Bribery Plot Reveals Dark Underside of Mysterious Money-Printing Industry

By Kit Chellel and Alexander Weber Oct 27, 2014 6:00 PM ET

One day in December 2005, a few hours before dawn, employees of the Austrian central bank, dressed in blue overalls, began stacking about 30 million bank notes onto wooden pallets. They loaded the manat bills, the currency of Azerbaijan, into 38-ton trucks, according to people familiar with the shipment. Escorted by police in unmarked BMWs, the convoy rumbled past Vienna’s centuries-old churches and Habsburg palaces, crossed the Slovakian border and arrived at Bratislava Airport. There, the shrink-wrapped pallets were loaded onto a plane destined for Baku, Azerbaijan’s capital on the shores of the Caspian Sea.

It looked like any other transaction in the international money-printing market, where bills are bought and sold amid tight security, Bloomberg Markets magazine reports in its December issue. In fact, Austrian prosecutors say, the sale was part of a corrupt bargain between officials at the Austrian central bank and their Azerbaijani counterparts.

Prosecutors put nine people on trial earlier this year, with charges including bribery and money laundering. The defendants included the co–chief executive officers of Oesterreichische Banknoten-und Sicherheitsdruck GmbH, or OeBS, the printing subsidiary of Oesterreichische Nationalbank, Austria’s central bank.

Wolfgang Duchatczek, former chairman of the printing subsidiary of Austria's central... Read More

Austrian prosecutors said the central bank employees jacked up the price of the currency so the surplus could be used for bribes. A total of 14 million euros ($18 million) was paid through offshore accounts to officials at Azerbaijan’s and, later, Syria’s central banks to win printing contracts, prosecutors say.

Two Acquitted

On Oct. 3, seven of the defendants were convicted in Vienna’s criminal court. Two of the accused, including the former chairman of OeBS and ex–deputy governor of the bank, Wolfgang Duchatczek, were acquitted. By the time of the verdict, the former co-CEOs of the printing firm, Michael Wolf and Johannes Miller, had already pleaded guilty.

The Austrian case affords a rare glimpse inside an industry shrouded in secrecy and mystique. Currency scandals have blown up periodically since the Lydians first minted coins in about 650 B.C. In 1278, an Englishman named Philip de Cambio was convicted of adding more than the legal amount of copper to pound coins; he was hanged and dismembered.

In the 1920s, a Portuguese scam artist, Artur Virgilio Alves Reis, persuaded a British currency-printing firm that he was an envoy from Banco de Portugal, and the company printed and delivered to him several million Portuguese escudos before the fraud was discovered, according to “Moneymakers: The Secret World of Banknote Printing,” by German journalist Klaus W. Bender.

Michael Wolf, former co-CEO of the Austrian central bank's printing subsidiary,... Read More

Tons of Money

Today, the business of printing bank notes is a large and highly technical enterprise. Government agencies and their private contractors produce 165,000 tons of currency annually, and the bills must be adorned with holograms, special inks and raised print so they are as difficult as possible to counterfeit.

The job is beyond the capacity of many countries, so about half of the world’s bank notes are produced by private companies. Three dominate the market, accounting for about 60 percent of sales: Basingstoke, England–based De La Rue Plc, the company that prints the British pound; Germany’s Giesecke & Devrient GmbH; and France’s Arjowiggins SAS, according to a 2011 report by California-based consulting firm Impacts.Ca. The industry was worth about $1.3 billion in 2011.