Central Banks, The Veil Of Secrecy, A Hotbed of Corruption, And Now Another One Got Ensnared

testosteronepit's picture


Wolf Richter   www.testosteronepit.com

Central banks are designed to be “independent,” and they shroud themselves in secrecy. But they have formidable and, when it comes to money, “unlimited” powers that they harness for the benefit of their clientele, banks. And hiding behind their veil of secrecy are shenanigans that rarely seep to the surface, but when they do, they just get worse and worse. And the latest is a sordid bribery and kickback scandal at the Reserve Bank of Australia (RBA) that appeared to be neatly contained to two subsidiaries, until now.

Securency International Pty Ltd, jointly owned by the RBA and Innovia Films, develops polymer materials for Australia’s banknote technology used in 27 countries. Note Printing Australia (NPA), a wholly owned subsidiary of the RBA, manufactures polymer banknotes. In May 2009, Age newspaper broke the scandal: eight former executives of Securency and NPA had paid millions of dollars in bribes and kickbacks to officials in Vietnam, Malaysia, and Indonesia between 1999 and 2004 through middlemen, including a Malaysian arms dealer, in order to win contracts for manufacturing bank notes. Forced to deal with the ruckus, Securency asked the Australian Federal Police to investigate.

In July 2011, finally, after two years of foot-dragging, and after international pressure to do something, the Federal Police arrested six former executives of Securency and NPA—Australia’s first prosecution under its foreign bribery laws.

On Aug 19, 2012, former Securency CFO David Ellery pleaded guilty to one charge of false accounting—he admitted to concealing a $79,502 payment to a Malaysian agent—and was given a six-month suspended sentence. In return, he handed over hard drives, provided details, and agreed to become a prosecution witness. In her ruling, the Judge lashed out against the company for its “corporate culture” where “staff were discouraged from examining too closely the use of, and payment arrangements for, overseas agents,” and where “secrecy and a denial of responsibility for wrongdoing” prevailed.

So justice reluctantly tiptoed around the lower levels. Suspicions that top officials at the RBA knew about the corruption were waved away by Governor Glenn Stevens. He testified before a parliamentary committee in 2011: he and others at the RBA learned about the scandal by reading the papers. Deputy Governor Ric Battellino—retired since February—sat right next him.

But at least Battellino knew since June 2007! A 5-page memo that ABC obtained from “sources” at the RBA, and made public yesterday, proves it. That June, NPA’s Brian Hood told Battellino in a secret meeting about the corruption issues. He later composed and sent the now surfaced 5-page memo to Battellino, detailing multi-million-dollar payments to overseas agents who in turn made payments to officials and politicians in Vietnam, Malaysia, Indonesia, and Nepal. Hood stated that he’d tried to address these issues within NPA but was told to “back off.”

Battellino reacted. Instead of calling the Federal Police to investigate, the RBA engaged a law firm to do an audit that gave the company a clean bill of health. Whistleblower Hood was axed in 2007, along with the foreign agents and some of NPA’s management. Despite the memo, the RBA, of course, continues to reject the “implication that the governor or other officers of the bank have misled” the parliamentary commission.

Central banks are special creatures, and investigating them turns out to be the hardest thing in the world. While pressures have been rising for an independent inquiry, Parliament voted against it last year, and may do so again.

But the RBA is not alone. Similarly sordid allegations have entangled Ewald Nowotny, Governor of the Austrian National Bank and member of the ECB’s Governing Council [read... Austrian Central Bank: Bribery, Kickbacks, Money Laundering]. At the Swiss National Bank, an insider trading scandal caused its chairman, Philipp Hildebrand, to resign. And in the US, an audit of the Federal Reserve System by the Government Accountability Office shed some light on the dizzying conflicts of interests and cronyism at the New York Fed when it decided who got which billions during its multi-trillion-dollar bailout mania [read.... The GAO Audit of the Fed Doesn’t Call It ‘Corruption’ but it Should].

Piercing the veil of secrecy surrounding central banks is tough. While Ron Paul [His Legacy, A Complete Fed Audit?] and others have long pushed for regular Fed audits, not much has been accomplished beyond the GAO audit. Inspector General Neil Barofsky was looking after TARP to prevent fraud and abuse, though it was handing out peanuts compared to the trillions the Fed was handing out—secretly and unobserved. Read.... All Heck Breaks Loose on CNBC, TARP Gets Sanctified, Bank Bailouts Get Whitewashed, And The Fed Escapes Scot-Free.

And here’s a central-planning debacle skidding towards its endgame: to stave off another collapse, the government in Argentina is imposing ever more trade barriers and capital restrictions. Read.... Argentina’s Creeping State Control, by stilettos-on-the-ground economist Bianca Fernet.

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Fri, 08/24/2012 - 20:40 | 2735959 silverdragon
silverdragon's picture

Silver is on the move, how long before those f*ckers at TPTB smack it back down?

Fri, 08/24/2012 - 19:18 | 2735794 YesWeKahn
YesWeKahn's picture

When someone with "unlimited" powser is corrupt, something serious gonna happen.

Fri, 08/24/2012 - 16:29 | 2735272 F-X
F-X's picture

This cannot be true. I went to the Note Printing Australia website to find out if they were an ETHICAL organization and I found they were. In fact, they list these corporate core values:

NPA's core values as an ethical organisation


- Inclusiveness

- Truthtelling

- Consistency

- Discipline


Under Truthtelling they list the following:

- Honesty

- Integrity

- Open Communication

- Providing all Information


Fri, 08/24/2012 - 17:06 | 2735394 11b40
11b40's picture

Thanks for that.  I feel much better now.

Fri, 08/24/2012 - 14:48 | 2734770 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Youdon't understand!  The Central Banks mean no harm!  They want to help you!

Right Lizzy360?

Fri, 08/24/2012 - 15:56 | 2735107 Zero Govt
Zero Govt's picture

well Trillions of counterfeit wealth shovelled into bwankers pockets are helping ...and low interest rates are a boon to all residents of the debt-slave society

it's a fucking travesty for savers and the productive economy, but who in their right mind thinks a (private cartel) monopoly on money was ever supposed to help wider society?

You want Govt, you eat shit... that simple 

Fri, 08/24/2012 - 12:58 | 2734270 Winston Smith 2009
Winston Smith 2009's picture

Something I've suspected for many years, long before the current crisis is that the financial system of the "developed" world is nothing more than a hidden banana republic style system, but the (former) wealth of those nations made the skimming mostly unnoticeable to the avergae Joe whereas such skimming in poor nations is very noticeable.  Now, after the lights have come on, the cockroaches are shown to be absolutely everywhere as could have been expected since human nature is the same everywhere.

Fri, 08/24/2012 - 12:41 | 2734228 Paracelsus
Paracelsus's picture

I used to live in Melbourne (OZ) and would occasionally drive by the banknote printers north of town about twenty miles. Barbed wire,cameras,looked about the same as your local FEMA camp,without the picnic areas and BBQ's.

Oh,and while I was there ('94?) the Treasurer in his wisdom sold off a third of the gold stockpile at about $220/oz. Gotta keep that price suppressed.

Fri, 08/24/2012 - 09:20 | 2733411 madcows
madcows's picture

Audit the FED?  Nah, that would be bad for business.  Here have a bribe or two.  Only a couple house democrats voted to audit the FED.  Dirty Harry Reid won't even take it up in the Senate.

I guess the FED figured they only had to buy one side of the Aisle.

Fri, 08/24/2012 - 11:39 | 2734030 11b40
11b40's picture

The other side didn't have to be bought.  They are already partners in their pockets.  You think Wall St needs to "buy" Romney? They just need to spend enough to insure his election.

Not that I much care for Obummer, and it is obvious that he has been captured by Wall St, too.  Romney, however, is likely a much more sophisticated theif.  After all, he has had much more "business experience" than Obummer.

Fri, 08/24/2012 - 13:17 | 2734340 madcows
madcows's picture

The right may be bought.  But in the house vote to audit the FED it was almost 100% Republican for and almost 100% democrat against.  And, the vote hasn't been brought up in the Democratic controlled senate.

I think they're all corrupt, but clearly the Democrats are looking to get money from the bankers this time around.

Fri, 08/24/2012 - 17:04 | 2735392 11b40
11b40's picture

No doubt, they all want Wall St Bucks. 

Wall St was behind Obummer big time last election.  This time, it's Mittens Willard Romney all the way.  It even has a silk stocking sound, doesn't it?  Since Wall St is the source of so much of our economic misery, I can't help be leary of anyone they so whole-heartedly endorse.

Different shades of gray.....different degrees of awful.

Fri, 08/24/2012 - 21:47 | 2736047 Ned Zeppelin
Ned Zeppelin's picture

As  i bemoaned to my wife, our choice is TweedleDum or Tweedle Dumber - both Romney and Obama are owned by the Banksters, who escape prosecution for their crimes on a seemingly daily basis.

Fri, 08/24/2012 - 09:42 | 2733482 WeAreJellyfish
WeAreJellyfish's picture

All those years "in the markets"? What the fuck are you talking about? You work/worked at a fucking casino. Markets are where you buy real shit. The grocery store, the mall and farmers markets are markets shit head.

You fucks buy and sell irredeemable promises and call it a living (the idea Wall Street is a market is like calling President Obushma real)


You are no different than the vampire squids - you just suck crill instead of big fish.

Most here define hypocrite:


Fri, 08/24/2012 - 15:08 | 2734868 Toolshed
Toolshed's picture

Why let people wonder about your level of intellect when you can open your mouth and dispel all doubt. Well played sir.


Fri, 08/24/2012 - 10:32 | 2733761 madcows
madcows's picture

What are you talking about?  The article is about corrupt central banks.  Go join an OWS protest somewhere.

Fri, 08/24/2012 - 06:27 | 2732970 falak pema
falak pema's picture

talking about hotbeds of corruption : Here is El Erian's conclusions on what the ECB/Merkel have to do to solve Eurozone.

Mohamed A. El-Erian: Will Actions Follow Words in Europe?

Now, can a hotbed of corruption produce magic like that? 

Open House.

Fri, 08/24/2012 - 06:40 | 2732980 Ghordius
Ghordius's picture

+1, interesting.

about corruption: the political trick is mitigating corruption, not trying to eradicate it completely - an impossible task. that's why federalistic systems have a better "efficiency".

note that Mohammed asks for a balance between austerity and smart governance. ah, this is always the crux - our markets don't like balance, they want "quick fixes"

Fri, 08/24/2012 - 07:46 | 2733095 Scalaris
Scalaris's picture

Moderateness is avarice's pussy cousin.

Is what my teacher nun used to tell me. 

Fri, 08/24/2012 - 04:46 | 2732922 Grand Supercycle
Grand Supercycle's picture

SPX / DOW / NASDAQ / DAX / FTSE choppy daily charts are still breaking down.


Fri, 08/24/2012 - 03:55 | 2732887 Peter Pan
Peter Pan's picture

There will always be crooks and crooked practices going on in big organizations but what is disturbing is the reaction of the hierarchy which attempts to cover things up and punish the whistleblowers.

Fri, 08/24/2012 - 19:45 | 2735862 CH1
CH1's picture

So long as we have systems that can control everyone, there will ALWAYS be crooks running it.

Where else would they go?

Fri, 08/24/2012 - 03:34 | 2732871 Nachdenken
Nachdenken's picture

Power corrupts, absolute power corrupts absolutely. 

We must be grateful to the brave and free who  expose corruption in those places of responsibility  that should function correctly for the benefit of all, as in everyone.

Australia used to be "Down Under" Antipodes perhaps they took it seriously.



Fri, 08/24/2012 - 03:32 | 2732869 doubledutch
doubledutch's picture

It'over , be ready for a DEEP dive..


Fri, 08/24/2012 - 01:01 | 2732721 q99x2
q99x2's picture

The banksters are financial terrorists, psychopaths, and when their fraud collapses the masses are going to hang them from street lamps all around the world. Their darkness shall be brought to light.

Or something like that. I read about it on the Internet. The main banker is supposed to have a really big head and a tail and live in the tunnels that connect Wells Fargo, the NY FED and Brown Brothers Harriman in NYC.

Fri, 08/24/2012 - 00:54 | 2732714 Schmuck Raker
Schmuck Raker's picture

Sorry, my bad.

I thought that said "Up to his neck: the Governor" of NEW JERSEY...

Again, I apologize.



I do

Fri, 08/24/2012 - 00:04 | 2732669 AUD
AUD's picture

Yeah, the RBA might have been giving kickbacks but this whole story is just obfuscation. As if giving bribes to officials is in any way comparable to the scam of passing dud cheques in perpetuity.

If Vietnamese officials are dumb enough to accept the bad credit of the Australian government, & whatever other junk is on the RBA's balance sheet as a bribe, fuck 'em.

Thu, 08/23/2012 - 23:31 | 2732625 Atlantis Consigliore
Atlantis Consigliore's picture

Silver baby, silver,  hi ho silver,  away...to Canada. 

Fri, 08/24/2012 - 12:14 | 2734149 FeralSerf
FeralSerf's picture

Chckenfeed compared to the trillions the Fed has stolen from the savers of the world.

Thu, 08/23/2012 - 21:20 | 2732338 apberusdisvet
apberusdisvet's picture


You didn't build that business, we did


You don't own your bank account, we do


You didn't get that chick pregnant, err...errr.....fuckit


Minutes from the New York FED meeting with Geithner

Fri, 08/24/2012 - 19:38 | 2735840 Thecomingcollapse
Thecomingcollapse's picture

+ 20, laughing my ass off!

Thu, 08/23/2012 - 21:02 | 2732293 Tango in the Blight
Tango in the Blight's picture

My relatives (who believe they are way more intelligent than me because they have business degrees) believe that bank accounts are the wise investment. They scoffed at me when I suggested gold and silver. I'm in doubt now, is it really wise to leave the safety of a normal bank account?

Thu, 08/23/2012 - 23:25 | 2732619 SAT 800
SAT 800's picture

Silver only; please. Gold is always popular as a scapegoat and call back item.

Thu, 08/23/2012 - 23:04 | 2732577 worbsid
worbsid's picture

You forgot the "/sarc" at the end of your post.

Thu, 08/23/2012 - 20:54 | 2732273 alfred b.
alfred b.'s picture


...and this is just the tip of the iceberg.  Politicians hardly hold a candle to the banksters when it comes to fraud and corruption...while Holder naps!

   Buy physical gold and silver...while still available!


Fri, 08/24/2012 - 15:56 | 2735112 madcows
madcows's picture

Holder's not napping.  He's busy chasing Republicans.

Thu, 08/23/2012 - 20:50 | 2732259 philipat
philipat's picture

"for the benefit of their clientele, banks"

Or in the case of the Fed, for the benefit of their Shareholders, banks??

Fri, 08/24/2012 - 07:12 | 2733020 boogerbently
boogerbently's picture

I love to read about the outrage by political officials about bribery being used in foreign countries to get things done.

That is exactly the "business model" of the US congress and senate.

Fri, 08/24/2012 - 16:29 | 2735274 madcows
madcows's picture

It's not an omnibus unless there is something in it for all of us. 

I'll swap you two bridges to nowhere for one cornhusker kickback.

Thu, 08/23/2012 - 20:49 | 2732251 Jlmadyson
Jlmadyson's picture

Yes Benjamin, tell us what banks in Europe last week that needed $14 billion in swaps....in one week.

The crunch for dollars is fully back on. Collateral needs breaking the shadow banking once again.

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