Connie Agius reported this story on Monday, September 30, 2013 08:06:00

TIM PALMER: The scandal over the potentially illegal overseas dealings of the Reserve Bank's note printing companies has spread, with a joint Four Corners and Fairfax Media investigation revealing illegal attempts to strike a business deal with Iraq's brutal dictator, Saddam Hussein.



Secret files show officials from the RBA's Note Printing Australia went to Iraq to discuss the sale of plastic bank notes.



The meeting took place at the height of UN sanctions in 1998, and some say that breached international law.



Connie Agius reports.



CONNIE AGIUS: The United Nations imposed sanctions on Iraq when Saddam Hussein invaded neighbouring Kuwait. The sanctions prevented any business dealings with Iraq and at the time the Reserve Bank of Australia was responsible for compliance.



But Four Corners has obtained secret files showing the RBA breached the very sanctions it was meant to uphold. The documents show the RBA's Note Printing Australia travelled to Iraq to meet with Saddam Hussein's brother-in-law, Arshad Yassin.



In part, it says:



EXCERPT FROM DOCUMENT (voiceover): Mr Arshad Yassin, extremely influential, he is willing to open all the doors for us. Arshad Yassin's assistance is critical as all decisions on this project will be taken by Saddam Hussein.



CONNIE AGIUS: The operation was called "Delta Project", and the aim was to win a contract that would allow the RBA's Note Printing Australia to turn Iraq's paper currency into polymer bank notes.



Two officials made the trip to Iraq in 1998 at the height of UN sanctions, and the documents show they were winning over Saddam Hussein.



EXCERPT FROM DOCUMENT (voiceover): He has confirmed that Saddam Hussein has seen the polymer notes samples and is keen to adopt our product.



CONNIE AGIUS: But the deal was called off six months later. Australian diplomats uncovered NPA's dealings with Saddam Hussein's regime and warned the company they:



EXCERPT FROM DOCUMENT (voiceover): May have already breached Australia's obligations under international law.



CONNIE AGIUS: Associate Professor David Chaikin from the University of Sydney says there was a breach.



DAVID CHAIKIN: Given the clarity of such a violation of Australian law and international law, this should have rung alarm bells to the highest levels of the bank, because what was happening potentially would destroy and undermine the reputation not only of Note Printing Australia but its owner, the Reserve Bank.



CONNIE AGIUS: This isn't the first time the RBA's subsidiaries have come under scrutiny.



The Australian Federal Police have charged NPA, their sister company Securency and several employees for allegedly paying bribes to public officials in Indonesia, Malaysia and Vietnam to secure bank contracts. (*see editor’s note)



The practice of using agents alarmed whistleblower Brian Hood, who started working as NPA's company secretary in 2004.



BRIAN HOOD: They were being paid millions of Australian dollars. That grabbed my attention right from the start, that these guys are being paid an enormous amount of money. What are they actually doing to earn that? The fear was that the money wasn't just staying with the agent, that it was being dispersed to others.



CONNIE AGIUS: Brian Hood raised his concerns with the NPA board in 2006, but the payments continued. So he went to the then deputy governor of the Reserve Bank, Ric Battellino, in 2007.



BRIAN HOOD: He did indicate that my briefing paper perhaps would be shown to the governor. That was the first time the governor was mentioned, and I thought well that's encouraging, it's actually literally got to the top.



CONNIE AGIUS: Brian Hood says he was confused when RBA Governor Glenn Stevens testified before a parliamentary committee that his board did not know about the corrupt practices until they were revealed in a Fairfax investigation in 2009.



BRIAN HOOD: Well it wasn't the truth. They were told in June 2007.



CONNIE AGIUS: Brian Hood's claims are supported by a second whistleblower, James Shelton, who worked with Securency. He says the board members of NPA and Securency who were aware of corruption prone practices have not been held to account.



JAMES SHELTON: Ultimately the board is responsible for corporate governance and is ultimately responsible for the company. They would have known the very large deals being done in very corrupt places. They knew the business model. They put in an anti-corruption program that was fundamentally flawed by any assessment and it doesn't seem that any action's been taken against the board or the former chairman or anyone.



CONNIE AGIUS: The AFP (Australian Federal Police) has handed its evidence to the Australian Securities and Investments Commission. ASIC said in a statement they had reviewed the material and decided not to take the matter further.



The RBA declined to comment.



TIM PALMER: Connie Agius reporting. And the full story will be on Four Corners tonight at 8.30pm on ABC1.



EDITOR'S NOTE (1 October 2013 ): In 2011 Securency and Note Printing Australia were charged by the Federal Police with bribery offences relating to the alleged payments to overseas officials. Court orders prevent recent developments regarding the charges against the companies being reported.