Printer of Bahamian currency subject of price-fixing probe

By LINDSAY THOMPSON lindsay@nasguard.com

The private company that prints Bahamian banknotes, and is gearing up to print new Iraqi currency, is being probed by the U.S. Justice Department.

Shares in De La Rue, the world's largest banknote printer, fell almost 10 per cent last Wednesday, after it was reported that a defendant in a Justice Department probe had alleged that a De La Rue subsidiary that supplies holograms to Visa cards engaged in price fixing.

In a statement, De La Rue said that the individual implicated left the company in 1999, but if the charge was substantiated, the company could lose millions of dollars.

Central Bank Governor Julian Francis said that the decline in shares of De La Rue is not likely to have an impact on the printing of Bahamian banknotes.

He told The Guardian on Monday that there is no long-term contract with the company, and that printing of notes is decided on a job-by-job basis, or the basis of competition between two or three companies.

Bahamian currency is printed approximately once every two or three years, he said.

De La Rue could face a penalty of up to $10 million if found guilty, according to the report. The news was said to be the latest in a series of blows that have combined to halve the De La Rue share price over the past year.

The company reportedly waited until five minutes before the end of UK trading on Wednesday before revealing the probe.

It said it had heard the news only late Wednesday and had put out a statement as soon as possible.

After noting that the individual implicated had left the company in 1999, De La Rue added: "In the event of there being any substance... the penalties could range from 20 per cent of the turnover in the relevant year ($5m in 1997) up to $10 m."

According to the report, the announcement undermined the benefit of news earlier in the week that the company is to lead a consortium to print new Iraqi currency. Although the company has refused to speculate on the value of the contract, brokers are believed to have put a £30m tag on the deal.

The report also noted that analysts heard about the latest twist too late to adjust their profit forecasts, but some argued that it had extinguished the first glimmer of hope for many months.

According to one analyst: "This is situation you see all too often when a limited number of players have a large market share.

"It is a shame. People bought the stock after the Iraqi announcement because they felt the company might have turned the corner after a long run of disappointing news, so they will be particularly upset that this latest piece of news came out so soon."

Another analyst was quoted as saying: "Although the potential impact was small for a company with an annual turnover of more than £500m, the uncertainty of legal action would unsettle investors..."

Caption:Julian Francis, Central Bank Governor

Posted Tuesday 15 July, 2003