Australia has a corrupt Reserve Bank!

Reserve knew of bribes two years before police called. It is hard to know which is worse, the initial offences or the coverup

THE Reserve Bank governor, Glenn Stevens, has admitted his deputy was told in writing of corruption inside the bank's operations in 2007, two years before the scandal became public and it called in the federal police.

But the bank is refusing to release the briefing or the legal advice it relied on when it decided not to report alleged corruption to the police.

Mr Stevens told the federal parliamentary economics committee yesterday the reserve's deputy governor, Ric Battellino, who retired earlier this month, was informed in writing about corruption inside the reserve's currency firm, Note Printing Australia.

The briefing was written by an unnamed Note Printing employee and detailed admissions made by its Malaysian and Nepalese agents that they had paid bribes on behalf of the Reserve's firm.

Last year, federal police charged Note Printing with bribing officials in Malaysia and Nepal as part of a criminal inquiry that begun in 2009 after revelations in the Herald. It is fully owned by the bank and overseen by serving and former Reserve senior officials.

The Herald revealed last October that Reserve officials were told in 2007 about the corrupt conduct involving Note Printing's overseas agents, but sought to cover it up instead of alerting police.

Under questioning from the Liberal MP Tony Smith yesterday, Mr Stevens initially told the committee the bank had received no written briefing on corruption inside Note Printing and that concerns raised in 2007 were only verbal and inconclusive.

Mr Stevens also used the hearing to strongly deny claims bank officials engaged in any cover-up, saying he "unequivocally" rejected the claim.

But after Mr Smith interrupted the conclusion of the hearing to press Mr Stevens on the bribery scandal, Mr Stevens conceded his earlier evidence to the committee was wrong and the bank had been advised in writing of corruption concerns in 2007.

"Well, actually, that [what I said earlier about their being no written briefing] wasn't quite true. I have been reminded while we have been talking that in fact the deputy governor invited that person [the Note Printing employee who raised bribery concerns] to put that in writing, which he did and give it to the deputy governor."

When he attempted to further press Mr Stevens about the briefing, Mr Smith was told he had run out of time.

It is the second committee hearing in which the RBA has been forced to correct the evidence it has given about its handling of the corruption scandal, which has so far led to the charging of 10 former bank note executives.

Note Printing's sister company, Securency, which is half owned by the RBA, is also facing bribery charges. At the time of the alleged bribery, both companies were chaired by the former Reserve Bank deputy governor Graeme Thompson. They shared the same agent in Malaysia, who has been charged with paying bribes.

Instead of alerting police to the allegations of corrupt conduct in 2007, the Reserve Bank appointees on Note Printing's board confidentially referred them to the corporate law firm Freehills. The Note Printing board also agreed to conceal from the Nepal central bank information about improper tender dealings involving secret commissions.

The RBA claims Freehills later advised there was no need to go to the police. It has also refused to release the Freehills report.

Mr Stevens told the committee yesterday the bribery scandal was "quite easily the most unpleasant, difficult set of issues I've ever had to deal with in my job".

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