radio current affairs programs covered the story intermittently through the year, as did Australian Associated Press (though most of its reports don’t seem to have been published by its subscribers). The West Australian and the Perth Sunday Times published one or two short pieces each during the year. Crikey gave the story only a couple of brief mentions.
As the anniversary of the first article approached, the Age resorted to stretching the truth a little and including the issue in its regular Saturday section, “The top ten: What everyone was talking about this week,” on 3 April. Summarising the state of play, the paper’s Warwick McFadyen wrote: “An independent audit of Securency, which makes polymer bank notes, found the Reserve Bank subsidiary had paid almost $50 million in commissions worldwide to agents with political connections from 2003 to January 2009. KPMG, which conducted the audit, was scathing of Securency’s work practices.” Federal police were continuing their investigation of the company’s alleged bribery of officials in Nigeria, Malaysia and Vietnam.
According to David Chaikin, a specialist in financial crime at the University of Sydney, the revelations by McKenzie and Baker are important and very worrying. “Their significance arises from the identity of the players,” he told me. “We mightn’t be too surprised by an energy company bribing officials in a corrupt country, but for our Reserve Bank to be associated in any way with this sort of activity is remarkable.”
The revelations highlight – and might also reflect – Australia’s very poor record of enforcing laws that prohibit Australian companies from bribing officials in foreign countries in order to further their businesses. The federal government has had opportunities to adopt a more aggressive approach, but despite being a signatory to the OECD convention prohibiting these practices it has fallen behind its major counterparts overseas. The United States, by contrast, “puts huge resources into investigating allegations of bribery by American companies,” says Dr Chaikin.
According to a progress report on the implementation of the OECD convention published in June last year by Transparency International, Australia is one of twenty-one countries in which there was “little or no enforcement” of anti-bribery laws. Only four countries – Germany, Norway, Switzerland and the United States – were “actively enforcing,” and another eleven were carrying out “moderate enforcement.”
SHADY middlemen, foreign governments, large quantities of cash, a previously unimpeachable public institution: the Securency story has all the essential characteristics of a scandal that could run across all media. But for a year the Age’s revelations gained almost no public traction outside the Fairfax papers in Melbourne and Sydney.
To help explain the lack of political traction all you need to know are the dates over which the alleged bribes were paid: from sometime in 2003 to January 2009 – the late Howard years and the first fourteen months of the Rudd government. Both the Coalition and the current Labor government have no particular interest in stirring up controversy about bribes that were being paid while Peter Costello and then Wayne Swan were treasurers and ultimately responsible for the Reserve Bank. And so, when the leader of the Greens, Senator Bob Brown, tried to set up a parliamentary inquiry into the affair last October, it’s no surprise that he was rebuffed by the government and the opposition.
The behaviour of the media is equally worrying. Newspapers, in particular, have generally been reluctant to take up another paper’s scoop unless the issue is pursued in parliament, and countless Four Corners stories have been ignored by its competitors. In this case, this means that readers outside Victoria and New South Wales, and anyone who doesn’t read the Age or the Sydney Morning Herald, would have seen glimpses, at best, of this unfolding story, and no analysis of how it fits into a broader failure by Australian governments to enforce its obligations under the OECD convention and other international agreements. •
Peter Browne is editor of Inside Story.
Photo: Danausi
4 Comments
Thanks for explaining something I couldn’t quite put my finger on. It seemed like a huge story but where were the hounds? Nice work inside story
It was Jim Hacker from “Yes Prime Minister” that reprimanded his Secretary as a moral vacuum. But is it questionable to give bribes to get business contracts? Is it like adultery when it is acceptable to the participating parties until found out?
I used to get presents at the end of year for purchasing goods from various businesses. So instead of a bottle of wine I got a penthouse on the Barrier Reef if I was in big time business. Would that be more reprehensible? The bottle of wine was tax deductible but the penthouse would be a business expense coming from the profit. If it was acceptable to the donor and certainly acceptable to me as a recipient of a penthouse why condemn the Reserve Bank? Never get caught with your pants down.
There is another quite simple explanation and that is despite The Age’s allegations being investigated by both the AFP and a report by KPMG not one single allegation has been proved. The use of overseas agents is a standard business practice. In Securency’s case they are not able to service all the worlds markets without using agents due to the prohibitive cost of having their own staff in all countries around the world. The fact that the contracts involved millions of dollars only reflects the size of the business it does not in itself imply the payments were corrupt and its misleading journalism to suggest this. Where in any of the Age articles does it state that not one agent was paid anything unless they made a successful sale (this fact was confirmed by the KPMG report). What The Age has done is put 2 and 2 together and got 14. The AFP investigation was instigated by Securency itself and as yet has not resulted in anyone being charged with anything even though it has been running for over a year. How about doing some research yourself and reading the KPMG findings that are available on the Securency website. Far from being “scathing” as you put it they in fact say that the use of Agents are a legitimate business practice.
Ian, the word “scathing” was the Age’s, not mine. Here’s what KPMG had to say in the report you mentioned. Scathing might be overstating it, but – as readers will see from the sections I’ve highlighted – the report is certainly critical of the company:
• The use of agents is a cost-effective and well-understood model used by many organisations to pursue business in foreign countries. The company did seek to understand and manage the associated risks, and the Board endorsed policies and procedures which should have been adequate in managing and/or mitigating them. Furthermore, management consistently sought legal advice on agent-related matters. However, KPMG has concluded that management has not properly implemented these policies and procedures.
• Securency’s records lack documentation to evidence compliance with the company’s policies relating to the appointment and monitoring of agents and the recording of relevant information concerning payments to agents.
• The company did not have a formally documented process for responding to concerns or allegations relating to agents, and the manner in which management dealt with concerns raised by an employee in 2007 about the activities of some agents was not transparent. Management did not bring these concerns to the attention of the Board or to the company’s internal auditors, and also did not bring to the Board’s attention other instances where the company’s policies in relation to agents had not been strictly applied.
• Several measures could be taken to strengthen Securency’s code of conduct.
Peter Browne