The Queen v Note Printing Australia Limited & Anor

2 Securency manufactures and supplies a range of unique substances used in banknotes and security documents. Note Printing's business includes printing finished banknotes for the Reserve Bank and some other central banks, producing Australia's passports, and producing banknote security materials. Note Printing prints banknotes using polymer substrate supplied by Securency.

3 Securency and Note Printing have each pleaded guilty to three charges of conspiring with others to bribe a foreign official, contrary to ss 11.5(1) and 70.2(1) of the Criminal Code 1995 (Cth).

4 Section 70.2 ("the foreign bribery provision") was introduced into the Code with effect from 17 December 1999. The provision is aimed at the persons who make or offer the bribes, rather than the foreign recipients of the bribes.

5 Securency and Note Printing have both pleaded guilty to charge 1, which relates to Indonesia, and charge 2, which relates to Malaysia.

6 Securency has also pleaded guilty to charge 3, which relates to Vietnam. Note Printing was not a party to the Vietnamese conspiracy.

7 Note Printing has also pleaded guilty to charge 4, which relates to Nepal. Securency was not a party to the Nepalese conspiracy.

8 In each case, the offence involved a conspiracy to provide a benefit, or to offer to provide a benefit, which was not legitimately due, with the intention of influencing a foreign public official in the exercise of the official's duties, in order to obtain or retain business, or a business advantage that was not legitimately due.

9 The Indonesian offence involved the provision of a benefit to foreign officials. The other three offences involved offers to provide such a benefit.

10 In each of the four countries, the relevant corporate offender engaged a local agent to assist in obtaining contracts to supply their products to the local central bank. The local agents were to be remunerated by way of success-based commissions. In relation to each of the conspiracies, any benefit offered was to be paid from the commissions payable to the local agent. The conspirators understood that the agent would offer part of those commission payments to one or more of the foreign bank officials.

11 The maximum penalty which may be imposed on each of the companies is $330,000 per offence.

12 The case against Securency is a rolled up count of conspiracy between 17 December 1999 and 2 February 2001, consisting of two parts:

(a) First, conspiring to provide a benefit directed at the business of supplying polymer currency to the Bank of Indonesia; and

(b) Secondly, conspiring to provide a benefit to influence the Indonesian bank's officials with respect to penalty payments and the future supply of polymer banknotes, including a possible 20,000 rupiah banknote contract.

13 Note Printing was only a party to the second part of the Indonesian conspiracy.

14 During the course of 1999, an agreement was entered into between Securency and certain individuals, including some of its employees and agents, to provide an illegitimate benefit to certain officials in the Indonesian bank, in order to obtain or retain the business of supplying 100,000 rupiah polymer banknotes.

15 The foreign bribery provision had not come into force at the time the agreement was entered into. However, after the provision was introduced in December 1999, the agreement continued throughout the Indonesian conspiracy period.

16 In June 1999, Securency and Note Printing executed a contract with the Indonesian bank for the supply of 100,000 rupiah polymer banknotes ("the Indonesian bank contract").

17 Between 31 August 1999 and 31 May 2000, Securency received more than A$13 million for the supply of substrate and other expenses incurred in the production of the 100,000 rupiah banknotes.

18 Between 18 January and 6 June 2000, commission payments totalling US$3.82 million were paid into an account controlled by the Indonesian agent, pursuant to the first part of the Indonesian conspiracy. This was equivalent to 17.2% of the total sales under the Indonesian bank contract in the relevant period; approximately 14% of the total sales was paid as benefits to other persons, and the balance of approximately 3.2% was retained by the Indonesian agent. That is to say, the total benefits paid to the foreign public officials in this period were in the order of US$3 million.

19 Under the Indonesian bank contract, the Indonesian bank was entitled to claim penalty payments from Note Printing and Securency, if there was a delay in the delivery of the 100,000 rupiah banknotes.

20 Note Printing was unable to print all 500 million of the 100,000 rupiah notes on time, even after several extensions had been granted.

21 This part of the conspiracy involved an agreement between Securency, Note Printing and certain individuals, that some of the contractually due penalty (namely, US$72,146.83) would be paid "officially" to the Indonesian bank, and the rest (US$124,461.13) would be paid "unofficially" to foreign bank officials.

22 The benefit was provided to the bank officials in order to resolve the penalty payments dispute, and to obtain and retain the business of supplying polymer banknotes, including the possible future supply of 20,000 rupiah banknotes.

23 The provision of the benefit was facilitated by the Indonesian agent, who made the payments to the Indonesian bank officials. The total benefit of US$124,461.13 was paid by Securency, pursuant to the second part of the Indonesian conspiracy.

24 In 1998, Securency and Note Printing supplied Bank Negara Malaysia with commemorative 50 ringgit polymer banknotes. Thereafter, they were keen to persuade the Malaysian bank to start using polymer banknotes more generally.

25 Between 1 October 2001 and 24 December 2003, Securency and Note Printing conspired with each other, and with certain individuals, including some of their employees and their Malaysian agent, to offer to provide an illegitimate benefit to certain officials in the Malaysian bank, in order to obtain the business of supplying polymer banknotes.

26 At least 5% of the banknote contract price was offered to a very senior official of the Malaysian bank. Other foreign public officials were offered unidentified amounts pursuant to the conspiracy.

27 On 24 December 2003, Note Printing and the Malaysian bank executed a contract to supply 160 million 5 ringgit polymer banknotes ("the Malaysian bank contract"). The total contract price was A$15.2 million. Although Securency was not a party to the Malaysian bank contract, it received A$4.93 million from Note Printing for the substrate used in the banknotes.

28 Total commissions of A$2,198,400 were paid to the Malaysian agent's company.

29 The total benefit offered to the very senior Malaysian bank official was A$760,000, being 5% of the total Malaysian bank contract price.

30 However, the evidence does not establish how much was offered to other foreign officials. Nor does it enable me to be satisfied whether any of the benefits offered were in fact paid.

31 The case against Securency is a rolled up count that between 9 January 2001 and 1 February 2004, Securency conspired with certain individuals, including some of its employees and its Vietnamese agent, to offer to provide an illegitimate benefit to at least one foreign official in the State Bank of Vietnam, in order to obtain or retain the business of supplying polymer for banknotes.

32 The benefit was offered to one very senior official in the Vietnamese bank, as well as other foreign public bank officials. As well as offering money, the benefit included the offer of a funded place at a particular foreign university, to be made available to the son of the very senior bank official. The value of the benefits offered by Securency under the Vietnamese conspiracy is unknown.

33 Between 20 August 2002 and 1 September 2004, Securency executed seven contracts for the supply of polymer banknotes for Vietnamese currency, with a total value of approximately A$76,477,751.

34 However, the evidence does not enable me to be satisfied as to what, if any, benefits were in fact paid.

35 Between 25 February 2000 and 3 May 2002, Note Printing conspired with certain individuals, including its Nepalese agents, to offer to provide an illegitimate benefit to a foreign public official in the Nepal Rastra Bank, in order to obtain or retain the business of supplying polymer banknotes.

36 The offer of a benefit was made by the Nepalese agents to a very senior official at the Nepalese bank, as well as to other unknown bank officials, to obtain and retain the business of supplying polymer banknotes, including a 10 Nepalese rupee note.

37 Initially, the benefit offered included at least A$4 per 1000 banknotes supplied, as an inflated price, although it appears to have been subsequently reduced.

38 On 3 May 2002, Note Printing and the Nepalese bank executed a contract for the supply of 50 million 10 rupee polymer banknotes. The total contract price was A$3,564,000.

39 Total commissions of A$330,043.19 were paid to the Nepalese agents.

40 However, the evidence does not enable me to be satisfied as to what, if any, benefits were in fact paid.

41 As federal offenders, the two companies are to be sentenced in accordance with the Crimes Act 1914, in particular s 16A of that Act.

42 The court is required to impose a sentence that is of a severity appropriate in all the circumstances of the offence. Section 16A(2) contains a non-exhaustive list of the matters which the court is required to consider, including the following:

(b) The degree to which the person has shown contrition for the offence;

(d) The degree to which the person has co-operated with law enforcement agencies in the investigation of the offence or other offences, or in relation to other proceedings;

(e) The need to ensure that the person is adequately punished for the offence;

43 Even though general deterrence and denunciation are not mentioned as relevant factors in s 16A(2), to the extent that they are not inconsistent with the Crimes Act, general common law sentencing principles such as these apply in the sentencing of federal offenders.

44 General deterrence is ordinarily a very important sentencing consideration in cases involving "white collar" crime, including cases involving bribes and secret commissions. Offences concerned with the commercial or public morality of the community are usually hard to detect. They have often been committed by persons who had been regarded as being of good character and reputation. And, because such offenders generally have good prospects of rehabilitation, specific deterrence is often not a very relevant sentencing consideration. In such cases, courts generally place great weight on the need to deter others from engaging in similar conduct.

45 But it does not follow that general deterrence must be the most important sentencing consideration in all such cases. The weight to be afforded to any particular factor in the instinctive synthesis sentencing process must depend on the circumstances of each individual case. Frequently, as here, there are conflicting and contradictory elements which bear upon the sentencing of the offender.

46 These are the first prosecutions brought under the foreign bribery provision. That means that there are no comparable cases, and no sentencing "tariff" in relation to the offence.

47 Although none of the offences could be described as being in the worst category for such offences, they are nevertheless serious examples of the offence:

(a) The conduct was deliberate, sophisticated, carefully orchestrated and concealed;

(b) The conspiracies lasted for substantial periods of time: the Indonesian conspiracy for just over one year; the others for more than 2 years each; and

(c) Similar conduct took place in more than one country.

48 It is not an element of the offence that the offer of a bribe must have been successful. But, if the offer has in fact caused the corruption of a foreign public official, that makes it a more serious example of the offence.

49 The first part of the Indonesian conspiracy involved the payment of substantial bribes (in the order of US$3 million) to senior Indonesian bank officials, in return for which Securency received a substantial financial benefit (of more than A$13 million). The second part of the Indonesian conspiracy also involved the payment of an actual bribe (US$124,461.13). It is not clear whether Securency received any financial benefit in return for this payment.

50 In relation to the Indonesian conspiracy, Securency's role was greater than Note Printing's. Note Printing was only a party to the second part of the Indonesian conspiracy, and it received no further business from the Indonesian bank after its participation in the Indonesian conspiracy. This means that the fine to be imposed on Note Printing should be less than that imposed on Securency for charge 1.

51 The prosecution accepts that there is no direct evidence that the bribes offered in Malaysia, Vietnam and Nepal were in fact paid, or did cause the corruption of any foreign officials. But the prosecution says that the court can infer those matters beyond reasonable doubt from other evidence.

52 The fact that banknote contracts were obtained by Securency and/or Note Printing in those three countries might tend to suggest that money was paid to one or more of the foreign bank officials. However, the evidence relied upon by the prosecution does not exclude, beyond a reasonable doubt, the possibility that the local agents kept for themselves the full amount of the commissions paid.

53 Furthermore, as a matter of law, it is not open to the prosecution to rely on the alleged payment of benefits as an aggravating factor in the Malaysian, Vietnamese and Nepalese conspiracies. The prosecution chose to only charge the companies with conspiring to offer to provide a benefit in those countries (unlike the situation in Indonesia, where the charge involved conspiring to provide a benefit). This court should not have regard to the alleged receipt of an actual benefit by foreign bank officials as an aggravating factor, as the companies are not to be punished for an offence for which they have not been charged or convicted.

54 In some cases involving bribes or secret commissions, the size of the bribe offered or paid may be very important in assessing the objective seriousness of the offence. But some care needs to be taken in that regard when sentencing under the foreign bribery provision. Bribes may be offered to foreign officials in countries of very different wealth; so, a relatively small bribe may still have a very substantial corrupting effect in a poor country. For similar reasons, care must be taken when considering the size of the financial advantage obtained by the offender as a result of offering or paying the bribe.

55 There are so many gaps in the evidence as to the total value of the benefits offered in Malaysia, Vietnam and Nepal, that it is not possible to be confident as to precisely how much was offered, or to which individuals. In all the circumstances, as far as the objective seriousness of the offences is concerned, I would not distinguish between those three countries on the basis of the monetary amounts involved.

56 The prosecution says that the conduct had the potential to bring the reputation of Australia and the Reserve Bank into disrepute, and included the possibility of impeding Australia's capacity to engage in legitimate foreign trade. I agree with the defence that such matters do not form part of the "injury, loss or damage resulting from the offence"; s 16A(2)(e) of the Crimes Act is concerned with actual (not potential) injury, loss or damage. But, the identity of the person acting corruptly (whether the offeror or recipient of the bribe) may be very relevant to the gravity of the offence. For example, where the corrupt person is the holder of a high public office, courts have long recognised that their conduct is particularly serious, because it has the capacity to destroy the integrity or reputation of a public institution.

57 By analogy, the fact that Securency and Note Printing were both subsidiaries of Australia's central bank (which plays an important role in relation to national monetary policy, financial stability and the issuing of banknotes), means that their actions had the capacity to harm the reputation of the Reserve Bank itself, and of broader Australian interests. That does make the offending more serious than if they had been commercial entities with no such connection.

58 Both companies indicated an intention to plead guilty at the earliest opportunity, prior to the committal hearing. The pleas were made with full admissions.

59 Given the nature of the offences, the enormous volume of documentary and other evidence which would have been involved in any trial, and the fact that these would have been the first trials under the foreign bribery provision, the pleas have a very substantial utilitarian value.

60 I also accept that the pleas are indicative of genuine remorse, acceptance of responsibility and a willingness to facilitate the course of justice.

61 The companies are entitled to a substantial discount to reflect those matters.

Co-operation and assistance with investigating authorities

62 The level of discount appropriate for past and future co-operation and assistance will vary depending on the circumstances, including the nature of the offence, and the difficulty, time and expense that would be involved in gathering all necessary evidence for a trial without such assistance.

63 Both of the offenders have provided a very high degree of co-operation and assistance to the Australian Federal Police ("the AFP"), in their investigation of what has been a long-running and complex investigation.

64 In May 2009, the Chairman of the Securency board of directors became aware that The Age newspaper was proposing to publish an article alleging that Securency had been involved in bribing foreign officials. The Securency board contacted the AFP, and asked them to investigate the allegations.

65 Also around this time, Securency approached KPMG about a review of all its policies and procedures in relation to the use of oversees agents. It subsequently engaged KPMG to conduct a detailed forensic examination of communications and payments by the company over a number of years. Securency directed KPMG to provide all the information it obtained to the AFP.

66 The assistance so far provided by Securency and Note Printing to the AFP has been very substantial and includes: providing full and free access to millions of company documents; waiving legal professional privilege over documents relevant to the investigation; facilitating interviews with employees and officers; and providing numerous witness statements to the AFP.

67 The AFP have acknowledged that the assistance provided to them by both companies has been very significant. It would have been extremely difficult, time-consuming and expensive for the AFP to have gathered the information necessary to prepare the conspiracy charges without the assistance of the companies.

68 During the course of the plea hearing, both companies provided written undertakings to provide future assistance, in a form acceptable to the prosecution. The assistance offered includes to search for and provide documents as requested by the AFP or the DPP, and to use all reasonable endeavours to make available employees for the purpose of taking statements or obtaining information. The undertakings have significant value, given the nature and complexity of the conspiracies. Section 21E of the Crimes Act requires the court to specifically quantify the discount it is giving for such future assistance.

Co-operation in the pecuniary penalty proceedings

69 In November 2011, the County Court made pecuniary penalty orders under s 116 of the Proceeds of Crime Act 2002 (Cth), requiring each company to pay a pecuniary penalty to the Commonwealth, reflecting the parties' agreement as to the benefit obtained by the company from the contracts in question.

70 In sentencing the companies, this court may not have regard to the size of the penalties, or even the fact that the pecuniary penalty orders were made.

71 However, the fact that both companies co-operated fully in the penalty process (including by providing detailed financial information to, and promptly agreeing a penalty figure with, the Commonwealth) is a matter which the court can take into account. It is further evidence of contrition, remorse and a willingness to facilitate the administration of justice.

72 In respect of each of the charges, the relevant directing mind and will of the corporate offender, for the fault element of the conspiracy, was that of senior executives. The prosecution case is that the companies engaged in the relevant conduct through "high managerial agents" (within the meaning of s 12.3(6)) of the Code). Although some of the executives held the position of a director, the prosecution accepts that each of the respective boards of directors had no involvement in, or knowledge of, the contravening conduct; in each case, the senior executives misled the board and actively hid their conduct from the board. These were not offences committed under the implicit or explicit direction of the board.

73 None of the senior executives who were involved in the conspiracies is still employed by either of the companies.

74 Securency and Note Printing have both accepted that the systems and procedures which they had in place at the time of offending were inadequate to prevent or detect the offending conduct of their senior executives.

75 Since the offences occurred, both companies have made very substantial improvements to their business and compliance systems, in order to reduce the risk of such behaviour re-occurring.

76 In general terms, they have introduced new risk management frameworks and operating policies and procedures, to ensure compliance with their legal obligations in relation to bribery and corruption. They have also appointed new officers and committees to oversee and monitor compliance, and introduced anti-corruption staff training.

77 They have also stopped using foreign sales agents in export markets; instead, all dealings with prospective or existing export customers are handled directly by their own staff.

78 In all the circumstances, I accept that the need for specific deterrence is very low in this case.

79 Because each offence involved different co-conspirators, and relates to a different country, a different course of dealing, and different periods of time, I consider it appropriate to impose separate fines for each offence, rather than an aggregate fine for each offender.

80 For the reasons mentioned earlier, I regard the Indonesian offence as the most serious, and Securency's culpability in that offence as more serious than Note Printing's. I regard the other offences as being of equivalent seriousness with each other.

81 General deterrence and the need for adequate punishment clearly have an important role to play in sentencing Securency and Note Printing, for what are serious examples of the offence. But so do their early pleas, their very substantial co-operation and assistance with investigating authorities, and the steps they have taken towards preventing similar things from happening in the future.

82 Having regard to all those matters, and to the principles of totality and parity, I sentence the companies as follows.

84 Pursuant to s 21E of the Crimes Act, I declare that but for Securency's undertaking to co-operate in the future, I would (on the basis of a guilty plea) have sentenced Securency to:

85 The parties agree that it is appropriate that I make a declaration pursuant to s 6AAA of the Sentencing Act 1991 (Vic), to specifically indicate the fines I would have imposed had the companies not pleaded guilty.[1] I declare that if Securency had not pleaded guilty (and also not offered future co-operation) I would have sentenced Securency to:

87 Pursuant to s 21E of the Crimes Act, I declare that but for Note Printing's undertaking to co-operate in the future, I would (on the basis of a guilty plea) have sentenced Note Printing to:

88 Pursuant to s 6AAA of the Sentencing Act, I declare that if Note Printing had not pleaded guilty (and also not offered future co-operation) I would have sentenced Note Printing to:

[1] It is not entirely clear whether such a declaration is required in the case of federal offences, although a number of first instance judges in this State have made such declarations.