National Integrity Spotlight – May 2023

This edition of the National Integrity Spotlight considers an investigation into foreign bribery conducted by the AFP, developments in the AAT, recently released statistics relating to fraud against the Commonwealth, guidance from the Australian Government on ‘insider threats’, Commonwealth PID reform, the introduction of the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023 and potential referrals to the NACC ahead of its commencement on 1 July 2023.

Operation Blare

The Australian Federal Police (AFP) recently released details of Operation Blare, the second prosecution of foreign bribery in Australian history. Operation Blare focused on the investigation into the directors of an Australian construction company for foreign bribery offences. Unlike the majority of financial crimes investigated by the AFP, which tend to be historic in nature and follow the event, Operation Blare was a live investigation.

The investigation involved persons linked to a company specialising in engineering, infrastructure and construction projects in Australia and overseas, who were proposing to expand operations to Iraq. Assistance liaising with the Iraqi government was offered, with an indication that there would be a requirement to pay a bribe.

The investigation began after AFP investigators detected a suspicious US $1 million transfer to Iraq, intended as a payment to a foreign public official in return for preferential treatment during a tender process. The AFP intercepted telephone calls and conducted surveillance. Following the payment, arrests were made relating to charges for conspiracy to bribe a foreign public official. In 2017, three individuals were convicted by the NSW Supreme Court of conspiracy to bribe an Iraqi official and sentenced to four years jail with a non-parole period of two years. Fines of $250,000 each were also imposed.

Australia has strong laws to prevent corrupt activity involving Australians overseas. Foreign bribery offences carry penalties of up to 10 years imprisonment and fines of up to $2.1 million for individuals and $21 million for corporations.

Administrative Appeal Tribunal updates

As we have previously covered, a new federal administrative review body will replace the Administrative Appeals Tribunal (AAT) with the aim of enhancing efficiency, accessibility, independence, and fairness.  Although a date has not been set for the implementation to take effect, a review process is underway, and recent appointments have been made to the AAT to strengthen the tribunal in the meantime.

On 8 June 2023, the Honourable Justice Emilios Kyrou AO was appointed as both a Judge of the Federal Court of Australia and President of the AAT. Justice Kyrou will lead the AAT during the reform process and subsequently serve as the inaugural President of the new federal administrative review body. In addition, the Honourable Justice Lisa Hespe and the Honourable Justice Geoffrey Kennett were appointed as Deputy Presidents, with 34 members reappointed until 22 December 2023.

Australian Institute of Criminology Statistics

The Australian Institute of Criminology has this month released statistics regarding fraud committed against the Commonwealth in the 2021-2022 financial year. Fraud against Australian Government entities is a serious matter, as it reduces funds available for public goods and services. In the 2021-22 financial year, the estimated cost of such fraud was $201.2 million.

A total of 80,184 allegations of fraud were received or detected by Commonwealth entities, with 17% relating to internal fraud committed within an organisation. The vast majority of instances of fraud (83%) related to fraud committed by someone outside of an organisation.

Of the 17 fraud cases that were accepted by the AFP, the estimated value was $115,126. This represents a significant decrease from the 2020-21 financial year (which had the same number of referrals), with an estimated value of $577,000.

A-G releases guide for Australian Government on ‘Countering the Insider Threat’

On 19 May 2023, the Australian Government published Countering the Insider Threat – A guide for Australian Government.  The publication provides an overview of how entities can understand, identify and prevent insider threats. It is a useful guide for Australian Government entities and for organisations who work closely with those government entities.

The guide profiles the different categories of insiders, discusses their motivations and methods and the red flags to watch out for. It also includes analysis of the types of insider acts and their impacts and Part 3 deals with countermeasures and prevention. The principles set out in the guide will have application in a wide range of businesses and particularly those that need to bolster or review their anti-corruption and anti-bribery policies.

Commonwealth Public Interest Disclosure Reform

On 19 June 2023, the Public Interest Disclosure Amendment (Review) Act 2023 (Cth) was passed, implementing 21 of the 33 recommendations of the 2016 Review of the Public Interest Disclosure Act conducted by Mr Philip Moss AM. (PID)

Key amendments include:

1. improving protections for public sector whistleblowers and witnesses by expanding the immunities and scope of the PID scheme to those who are permitted to make a disclosure;
2. increasing the oversight that the Commonwealth Ombudsman and the Inspector-General of Intelligence and Security has over the PID scheme;
3. narrowing the focus to serious integrity wrongdoing; and
4. simplifying the PID scheme for administration by agencies.

Consultation into further reform has been proposed by Attorney-General Mark Dreyfus.

Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023

On 22 June 2023, the Crimes Legislation Amendment (Combatting Foreign Bribery) Bill 2023 was introduced in the House of Representatives. Amongst other matters, the Bill creates a new offence for corporations that fail to prevent instances of foreign bribery, with a maximum penalty of $27.5 million. This application of this offence will see companies held liable for the actions of their employees, agents, contractors, and subsidiaries, unless a statutory defence is triggered and it can be shown that the company had adequate protective measures in place to prevent the conduct.

Potential NACC Referrals

With the National Anti-Corruption Commission (NACC) set to commence operations on 1 July 2023, speculation has commenced regarding the first potential referrals to the NACC. Having regard to the remit of the NACC, possible initial referrals include the PwC tax scandal, former cabinet minister Stuart Robert, the Brittany Higgins settlement, and referrals from the Royal Commission into the Robodebt Scheme.

PwC

The PwC tax scandal, which has received extensive news coverage over recent months, may be an early referral to the NACC given the allegations that senior partners misused confidential information obtained through their work with the Australian government to assist multinational companies to reduce their tax burden. It has been reported that PwC is conducting an internal investigation, and that the Australian Federal Police are conducting a criminal investigation.

On 21 June 2023, the Senate Finance and Public Administration References Committee released its report entitled ‘PwC: A calculated breach of trust’. The report details the practices engaged in by PwC, with the committee stating that PwC’s inclination to “aggressively monetise confidential Commonwealth information demonstrates no regard for the public interest and the efforts of the then government to prevent multinationals from … paying their fair share of tax in Australia” and that “it is clear that the desire for personal gain trumped any obligations that PwC had to the Commonwealth of Australia and its citizens.” The committee set out two recommendations, being that PwC cooperate fully with all future investigations and inquiries, and that PwC publish accurate and detailed information about the involvement of personnel, including the names of those involved.

Stuart Robert

Former cabinet minister Stuart Robert has been referenced as a possible NACC referral following allegations regarding his possible involvement in facilitating lucrative deals for consultants with federal agencies. The NACC would not be prevented from investigating the conduct of Mr Robert, despite his departure from politics, given the retrospective powers of the NACC.

The potential use of the NACC’s special investigative powers to examine Mr Robert’s conduct has been supported by Former NSW Supreme Court Judge Anthony Whealy, KC, who stated the powers should be used to “resolve suggestions of abuse of power to advance Robert’s personal interests,” and Former Victorian Court of Appeal judge Stephen Charles, KC, who stated that “the public reports raise allegations about Mr Robert’s conduct as a minister that would clearly justify an investigation by the NACC.”

Brittany Higgins

Opposition leader Peter Dutton has indicated that he supports the referral of Brittany Higgins’ settlement payout from the federal government to the NACC. Mr Dutton and Liberal Senator Linda Reynolds have raised questions about transparency and fairness leading to the settlement. Attorney-General Mark Dreyfus has referred to the settlement as being “an entirely regular decision” made in accordance with legal directions.

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Authored by:
Cinzia Lee Donald, Partner (Lavan)
Kathy Merrick, Partner
Kelly Griffiths, Partner
Daniel Maroske, Director
Anna Fanelli, Senior Associate
Kasia Jaruzelska, Associate
Stefani Giangregorio, Lawyer
Anastasia Tyshing, Paralegal