RBA caught in banknote fraud
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.
This article was first published in the print edition of The Saturday Paper on Aug 25, 2018 as "Notes in a scandal".
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