Saddam and the deal of a lifetime

It is early summer in Baghdad and the heat is already stifling. Two Australian businessmen, still stiff from the long drive across parched desert plains from Jordan, walk along a crowded street.

They, and the armed henchmen escorting them, find relief inside an airconditioned office belonging to a well-dressed man with fair hair and striking blue eyes – unusual for an Arab in these parts.

But in the court of Saddam Hussein, Arshad Yassin is far from your average man: the Iraqi dictator’s brother-in-law is the feared former head of Hussein’s private security unit, his personal pilot and, by virtue of his influential position, a notorious plunderer of Iraq’s historic treasures.

For the Australians, Yassin is the conduit for the deal of a lifetime, even though what is being discussed on that hot May day in 1998 is against international law. Given the high stakes, and the involvement of Hussein’s inner circle, those present also know that what they are discussing has to be kept confidential.

And so it has remained for 15 years, due to an extraordinary exercise in concealment by the organisation responsible for sending the Australians to Iraq – the Reserve Bank of Australia.

Today, Fairfax Media and the ABC’s Four Corners program reveal confidential RBA documents that show its banknote-printing arm, Note Printing Australia, launched ”Project Delta” in May 1998 to secure $80 million set aside by Hussein for new currency.

The only problem was that United Nations trade sanctions on Iraq – which banned promoting business deals with Hussein’s regime – meant the Project Delta proposal was illegal. The RBA’s brush with Hussein was the first of many instances where its polymer banknote firms, NPA and Securency, got involved with dubious people and allegedly illegal activity.

Those companies and several of their former executives have now been called to account, charged with Australia’s first foreign bribery offences. But what about the businessmen and RBA officials who sat on the companies’ boards and were responsible for their good corporate conduct?

Why, when they repeatedly failed to act on evidence of alleged corruption across several years, has the corporate regulator, the Australian Securities and Investments Commission, not sought to explore their role in the scandal?

Former deputy RBA governor Graeme Thompson and former Reserve Bank board member Dick Warburton were NPA directors at the time of the Iraq venture. While neither man would answer questions about their knowledge of the Iraq trip or other matters related to NPA’s alleged corruption, there is no doubt both knew the RBA was responsible for enforcing United Nations Security Council sanction 661, banning all business interactions with Hussein’s regime.

Thompson is now a director of AMP Superannuation Limited and Warburton is chairman of the Westfield Retail Trust. Their fellow NPA director at the time of the Iraq trip, Mark Bethwaite, is on the board of the Sydney Catchment Authority and was treasurer of the federal Liberal Party between 2006 and 2008.

The Iraq currency deal might have gone ahead if not for the intervention of Australia’s Department of Foreign Affairs and Trade, which later in 1998 warned NPA that what had occurred ”may have already breached Australia’s obligations in international law”.

Making matters worse, wrote DFAT’s assistant secretary of Middle East and Africa branch, John Hines, was that at least one of the RBA’s men had travelled to Iraq using an official Australian government passport, a fact that ”only adds to the potential for embarrassment to the government”.

The existence of Project Delta has never been publicly acknowledged by anyone from the RBA and the federal police were not aware of the Iraq documents until Fairfax Media provided them.

Legal expert Dr David Chaikin believes the Iraqi dealings were a prima-facie breach of Australia’s obligations under international law. ”They were acting dishonestly in trying to circumvent the UN sanctions and Australian law,” says Dr Chaikin, from the University of Sydney’s business school.

For more than a decade, Thompson and some of his fellow directors, including the RBA assistant governor who replaced Thompson as chairman, Bob Rankin, authorised tens of millions of dollars to be transferred overseas by NPA and Securency to overseas agents who promised to win the firm contracts. These agents operated in countries where bribery is common and included an arms dealer, a foreign spy chief and a white-collar criminal.

Not once did the directors, or any of the RBA’s leadership team, raise any concerns with police about the use of agents, not even when a whistleblower provided them with specific evidence of bribery in 2007 and 2008. The RBA only called in police after Fairfax Media reported on corruption concerns in May 2009.

Despite criminal charges against NPA and Securency, and a host of former executives in 2011, the companies’ directors have not been scrutinised. Australian law requires directors to act with diligence to ensure their firms avoid illegality, but ASIC has, for reasons it won’t explain, rejected an AFP referral to examine possible corporate offences.

Today, in addition to the revelation of the RBA’s dealings with Saddam Hussein’s family, two whistleblowers, who are also key police witnesses in the bribery case, speak publicly for the first time about the scandal.

Former NPA company secretary Brian Hood and former Securency sales executive James Shelton accuse the boards of both companies of failing in their corporate duties to the extent that ASIC has no option but to investigate.

For instance, Hood says that, in 2007, chairman Thompson ordered him to send $400,000 to a Malaysian arms dealer, despite concerns the arms dealer was corrupt. Hood and Shelton say they are staggered by ASIC’s lack of interest in NPA and Securency board members. ”It seems that there are a group of people that are untouchable. Why, I don’t know,” Hood says.

The small group of men who worked in senior management or sales for the RBA’s currency firms lived in a world of power and privilege.

Their job was to fly to often exotic destinations to meet politicians, central bankers and senior bureaucrats and convince them to buy Australia’s unique plastic banknotes.

With official Australian government passports, doors were always open. But the RBA men knew that what happened behind closed doors had to remain secret. The two NPA men who went to Baghdad in 1998 were certainly aware of the clandestine nature of their business.

In a confidential report faxed on May 22, 1998, to Bethwaite, one of the NPA men – who cannot be named for legal reasons – outlined what role Saddam Hussein’s brother-in-law, Yassin, was to play and how his involvement had to be kept secret.

”Mr Arshed [sic] Yassin: Married to Saddam Hussein’s sister and first cousin of SH [Saddam Hussein]. Extremely influential, he is willing to open all the doors for us. He confirmed that SH has seen polymer notes samples and is keen to adopt our product. AY’s [Arshad Yassin’s] assistance is critical, as all decisions on this project will be taken by SH,” the report states.

The fax goes on to describe NPA using a ”front man” to conceal its dealings with Saddam Hussein’s inner circle.

Iraq did need new banknotes. Its money was old and easily counterfeited. But UN sanctions made it impossible for any currency printer to deal with Iraq without an export permit from its home government.

However, according to the faxed report, Hussein was keen on the Australian technology and had ”instructed the central bank to freeze all negotiations with other suppliers, and to provide him with a full proposal for the polymer banknotes”.

Bethwaite, who says he cannot recall reading the Iraq fax and asked that all questions be put to the RBA, was warned that rival currency firms were aware of NPA’s dealings in Iraq and ”are actively trying to undermine our efforts”. ”For this reason confidentiality on this project is paramount.”

Hussein’s men were told by the Australians that although NPA could not deliver any product until the trade embargo was lifted, ”nothing was stopping us to sign a contract and to have products (banknotes, machines, etc) manufactured as long as we had a guarantee of payment established”.

Iraq had the money to pay for new banknotes, with Yassin advising that ”SH office has already allocated USm 65 for the total project”.

A payment option proposed by the Iraqis involved a private bank paying on Iraq’s behalf, with the Central Bank of Jordan acting as guarantor. ”This option only possible with the green light of SH,” the fax concludes.

For 11 years, the Iraq fax remained buried in a file at NPA’s Craigieburn headquarters in Melbourne’s north. It was found in 2009 by veteran NPA employee Danny Reid, who, after more than 20 years working on the technical side of the business, found himself in 2005 among the jet-setting chosen few charged with selling plastic banknotes around the world.

Reid, head of NPA’s sales and marketing since 2005, declined to be interviewed. However, Fairfax Media has obtained a statement by Reid that was lodged with police this year. It has never before been made public and is damning.

Reid claims that NPA directors and RBA officials were aware of ”high-risk strategies and poor business practices” since early 1998. These practices included paying agents after they had been sacked for bribery concerns.

”The ongoing authorised payments to agents that had already had their contracts terminated, even after the [internal] … investigation, cannot be ignored. If NPA directors had such a high level of concern in regard to the high probability of corruption and criminal activity, how could they possibly authorise further payments [to overseas agents]?”

When Reid found the Project Delta documents on Iraq in June 2009, he telephoned Rankin, then assistant RBA governor and NPA chairman, and read their contents.

In response to questions from Fairfax Media in 2009 about the Iraq trip, Rankin released a brief statement declaring no deal had been done and no sanctions were breached. He did not mention the involvement of Hussein’s brother-in-law nor the DFAT advice that sanctions might have already been broken.

Ironically, it was the 2006 Cole inquiry into wheat exporter AWB’s corrupt dealings with Iraq that prompted NPA’s directors to examine their company’s own use of overseas agents to win contracts.

A series of internal reviews in 2007 and 2008 found evidence of corrupt behaviour by NPA agents overseas. But neither the NPA board nor the RBA leadership alerted federal police for further investigation.

Hood, as NPA company secretary, was central to these internal probes. He documented explosive allegations of the company’s overseas agents paying bribes to win deals in Malaysia and Nepal.

But despite passing on his concerns to the board, Hood witnessed Thompson and other directors authorise further payments to allegedly dodgy foreign agents.

”I was pretty stunned by the decision to let the funds go,” Hood says. ”I thought this is clearly not in the best interests of the company.”

In June 2007, Hood personally briefed RBA’s deputy governor, Ric Battellino, about his corruption concerns. Battellino then asked Hood to put his concerns in writing.

Still no one at the RBA called the federal police or ASIC.

Instead, corporate law firm Freehills, which has no police powers, was asked to investigate. Freehills found no breaches of Australian law.

In the wake of Hood’s concerns, NPA decided to sack all its overseas agents and, in late 2007, Thompson stood down as NPA chairman. But he remained in charge of the board of sister firm Securency.

Hood’s fellow whistleblower, James Shelton, arrived at Securency in 2007 as a fresh-faced sales executive. Although he and Hood worked just a few hundred metres apart in companies devoted to the same task – selling the Reserve Bank’s polymer currency material across the globe – they only met years later when they became star police witnesses.

Shelton says in his first week at Securency he suspected the company was paying bribes. He was further alarmed when he learnt that while NPA had dismissed its agents, Securency, still chaired by Thompson, had decided to keep its far bigger network of fixers, including those sacked by its sister firm.

”If it’s not good for one, it’s not good for the other,” he says.

In 2008, Hood was pushed out of NPA. After doing so much to report corruption, he was told by new NPA chairman Bob Rankin that his position was redundant.

Around the same time, Shelton had seen enough and also wanted out. He felt he could not go to the board because another employee with similar concerns had been sacked after reporting matters to a senior Securency manager whose job it was to liaise with directors.

Instead, Shelton contacted the AFP while still working for Securency (his contract would expire at the end of 2008).

While the police showed some initial interest in acting on his concerns, they soon stalled.

In response, Shelton decided to contact The Age. With a government and intelligence background, going to the press was not a natural instinct for Shelton.

But it paid off. The federal police launched a full-blown probe after the firms’ use of foreign agents was reported on the front page.

Australia’s banknote bribery scandal has damaged many. Two overseas agents have been charged with paying bribes on behalf of the RBA firms, with more arrests expected. One has taken his own life.

Former senior staff from Securency and NPA have also been charged in connection with the agents’ alleged bribery. Whistleblowers Hood and Shelton were ostracised, left disillusioned and temporarily unemployed. But where others have paid a price, the men who sat around the board tables of both RBA firms have not been asked by anyone how this happened under their watch.

Richard Baker and Nick McKenzie are investigative reporters.

Watch Four Corners at 8.30pm tonight on ABC1 for exclusive interviews with the key police witnesses.

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