RBA subsidiaries scandal deepens

The Reserve Bank has been rocked by fresh corruption charges against one of its subsidiaries, with Nepal becoming the fourth country where federal police allege bribes were paid.

A series of Melbourne court orders prevent Fairfax from reporting important recent developments in the banknote bribery prosecution-the first of its kind in Australia- but the newspaper can reveal that the AFP has charged Note Printing Australia with conspiring to bribe Nepalese government officials between 2000 and 2002 in order to win currency supply contracts.

The decision to lay charges over NPA's Nepal deal is highly damaging to the RBA and its leadership.

Fairfax last month revealed that some of the central bank's most senior officials, including deputy governor Ric Battellino, sought in 2007 and 2008 to suppress or cover up explicit evidence NPA had been implicated in bribery in Malaysia and Nepal.

This information included admissions by NPA's Nepalese and Malaysian agents of using their commission fees to make illicit payments to officials to secure contracts, the discovery that NPA had lied in tender documents to a foreign central bank and had paid a middleman $500,000 months after he was sacked for corruption concerns.

The RBA leadership chose not to refer this information to federal police in 2007 and 2008, instead hiring law firm Freehills to provide advice on whether any Australian laws had been broken. Freehills said it could find no breach.

Police have now used the information that was not acted upon by senior RBA officials in 2007 and 2008 as the basis to charge NPA and several of its senior former executives with Australia's first ever foreign bribery offences in Nepal and Malaysia.

In a statement last month, the Reserve denied the cover-up allegations and claimed they were based on ''inaccurate and incomplete facts'' but said specific details could not be addressed as the matters were, or were potentially, the subject of court proceedings.

Police documents lodged in the Melbourne Magistrates' Court allege NPA conspired "to provide a benefit...with the intention of influencing a foreign public official".

Other documents show Nepal's interest in NPA's banknotes was sparked by a June 2001 letter from the then RBA governor, Ian Macfarlane, who urged his Nepalese counterpart Tilak Riwal to consider the product.

Mr Macfarlane's letter set in train a process where Nepal's central bank, finance ministry and cabinet endorsed the introduction of polymer banknotes, changed laws to allow Nepal's currency to be printed on material other than paper and held a short global tender process in early 2002.

There is no suggestion that Mr Macfarlane was involved in or aware of any of NPA's allegedly corrupt deals. However, his letter highlights how some of the RBA most senior figures lobbied strongly on the company's behalf.

NPA, which is 100 per cent owned by the RBA and whose board at the time of the alleged offences featured former deputy RBA governor Graeme Thompson and assistant governor Frank Campbell, has also been charged with bribing officials in Indonesia.

Sister firm, Securency and several of its former top executives have been charged with bribing officials in Vietnam, Indonesia and Malaysia. Securency, which makes plastic banknotes, is 50 per cent owned and supervised by the RBA.

Federal police only began investigating the overseas activities of the RBA firms in May 2009 after Fairfax exposed their huge commission payments to a series of shady foreign middlemen with political connections.

The latest charges to be laid against NPA further challenge RBA governor Glenn Stevens' statement to parliament this year where he said no one at the central bank knew anything about corruption concerns at its subsidiaries until May 2009.

The Gillard Government has consistently refused to support moves for parliamentary scrutiny of Mr Stevens and Mr Battellino's handling of Australia's biggest corruption scandal.

Labor MPs on the parliament's economics committee last month voted against a push by Coalition MPs to re-call the pair to face questions over allegations the RBA had sought to cover-up the scandal during 2007 and 2008.

The Nepal bribery charges are also a blow to the Department of Foreign Affairs and Trade, which played a key role in lobbying Nepalese officials to award NPA contracts in 2002 and 2004.

NPA and Securency have been ordered to appear next month in the Victorian Supreme Court in relation to the charges.

Eight former NPA and Securency executives are also scheduled to appear before court next month. They will face committal hearings next year. If they are committed to stand trial and are found guilty, they face jail sentences of up to 10 years.

The Federal Government last week it would strengthen foreign bribery laws in the wake of the banknote scandal.