It is often said that you should not let economists run businesses. On the whole it’s probably true. The academic economist inhabits a life of ideals that has little reference to the cut and thrust of business. I could cite many examples but let’s just leave it at the basic point that a discipline that relies upon models that assume rational behaviour in people is always going to find itself on the wrong side of reality.
And so we come to the RBA and the alleged frauds and bribes around its note printing subsidiaries. We’ve all watched as the bank’s reputation has slid into the muck around the myriad bribery charges that have already forced the bank to divest its stake in Securency. Today it gets much worse. From the AFR:
Confidential bank documents reveal that in May 1998, NPA (Note Printing Australia) launched a secret project code-named Delta to secure $80 million that Iraqi President Hussein had “already allocated” to buy Australian plastic note technology.
Reserve Bank officials working for NPA said the funds could potentially be accessed by funnelling the money through a Jordanian bank “with the green light of SH [Saddam Hussein]”.
A frontman was used by Reserve Bank officials to cover up NPA’s decision to use a notoriously corrupt middleman, Saddam’s brother-in-law and bodyguard, Arshad Yassin, as a facilitator to sell notes to the Iraqi regime.
A legal expert and Sydney University associate professor, David Chaikin, who reviewed the Project Delta files for Fairfax Media, said they showed a “very strong prima facie” case that RBA officials involved in the Iraq trip breached UN sanction 661, which banned Australians from engaging in any business dealings “which promote or are calculated to promote” the sale or supply of any goods to Iraq.
When Project Delta was launched, the Reserve Bank was responsible for upholding the sanctions. The project was known to top RBA bank-note officials, including Mr Bethwaite.
A Project Delta file faxed to Mr Bethwaite in 1998 states that Arshad Yassin’s involvement in the secret deal was “critical as all decisions on this project will be taken by SH [Saddam Hussein].”
Project Delta was stopped in September 1998, after a senior Australian diplomat, John Hines, from the Department of Foreign Affairs Middle East branch, learned of it and wrote a furious letter to NPA warning that its “informal meeting with Saddam Hussein’s brother-in-law may have already breached Australia’s obligations in international law”. He complained NPA had ignored repeated requests to provide details to the government about its plans in Iraq.
Good grief. This is about as bad a crime that an institution like the RBA could commit. The RBA is tasked with policing financial stability yet it is alleged it was allowing one of its own subsidiaries to do secret deals through off-balance sheet vehicles, dodgy conduits and shady banks with a rogue regime that we were at war with within five years.
And in the name of what? The obvious comparison here is with the Australian Wheat Board (AWB) which behaved in a similar fashion but at least it had the excuse of being tasked with selling Australian farmer’s wheat. The RBA was just playing around with a bit of its own intellectual property. It doesn’t even have a profit motive. WTF was it doing?
In law, policemen that turn bad get the very harshest treatment by the courts because they are not only tasked with policing but with upholding the normatives that make policing possible.
And it gets worse. From the SMH:
But the federal police and ASIC have never investigated the former directors of the two firms, including the long-standing chairman and former Reserve deputy governor Graeme Thompson, for overseeing these high-risk practices.
ASIC has not interviewed a single witness or suspect since it decided last year not to conduct a formal inquiry. ASIC made the decision after reviewing documents gathered by the federal police probe, despite the fact that the AFP bribery inquiry never investigated directors for alleged corporate offences.
In his first public interview, former NPA company secretary Brian Hood alleges that not only did some former directors allow highly risky business practices to occur, they covered up suspected corruption.
Mr Hood also revealed that Mr Thompson and other directors, including Mr Bethwaite and former RBA board member Dick Warburton, agreed to conceal from Nepali authorities the secret commissions NPA had paid to an agent in Nepal in return for his help winning polymer banknote contracts.
“The inaction by ASIC has been astounding. The parent organisation [the Reserve Bank] and the boards of directors have all got their responsibilities. Clearly there has been failings … and they should be investigated,” said Mr Hood, who was the NPA’s company secretary between 2004 and 2008.
These allegations are of corruption on a grand scale. If AWB warranted a Royal Commission so does this, to put it mildly.
