RBA caught in ban­knote fraud.

In an em­bar­rass­ing moment for the RBA, the Fed­eral Court has or­dered that the com­pany formed to ex­port Aus­tralia’s poly­mer ban­knote tech­nol­ogy pay $65 mil­lion to an over­seas agent de­frauded of his com­mis­sion.

The Saturday Paper - - The Week | Contents - Nick Bony­hady

It was a “shabby fraud”, ac­cord­ing to Jus­tice Steven Rares, who or­dered in the Fed­eral Court on Au­gust 17 for Securency, a busi­ness formed by the Aus­tralian gov­ern­ment in 1996, to pay out nearly $65 mil­lion to an In­dian–

Ir­ish busi­ness­man, Dr Benoy Berry.

Af­ter al­most four years of pro­ceed­ings, con­clud­ing in a pri­mary judge­ment in De­cem­ber 2017, the judge sided with Berry, agree­ing Securency tricked him into giv­ing up a mul­ti­mil­lion-dol­lar com­mis­sion he was due for his work se­cur­ing a con­tract that led to Nige­ria in­vest­ing in an in­ven­tion as Aus­tralian as the Hills Hoist – poly­mer ban­knotes.

Cre­ated by a team at the CSIRO in the 1980s, poly­mer money proved far more durable and harder to forge than the pa­per-based notes still in use in coun­tries such as the United States. Securency was formed by the fed­eral gov­ern­ment to com­mer­cialise the in­ven­tion. Based in Mel­bourne, it was tasked with ex­port­ing the tech­nol­ogy around the world. To­day, more than 25 coun­tries use Aus­tralian ban­knote tech­nol­ogy and bil­lions of poly­mer notes are in cir­cu­la­tion glob­ally. When the com­pany was es­tab­lished as a joint ven­ture, its own­er­ship was split 50– 50 be­tween the Re­serve Bank of Aus­tralia and a Bri­tish com­pany, In­novia, it­self a sub­sidiary of a sub­sidiary of the Bel­gian com­pany UCB, which brought decades of ex­pe­ri­ence in making plas­tic prod­ucts.

The RBA di­vested from Securency in 2013, sell­ing its share of the com­pany to In­novia “in ac­cor­dance with the Bank’s longstanding in­ten­tion to exit from the joint ven­ture once Securency had es­tab­lished it­self as a vi­able long-term sup­plier in the in­ter­na­tional mar­ket for ban­knote sub­strate”, as the bank said in a me­dia re­lease at the time. Ac­cord­ing to the RBA, Securency’s sale process “was com­menced in late 2010”, which was af­ter Berry had raised his con­cerns with Securency. The bank re­ceived $65 mil­lion in ini­tial pay­ments for its stake.

Noth­ing in the pub­lic record sug­gests Berry in­formed the RBA about his con­cerns. In its 2011 an­nual re­port, the bank makes only vague ref­er­ence to its re­grets over “gover­nance ar­range­ments and pro­cesses”, which it says it has taken steps to rem­edy. Be­yond fi­nan­cial back­ing, though, the RBA also pro­vided of­fi­cials to serve on the Securency’s board. Re­plac­ing its board rep­re­sen­ta­tives and “draw­ing all of its [new] ap­pointees from the Bank’s ex­ec­u­tive or the Re­serve Bank Board” was one of the in­ter­ven­tions noted in the 2011 an­nual re­port. Dur­ing the trial, Berry tes­ti­fied that “to me, Securency was [the] Re­serve Bank of Aus­tralia, so that’s what I was re­ly­ing on”.

The strange case of Dr Benoy Berry – re­plete with high-stakes wheel­ing and deal­ing in the world’s cir­cles of power

– and the huge pay­out awarded to him, high­lights the po­ten­tial per­ils gov­ern­ment faces when it de­cides to get into busi­ness.

It was late Novem­ber 2007 when Berry met with Gov­er­nor Charles Soludo of the Cen­tral Bank of Nige­ria at the ex­clu­sive Hil­ton Lon­don Metropole ho­tel. By all re­ports, things went well. Berry seem­ingly per­suaded Soludo to buy tens of mil­lions of dol­lars’ worth of poly­mer ban­knotes from Securency.

The Metropole meet­ing had taken prepa­ra­tion. Berry and Soludo had met ear­lier at the Nigerian high com­mis­sioner’s Lon­don res­i­dence for a pre­lim­i­nary chat. An­other con­ver­sa­tion be­tween Berry and his part­ners at Securency hap­pened at The Ritz.

Berry had al­ready made mil­lions through his work for Securency in 2006 when Nige­ria had agreed to con­vert its 20 naira note from pa­per to poly­mer. He stood to make an­other for­tune if Nige­ria pro­ceeded with more de­nom­i­na­tions as Gov­er­nor Soludo had in­for­mally agreed at the Lon­don meet­ing. In­stead, Berry’s com­mis­sion pay­ments dried up.

As Jus­tice Rares found shortly be­fore Christ­mas last year, this was be­cause Peter Chap­man, Securency’s busi­ness de­vel­op­ment di­rec­tor for

Africa, had de­frauded Berry. Chap­man had in­duced him to sign a “rou­tine” agree­ment in Fe­bru­ary 2008 that in fact ter­mi­nated Berry’s role with Securency and de­prived him of his com­mis­sions.

In the early 2000s, Securency wasn’t get­ting any­where in Nige­ria. Even then prime min­is­ter John Howard had twice failed to per­suade Nige­ria’s then pres­i­dent Oluse­gun Obasanjo to con­vert Nige­ria’s bil­lions of pa­per ban­knotes to poly­mer, in­clud­ing a per­sonal pitch in 2003 at the Com­mon­wealth Heads of Gov­ern­ment Meet­ing in Abuja, Nige­ria’s cap­i­tal. So, in 2003, Chap­man ap­pointed Berry as Securency’s sales agent in the coun­try.

Berry was ex­cep­tion­ally well con­nected in Africa. He knew Zim­babwe’s then prime min­is­ter Robert Mu­gabe and Uganda’s Pres­i­dent Yow­eri Mu­sev­eni per­son­ally. To­gether, Berry told the court, the three men had trav­elled to Nige­ria in 1995 to plead for clemency for Obasanjo, who was then an op­po­si­tion politi­cian fac­ing a death sen­tence from Nige­ria’s mil­i­tary regime.

Berry’s in­volve­ment re­versed Securency’s for­tunes. When, in 2006, the Cen­tral Bank of Nige­ria agreed to con­vert its 20 naira note to poly­mer, Berry took home a fat com­mis­sion pay­ment for his ef­forts. Cru­cial to Securency’s success was its prom­ise to give Nige­ria the tech­nol­ogy to pro­duce its own poly­mer ban­knotes if the coun­try bought enough poly­mer. This would en­able Nige­ria to sup­ply ban­knotes to up to 15 other African coun­tries that were plan­ning, at the time, to adopt a sin­gle cur­rency. If it had even­tu­ated, that op­por­tu­nity would have been worth a vast sum of money.

How­ever, Jus­tice Rares found Securency’s as­sur­ances were a “prac­tised de­cep­tion”. The com­pany, Rares held, “never had any in­ten­tion of con­struct­ing such a plant in Nige­ria” but used it to string the Nige­ri­ans along.

Berry’s own role in the project was not with­out com­pli­ca­tions. His com­pany, Con­tec, was un­der scrutiny by anti-cor­rup­tion bod­ies in 2006 and 2007 in Uganda and Nige­ria, but noth­ing un­to­ward was found. More sig­nif­i­cantly, in the same pe­riod, Berry be­came em­broiled in a dis­pute with the Nigerian gov­ern­ment over hun­dreds of mil­lions of dol­lars in fees that Con­tec was owed for other projects. At trial,

Berry said the dis­pute did not pre­vent him from trav­el­ling to Nige­ria. Jus­tice Rares dis­agreed. Berry “was re­luc­tant or, more prob­a­bly, not able safely to travel to Nige­ria dur­ing the four-year pe­riod about which he lied”, Jus­tice Rares held.

None­the­less, Berry con­tin­ued to ad­vo­cate for Securency from abroad. De­spite his ef­forts, though, Berry was be­ing un­der­mined. In 2008, Securency sur­rep­ti­tiously re­placed him as its Nigerian agent with two com­pa­nies: JH Mar­ket­ing Ltd and SPT Ltd. They shared a 20 per cent com­mis­sion – 8 per cent to JH, 12 per cent to SPT – sig­nif­i­cantly more than the 15 per cent Berry was re­ceiv­ing.

Berry was not told he had been re­placed. In­deed, Securency cre­ated a false pa­per trail to jus­tify its de­ci­sion to dump Berry. Doc­u­ments from 2008 at­trib­uted the de­ci­sion to Berry’s “con­tin­u­ing ill health”, though he was not un­well.

It is not clear why Securency re­placed Berry as its agent in Nige­ria. The two new com­pa­nies had less ac­cess to the coun­try than Berry, and their ser­vices cost Securency more. What is clear is that Chap­man had an in­ter­est in SPT. Jus­tice Rares found that Chap­man “set up and con­trolled SPT” from when it was first reg­is­tered in the Sey­chelles, a tax haven, in 2008.

And while Chap­man was lin­ing his own pock­ets, Berry’s com­mis­sion pay­ments stopped. By Septem­ber 2009, af­ter Fair­fax Me­dia re­vealed Securency’s le­gal trou­bles in Nige­ria and abroad, Berry had had enough. He de­manded pay­ment from Securency and, af­ter many months of be­ing ig­nored, be­gan court pro­ceed­ings.

How­ever, Securency’s lawyers ar­gued that Berry was not en­ti­tled to any­thing be­cause he had al­legedly ended his re­la­tion­ship with the com­pany on Fe­bru­ary 24, 2008, at a meet­ing in Berry’s home in Lon­don. “We could do a great In­dian lunch. My chef is re­ally good!!” he had texted Chap­man be­fore­hand. Ac­cord­ing to court doc­u­ments, Chap­man ar­rived in his old Volvo — an odd fit sit­ting out­side Berry’s stately home. The two ate in the con­ser­va­tory. Jus­tice Rares found that af­ter lunch Chap­man asked Berry to sign some doc­u­ments, which he said would can­cel Berry’s old con­tract and re­place it with one that would al­low the opaci­fi­ca­tion plant to be built.

Berry took Chap­man at his word. In re­al­ity, though, his can­celled con­tract was not re­placed with any­thing. As Jus­tice Rares found, Chap­man had de­frauded Berry out of his com­mis­sion. Chap­man was a per­son, ac­cord­ing to the judge,

“who is and was pre­pared to say or do any­thing in his deal­ings with oth­ers”.

With his hon­our find­ing that the agree­ment had been dis­hon­estly ter­mi­nated, Berry re­tained his rights to the com­mis­sion pay­ments now worth – with in­ter­est – al­most $65 mil­lion. This is the same amount of money the RBA re­ceived as its ini­tial pay­ment for the sale of Securency. With lawyers’ fees, Securency’s bill will be even higher.

This week, coun­sel for Securency’s new Cana­dian own­ers in­di­cated to Jus­tice Rares that their client plans to ap­peal his judge­ment to the full Fed­eral Court. If that hap­pens, a deeply em­bar­rass­ing chap­ter for the RBA will drag on.

CRU­CIAL TO SECURENCY’S SUCCESS WAS ITS PROM­ISE TO GIVE NIGE­RIA THE TECH­NOL­OGY TO PRO­DUCE ITS OWN POLY­MER BAN­KNOTES IF THE COUN­TRY BOUGHT ENOUGH POLY­MER.

NICK BONY­HADY is a free­lance jour­nal­ist. He writes for Jus­tinian and the Gazette of Law & Jour­nal­ism.

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