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They’re off and racing
Watch a video of Rebecca Twigley launching this year’s spring carnival fashions on the field. theage.com.au/video

Powerball (draw 702): 20, 2, 45, 11 and 10. Powerball: 45. Wednesday Lotto (draw 2873) dividends: Division 1, no winners; division 2, $6523.35; division 3, $606.25; division 4, $27.80; division 5, $16.35.

Lady swings the blues
As singer-guitarist Deborah Coleman points out on the eve of the Wangaratta Jazz Festival, the blues keeps coming back in fashion, writes Ken Williams.

Notes on a scandal
Hanoi businessman Anh Ngoc Luong has strong connections with the Vietnamese Government. So why is Securency, the Reserve Bank’s polymer banknote firm, sending him money? By Richard Baker and Nick McKenzie.


Monday-Friday: 765,000 Saturday: 957,000 Sunday: 735,000 View the law list at: theage.com.au/lawlist
CORRECTION POLICY It is the policy of The Age to correct all significant errors as soon as possible. The Age is committed to presenting information fairly and accurately. FOUNDED IN 1854 Published by the Age Company Ltd (ABN 85 004 262 702) of 250 Spencer Street, Melbourne. Printed by The Age Print Company Pty Ltd (ABN 36096 607 402), Western Avenue, Tullamarine. Paul Ramadge, Editor in Chief, takes responsibility for political editorial comment in this publication. To find out more about The Age, its people, history and services, go to about.theage.com.au

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New chance to aid Murray Darling
Cotton farm sale lifts hope for rivers
HOPES have soared that huge amounts of water from Australia’s most famous cotton farm could return to the MurrayDarling river system, after administrators were appointed to handle the affairs of Queensland’s Cubbie Station. After months of trying to sell the huge station and its water entitlement to governments and agricultural businesses, Cubbie chairman Keith De Lacy said the company would be handed to administrators today. ‘‘In the end it was drought that beat us,’’ he said. ‘‘We have only had one good season in the last five.’’ When full, Cubbie holds a mammoth 530 billion litres of water; by comparison, Melbourne’s massive Thomson dam yesterday was holding 219 billion litres. Mr De Lacy said the company was struggling to satisfy a $320 million debt arrangement to the National Australia Bank, and he was confident that going into administration would cause the least disruption to Cubbie’s operations. ‘‘We have discussed and have in-principle agreements with the voluntary administrators such that the business can continue to trade and we will work with them during the administration period,’’ he said. ‘‘This will allow the value in the assets to be realised in an orderly way, in the interests of all our stakeholders.’’ It was unclear last night what the development would mean for the sale of Cubbie and the Commonwealth’s buyback of water entitlement in the Murray-Darling river system. University of Adelaide water expert Professor Mike Young said it increased the chances that Cubbie’s infamous water entitlement returning to the environment. ‘‘Whether that is through acquisition or the licences being cancelled, this clearly increases the chances that Cubbie’s water will return to the river,’’ he said. Australian Conservation Foundation spokeswoman Dr Arlene Buchan said the Commonwealth, which has baulked at offers to buy Cubbie’s water, was faced with a new opportunity. ‘‘There is a renewed space for the Commonwealth to explore the opportunities with state governments and other stakeholders,’’ she said. Federal Water Minister Penny Wong would not comment on the shift to administration, but said the Government remained open to talks with any willing seller of water in the Murray-Darling system. Water rules in Queensland, which insist on land and water entitlement being sold together, are known to have played a role in dousing Commonwealth interest in Cubbie. Independent senator for South Australia Nick Xenophon said Cubbie’s failure was proof that the enterprise was not sustainable and state governments could not be trusted with water allocations. ‘‘The only way to avoid more Cubbies is for there to be an immediate national takeover of our river systems, including the Murray-Darling Basin,’’ he said. Queensland National senator Barnaby Joyce yesterday blasted Liberal senator Bill Heffernan and members of the Federal Government who had publicly questioned the asking price of Cubbie’s owners. Senator Joyce said comments by Senator Heffernan had scared away potential investors and destroyed jobs for residents of the nearby town St George. ‘‘Who wins out of this? . . . I never hear them talk about ways to reinvest in the employment of the area,’’ Senator Joyce said. ‘‘All I ever hear about is a tirade of venom that has finally brought about what they want — they have managed to be part and parcel of sending a town broke.’’ With AAP

RBA’s new ‘bribe’ storm
From PAGE 1
Government sources said the Department of Foreign Affairs and Trade had long believed Mr Luong to be a government official and his firm an arm of the Public Security Ministry. One senior source said CFTD’s government connections were ‘‘common knowledge’’ among Australian embassy officials in Vietnam. A Securency source said senior company officials had privately claimed that Mr Luong was a senior security official. Mr Luong is also listed as a director of CFTD’s Australian operations, based in Frankston, Melbourne. A second director and shareholder of CFTD’s Australian firm is Vietnam’s attache to the United Nations and World Trade Organisation in Geneva, Thuong Minh Do. Securency and the RBA have refused to explain why the payments to Mr Luong and CFTD were so high and sent to offshore accounts, saying it was inappropriate to comment during a police inquiry. In 2007, when Securency executives were quizzed by an overseas reporter about why their firm was working with CFTD, they stressed the Hanoi company’s role was limited mostly to the translation of documents, arranging meetings and airport pick-ups. ‘‘A lot of the [CFTD’s] roles in the early stages were to do with interpreting and translating . . . so that is the primary role they play. So it is the liaison between the state bank,’’ Securency managing director Myles Curtis said in the 2007 interview.

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MARCH 26 The Age reveals that defence officials conducted a covert probe into Joel Fitzgibbon’s relationship with Chinese businesswoman Helen Liu (left). There were concerns their relationship might pose a security risk given Ms Liu’s ties to the Chinese Government.

trips to China paid for by Liu, after earlier telling the media he only received “very small gifts” from her.

MARCH 28 Australia’s intelligence

Fitzgibbon reveals that he failed to disclose two


watchdog, the Inspector-General of Intelligence and Security, begins investigation into claims that a Defence intelligence official improperly searched the minister’s computer. Defence Department also investigating claims that defence officials looked into Fitzgibbon’s personal affairs. defence officials had privately raised concerns about Fitzgibbon’s

MARCH 28 The Age reveals that

role in the lobbying by a business connected to his brother. Mark Fitzgibbon (right), who is managing director of the NIB Health Fund, and executives of US health services giant Humana, met Government and defence officials. Joel Fitzgibbon said he had drinks with NIB and Humana representatives, but had referred their request to discuss business dealings to other Government ministers.

The Age reveals a third China trip paid for by Liu, taken in 1993 before Fitzgibbon was a minister. Also on the trip was Fitzgibbon’s father, Eric, who was then a federal Labor MP.



embassy officials in Australia. Liu gave at least another $50,000 to the NSW ALP between 2001 and 2007.


JUNE 2 Fitzgibbon reveals he failed
to declare an interest on the MPs’ register in regard to $450 of hotel accommodation paid for by his brother’s company in June last year. security watchdog backs Warner’s findings that no “rogue elements” in the Department conducted a covert probe of the minister. But Fitzgibbon is under fresh pressure, after revelations by Major-General Paul Alexander (right), who says he was instructed to attend meetings with the minister’s brother at which defence health contracting was discussed.

MAY 30

APRIL 4 Revealed that Liu gave Joel Fitzgibbon at least $40,000 in direct political donations while she was working closely with Chinese

Defence Department secretary Nick Warner (right) dismisses as “fiction” claims his officials spied on the minister.


JUNE 3 Australia’s intelligence and


JUNE 4 Joel Fitzgibbon resigns

from cabinet after revelations that he failed to disclose additional meetings he had with his brother’s company, in contrast to the minister’s earlier public assurances.

Richard Baker and Nick McKenzie, whose reports exposed Joel Fitzgibbon’s problematic affairs, chart the minister’s demise.

Brothers in arms
Fitzgibbon’s office requesting meetings to discuss defence health contracts. The slip-up over the bill, described by Fitzgibbon as a product of confusion after his brother had pulled out of the hotel stay at the last minute, was enough to fire up Opposition MPs, who on Wednesday used a parliamentary hearing to grill Defence officials over the lobbying activities. Major-General Paul Alexander, who is responsible for defence health services, told the Senate committee that staff from Snowden’s office and other Defence officials told him to attend meetings featuring Mark Fitzgibbon. Alexander said he was at a meeting with Humana executives on August 27 last year. He said Mark Fitzgibbon was also present and appeared to ‘‘sponsor’’ Humana. When The Age asked the Defence Department in March about meetings between its officials, NIB and Humana, it referred only to the August meeting. The department failed to disclose that Mark Fitzgibbon also met staff from Snowden’s office and Defence officials on July 3. Until yesterday, the department and Joel Fitzgibbon had kept quiet about the meeting in his office, which was attended by some of the Defence than have the revelations about the minister’s associations and conduct. In early March, The Age and The Canberra Times received an anonymous letter from a person claiming to be a Defence Department official. Concerns were raised about decisions to allow mining companies to mine on Defence Department land and the possibility that Fitzgibbon’s family members held shares in some of the companies. Nothing has emerged to suggest this information is true. But the bulk of the letter refers to the involvement of Fitzgibbon’s office in the lobbying of Defence by NIB and Humana and the minister’s longterm friendship with Helen Liu. The letter suggested the minister’s office had been used ‘‘as a base for their lobbying activities’’. The fact that the Fitzgibbon brothers had been socialising with Humana executives was also raised. ‘‘(Defence) officials felt they were being pushed by the minister to do business with his brother,’’ the letter said. On the friendship with Liu, the letter was specific and suggested the Chinese-born businesswoman posed a security risk due to her extensive political, business and military connections in China. The letter disclosed that Fitzgibbon was living


OMETIMES the innocuous can prove deadly. And so it was for Joel Fitzgibbon when he responded to questions from The Age on an afternoon in late March. In committing to a public statement on the level of his involvement in his brother’s Parliament House lobbying, Fitzgibbon set a trap for himself. Two months later — after withstanding revelations about his friendship with a Chinese-born businesswoman with close ties to Beijing’s political and military elite, and failures to declare gifts and sponsored travel — that trap snapped shut. Yesterday, the Defence Minister resigned, becoming the first ministerial scalp in the Labor Government. As Prime Minister Kevin Rudd explained, the catalyst for Fitzgibbon’s resignation was the inaccuracies in ‘‘undertakings that the minister made publicly in March’’ about his role in the lobbying activities of his brother. Mark Fitzgibbon is the managing director of NIB Health Fund who, in partnership with US company Humana, last year sought to do business with the Defence Force. In response to The Age’s questions in March, Fitzgibbon’s spokesman said the minister and his staff were not involved in discussions with NIB or Humana regarding Australian defence health contracts. Fitzgibbon’s office had directed both companies to deal with Veterans Affairs Minister Alan Griffin and Defence Personnel Minister Warren Snowden. Furthermore, Fitzgibbon’s spokesman said the minister’s office was never used for any meeting with the health company officials, only as a place for his brother and the Humana executives ‘‘to leave their bags’’. In other words, Fitzgibbon’s spokesman had insisted that the minister had kept well away from his brother’s lobbying. What emerged yesterday, and was ostensibly the reason for Fitzgibbon’s ministerial demise, was the fact that he was more involved with his brother’s Parliament House affairs than he initially disclosed. ‘‘What he has informed us of today is that his staff did attend meetings with NIB on this matter and, furthermore, that one of those meetings occurred within his office,’’ Rudd said. Yesterday’s events marked the third time in just over two months that Fitzgibbon has failed to meet Rudd’s ministerial code of conduct. The first came in late March when he admitted to failing to declare two trips to China paid for by businesswoman Helen Liu. Fitzgibbon had earlier denied receiving any large gifts or travel from his friend. On Tuesday evening, Fitzgibbon informed Parliament of another amendment he needed to make to his parliamentary register of interests. This mistake concerned a $450 hotel room paid for by his brother’s company in June last year, just weeks before a letter was sent by NIB to

Former business associates of Liu . . . have claimed that Fitzgibbon was vulnerable to more damaging revelations.
Minister’s staff. That Fitzgibbon chose to resign shortly before question time at 2pm is telling. Had he retained his position on the front bench, he would have faced further questions about NIB and Humana. The Opposition also planned to press Fitzgibbon about his relationship with Liu, in particular whether she had given significant amounts of cash or company shares to his family members. Fitzgibbon has repeatedly refused to answer allegations made by Liu’s business associates — and his onetime friend and former ALP leader Mark Latham — that he and his family have enjoyed considerable financial benefits from the woman he first met on a trip to China with his father in 1993. For the past two months, Fitzgibbon’s standard response to questions about cash or gifts between Liu and his family members has been: ‘‘As advised in the response yesterday, Minister Fitzgibbon has never received any shares or cash from Ms Liu. Questions relating to any other individuals should be referred directly to them.’’ So where did the information about Fitzgibbon’s ties to Liu — including his rental of a Canberra townhouse owned by her family and his brother’s lobbying activities come from? In the past two months, the source of the damaging leaks against Fitzgibbon has created a bigger stir

at a Canberra residence owned by Liu or her sister, a fact that Australia’s intelligence agencies seemed unaware of or untroubled by. It referred to her significant donations to the ALP and gifts to Fitzgibbon, such as an expensive suit. The letter also alleged that an officer of the Defence Signals Directorate found Liu’s credit card details on Fitzgibbon’s office IT systems. Upon receiving the letter, The Age set about verifying the allegations raised concerning Fitzgibbon’s friendship with Liu, her links to China’s political and business elite and her corporate activities in Sydney and in Shandong. The Age also began investigating recent mining licences on Defence land and sought to find out if NIB and Humana had in fact held meetings in Canberra last winter. Most importantly, The Age and The Canberra Times took time to establish the identity of the author of the letter and to confirm his position in the senior ranks of the Defence Department before publishing the initial story. The official is among a small number of Defence or Australian Defence Force personnel who were involved in discreet inquiries — done largely out of work hours and away from work computers — after hearing of ‘‘gossip’’ circulating among Fitzgibbon’s staff regarding his personal affairs. In establishing the author’s iden-

tity, The Age did what investigations by the Defence Department and the Inspector-General of Intelligence and Security were unable to do. Both inquiries claimed to have found no evidence of an unauthorised inquiry into Fitzgibbon by Defence staff. Defence Department secretary Nick Warner has been at pains to say his organisation was not involved in any probe of Fitzgibbon’s personal affairs, describing the notion as ‘‘pure fiction’’. Asked by a Senate estimates committee yesterday about the reports that someone in the Defence Security Authority had been looking into Fitzgibbon, Warner said: ‘‘Maybe it means some bloke sitting at home Googling.’’ The Age discovered information about Liu’s $60 million property portfolio, donations of $40,000 to Fitzgibbon’s election campaigns and a further $50,000 to NSW Labor, and her links to Chinese political and military officials by accessing publicly available databases, political financial disclosures, court transcripts and company records. Some of the information also came from within the Defence Department or the minister’s office. As yesterday’s events make clear, the serious questions raised were not without substance. One question left unresolved by Fitzgibbon’s resignation is — was there more to come? Had he stayed on as minister, Fitzgibbon may have anticipated the airing of further information about his ties to Liu or dealings with his brother’s company. Given his initial failings to issue accurate disclosures, the risk of further exposure was too great. Certainly, former business associates of Liu who remain politically and commercially engaged in Australia have claimed that Fitzgibbon was vulnerable to more damaging revelations. They maintain the Fitzgibbon family may have enjoyed further largesse from Liu and her companies, dating back to 1993 when the pair first met as he accompanied his father, Eric Fitzgibbon — then a Labor MP — on a firstclass trip to China. Since then the younger Fitzgibbon has travelled to China courtesy of Liu in 2002 and 2005 when he was a shadow minister. Eric Fitzgibbon also travelled to China with Liu in 2001. Little is known about the purpose of these trips or what occurred on them. One of the trips was over Christmas, one of the few occasions MPs get to spend quality time with their families. But Joel Fitzgibbon was in China and it remains unclear why. For all the questioning and attacks about who was digging dirt on Fitzgibbon and for what purpose, it was not a third party who has been the architect of his demise. His resignation lies in the repeated failure to meet basic standards of ministerial conduct. For that, he only has himself to blame. Richard Baker and Nick McKenzie are with The Age’s investigative unit.

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Notes on a scandal
Hanoi businessman Anh Ngoc Luong has strong connections with the Vietnamese Government. So why is Securency, the Reserve Bank’s polymer banknote firm, sending him money? By Richard Baker and Nick McKenzie.


NH Ngoc Luong always went about his business quietly. During his time as a mature age science student at Monash University in the early 1990s and then as an employee at a Victorian security supplies firm, Luong was regarded as polite, smart and diligent. Those who worked with him had no inkling that he would one day become a person of considerable wealth and power in Vietnam. Nor did they have any idea that he would emerge as a key player in the most serious corruption scandal ever faced by the Reserve Bank of Australia. ‘‘He was extremely hard-working and intelligent. He was a pleasure to work with . . . a good guy,’’ a former colleague recalls. But Luong is much more than your average ‘‘good guy’’. He is directorgeneral of Hanoi’s Company For Technology and Development (CFTD), which supplies high-tech equipment to Vietnam’s military and security services. Furthermore, sources who have worked in three different Australian Government agencies suspect Luong has acted as a senior representative of Vietnam’s powerful Ministry of Public Security, which is responsible for the country’s internal security and controls police and domestic intelligence services. Luong and CFTD are central to an Australian Federal Police investigation of allegations that the RBA’s polymer banknote supplier, Securency, has paid bribes to foreign officials to secure currency printing contracts, most notably in Vietnam and Nigeria. The revelation that Securency wired more than $5 million to overseas bank accounts tied to Luong is the most serious development yet in the corruption scandal engulfing the RBA. CFTD also received several million dollars from Securency as part of a

business deal in which Vietnam switched from paper banknotes to notes made from the polymer supplied by the RBA firm. Given the suspected strong ties between Luong and CFTD to the Vietnamese Government, Securency and the RBA are under immense pressure to explain the payments. Under Australia’s criminal code, Australian companies are forbidden from making payments to foreign officials or firms controlled by foreign governments in order to gain beneficial treatment. But the Vietnamese payments cast a shadow that extends well beyond Securency and the Reserve Bank of Australia, which supervises and half-owns the polymer currency company: Australia’s Department of Foreign Affairs and Trade (DFAT), as well as the trade agency Austrade, were heavily involved in Securency’s dealings with CFTD and Luong. What was, just a few years ago, being hailed as a major Australian export success story has morphed into an international corruption scandal with serious implications for all involved. The question of who knew what and when looms large. Says Richard Broinowski, a former Australian ambassador to Vietnam: ‘‘Given what has now been unearthed, it seems to me that Foreign Affairs would have had [at the time] an indication of what is going on and should have pursued it.’’ When the State Bank of Vietnam began considering switching the country’s currency from paper to polymer about 10 years ago, Vietnamese and Australian officials were keen for Securency and CFTD to join forces. It appeared a good fit. CFTD, in addition to providing equipment for Vietnam’s armed forces, also had developed expertise in the banking and finance sectors. The partnership worked for other

reasons as well: staff at Securency’s offices in Melbourne heard whispers that some CFTD staff had considerable pull in Vietnam. One of the senior employees of a CFTD subsidiary was the son of the governor of the State Bank of Vietnam. This in itself sparked corruption concerns in Vietnam, but newspaper reporting on the subject was quickly suppressed by authorities. A later Vietnam Government inquiry in 2007 found the central bank’s handling of the polymer contract to be ‘‘irregular’’ and ‘‘lacking in transparency’’. But the inquiry’s impact was minor: central bank governor Le Duch Thuy was cen-

from Securency, the RBA, DFAT or Austrade know of Luong and CFTD’s extensive connections with Vietnam’s Ministry of Public Security and other government agencies? It is hard to believe DFAT and Austrade did not. Company documents show that in addition to Luong, CFTD and its offshoots have other Vietnamese Government representatives as shareholders and directors. CFTD has also entered into joint stock companies in Vietnam with state controlled banks and oil companies. One of its subsidiaries, CFTD-Sangtao had a website with a Viet-

TOP: Anh Ngoc Luong. ABOVE: Securency managing director Myles Curtis.
sured and the banknote deal rolled on. The joint venture partnership between Securency and CFTD became official in 2002 when Vietnam’s central bank formally announced the switch to polymer money. Diplomatic and trade sources have told The Age the Australian Government was heavily involved in the behind-the-scenes negotiations surrounding the Vietnamese currency project, including Securency’s partnership with CFTD. The key question is did anyone namese Government address. Former ambassador Broinowski told The Age any payments by Securency to companies or individuals connected with Vietnam’s Ministry of Public Security would constitute ‘‘a huge moral irresponsibility’’ on the part of the RBA and the Australian Government. They may also constitute a criminal offence carrying a jail term of up to 10 years. ‘‘I would have to ask how far the knowledge of this case extends into the

senior management of the Reserve Bank, Treasury and therefore into Canberra . . . into DFAT.’’ Neither DFAT nor RBA would answer questions from The Age about the extent of their knowledge about CFTD’s and Luong’s suspected ties to the Vietnamese Government. A Foreign Affairs spokesman says although ‘‘CFTD is known to DFAT and Austrade officers’’, the Australian Government was not involved in, or privy to, any commercial arrangements between Securency and the Hanoi company. Several Australian diplomatic and trade officials have privately told The Age that CFTD’s and Luong’s connection to the Vietnamese Government were well known. Says one diplomatic source: ‘‘CFTD is a consulting arm of the Vietnamese Government, the Ministry of Public Security.’’ The source highlights the danger of looking at the Securency deal through Western eyes and says that, at least a few years ago, it was routine for foreign firms to do business with companies owned by Vietnam Government ministries. Such an arrangement is common in Communist states and, as long as there are tight controls, there may be nothing wrong with such dealings. So what of the multimilliondollar commission payments to CFTD and Luong? ‘‘I am surprised at that,’’ the source says. So what did Securency know about Luong and CFTD’s suspected ties to the Communist Government? And why the need for massive commissions? Securency has for months refused to response to The Age’s questions, citing the need to allow police to do their job. But a Securency insider has told The Age that senior managers had discussed Luong’s links to Vietnam’s internal security agency. The RBA has also refused to respond to questions about CFTD and Luong’s ties to government, citing the ongoing federal police inquiry. But some aspects of the RBA’s handling of Securency’s overseas dealings are already known, and they are troubling. For example, it has emerged that three years ago the RBA became worried about the commissions-forcontracts practice adopted by

Securency and its other banknote company, Note Printing Australia. What triggered the RBA’s concern was a similar corruption scandal involving a prominent Australian company that, like Securency, enjoyed strong support from the Federal Government. In late November 2006, commissioner Terence Cole’s findings in the Australian Wheat Board kickback inquiry were made public. His condemnation of the wheat exporter’s payment of bogus trucking fees to a firm connected to Saddam Hussein’s regime served as a warning to other Australian companies involved in countries in which bribery and corruption are commonplace. Cole’s warning appears to not have been lost on the RBA board, which commissioned an audit of the use of foreign commission agents or ‘‘middlemen’’ by Note Printing Australia to secure contracts. In some cases, NPA and Securency shared agents.


HE RBA audit confirmed integrity fears about some agents, and NPA was ordered in 2007 to shut down its network of middlemen, which included a Malaysian arms broker. For some unknown reason, Securency was allowed to continue its own high-risk arrangements in which middlemen in corruption-prone countries were offered commissions if they won supply contracts. Securency appears to have decided that, at least in some countries, a large carrot was better than a smaller one and offered commissions that exceeded those offered by competing banknote firms. The commissions that Securency dangled before some of its agents were sometimes more than 10 per cent of the contract value and could be maintained over the life of a contract. Every time an order for polymer was rung through, a middleman got rich. Whether other beaks were whetted along the way is the question currently being probed by the police. This commission-for-contracts arrangement, which was condoned by senior RBA officials, has also caused Securency problems in Nigeria, where it faces allegations of bribing central bank and other government officials to secure supply contracts in 2006. It is believed that Australian and Nigerian authorities are, or will soon

start, examining deals that involved Securency making multimillion-dollar payments into the tax-haven bank accounts of two British-based businessmen with high-level contacts in Nigeria. Securency has previously said that it required all of its agents to sign contracts that included a prohibition on bribery. Securency has also said that all its agents were recommended or approved by Austrade and Australia’s embassies. This is true to an extent, and is something that government officials are increasingly aware may soon cause problems for DFAT and Austrade. Broinowski has little doubt DFAT would have been suspicious about the relationship between Securency and CFTD and he questions why this suspicion wasn’t raised at the time and dealt with. As for what CFTD actually did to help Securency’s operations in Vietnam, Securency managing director Myles Curtis and Asia business manager Ron Marchant told a foreignbased journalist in 2007 that the Hanoi company mainly translated documents, arranged meetings and picked up people from the airport. At the time of this interview, Securency’s payment of more than $12 million to CFTD and Luong were known only to a handful of the RBA company’s executives. Five months after Securency’s overseas dealings were referred by RBA assistant governor Bob Rankin to the AFP for investigation, two key questions remain. Why did Securency pay so much to Luong and CFTD and was it aware of their suspected ties to the Vietnamese Government? Several Australian diplomatic and trade sources familiar with Vietnam believe it would have been impossible for Securency to not know who it was dealing with. Some are even sympathetic to the company’s plight. ‘‘You’ve got to remember it is the way business is done over there. Almost all major companies in some way have a connection back to the Government,’’ a trade official says. Another Foreign Affairs source says: ‘‘In Australia, you would say dealing with CFTD smacks of corruption, but it is what is done in Vietnam.’’ Richard Baker and Nick McKenzie are investigative reporters.

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As the globe warms up, a way of life is washed away

Death in Papua: a tale of scapegoats and politics
AS DAWN was breaking across the Indonesian province of West Papua last July, an Australian mine worker, Drew Grant, set out with friends along the winding road near the Freeport mine for a weekend of golf. The driver and fellow mine worker, Lukan Biggs, would later recall that he heard a sharp pop and thought the car had skidded off a stone. Then the back seat passenger screamed: Grant, 29, had been shot by a bullet that pierced the roof. Just back in West Papua after visiting his wife and baby in Melbourne, Grant was probably killed instantly. In the aftermath, six villagers from the nearby town of Timika were rounded up by police and held without trial for four months. The men insist they are innocent and that they confessed after being beaten with rifle butts and threatened with shootings and electric shocks. On Tuesday, after four months in jail, five of the men were apparently released after their detention period expired: their lawyers say all six still face charges. ‘‘They were blindfolded and the police said if they did not confess they would be taken to the bush and shot,’’ said Dackson Beanal, whose five relatives were among the six in jail. The murder of Grant was one of several military-style ambushes in the past four months around the Grasberg mine, which reputedly has the world’s largest recoverable copper and gold deposits and is owned by the US company Freeport-McMoran. Two others have died: a Freeport employee, Markus Rante Allo, and a police officer, Marson Pattipeilohy. But the shootings continued despite the detention of the six men. Analysts say the attacks, which were well planned and involved skilled marksmen and military-issue bullets, bear the hallmarks of the Indonesian military.

Villagers on the island of Abaiang stand in the sea where their homes used to be.

WHEN a coconut tree dies, the decay starts at the top. First the leaves fall, then the fruit. All that is left is a desiccated trunk, cut off at half-mast. In a low-lying area flooded with seawater, the dead palms look like natural tidal gauges, the high water mark visible on their stranded remains. There is no shortage of them in Tebunginako, a tiny village on an

outer island of the Pacific republic of Kiribati (pronounced Kiribas). Over the past 40 years the villagers have seen the sea rise, storm surges become more frequent and spring tides more forceful. Eventually the erosion was so great that the village had to be abandoned. The remains of about 100 thatched homes and a community meeting hall, or maneabe, sit up to 30 metres offshore. ‘‘The contamination of the groundwater started in the late ’70s, and after that erosion started and houses started to fall into the

sea,’’ recalls Aata Maroieta, the 64-year-old village chief. ‘‘The force of erosion was stronger than the sea walls and eventually the Government said, ‘All you can do is relocate.’ ’’ It is a phrase that the 98,000 people of Kiribati are getting used to. President Anote Tong has long warned that what is happening at Tebunginako, on the island of Abaiang, is only the start; that unless there is action to cut greenhouse gas emissions and an international finance scheme to help countries such as Kiribati

adapt, they will eventually be forced to leave their homeland. “We would like to be able to build up the islands and remain here for the next century at least,” Mr Tong tells The Age. “How realistic that would be I think could depend on the resources that are available at the international level. There is no way we can do it on our own and I think that we deserve, and we demand, that the international community come to the party.” As a member of the Alliance of Small Island States, Kiribati is

fighting for a deal at next month’s Copenhagen climate summit that no one pretends is attainable: a cut in emissions of at least 45 per cent below 1990 levels by 2020 to limit global warming to no more than 1.5 degrees above preindustrial levels. As Mr Tong concedes, a temperature rise of this order is all but inevitable. Perhaps more pressingly, then, Kiribati hopes for billions of dollars from the countries responsible, to help it deal with the problem of climate change. At Tebunginako, the money

might have to be spent on another relocation. The village was rebuilt about 15 years ago, initially about 50 metres from the shore. It wasn’t far enough. Each day at high tide a handful of houses and the village’s biggest buildings — a dishevelled Catholic church and giant concrete maneabe — are surrounded by a saltwater moat as the sea flows in and floods what was once a fresh-water pond. Just like the coast, the food

Continued PAGE 4 Turnbull takes aim at Abbott Bustle of life floods Mallee PAGE 9

Police raids in RBA probe
Securency executives stood down by board
FEDERAL police have raided the homes of executives from a Reserve Bank of Australia company as part of an international bribery investigation. Warrants were executed on Thursday to search the Mont Albert North home of Securency managing director Myles Curtis and the Roxburgh Park home of company secretary John Ellery. Australian Federal Police officers also executed a search warrant on the Melbourne headquarters of the RBA polymer banknote firm on Thursday. An AFP spokeswoman last night said no charges had been laid as yet nor had anyone been questioned. An emergency meeting of Securency’s board, which is chaired by RBA assistant governor Bob Rankin, last night resolved to stand down Mr Curtis and Mr Ellery while the police inquiry continued. The board has also ordered Securency to immediately suspend all overseas marketing activities involving foreign agents and has asked external auditor KPMG to conduct a case-by-base review of the company’s agreements with agents. The Age can also reveal that Britain’s Serious Fraud Office has become involved in the investigation. Two of Securency’s leading sales executives conduct much of their work from England. Securency, which is halfowned and supervised by the RBA, makes polymer material used to print money in Australia and 28 other countries. The AFP has been investigat-

How The Age broke the story.
ing the company since May for allegedly bribing foreign government officials to secure banknote supply contracts in countries such as Vietnam, Nigeria and Malaysia. The

investigation has centred on a series of multimillion-dollar payments by Securency to politically connected middlemen or agents hired to help it win contracts. In a statement released last night, the Securency board revealed KPMG auditors had discovered that concerns about the company’s payments to middlemen were raised by a staff member in 2007. The statement said Securency management investigated the claim and took no action. Securency management did not disclose the complaint to the Securency board or the RBA. ‘‘The [Securency] board’s view is that such non-disclosure by company management is unac-

ceptable,’’ the statement said. Under Australia’s criminal code, it is an offence to pay a foreign government official in order to obtain a business advantage. Jail terms of up to 10 years and hefty fines apply to those convicted of foreign bribery offences. If police charge Securency and its executives, it will be Australia’s first prosecution for foreign bribery offences. The RBA called in the federal police after The Age in May revealed Securency’s payment of commissions to middlemen. Many of these men had been implicated in previous corruption scandals and one was a convicted white collar criminal. In an apparent breach of RBA

policy, Securency paid millions of dollars into tax haven bank accounts linked to the foreign middlemen. In 2007, the RBA ordered its sister company, Note Printing Australia, to sack its network of foreign agents after an audit confirmed integrity fears. However, the RBA allowed Securency to continue paying millions of dollars to middlemen to help win contracts. Securency’s biggest contracts have come from Vietnam and Nigeria. The RBA last night released a statement endorsing the actions of the Securency board.

Continued PAGE 2

Murdered mine worker Drew Grant.

Got a tip? investigations@theage.com.au
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An 18-year-old Indianapolis man is in custody after a surveillance video showed him warming up a bottle for a crying baby in a house he was allegedly robbing. Police said two suspects were ransacking the house when one stopped and gave the bottle to a child to feed the baby. No mention of the parents was made.




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SATURDAY, MAY 23, 2009



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Revealed: the RBA’s dodgy global deals
EXCLUSIVE Bank linked to shady payments
THE Reserve Bank of Australia has been involved in the payment of multimillion-dollar commissions to shady middlemen in its drive to win banknote printing deals with foreign governments. Securency Pty Ltd, a Melbourne-based banknote supplier half-owned by the RBA, has made a substantial number of ‘‘commission’’ payments to agents, including some previously implicated in corruption scandals. The company, which has supplied polymer material to print money in Australia and 26 other countries, is chaired by the RBA’s assistant governor, Robert Rankin. Its board has another two RBA appointees, as well as executives from British firm, Innovia Films, owner of the other half of Securency. Some of Securency’s agents are closely tied to government or central bank officials in countries ranked by Transparency International as highly corrupt. Several agents have been named in official corruption investigations in Africa and Asia. At least one has a criminal conviction for fraud. Company insiders have raised concerns that the company’s practices have left it exposed to allegations that some commissions could be used to pay kickbacks to foreign government officials. RBA deputy governor Ric Battellino told The Age yesterday that he would demand an immediate response from Securency about its use of

A Long journey inspires others to follow

The Money Makers

agents and payments to them. ‘‘If this is happening, then it is against all the policies and procedures the RBA has put in place for this organisation,’’ he said. The Age can reveal Securency has: ■ Made lucrative payments to London firm Contec Global, which was accused in an official Ugandan corruption inquiry of having a corrupt relationship with a Ugandan government minister found to be ‘‘fronting and lobbying’’ for the company. ■ Partnered with controversial South African casino tycoon, Vivian Reddy, who was embroiled in the recently aborted corruption trial involving financial dealings with his close friend, South African President Jacob Zuma. Reddy, who was accused of setting up an account used to hide payments to Mr Zuma from a French arms maker, denies the allegations. ■ Made payments to companies linked to South African businessman and Reddy associ-

ate Don McArthur, who last year was convicted of fraud and reckless trading associated with one of South Africa’s biggest corporate collapses. McArthur, who was charged with fraud in 2005 and forced to pay money to a criminal assets recovery fund, denied any link to Securency. ■ Paid million of dollars in commissions to Vietnamese company CFTD, whose subsidiary, Banktech was managed by the Vietnamese central bank governor’s son at the time the central bank decided to switch to polymer notes in 2002. A 2007 Vietnam corruption inquiry found the governor’s role in the deal was irregular and lacked objectivity. A company insider also claims he was told that Securency had provided $US100,000 — subsequently donated to an Indian political party in 2007 — while it (Securency) was seeking a trial of polymer notes. It is claimed the payment was recorded in company accounts as ‘‘marketing expenses’’. In a statement yesterday, Securency said it conducted a thorough due diligence process when appointing agents, which included checks by Federal Government agency Austrade and compliance with international anti-corruption conventions. Securency said its agents — whose identities are disclosed to the RBA representatives on its board — had signed agreements forbidding payments to foreign officials and politicians. In its statement, Securency acknowledged it had cut ties with agents on a ‘‘number of


When Michael Long came to Essendon 20 years ago, he was the club’s only indigenous player; now there are seven (pictured). And back then there were only 15 in the entire competition; now there are 82. This weekend is the AFL’s indigenous round, the centrepiece of which is tonight’s match between the Bombers and Richmond at the MCG. In SPORT, Caroline Wilson writes on the Long legacy. CATS IN A THRILLER

Flu alert raised as cases grow
MORE schools and child-care centres could be closed soon to prevent the transmission of swine flu after the Federal Government upgraded its response to contain the virus yesterday. As the number of confirmed cases rose to 13 nationally, Health Minister Nicola Roxon raised Australia’s pandemic response to the ‘‘contain phase’’, allowing governments to close schools and child-care centres and to start distributing stockpiles of antiviral medication. The step also empowers local health authorities to quarantine a defined area, such as a workplace, if the virus is spreading. Preventive health services, including elective surgery, can also be suspended if necessary. In Victoria, the number of confirmed cases rose to eight, with the latest case an eightyear-old boy from Melbourne’s western suburbs. Earlier, a 17-year-old student from St Monica’s College in Epping tested positive to the flu. Health authorities are concerned that neither this youth nor the eight-year-old or a 15-year-old South Australian girl with the virus had travelled overseas recently or been in apparent contact with anyone carrying the disease. The girl recently returned from a camping trip to Mildura. Ms Roxon urged people not to panic about the virus, which remains mild in those Australians affected. The upgrade came as experts warned that the virus was certain to mutate in coming months, potentially becoming more dangerous. Everyone with flu-like symptoms is now urged to call GPs in advance so they can be given a mask on arrival and separated from other patients. Young people and those with respiratory problems, diabetes or obesity are most at risk. Health Minister Daniel Andrews said officials were speaking to the family of the eight-year-old boy last night to check on his movements over the past week. The boy became ill on Monday and saw his doctor on Tuesday, when he was given antiviral drugs. He returned to school yesterday, when he was at the end of his infectious period. He and his family are in home quarantine. Acting Victorian Chief Health Officer Rosemary Lester said officials were trying to establish the link between the 17-year-old and other swine flu sufferers. She said he fell ill on Saturday, went to his GP on Monday and stayed home from school until Thursday. He tested

Continued PAGE 6

This coin could soon make no sense at all
THE Royal Australian Mint is believed to be poised to scrap the five-cent piece as part of an overhaul of Australian coins that will also give the Queen a makeover. The move — which many retailers support — could upset some consumers, with all transactions needing to be rounded to the nearest 10 cents. CEO Graham Smith would not comment yesterday, but said he would give The Age a statement on Monday. Earlier a mint spokesman did not deny the plans to abolish the coin, saying: ‘‘We are not going to answer that question.’’ But a reliable source said staff in the design and engraving section had been working for some months on a redesign that

Sources have told The Age that secret preparations for the change have been under way since early this year. Royal Australian Mint acting

SPORT: Reports, pictures ODD SPOT

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Quick-thinking Tustin Mains, 6, jumped from the back seat and grabbed the wheel of the family pick-up truck after his father passed out in North Platte, Nebraska. The boy stood on his father’s lap and steered for several hundred metres until police halted the vehicle, which also carried Tustin’s three-year-old brother.




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Support Sponsor Indemnification for this exhibition is provided by the Victorian Government. John Brack Three of the players 1953 Private collection, Melbourne © Helen Brack




Tampa refugees return
FOUR asylum seekers who were rescued by the Tampa in 2001, but sent back to Afghanistan, have been found to be genuine refugees. One of the men, Asmatullah Mohammadi, says he was so desperate to escape the Taliban he risked his life in a second boat journey with people smugglers.


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Watchdog to probe spies in Defence
NEW revelations about the extent of the ‘‘rogue’’ probe into Defence Minister Joel Fitzgibbon’s personal affairs have emerged, with officials alleging he facilitated lobbying by his brother to win government business. The revelations come as Prime Minister Kevin Rudd yesterday admonished Mr Fitzgibbon but refused to sack him over his failure to declare two trips to China paid for by his wealthy Chinese-born friend Helen Liu. Australia’s intelligence watchdog, the Inspector-General of Intelligence and Security, said last night he would investigate claims that a Defence intelligence official improperly searched the computer of Mr Fitzgibbon. Welcoming this move, Defence Department secretary Nick Warner said an initial inquiry by the Defence Security Authority had found that no investigation of the minister, his personal relationship with Ms Liu or of Ms Liu herself had been conducted by ‘‘any element’’ of Defence. As the Defence spy affair continued to rock the Government, ASIO took the unusual step of releasing a statement saying it had no information relating to Ms Liu ‘‘which would have given rise to any security concern regarding

Hawks soar, but Cats avenge grand final loss

The other battle
LAST year, the Federal Government acknowledged fears that the mental health system for soldiers and veterans was failing and commissioned two confidential inquiries. The findings are still secret. But many soldiers and veterans are struggling to find help. Nick McKenzie reports

“Even on the facts belatedly admitted by Mr Fitzgibbon, his hold on the ministry is tenuous”
her activities or associations’’. The Age was last night told that security officials from Defence had told staff from Mr Rudd’s office some months ago they were concerned about the relationship between Mr Fitzgibbon and Ms Liu. Nothing was done by Mr Rudd’s office, a source said. Mr Fitzgibbon said yesterday it was inexplicable why he had failed to declare trips to China in 2002 and 2005 that were paid for by Ms Liu. He apologised for misleading Parliament and the public. Speaking from Washington, Mr Rudd said he ‘‘expected better’’ from Mr Fitzgibbon in the future. But he said Mr Fitzgibbon had done a good job as Defence Minister and would not

A rush to praise
GEOFFREY Rush has been lauded for his Broadway stage debut in a Melbournemade revival of Exit the King. Critics described Rush’s performance as a ‘‘virtuoso work’’. New York Times critic Ben Brantley compared Rush’s ‘‘knockout portrayal’’ to that of ‘‘Laurence Olivier’s great music-hall persona in The Entertainer’’.

be dismissed over his failure to declare the trips. On Thursday, The Age revealed how rogue Defence officials had secretly investigated Mr Fitzgibbon’s relationship with Ms Liu. The Age can also reveal that their probe raised potential conflict-of-interest questions about lobbying by the minister’s brother, Mark Fitzgibbon, who is managing director of the NIB Health Fund, and executives from US health services giant Humana. It has been alleged by Defence officials that the minister’s brother and the US executives used Mr Fitzgibbon’s office as a base for their lobbying. The officials scrutinised their minister’s contact with the visiting lobbyists and noted he had socialised with them outside work hours. A spokesman for Mr Fitzgibbon said yesterday the minister rejected any conflict-of-interest claims. The minister had made it clear to his brother and his associates that it was inappropriate for him to deal with the matter of defence health contracts. But the spokesman admitted the NIB and Humana executives had based themselves in his office and left their bags there while attending appointments in Parliament House. Mr Fitzgibbon’s office also acknowledged that he had had drinks with the NIB and Humana representatives before leaving to

Continued PAGE 8

Chinese bid for OZ rejected

Hawthorn superstar Lance Franklin flies in vain against Geelong in last night’s MCG blockbuster.
final team but the Hawks’ good players played well and the rest held fast. The pattern of the grand final soon re-emerged in ghostly fashion with Geelong dominating play, but unable to translate superiority into goals. Cameron Mooney, whose miss after the half-time siren in the grand final was a deeply ominous moment for the Cats, missed with his first shot last night and hit the post with his second. When he goaled with his third shot of the night, he danced a sailor’s jig. At the opposite end of the ground, Hawthorn’s goalkicking sensation of 2008, Lance ‘‘Buddy’’ Franklin, fell horizontally from the top of a pack and appeared to injure himself. Three minutes later, he kicked his first goal and limped no more thereafter. The match was hard-fought and spirited with a melee in the second quarter and four reports. One of those to have his number taken was the 2008 Norm Smith medallist, Hawthorn vice-captain Luke Hodge. Last year’s grand final was won by Hawthorn in the third term. Last night, Geelong won that quarter emphatically, kicking six goals to lead by 33 points at three-quarter time.


A STATE-OWNED Chinese company will not be able to take over Australia’s third-largest miner, OZ Minerals, if the proposal includes a mine in the Woomera rocket range in South Australia’s outback. Federal Treasurer Wayne Swan invoked national security concerns as he announced that the proposed $2.6 billion takeover of OZ by Minmetals would be scotched if it included the new Prominent Hill coppergold mine, 650 kilometres north-west of Adelaide.

The mine is within the Woomera Prohibited Area — a 127,000-square-kilometre site administered by the Defence Department and used by the Australian military for weapons testing. OZ is banking on the takeover to keep banks owed $1.3 billion from placing it in administration. The company will spend the weekend recasting its deal with the Chinese group in an effort to placate its banks. The bid is one of three from China worth more than $30 billion that are before the Government for approval. The Government’s decision to force OZ to excise Prominent

Hill from any deal comes as Rio Tinto waits on approval for a $US19.5 billion ($A28 billion) deal with China’s Chinalco, while Fortescue Metals is seeking approval to issue 18 per cent of its shares to China’s Hunan Valin group. The knockback by Mr Swan followed a dramatic escalation yesterday of the Opposition’s political attack on the Government over its links to China, and is likely to place the bilateral relationship under strain. After days of controversy

GEELONG hung on to defeat Hawthorn by eight points last night in a thrilling grand final replay at the MCG. Played before a crowd of 69,593, the game began at the standard and intensity expected of such an encounter. There was a clever left-foot kick by Geelong’s Jimmy Bartel, a man-trap of a tackle by Hawthorn’s Cyril Rioli. Hawthorn was missing seven of its grand

Continued PAGE 9

The match appeared over, but it was then that a primary difference between the teams reasserted itself. Geelong does not have a major key forward. In Franklin and Jarryd Roughead, Hawthorn has two. In the final term, as Geelong stagnated, unable to push home its advantage, Franklin and Roughhead kicked six between them at the other end as their supporters increasingly found their voice. The Hawks lost the match, but they would not have lost any confidence for season 2009.


More Reports SPORT
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The Prince of Wales, a black and white Tudor-era pub in Hereford, England, has been painted bright pink by pranksters. Landlord Les Smith, 52, said: ‘‘I haven’t a clue who would do this or why. We closed the pub after midnight, then I came round at about half past eight in the morning and it was pink.’’




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6 News


Revealed: the RBA’s dodgy global deals
government ministers, diplomats and trade officials. The Age is not suggesting occasions’’ when it was not satisfied with their performance. Securency has engaged in bribSecurency denies any pay- ery, but its operations with ment to Indian political parties agents in corruption-prone or politicians. countries raise concerns about In contrast to Securency, an its risk-management associated company, Note procedures. Printing Australia — which is Company insiders claim fully owned by the RBA — said it Securency offers some agents no longer used agents because it commissions of between 10 per was ‘‘more responsible’’ to deal cent to 20 per cent of any deal they help win. The industry directly with central banks. Another Securency agent standard agent commission is operating in Asia is Melbourne between 2 to 6 per cent. Securency said commission barrister Daryl Dealehr, who has ties to the family of Cambodia’s payments varied between its notorious late police chief, Hok agents and that advice from Lundy, and controversial Prime Austrade was sought to determine appropriate commissions Minister Hun Sen. Securency has yet to win any levels for each country it contracts in Cambodia and Mr operated in. ‘‘This advice indicates that standard commission rates vary between countries. Securency does not pay commissions higher than the standards which apply in each country,’’ the statement said. An Australian international corruption expert, Sydney University’s David Chaikin, said companies must be cautious of hiring agents with high-level government contacts. ‘‘Companies need to be aware of what The RBA’s Ric Battellino said he would their agents are doing demand a response. with their commisDealehr has not been named in sions,’’ Dr Chaikin said. ‘‘They need to know if those any corruption or criminal inquiries. commissions are being used to The revelation of Securency’s pay people other than the payments to agents in Third agent.’’ World countries has the potenJohn Burbidge-King, an antitial to embarrass the Federal corruption adviser and head of Government and the RBA, London-based Interchange especially so soon after the Iraqi Solutions, said companies must kickbacks scandal involving do thorough due diligence on all AWB. agents, especially those in Mr Battellino told The Age corruption-prone countries. the RBA was aware that ‘‘There should be a criminal Securency operated in countries record check, a financial check with ‘‘bad reputations’’, but was and consultation with others ‘‘very conscious to ensure arran- about them,’’ Mr Burbidge-King gements were in place to avoid said. corruption payments’’. Securency has received Got a tip? email investigations strong support from Australian @theage.com.au

BENOY BERRY, CONTEC GLOBAL Securency has paid millions of dollars to London-based businessman Benoy Berry, who heads multi-national technology firm Contec Global. The firm has won large contracts across Africa, including Sudan and Rwanda, but has also been implicated in a corruption inquiry in Uganda. In 2005, Contec Global was accused by Uganda’s internal security organisation of making an alleged $1.8 million bribe to a cabinet minister responsible for a national ID card tender process. A 2006 inquiry by Uganda’s Inspectorate of Government found the Finance Minister

The adage “it’s not what you know but who you know” still applies when seeking contracts to print money.
Issac Musumba favoured Contec Global’s bid even though it did not meet the selection criteria and was by far the most expensive. The office of Uganda’s president alleged Contec Global had promised Musumba to share in money gained from its inflated bid. Musumba has denied any wrongdoing. The Ugandan inspectorate did not substantiate that a bribe was paid but found that: “He (Musumba)was acting in bad faith and had a personal interest in the outcome of the procurement process. From the evidence gathered, Musumba was fronting and or lobbying for Contec Global.” Dr Berry, who is also Burundi’s honorary consul to India, did not respond to questions from The Age.

VIVIAN REDDY, EDISON CORPORATION The South African casino tycoon won the rights to promote Securency’s banknotes in Africa a few years ago and has more recently declared he will push the notes across half the continent within a decade. One of his senior employees said Reddy’s relationship with Securency was over, but would not say when or why due to “confidentiality and non-disclosure issues”. Reddy is a controversial figure in South Africa due to his political

From PAGE 1

connections and his bankrolling of the recently elected President Jacob Zuma. The magnate was ensnared in the South African Government’s aborted corruption trial against Zuma, who was alleged to have accepted a bribe from a French defence contractor seeking to build four ships for South Africa’s navy. In a related corruption case against Zuma’s now jailed former financial adviser, prosecutors alleged a charitable trust account set up by Reddy was used to hide payments from French defence firm Thales to a company owned by the financial adviser and then to Zuma. Reddy’s lawyer has rejected the claims of corruption made by the state prosecutors.

DON MCARTHUR Securency has had financial dealings with companies linked to South African businessman Don McArthur, who was the head of a major company involved in South Africa’s biggest ever corporate
failure in 1999. In 2005, McArthur was arrested by South African police and charged with racketeering, fraud and corruption and accused of improperly pocketing money borrowed from banks. Last year, he did a deal with the prosecutors and pleaded guilty to fraud and reckless trading. He paid a substantial fine instead of serving a two year jail term. He was also forced to pay money into a proceeds of crime fund. McArthur worked for Vivian Reddy in 2005. McArthur repeatedly denied any association with Securency when contacted by The Age, although Securency said he has been an agent.

DARYL DEALEHR, ZOELICK PTY LTD Melbourne barrister Daryl Dealehr is Securency’s agent in Cambodia, where he is the director of mining company Cambodian Resources Limited. Dealehr has ties to the families of Cambodia’s late and notorious national police chief, Hok Lundy and Cambodia’s controversial Prime Minister Hun Sen. Human rights groups and former senior Cambodian officials accuse Lundy, who died last year, of being responsible for dozens of murders. “There is hardly anyone in Cambodia who has shown more contempt for the rule of law than Hok Lundy,” Human Rights Watch said. Dealehr told The Age that he was surprised he had not yet landed a banknote deal for Securency, but said Cambodia’s reserve bank was conservative and wedded to paper banknotes. Dealehr said he had developed “very good contacts” with bank officials and had been Securency’s agent for many years. He was unable to speak further about Securency’s affairs due to privacy clauses. In 2007, Dealehr’s mining company won the rights to develop iron ore, gold

CFTD AND BANKTECH In 2002, as Vietnam switched from paper to plastic banknotes, Securency teamed up with a Hanoi firm called CFTD and its subsidiary Banktech. In early 2002, Banktech’s deputy director was Le Duc Minh, the son of the State Bank of Vietnam’s then governor, Le Duc Thuy, who was in charge of the deal. The bank governor denied his son was involved, but Banktech documents reveal it was the “exclusive suppliers” of banknote printing materials for Vietnam. Securency was listed as one of its “overseas partners”. A 2007 Vietnam Government inquiry reportedly found “irregularities and weakness” throughout the banknote project. It found the bank governor had failed to include a comparison of the polymer and paper notes in his submission to the Prime Minister. The inquiry concluded that the involvement of his son had “created a lot of suspicion”, affected the “transparency” of the project and damaged the governor’s reputation. Securency has paid millions of dollars in commissions to CFTD directors, who are connected to Vietnam’s political

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Compliance Manager
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Cable Jointers, Electrical
XLPE and Paper Lead experience and qualifications essential

Protection Testers
Testing new High Voltage facilities, SCADA and Relays. Diploma Power Systems essential

Operations Coordinators/Supervisors, Distribution
Lead multiple field based teams. Coach, mentor and coordinate people and resources

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Lead field teams building new and refurbishing High Voltage transmission assets

Distribution Line Workers
ESI Cert III Lineworker essential

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Manage multiple projects from new builds to refurbishment. Utilities and ideally electrical supply experience

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You love heights and have a Cert III ESI qualification. Experience essential

Project Engineers (SYD only)
Great variety from cost analysis to design, from the office to site based challenges

Line Surveyors
Tertiary qualified. Transmission and Distribution

Construction Managers
Hands on management of the construction phase on major infrastructure

8 News Fitzgibbon affair


The Age Richard Baker and Nick McKenzie, working with Philip Dorling from The Canberra Times, reveal that officials in the Defence Department have conducted a covert investigation into their own minister, Joel Fitzgibbon, leaking personal information about his relationship with a wealthy Chineseborn businesswoman Helen Liu.

Raising the Chinese bogey
FOR a Government that has to make several highly sensitive foreign investment decisions over the next few months, the worst thing that could be happening is a growing feeling in the body politic that Canberra is too close to China. The past week in federal politics has been surroundsound China — either directly in the foreground of the national discussion, or simmering in the background. Contentious issues ranged from Defence Minister Joel Fitzgibbon’s relationship with Chinese-born businesswoman Helen Liu (and one of its subtexts, fund-raising in the Chinese business community by the ALP’s NSW branch) and the private meeting Kevin Rudd had last week with the propaganda chief of the Chinese Communist Party, Li Changchun, to the Prime Minister spruiking China’s role in the International Monetary Fund in Washington. And those controversial multibillion-dollar resources deals bubbled away in the background, with the political opponents of greater Chinese ownership of Australia’s strategic resources firing shots in advance of a Senate inquiry that will probe investment by ‘‘stateowned entities’’. Mandarin-speaking Rudd’s China expertise is unquestionably a strength — but it could turn into a domestic political weakness. In tough economic times, people look for scapegoats, and for an Opposition struggling to cut through to the voters, raising the Chinese bogey could prove fulfilling political sport. Yesterday’s decision by Treasurer Wayne Swan to refuse one of the proposed Chinese foreign investments in the mining industry on national security grounds spices things up and allows the Government to look hairy-chested about protecting Australia’s national interest. The fact the decision followed a day of heavy fire from the Opposition on the Government’s links to China is no doubt just a happy coincidence. Opposition Leader Malcolm Turnbull yesterday dropped any pretence of subtlety, branding Rudd the ‘‘spokesman for China’’ and a ‘‘travelling advocate’’ for Beijing. Expect more of this populist rhetoric. The Government has some hard yards ahead — the most difficult will be a decision about whether to let Chinese company Chinalco get a big slice of one of the icons of the Australian resources sector, Rio Tinto. The Rio-Chinalco tie-up is an epoch-making deal in every sense. And our Sinophile-inchief is in for a few sleepless nights.

Is Prime Minister Kevin Rudd seeking solace and advice about Defence Minister Joel Fitzgibbon’s Chinese troubles? Mr Rudd was not only clutching his wife, Therese Rein, in Washington yesterday but also a copy of China’s Rise: Challenges and Opportunities. Written by experts from the Peterson Institute for International Economics, where Mr Rudd had spoken, China’s Rise discusses how the West can aid China’s ‘‘constructive integration’’ into the global community.

Rudd lashes EU chief’s US outburst
KEVIN Rudd has lashed out at European Union President Mirek Topolanek for his attack on US efforts to stimulate the American economy. Mr Rudd described as ‘‘extraordinary’’ the comment by Mr Topolanek that the American plan was the ‘‘way to hell’’. The Prime Minister suggested the outburst was influenced by Mr Topolanek losing the Czech prime ministership earlier this week. ‘‘I suppose if he just lost a vote of confidence in the Czech Parliament, it hasn’t improved his sense of humour.’’ Mr Rudd also suggested that the disagreement which has emerged between those G20 nations favouring more stimulus and those favouring more regulation was being exaggerated. The US favours greater stimulus while European countries remain wary. Mr Rudd said there was always a tendency to see the glass as part empty rather than part full. ‘‘What I sense across my counterparts across the G20 is a strong sense of emerging consensus’’ on most of the issues. Mr Rudd invoked a favourite word of his, argybargy, to explain the situation. ‘‘There is always going to be, let me use an Australian technical term for you, argy-bargy. It’s short for argument. There was always going to be some argybargy at the margins,’’ he said at a question and answer session.

Mr Fitzgibbon admits to failing to disclose taking two trips to China paid for by Helen Liu, failing to declare the trips to Parliament as required, and misleading the Australian public by saying earlier he had received only “very small gifts” from Ms Liu.


Watchdog to investigate rogue defence probe of minister
From PAGE 1
attend a diplomatic reception. Mark Fitzgibbon said his brother had ‘‘quite properly’’ referred him to meetings with the Minister for Defence Personnel, Warren Snowden, Veterans Affairs Minister Alan Griffin, Health Minister Nicola Roxon and Finance Minister Lindsay Tanner. Mark Fitzgibbon said suggestions of any conflict of interest involving his brother were ‘‘purely scurrilous’’. Personal details emerging from the unauthorised inquiry have included Mr Fitzgibbon’s sub-letting of a Canberra residence from Ms Liu, his possession of her bank account details and his receipt of gifts from her, including a Hugo Boss suit, which he later returned. Defence officials were aware of the gift of the suit at least a month before Mr Fitzgibbon revealed it publicly on Thursday. It is understood Mr Fitzgibbon has spoken to Ms Liu in the past few days to express sympathy at her being caught in the crossfire of attempts to undermine him. Ms Liu’s Sydney lawyer, Donald Junn, did not return phone calls yesterday and Ms Liu yesterday remained uncontactable. The Defence Department has confirmed that executives from NIB Health, including Mark Fitzgibbon, and Humana met the Australian Defence Force’s Commander Joint Health, Major-General Paul Alexander, in August. A Defence spokeswoman said: ‘‘The companies proposed the provision of health care to veterans and serving Australian Defence Force members. Any future requirement for such a service would be managed in accordance with government procurement guidelines.’’ No contracts had been issued to either company and neither firm had been in contact with Defence since, she said. Last night, the InspectorGeneral of Intelligence and Security, Ian Carnell, said his inquiry, to be conducted in secret, would be thorough and timely. Mr Carnell’s inquiry is in addition to a Defence Department investigation into the spying affair. Mr Warner said yesterday that ‘‘prior to the current media articles, no Defence investigative authority was aware of Ms Liu’’. ‘‘Neither the Defence Signals Directorate nor any other part of Defence has had any access, authorised or unauthorised, to personal information within the minister’s office, including telephone contact numbers.’’ Australia’s Foreign Minister Stephen Smith yesterday said there was nothing unusual about politicians from both sides of Parliament accepting trips to China. ‘‘The key thing is whether they declare them or disclose them,’’ he said. With NICK McKENZIE



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Defence spies on its minister
Fitzgibbon friendship under scrutiny
OFFICIALS in the Defence Department have conducted a covert investigation into their own minister, leaking personal information about Joel Fitzgibbon’s relationship with a wealthy Chinese-born woman with past financial ties to Beijing. Mr Fitzgibbon’s 16-year friendship with Sydney-based businesswoman Helen Liu has recently been raised by officials within the Defence Department’s intelligence and security areas as a possible security risk. The dramatic developments suggest a serious deterioration in the minister’s relationship with his department in the wake of a bruising row over responsibility for bungled payments to SAS soldiers. A source close to Mr Fitzgibbon yesterday said it appeared the minister was ‘‘at war’’ with his department. Earlier this month, Mr Fitzgibbon described his department as ‘‘incompetent’’ in its handling of the SAS pay row. It is understood the secret Defence investigation into Mr Fitzgibbon’s friendship with Ms Liu and other aspects of his personal life began well before the pay row broke out. As part of their investigation, officials from Defence’s security

The man who sold out the MCG
BEN Cousins was in a state of high anxiety when Channel Ten’s crew arrived at Tigerland two days ago to record an interview with Richmond’s most famous recruit and Australia’s most famous recovering drug addict. The man who has singlehandedly rewritten the script for the 2009 AFL season-opener, sold out the MCG on a school night, buried the formula one grand prix and forced the Ten Network tonight to ditch The Simpsons, was stressed and unhappy. Cousins remains a superstar but he is a fragile one, no longer wealthy and, on the eve of his long-awaited comeback, he looked drawn and nervous. The source of his displeasure lay in some of the questions put to him by Ten’s commentator and former Western Bulldogs captain Luke Darcy. Forced to conduct the interview under a new AFL media agreement with its broadcasters, Cousins did not appreciate being asked, for example, how he felt when St Kilda abandoned him late last year. The tension in the room was tangible. He took his displeasure out on Tiger officials. His manager Ricky Nixon took it out on the AFL Players’ Association and AFL executive Gillon McLachlan told The Age the interview, which will air at halftime during tonight’s RichmondCarlton game, would be edited. Most parties felt Cousins was over-reacting. That his response was one of a fragile 30-year-old champion who has not played a proper AFL game for more than 18 months and whose reputation and livelihood depend on a successful comeback. Clearly, he is no longer as financially secure as he once was and he has heavily invested in a documentary he needs to sell. The anticipation surrounding his performance tonight, as he takes on a rejuvenated Carlton led by his 2006 premiership teammate Chris Judd, at least across Victoria and South and Western Australia, could be compared to Cathy Freeman’s Olympic quest back in 2000. His impact on the once mighty Richmond Football Club, the competition’s worst-performed team over more than a quarter of a century, has been spectacular in financial terms. The club has more

Mr Fitzgibbon is understood to be furious at the unauthorised intrusion into his personal affairs.
and intelligence areas discovered Mr Fitzgibbon stays in a Canberra residence sublet from Ms Liu and her family. The minister’s office confirmed this arrangement yesterday. It is alleged the officials informed senior Defence figures of this and their concern about the possible security implications of the minister’s relationship with Ms Liu. In the course of their investigation, it is further alleged a Defence Signals Directorate officer accessed Mr Fitzgibbon’s office IT systems and is understood to have found Ms Liu’s banking details. It has been alleged that officials from Defence’s security and intelligence areas passed on their concerns about Mr Fitzgibbon’s association with Ms Liu to ‘‘top brass’’ within Defence but the matter did not go further. In response to questions about whether any security concerns about Mr Fitzgibbon’s relationship with Ms Liu had ever been raised with him, a

spokesman for the minister said: ‘‘No. Unequivocal no.’’ Mr Fitzgibbon is understood to be furious at the unauthorised intrusion into his personal affairs and the subsequent leak of information about the covert investigation from within his own department. A spokesman for Mr Fitzgibbon last night said he and his family had known Ms Liu and her family since 1992-93 and regarded them as ‘‘personal friends’’. Mr Fitzgibbon’s office yesterday said the minister first met Ms Liu when his father, former Labor MP Eric Fitzgibbon, visited China to represent then prime minister Paul Keating at the commencement of a large construction project. In response to leaked allegations from Defence suggesting Mr Fitzgibbon had received expensive gifts from Ms Liu, his spokesman said the families had exchanged small, personal gifts at birthdays and Christmas. But he said Mr Fitzgibbon had not accepted any gifts from Ms Liu that would require declaration on Parliament’s members’ interest register. Ms Liu could not be reached for comment yesterday. Her Sydney lawyer, Donald Junn, did not return calls. ALP sources have confirmed a long-standing friendship between the minister and Ms Liu, with MPs privately revealing Mr Fitzgibbon had invited

Continued PAGE 10

Ben Cousins trains with Richmond yesterday before tonight’s clash with Carlton.


Continued PAGE 2

Frankston bypass in doubt as Canberra goes cool
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THE future of the $750 million Frankston Bypass, a key plank of John Brumby’s transport plan for Melbourne, is in doubt, with funding from the Federal Government now unlikely. The Age believes the 25-kilometre link, from Carrum Downs to Mount Martha, will not make the list of projects proposed for immediate funding by Sir Rod Eddington’s Infrastructure Australia advisory board.







FRANKSTON BYPASS Proposal under threat

Sir Rod’s board is set to finalise its list of priority projects under the Building Australia Fund tomorrow. But with the global economic crisis whittling money for the fund from $20 billion to $12.6 billion, fewer projects than anticipated will get backing. The Government has already earmarked $4.7 billion for the national broadband roll-out. A well-placed source said federal bureaucrats argued against support for the bypass, maintaining the Brumby Government should fund it. Another Government source said the

bypass did not not tick the boxes necessary to win support, including the capacity to help ‘‘nation-build’’, expand Australia’s productive capacity, and reduce greenhouse emissions. Likely to make the list, however, is a $4 billion regional rail link from Southern Cross to West Werribee — dubbed the Tarneit line — to help speed regional trains to Geelong, Ballarat and Bendigo. Two other schemes — the $4.5 billion first stage of the ‘‘metro’’ rail tunnel beneath central Melbourne, and a $2.5 billion road tunnel linking

the Port of Melbourne to West Footscray — are more likely to make a secondary list of projects for possible future backing. In its submission for federal funding last year, the state said Frankston bypass was ‘‘subject to a Commonwealth-state funding agreement’’. A senior state insider last night said the bypass had always been viewed as a joint project. Failure to win federal backing for the Frankston road may add to the mounting pressure on the State Government’s already stretched coffers. Premier John Brumby has

ruled out tolls and, with private finance hard to find for publicprivate partnerships, it is difficult to see alternatives other than state money or borrowings. Yesterday the Government would not be drawn on the future of the bypass without federal backing. A spokesman for Mr Brumby declined to respond when asked if the road would begin this year. Roads Ministers Tim Pallas — who said three months ago he hoped the bypass construction would start in 2009 — last night would say only that the Government remained commit-

ted to the bypass as a joint project, without tolls. ‘‘We are looking for works to commence later this year,’’ spokesman Bill Kyriakopoulos said. The Victorian Employers Chamber of Commerce and Industry, which has been a strong supporter of federal funding for the Frankston project, said it would be ‘‘mystified’’ if it did not get money. ‘‘It is a good short-term, jobcreating project that is needed to reduce bottlenecks and promote tourism on the peninsula,’’ said spokesman Chris James.



ISSN 0312-6307

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ALL CHANGE: Mohammad Khatami, one-time president of Iran, shares a trait with US President Barack Obama. Both like to talk about change.

Man charged over Canberra killings
RUSSELL Field is 20, has been charged with a double murder, including a bikie gang member, and fears for his life. Field was formally charged yesterday with the murder of Richard John Roberts, 58, and Greg Carrigan, 47, after police found two bodies in the South Canberra suburb of Chisholm on Tuesday night. Mr Roberts, also known as ‘‘Rebel Rick’’, was the former head of the West Australian chapter of the Rebels motorcycle club and a convicted drug dealer. Field was scheduled to appear in the ACT Magistrates Court yesterday for a bail application. In preparation for his court appearance, ACT police brought in the bomb squad and a marked police car sat on a traffic island out the front of the court for most of the morning. But Field did not appear. Instead, his lawyer asked for an adjournment for a bail application until April 15, which was granted by magistrate John Burn. After the brief hearing, Field’s lawyer, Ben Aulich, told reporters he held fears for his client’s safety. ‘‘I have asked him to say nothing, to be careful and to put in (an application for protective custody) to protect himself,’’ Mr Aulich said. ‘‘There are serious allegations against certain people and there is some fear for his safety.’’ Mr Aulich said his client would be pleading not guilty.

Richard ‘‘Rebel Rick’’ Roberts.

Supporters of the four men accused of murdering Anthony Zervas in a bikie fight at Sydney Airport on Sunday leave a Sydney court yesterday.


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TWO days before Anthony Zervas was bludgeoned to death at Sydney Airport, he knifed an off-duty policeman and threatened to kill him, a court heard. Four men charged after the bikie brawl at the airport on Sunday have been refused bail in a Sydney court. Zervas, 29, the brother of a senior Hells Angel, allegedly argued with the officer who had complained about his repeatedly buzzing the intercom at a block of Sydney flats. After the stabbed officer managed to shut the front door, Zervas allegedly kicked in the glass and tried to climb in. Zervas had allegedly been ringing the buzzer with Michael Xippas, who appeared in Sydney’s Central Local Court yesterday. Xippas, 40, is charged with concealing a serious crime by not reporting the alleged malicious wounding to authorities. According to a statement of facts tendered to Magistrate Allan Moore, Zervas and Xippas went to the flats, at Brighton-Le-Sands in Sydney’s southern suburbs, on Friday and began calling out for ‘‘Spiros’’, repeatedly pressing the intercom buzzers for all six flats for 20 minutes, the statement said. The noise awoke the police

Anthony Zervas, killed in a brawl on Sunday, allegedly knifed an off-duty police officer a few days before. ■ Four men charged over the brawl have been denied bail.
officer, Sergeant Matthew Fotopoulos. He told the men Spiros was obviously not home, which resulted in an argument about the constant use of the buzzer. It is alleged that Sergeant Fotopoulos told the men to ‘‘piss off ’’ before Zervas replied: ‘‘Watch yourself or I will kill you.’’ The argument continued until Zervas allegedly ran towards the door with a knife which he aimed at Sergeant Fotopoulos’ head. But, the statement said, the officer dodged and was stabbed twice in the arm before managing to push Zervas out and slam the door. After Zervas shattered the door and tried to climb through, he and Xippas ran away down the road. Sergeant Fotopoulos received 11 stitches for his wounds. The statement said CCTV footage showed Zervas and Xippas, fitting the description given by Sergeant Fotopoulos. ‘‘At the time Zervas was killed on Sunday, he was wearing

the pair of black denim shorts and the white Nike joggers which matched the clothing he was wearing at the time of the offences,’’ the statement said. When arrested on Tuesday, Xippas allegedly admitted being with Zervas at the flats, but said he had no knowledge of Zervas having a knife or of the man they encountered being an off-duty policeman. His lawyer unsuccessfully applied for bail and Mr Moore adjourned the case to the same court on April 22. Meanwhile, John Korn, the barrister for the four men charged after the airport bikie brawl, said they should not remain locked up while police prepared their evidence, which could take more than six months. Ismail Erden, 26, of Kingsford, Maher Aouli, 28, of Casula, Pomare Pirini, 21, of Georges Hall, and Zoran Kisacanin, 22, of Ingleburn, were each charged with affray over the fight on Sunday, allegedly involving up to 20 men, including Hells Angels and Comancheros bikies. Only Kisacanin appeared in the dock of Sydney’s Central Local Court. However, Mr Moore refused the application for bail for all four accused. The matter was adjourned until May 5. AAP

COMMENT & DEBATE The wild ones PAGE 21

Teachers make science plea




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SCIENCE teachers are demanding that the national curriculum mandate a minimum weekly teaching time for the subject because they fear it will be crowded out by other disciplines. In a submission to the National Curriculum Board, the Australian Science Teachers Association said at least 1 1⁄ 2 hours a week should be devoted to science in the first four years of school. It suggested at least two hours a week in grades 3 to 6, and at least 3 1⁄ 2 hours in lower secondary school. The association said science tended to be given little time in primary schools because many teachers lacked


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confidence and knowledge of the subject. A survey by the Australian Primary Principals Association found schools allocated an average of 3 per cent of teaching time to science, less than they devoted to religion. It said there was a trend of reducing the amount of science at the secondary level, with some schools offering it as an elective subject or for a semester rather than the year. The association said: ‘‘This has been occurring in a context . . . where the great majority of future employment opportunities will be science and technology-based. ‘‘It is imperative that sufficient time is mandated, not recommended, for covering the curriculum in classrooms.’’ Association president Peter

Turnbull said lifting the level of science teaching would require substantial spending on professional development. ‘‘We have a very large cohort of primary teachers that are not confident or experienced in science . . . those people without a considerable investment in professional learning and support are not going to immediately move to 120 minutes a week, but with the right structures in place, I believe that they can.’’ Last year’s Trends in International Mathematics and Science study showed students’ performance in science had slipped significantly at year 8. The national curriculum for the sciences, maths, English and history is scheduled to be introduced in 2011.

Defence spies on its minister
From PAGE 1
them to dine with or meet the 48-year-old businesswoman. Business associates of Ms Liu, who travels regularly between Sydney and China, also acknowledged there was a strong friendship between her and Mr Fitzgibbon. Ms Liu has been a generous financial supporter of the New South Wales ALP over the past decade, with two of her former property development companies contributing about $90,000. Australian Securities and Investment Commission
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documents show several of her deregistered Australian companies had Chinese Government-owned enterprises as shareholders. The Chinese state-owned enterprises that held shares in some of Ms Liu’s former companies include the Shandong Group Fisheries Corporation, the Industrial & Commercial Bank of China and the Jinan Steel and Iron Works. The Shandong fishing enterprise and the Jinan steelworks are run by senior Communist Party officials. Federal Court records show that in the 1990s Ms Liu’s com-

panies bought properties around Sydney worth tens of millions of dollars, including shopping plazas in Dee Why and Blacktown, through her companies Diamond Hill International Pty Ltd, Wincopy Pty Ltd and the British Virgin Islands-incorporated Vision Wise Holdings. The court documents reveal she had a falling-out with her business partner Humphrey Xu. In a 1998 NSW Supreme Court document, Justice Peter Young referred to Ms Liu owing $1.5 million on her credit cards but still having ample funds to meet other commitments.





A company half-owned by Australia’s Reserve Bank has engaged in questionable dealings in its pursuit of the ‘‘licence’’ to print money. Nick McKenzie and Richard Baker report.


HE din of scooters in Hanoi’s old district could barely be heard inside Vietnam’s Ministry of Culture and Information. It was 2006 and neatly dressed government officials were looking for newspaper stories critical of the controversial role of the Vietnam Central Bank governor in a deal to replace the country’s paper banknotes. When the deal was first announced, it appeared to be much like the new plastic banknotes: clean, neat and shiny. Indeed, the formula for the special polymer material used to make the new notes was owned by a company with a reputation for integrity. Based in Craigieburn, Securency Pty Ltd was half-owned by the Reserve Bank of Australia, the guardian of the nation’s financial system. This, however, had not stopped questions being asked in the Vietnamese press about the integrity of the currency deal — particularly as the bank governor’s son was involved with a company Securency had engaged as its local agent. In 2007, an official Vietnamese government inquiry found that irregularities in ‘‘the objectivity and transparency of the (banknote) project’’ had damaged the bank governor’s reputation. This finding meant little for the local journalists who had, a year earlier, posed questions about the deal. According to a US Government report into human rights abuses in Vietnam, the Ministry of Culture and Information had ‘‘reportedly threatened (the journalists) with sanctions for their publication of criticisms of the Government, including revelations of alleged official corruption’’. Two editors were stood down and seven newspapers cautioned by government officials. As a result, fewer and fewer questions were asked. Only now — after revelations in The Age on Saturday — are fresh inquiries being made. But this time they are focused on Securency and how it excels at doing business not only in Vietnam but in some of the most corruption-prone countries in the world. Chief among them is why the Reserve Bank and a host of Australian politicians and government officials have given their backing to a company paying large commissions to several disreputable overseas middlemen, as well as doing some of its business in offshore tax havens known for their secrecy provisions? They are questions familiar to Prime Minister Kevin Rudd, who made his mark as opposition foreign affairs spokesman probing the Iraq kickbacks scandal involving the Australian Wheat Board. Now, a different company with impeccable Australian government connections is under the spotlight. And the PM is being asked some of the same questions he was once so adept at posing.

THE world’s money makers have long favoured secrecy over scrutiny. American journalist Murray Bloom discovered this in 1983, when he published The Brotherhood of Money. According to Klaus Bender, a German author who also attempted to chronicle the work of currency companies, banknote firms banded together to bulk-buy Bloom’s book, only to have it pulped. The few who have managed to thumb its pages are treated to a historical expose of the tricks of the money makers’ trade, including the use of dubious agents to win deals and the corrupting of foreign central bank officials, who decide which company should win a contract to make a new note or coin. Bloom’s book revealed the close ties between the British, European and American currency printing companies and their respective national governments and intelligence agencies. He also exposed the willingness of some within the industry to lie, intimidate and bribe in order to secure the extraordinarily lucrative right to print a country’s currency. Henry Keith, a former legendary sales executive for American Bank Note Company in Latin America between the 1930s and ’50s, told Bloom that bribery was common. ‘‘When a competitor gets his first hook into your account . . . you know damned well he’s going to move heaven and earth — and bribe God knows who — to get more business to entrench himself,’’ Keith said. He also spoke of the ‘‘necessary and controversial’’ role of middlemen in foreign countries who were able to help secure deals for currency companies. According to Keith, the best agents were from ‘‘well connected, prominent local families’’. Bloom discovered that some of the world’s biggest banknote companies had engaged senior politicians and central bank figures as agents who would receive commissions on the completion of successful deals. Said Keith: ‘‘In one case (our agent) was an ex-minister of foreign affairs. In Ecuador, it was an ex-general named Cobo, Comandante Cobo, who made a fortune from his 5 per cent commission.’’ Since Bloom penned his book, currency companies have continued to run into trouble; British banknote printer De La Rue is under investigation by London’s Serious

Fraud Office over claims of corruption in Africa. Germany’s Giesecke and Devrient stopped supplying money to Robert Mugabe’s regime in Zimbabwe after a request from the German Government. The American Bank Note Holigraphics Company was fined a few years ago after it was accused of breaching the US corruption laws in connection to a payment to a Swiss bank account that was aimed at influencing Saudi Government officials. Over the past two decades, there have also been some major changes in the industry, including the introduction of new international business standards prompting some companies, including Giesecke and Devrient, to ban the payment of money into accounts in offshore tax havens. Another change involved the entry of a new competitor in the market. It had government backing, swish new technology and a fierce desire to win contracts.

ALONG with the Hills hoist and the lawn mower, the development of polymer banknotes rates as one of Australia’s most innovative offerings to the world. After a large-scale counterfeiting attempt in 1967, the RBA decided Australia’s currency needed greater protection. It eventually turned to the CSIRO. Australia’s premier scientific research organisation and the bank’s fully owned subsidiary, Note Printing Australia, began work on the project in the 1980s. The team’s focus ‘‘soon moved to a plastic polymer material’’. Australia began the switch to the durable and more secure plastic notes in 1988. Eight years later, the RBA and Belgian plastics firm UCB became joint venture partners in a company called Securency. Over the next decade, nearly 30 countries, including Romania, Nigeria and Guatemala, switched to or tested the polymer notes. While the company’s operations, as well as its partnership with the Reserve Bank, is relatively unknown in Australia, Securency’s success has been increasingly noted in the boardrooms of its overseas-based competitors. An executive from a competing firm says one question that is regularly pondered is: ‘‘How can a company that is owned 50 per cent by the Reserve Bank be so successful in some of the most corrupt countries in the world?’’ Securency’s employees mostly respond to that question by describing the superiority of polymer notes when compared to the paper products produced by many of its rivals. But Securency’s network of overseas

agents have also been making a difference. Stane Strauss, a Frankfurt-based banknote expert and former marketing consultant to Securency’s sister company Note Printing Australia, says agents still play a critical role in the industry. ‘‘There is more to getting a printing order than merely having the best possible product or the lowest price for a given standardised product,’’ Strauss says. ‘‘Longterm relationships, trust, political influence, international relations all play role in this highly complex business. Secrecy is imperative for both printers and the central banks.’’ In Mexico in 2004, Securency employed the country’s former central bank chief cashier, Raul Sierra. Sierra’s replacement as chief cashier at the Banco de Mexico, Jaime Pacreu, who was in charge of introducing polymer notes, became Securency’s Mexican manager in October 2007. Pacreu’s integrity has never been questioned. His hiring by Securency raises questions about the practice of government officials jumping ship to a private company able to profit from their past connections (a practice that happens the world over, including in Australia). But nothing about it was illegal. For Securency and the Mexican Government, Pacreu’s involvement made sense; last year, Securency unveiled its new printing plant in Mexico, owned 20 per cent by the Banco de Mexico. In doing so, it signalled its intentions to conquer the region’s currency market. But if the Mexican operations were above board, what about Securency’s activities in other more corruption-prone countries?

AS A a cluster of islands surrounded by the deep blue waters of Indian ocean, Seychelles is a dream location for honeymooners. Lying 1500 kilometres off the east coast of Africa, the country is also a sought-after tax haven. Company insiders say that Securency has made large payments, including ‘‘commissions’’, to accounts in a number of countries regarded as tax havens by Australian authorities, including the Seychelles. The reason for doing this remains unclear, partly due to the haven’s strict secrecy provisions, which make it difficult to unravel those behind the offshore accounts. Asked whether it makes payments to tax havens, Securency told The Age that ‘‘it does not make payments to any tax havens or jurisdictions which have not committed to the internationally agreed tax standard developed by the OECD’’. According to the OECD, scores of tax havens and financial centres have pledged to reform their standards, but are yet to do so. Twenty-two countries — including 18 considered tax havens — have ‘‘committed’’ to making changes, but have ‘‘not yet substantially’’ done so, says the OECD. Securency has done business in at least a few of them. Paying monies into offshore accounts appears to sit uneasily with the OECD’s anticorruption guidelines, which instruct companies to ‘‘adopt financial and tax accounting and auditing practices that prevent the establishment of ‘off the books’ or secret accounts’’. If suspicion is aroused by the dealings with offshore accounts, some of the

Securency Pty Ltd was formed in 1996 as a joint venture between the Reserve Bank of Australia and Belgian multinational UCB. In September 2004, Innovia Films, owned by a consortium led by Candover PLC, acquired UCB’s share. In its first 10 years, Securency sales rose to $60 million. ■ Securency manufactures special polymer currencies for more than 20 countries including Bangladesh, Brazil, Brunei, Chile, China, Guatemala, Hong Kong, Indonesia, Kuwait, Malaysia, Mexico, New Zealand, Nepal, Nigeria, Northern Ireland, Papua New Guinea, Romania, Singapore, Solomon Islands, Sri

Lanka, Taiwan, Thailand, Vietnam, Western Samoa and Zambia. ■ Securency’s profit for the past two years is about $26 million. ■ Note Printing Australia Limited is a wholly owned subsidiary of the RBA. It produces Australian banknotes and passports and supplies banknotes to several countries in the Asia-Pacific. ■ In 2007/08, NPA produced 470 million banknotes, of which 288 million were Australian. ■ NPA’s total profit over the past two financial years is $11.5 million.

businessmen whom Securency has engaged across the globe also do not inspire confidence. One company active across Africa, Contec Global, which is owned by an Indian businessman and honorary consul to Burundi, Benoy Berry, has reaped lucrative payments from Securency as their agent. . In 2006, the Ugandan Government inspectorate investigated a contract process involving Contec Global and found that a Government minister appeared to be improperly lobbying for the company. While it could not confirm an allegation raised in a report by Uganda’s intelligence services that the minister had received a hefty bribe, it did find that he had abused his office, ‘‘had a personal interest in the outcome of the procurement process (and) . . . was fronting and or lobbying for Contec Global’’. In South Africa, Securency has had dealings with at least two very colourful businessman. For a period, it was dealing with casino magnate Vivian Reddy, who has been embroiled in a corruption scandal involving his close friend and now president, Jacob Zuma. Another Securency connection in South African, Donald McArthur, was charged with corruption by authorities in 2005 in connection to the nation’s biggest corporate collapse in 1999. Last year, McArthur struck a deal with South African authorities and pleaded guilty to a charge of fraud. In India, a company insider believes Securency made a political donation of $100,000 but listed it on the books as a ‘‘marketing expenses’’. Securency has denied making payments to any political entity. A company source also alleged that Securency was paying its agents commissions of 10 per cent or more, which are well above those paid by at least two other major currency companies, who told The Age their commissions are between 2 and 6 per cent. Securency says it pays commissions after ‘‘taking into account advice from other organisations (including Austrade) on the appropriate commission levels for each country’’. The risk inherent in using agents in corruption-prone countries has not escaped Securency’s attention — indeed, it has been a topic at company meetings and ethics workshops. The company says its agents must sign a code of conduct that prohibits bribery. It also says it has, ‘‘on a number of occasions, terminated or not renewed’’ agents’ contracts due to poor performance. Securency’s sister firm in Melbourne, Note Printing Australia, has taken a different approach. NPA’s business development manager, Daniel Reid, told The Age that his firm believes that, rather than using agents, ‘‘it is a more responsible approach to deal directly with central banks’’. Londoner John Burbidge-King, a former executive at British banknote firm De La Rue who now runs an anti-corruption consultancy, also says that caution must be taken when dealing with agents in corruption-prone countries. ‘‘Companies need to ensure that they have selected an

agent with care and independent due diligence. If a country is below 50 on the Transparency International index we advise companies to dig a little deeper before appointing their agent,’’ he says. (Transparency International is an NGO that rates the corruption levels in countries.) Securency says it applies ‘‘due diligence’’ when hiring all of its agents. Some of its staff are also careful when communicating with them. An email sent by one of the firm’s former senior sales chiefs to colleagues advised them to use an instant messaging service that leaves no records. But the company’s dealings in corruption-prone regions has not always gone without notice. In 2002, Vietnam’s central bank governor was overseeing the country’s project to switch to polymer notes. Securency stood to make millions out of the deal and engaged as its Vietnamese agent a firm called the Company For Development and Technology or CFTD. CFTD’s offices are close to the Ministry of Culture and Information, whose officials in 2006 targeted local journalists who had queried the central bank governor’s handling of the deal. One of the issues revealed by journalists concerned the identity of a director of a CFTD company involved in the currency deal. He was the central bank governor’s son. According to newspaper reports in Vietnam, the state’s corruption watchdog found in 2007 that the involvement of the bank governor’s son in the deal in 2002, however brief, was ‘‘irregular in terms of the objectivity and transparency of the project and has an impact on the state bank governor’s reputation’’. What was never uncovered by the inspectorate’s investigation were any details about the commission payments made to CFTD from Securency. A company source told The Age they run into the millions. While this may tally with any percentage deal agreed to between Securency and CFTD, the destination of some of the commission payments appears unusual. A source close to the company says at least some of the payments were directed into an account in Switzerland. The country is one of the financial centres that the OECD said last month had ‘‘not substantially implemented’’ appropriate tax and secrecy standards, despite committing to do so.

LAST December, outside Securency’s new plant in central Mexico, a notable cast gathered. Mingling with the governor of Mexico’s central bank was the assistant governor of the Reserve Bank of Australia, Dr Robert Rankin, and Katrina Cooper, Australia’s ambassador to Mexico. They were there to cut the ribbon to launch the new plant and, in doing so, send the message that Australia’s Government and central bank were firm backers of Securency’s work. In 2004, during a presentation in Canberra, Securency CEO Myles Curtis extolled the virtues of this support: ‘‘One should not underestimate the extremely high level of trust and integrity that must be established before a (currency) project . . . can even be considered. As in all the countries we are working in, the support we received from the embassy and the Department of Foreign Affairs and Trade has been extremely helpful.’’ Just how much the RBA knows about the company it half-owns, regularly audits and on whose board sits several Reserve Bank officials is unclear, although the bank’s deputy governor, Ric Battellino, reacted with surprise when told about the allegations last week and said he would demand an immediate explanation. What is known by Department of Foreign Affairs and Trade, and Austrade, about Securency’s activities is also unclear. (According to one source, an Austraderecommended consultant in South-East Asia actually advised Securency managers that they would need ‘‘someone to hand out the white paper envelopes’’ if they wanted to do business in a certain country.) Securency says it advises the Reserve Bank about all agent ‘‘appointments and terminations’’ and that it also takes advice from Austrade about making commission payments. The issues that arise from Securency’s overseas operations, including the support from the Australian Government, are similar to those raised persistently by Kevin Rudd in opposition when he probed into government knowledge of the commission payments being made by the Australian Wheat Board to the regime of Saddam Hussein. Rudd campaigned tirelessly for an inquiry into government negligence surrounding the wheat board scandal. How hard the Government will push for answers about Securency’s behaviour — and what the Reserve Bank and government officials know or should have known — remains unclear. But the spotlight is now on Securency’s activities. And the money makers hate that. Nick McKenzie and Richard Baker are with The Age’s investigative unit.