Australian Foreign-Bribery Investigation of Banknote Firms Nears End on Discordant and Surprising Notes

During November, two developments in the long-running foreign-bribery investigation of two Australian banknote companies by the Australian Federal Police (AFP) and Commonwealth prosecutors appear to have brought that investigation to a close.  Both companies — Securency, which made the plastic base for banknotes, and Note Printing Australia (NPA), which produced the notes investigation – were owned by the Reserve Bank of Australia (RBA) at the times relevant to the investigation.

First, on November 8, the High Court of Australia, in a unanimous decision, affirmed the permanent staying of prosecutions against four unnamed NPA executives, who had been charged with violations of the Commonwealth Criminal Code (and, in some cases, the Victoria Crimes Act 1958), on abuse-of-process grounds.  The High Court’s decision stated that the Australian Crime Commission (ACC), which has statutory authority under the  Australian Crime Commission Act 2002 to investigate criminal activity, had failed to comply with key provisions of its own legislation.  Even though each of the four executives had been asked to participate in a cautioned record of interview by the AFP and had declined that request, an ACC examiner chose to use the ACC’s coercive powers to compel the executives to answer the AFP’s questions.  Because the AFP and commonwealth prosecutors gained a substantial forensic advantage from the compelled questioning, the Court agreed with the trial-level judge’s conclusion that “the continued prosecution of the appellants would bring the administration of justice into disrepute.”

Second, during the week of November 26, a former NPA sales executive, Christian Boillot, pleaded guilty to conspiring to offer a bribe to foreign officials in Malaysia.  That result, closely following the High Court’s decision regarding the four other executives, led to the November 28 lifting of non-publication court orders in the case.  That in turn prompted the RBA to issue a statement, in which it publicly disclosed for the first time that in 2011, NPA (wholly RBA-owned) and Securency (50 percent RBA-owned at the time) entered pleas of guilty to charges of conspiracy to bribe officials in Indonesia, Malaysia, Vietnam, and Nepal in connection with banknote-related business.  Previously, in 2011 both firms had been publicly charged in the investigation, but no resolution had been reported until now.  The RBA also stated that as a result of their pleas, the two companies paid a combined total of nearly A$22.6 million (US$16.3 million) in fines and pecuniary penalties under the Proceeds of Crime Act 2002. Although Securency’s pecuniary penalty of A$19,809,772 was more than ten times the size of NPA’s pecuniary penalty of A$1,856,710, the RBA statement did not provide any explanation of the reasons for the disparity or the facts relating to the firms’ relative culpability.

Previously, four other individuals — Securency’s former chief executive and chief financial officer, a  manager, and an agent  principal of a Securency agency business in Indonesia – pleaded guilty to various charges and received suspended sentences.  It will be surprising if Boillot, who is scheduled to be sentenced December 6, receives anything but a suspended sentence as well.

Note:  As one of the first cases pursued under Australia’s foreign-bribery laws, this investigation has had as many plusses as it has minuses.  On the plus side, the AFP and the Commonwealth Director of Public Prosecutions (CDPP) deserve credit for initiating and seeing the investigation through over nearly a decade, for conducting a true joint investigation with the United Kingdom Serious Fraud Office (SFO), and for obtaining guilty pleas from NPA, Securency, and a number of top executives.  On the minus side, the SFO is the only prosecutive office that succeeded in obtaining a sentence of imprisonment in that joint investigation, and the High Court’s strong rebuke of the AFP and the CDPP has strengthened the voices of crossbench Members of Parliament advocating the creation of a federal anti-corruption body.  The investigation also called into question the adequacy of the RBA’s supervision of its own subsidiaries.  RBA Governor Philip Lowe acknowledged that  the RBA “accepts there were shortcomings in its oversight of these companies, and changes to controls and governance have been made to ensure that a situation like this cannot happen again.”

In one respect, this case could prove to be a historical artifact with respect to regulatory and law enforcement expectations about director accountability for bribery-related conduct.  The RBA’s public statement specifically said that in 2011, the CDPP ”accepted that the boards of the two companies had no involvement in, or knowledge of, the conduct in question. No evidence of knowledge or involvement by officers of the RBA, or the non-executive members of either board appointed by the RBA, has emerged in any of the relevant legal proceedings or otherwise.”  Both NPA and Securency, on the other hand, reportedly “accepted that the systems and procedures they had in place at the time of the offending were inadequate to prevent or detect the offending conduct of their senior executives.”  Since 2011, regulatory expectations in the United Kingdom and other countries about the responsibility of boards for overseeing corporate compliance have been increasingly stringent.  It seems highly likely that in future Australian investigations of corporate wrongdoing, mere denials of knowledge or involvement by board members in the alleged wrongdoing will not suffice to avoid individual director culpability, at least when multiple C-level executives and managers are implicated in the bribery scheme and the board failed to establish and maintain consistent oversight on compliance matters.

Further details regarding the sequence of events in the investigation can be found in the RBA’s chronology and an ABC News timeline.

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