Saturday, September 15, 2012

"Watchdog" refuses to investigate the bureaucracy

AUSTRALIA's corporate watchdog badly bungled its handling of one of the nation's biggest bribery scandals by failing to interview a single relevant witness and misspelling the lead police investigator's name in emails, leaving crucial correspondence stalled or unread.

The Australian Securities and Investments Commission announced in March that it would not act on a referral by the Australian Federal Police to investigate the Reserve Bank banknote scandal, despite the federal police and government lawyers finding compelling grounds to do so.

The Herald can reveal that so strong is the evidence of possible corporate malfeasance that before referring the matter to ASIC, the police considered taking the rare step of getting a special delegation from the Gillard government to investigate corporate law offences.

ASIC's failure to conduct the most basic investigation has not only infuriated senior law enforcement sources in Canberra but left a big part of the corporate corruption scandal untouched. It has also sparked questions about whether the political sensitivities that could flow from a probe that ensnared serving and former Reserve officials has influenced ASIC's conduct.

The Liberal MP Tony Smith said he intended to grill the ASIC chief, Greg Medcraft, about the issue and the independent senator Nick Xenophon questioned "the extent ASIC has been blind-sided by the fact that these allegations involve subsidiaries of the Reserve Bank.

"It seems extraordinary that given the seriousness of these allegations and what is at stake, that not one relevant witness has been interviewed by ASIC.

"This is serious enough to warrant a special taskforce from ASIC. If they need more funding from the government, they should get it," Senator Xenophon said.

A senior legal source aware of evidence implicating some of the directors of the allegedly corrupt Reserve subsidiaries Securency and Note Printing Australia said it was very strong and included the reckless approval of payments to a suspected corrupt arms dealer and to front companies in known tax havens.

Yesterday the Herald revealed that several directors of both companies, including top Reserve officials, were told of explicit bribery and corporate corruption concerns in 2007 but chose not to call police.

It was revealed in court yesterday that a corruption whistleblower, Brian Hood, was made redundant in 2008 by the top Reserve official Bob Rankin after Mr Hood repeatedly raised corporate corruption concerns.

Australian corporate laws prohibit reckless conduct by directors and the victimisation of whistleblowers.

ASIC's task of starting an inquiry was made vastly easier after the police gave it boxes of evidence related to possible corporate charges identified during the police probe of criminal bribery offences.

But it is understood ASIC investigators did not question a single director, or interview a single relevant witness, about the material police provided.

Documents obtained by the Herald under freedom-of-information laws reveal ASIC only twice corresponded in writing with police about the scandal before deciding not to launch a formal probe.

In July last year, a senior ASIC investigator emailed the head of the police taskforce investigating Securency and NPA to seek advice. "The deputy chair of ASIC has requested that I inquire of the AFP as to the scope of its investigations and the charges that have been laid, before ASIC makes any decision as to whether we need to investigate anything arising from this matter," the ASIC investigator wrote.

"ASIC would not want to duplicate any work that the AFP has already undertaken so it would be appreciated if you could assist ASIC in determining whether it should commence any investigation."

But the investigator misspelt the email address of the police officer, calling him Roland Pike instead of Rohan Pike. This meant Mr Pike did not receive the initial email.

In the email, ASIC also mistakenly wrote that the police were "given delegation by the minister to prosecute Corporations Act offences as part of their investigation", despite the fact that this was not ultimately given to the federal police by the government. ASIC declined to release the only other correspondence between it and the police, emails sent in March just before it announced it would not investigate directors of the Reserve firms. Police have charged Securency, NPA and eight former executives with criminal bribery offences but no action has been taken against the directors.

Mr Medcraft has yet to explain publicly the basis for his decision not to investigate, despite promising more openness about watchdog decisions.

An ASIC spokesman said a thorough assessment of the material provided by the police had been done before it was decided not to investigate. He declined to answer specific questions.


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