Wat Da Con Heo !

Notes on a scandal

RICHARD BAKER AND NICK MCKENZIE

Anh 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 director-general 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 censured 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 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 Vietnamese 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 multimillion-dollar 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-for-contracts 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.

THE 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 foreign-based 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.”

Source:  Link

RBA linked to bribery scandal

By Alison Caldwell for AM

Posted Fri Oct 30, 2009 9:27am AEDT
Updated Fri Oct 30, 2009 11:20am AEDT

Allegations that a company half owned by the Reserve Bank bribed foreign government officials with multi-million-dollar commissions are being investigated by the Australian Federal Police.

Today it has been reported a senior Vietnamese official received more than $5 million in so-called commission payments from the company, Securency.

According to The Age newspaper, payments to the Vietnamese official and his company, wired into overseas bank accounts, totalled more than $12 million.

Now investigators want to know who knew what, and when.

The allegations are the most serious developments yet in the corruption scandal engulfing the Reserve Bank.

Securency manufactures the polymer material which is used in Australian bank notes.

The patented polymer formula is now used in banknotes in 27 other countries, including Vietnam. It switched from paper-based banknotes to polymer in 2002.

Hanoi businessman Anh Ngoc Luong played a major role in the deal.

Securency hired him because of his high-level government connections. It is understood he and his company worked for Vietnam’s Ministry of Public Security.

According to the Age, Securency paid him and his company, CFTD, more than $12 million, some of which was wired to offshore bank accounts in Switzerland.

Under Australia’s federal bribery laws, it is illegal for Australian companies to pay foreign officials or government-controlled entities to gain a business advantage.

If it can be proven that Securency executives knew or should have known that Mr Luong worked on behalf of the Vietnamese Government, they may face criminal charges, which carry a 10-year jail sentence.

The allegations also raise questions about the conduct of the Reserve Bank. Some of its officials sit on the Securency board and oversee its activities.

Then there is the Department of Foreign Affairs and Trade and other Australian agencies which work with Securency around the world.

Richard Broinowski is Australia’s former ambassador to Vietnam. He says the scandal raises serious questions for the Government.

“I think the main thing is that there should have been an awareness of what was going on,” he said.

“If the story is true then it would imply knowledge on the part of the RBA, therefore knowledge surely on the part of senior bureaucrats in Canberra too – including the Department of Foreign Affairs and Trade.

“Australia is a signatory to anti-corruption international laws and regulations, and it’s something that we shouldn’t we doing.

“I see a parallel between this and the AWB scandal, which still hasn’t been properly involved and the people who’ve been responsible for it haven’t been brought to any kind of account.

“I have been quoted in The Age as saying it’s [Vietnam's Ministry of Public Security] an odious agency, I mean that only to the extent that yes, it’s got responsibility for public security and in a country like Vietnam there isn’t a great deal of transparency,” he said.

“But I really should say that it’s not so much the moral turpitude or otherwise of that agency. Any government agency in Vietnam would be equally culpable and Australian officials should equally know who is involved.”

Mr Luong is listed as a director of his company’s Australian operations based in Frankston, south-east of Melbourne.

Two years ago, Securency executives claimed the company’s role was limited to translating documents, arranging meetings and airport pickups.

Source:  Link