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    The Securency and Note Printing Australia bribery case reveals vital lessons for directors on dealing with cover ups and whistleblowers, writes Professor Pamela Hanrahan.


    A decade ago, Australia’s corporate community was rocked by allegations that Securency and Note Printing Australia (NPA) — two entities then owned or part-owned by the Reserve Bank of Australia (RBA) — had conspired to bribe foreign officials in Malaysia, Nepal, Indonesia and Vietnam. What followed was later described by the Commonwealth Director of Public Prosecutions (CDPP) deputy director as “one of the most complicated and significant prosecutions ever brought by the CDPP”.

    That prosecution finally concluded in November 2018, when a fifth individual involved in the scandal — a former banknote specialist at Securency — pleaded guilty to conspiracy to bribe foreign officials. This followed earlier guilty pleas by its CEO and an Indonesian agent to similar offences, and guilty pleas by its CFO and a senior business development manager to false accounting.

    Also in November, the High Court of Australia permanently stayed the trials of four other individuals implicated in the scandal because of what it described as “profoundly unlawful” compulsory examinations conducted by the (then) Australian Crime Commission in 2010 that had violated their common law right to silence.

    The conclusion of these cases in November cleared the way for suppression orders made by the Supreme Court of Victoria in 2011 to be lifted.

    It then emerged that Securency and NPA had pleaded guilty in October 2011 to three charges of conspiracy to commit foreign bribery. The entities were fined $480,000 and $450,000 respectively, for their offending. A subsequent CDPP proceeds of crime application, with which the entities cooperated, resulted in the payment of additional pecuniary penalties totalling more than $21.6m — at the time, the largest pecuniary penalties ever ordered in Australia.

    The RBA has since said that the boards of Securency and NPA “decided to enter guilty pleas at the earliest possible time rather than to defend the charges, reflecting an acceptance of responsibility and genuine remorse”.

    It said the CDPP had “accepted that the boards of the two companies had no involvement in, or knowledge of, the conduct in question”. It also said there was “no evidence of knowledge or involvement by offers of the RBA, or the non-executive members of either board appointed by the RBA”.

    The fact that the offending was so serious and had occurred so high up in Securency raised questions about the decision not to hold its directors to account. In March 2012, the Australian Securities and Investments Commission (ASIC) stated it had reviewed material provided to it by the Australian Federal Police (AFP) for possible directors’ duty breaches and decided not to proceed to a formal investigation. Asked by the ABC’s Four Corners program in September 2013 about that decision, ASIC responded: “As there are related prosecutions before the court, we cannot discuss the reasons for our decision, but the public can be completely and utterly confident in ASIC’s actions.”

    Questions were also asked about the RBA’s hands-off approach. After charges against Securency and NPA were laid, the RBA commissioned an independent governance review of the entities and its oversight of them. The review (available on the RBA website) concluded governance and oversight arrangements were “broadly consistent with usual practice at the time”. However, with the benefit of hindsight, the review suggested further actions that could have been considered. These include regularly reviewing governance arrangements as best practice and business conditions change, ensuring a strong flow of information, and responding to emerging issues promptly.

    The Securency scandal should be on every director’s radar because of the way the primary offending — the foreign bribery — was concealed within the entity. Rogue individuals may cut corners or break the law, but the real damage occurs when the corporate culture allows or encourages others to cover for them.

    Secrecy and a denial of responsibility for wrongdoing... [were] part of the corporate culture.

    Justice Elizabeth Hollingworth
    Victoria Supreme Court

    In R v Ellery [2012] VSC 349, Securency’s former CFO and company secretary, John Ellery, was sentenced for false accounting. Justice Hollingworth observed that, unlike most such cases, Ellery “did not offend for the personal financial gain of yourself or a closely-related person or company”. The person who benefited from the cover-up was someone with whom Ellery had no personal relationship. “And the primary motive behind your offending was to assist your employer in its commercial activities, by assisting it to gain the benefit of future contracts,” said Hollingworth J.

    More damningly, the judge accepted “that you were acting within the culture which seems to have developed within Securency, whereby staff were discouraged from examining too closely the use of, and payment arrangements for, overseas agents. Secrecy, and a denial of responsibility for wrongdoing, also seem to have been part of the corporate culture at Securency at that time”.

    The 2018 proceedings revealed that the offending had only been brought to light by the actions of two whistleblowers, Brian Hood and James Shelton. Their roles were explained by Hollingworth J in CDPP v Biollot [2018] VSC 739. When Hood, after joining NPA as its company secretary, became aware of the entities’ illegal activities, he raised his concerns with the CEO, board and RBA officials. His attempts to report what was happening and to change the corporate culture “were met with hostility and resistance”, and he was eventually made redundant.

    When Shelton joined Securency as a senior sales manager in 2007, he realised he was expected to take part in foreign bribery. He raised the matter with the AFP in 2008, but, Hollingworth J says, “they appear to have done little to investigate his reports at that time” and he was subsequently dismissed by the company.

    Hollingworth J concludes: “Given the corporate cultures in which they were operating, Mr Hood and Mr Shelton both showed tremendous courage in raising their concerns about the foreign bribery activities with appropriate people. In each case, their concerns were dismissed or not followed up on.” It remains to be seen whether the new legislation protecting whistleblowers — the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Cth) — will make it easier for others in their position.

    Foreign bribery is a blight on global business. Legislation to strengthen Australia’s foreign bribery rules — the Crimes Legislation Amendment (Combatting Corporate Crime) Bill 2017 — lapsed when the 45th parliament was dissolved in April; it will likely come back onto the agenda later in the year. However, the broader lessons for boards from the Securency scandal are in the manner in which the offending was accepted and concealed within the entities, and attempts to bring it to light dismissed.

    The culture within Securency and NPA was the ultimate cause of this sorry scandal, not just the individual offending of those convicted.

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