FOI documents show government was advised to withhold details unless claims about Sinclair Knight Merz became public

This article is more than 1 year old

This article is more than 1 year old

Australian ministers knew one of the government’s biggest foreign aid contractors was mired in allegations of widespread corruption but withheld the information from the public and continued giving the company work, internal documents show.

Earlier this year, Guardian Australia revealed evidence that Australian firm Sinclair Knight Merz had repeatedly bribed government officials in Vietnam and the Philippines to secure work on aid projects funded by the World Bank and Asian Development Bank.

The firm allegedly offered bribes to Vietnamese officials between 2006 and November 2011 to access work on four infrastructure projects, and conspired to bribe officials on five separate projects in the Philippines between 2000 and mid-2005, including sewage, river rehabilitation, and air quality projects in Manila, and an urban services project on Mindanao.

Quick guide Sinclair Knight Merz timeline Show Hide 2000-05 According to court documents, Sinclair-Knight Merz employees allegedly bribe officials in the Philippines to gain contracts on a number of World Bank and Asian Development Bank-funded projects between 2000 and 2005

2006-11 According to court documents and a World Bank investigation, Sinclair Knight Merz employees allegedly bribe Vietnamese government officials between 2006 and 2011 to obtain work on a number of World Bank-funded infrastructure projects 2012 Sinclair Knight Merz self-reports corruption allegations to the World Bank. The allegations are investigated by the World Bank’s integrity unit, INT July 2013 The Australian federal police launch an investigation into bribery allegations 24 July 2013 World Bank announces a conditional sanctions agreement with Sinclair Knight Merz, following the company’s self-reporting to the World Bank. The company remains able to bid on World Bank contracts, provided a number of governance and compliance conditions are met by the company 9 September 2013 Jacobs Engineering Group announces merger with Sinclair Knight Merz. Sinclair Knight Merz is maintained as a registered business name in Australia 26 January 2018 The World Bank issues a sanctions decision regarding two individuals allegedly involved with bribery incidents in Vietnam 11 May 2018 Jacobs Group and a number of former executives are issued with a court attendance notice for Australia

Documents obtained by Guardian Australia under freedom of information laws now reveal the extent of the Australian government’s knowledge of SKM bribery allegations.

The then Labor government was briefed on the corruption probe in August 2012. SKM continued to be awarded foreign aid contracts by the Australian government after the briefing.

An unnamed minister received a confidential briefing on the SKM case marked “only to be used if the issue becomes public”.

The briefing then provided guidance on what should be said about the case, namely that the minister was aware of the SKM corruption probe, but that no Australian aid money was thought to be involved.

The minister was also told that SKM’s chief executive, Santo Rizzuto, had phoned a senior executive in AusAID, the former Australian government aid agency, on 30 August 2012. During the phone call, Rizzuto is said to have told the government his company had detected suspicious payments made over a number of years. The minister was told Rizzuto had said that:

“They have found a number of suspicious transactions/questionable payments stretching back over a number of years.

“The questionable payments relate to payments though [sic] agents that SKM has used in both Vietnam and the Philippines. The sum involved could be in the order of $AUD1 million.”

“They [SKM] have undertaken detailed investigations and they are confident that no AusAID funds are involved. They are also confident that there are no similar issues with any AusAID-funded projects they are delivering now or have delivered in the past.”

SKM continued to receive foreign aid work from the federal government even after Australia was made aware of the bribery allegations.

The documents show that AusAID, the former Australian government aid agency, could see no reason not to keep working with SKM.

A departmental minute, prepared for senior AusAID officials in late July 2013, recommended that AusAID not terminate its contracts with SKM or bar it from bidding for more foreign aid work, despite the bribery probe.

It reported that SKM had managed to avoid being barred from future work by the World Bank, on the condition that it improve its integrity compliance systems.

“As SKM has not been debarred by the [World Bank], AusAID has no grounds to terminate our agreements with SKM or prevent SKM from tendering for AusAID contracts,” the minute said.

“However, if SKM breach the conditions of their agreement and are debarred, AusAID would immediately review its relationship. Also, if other new information comes to light – for example from the [Australian federal police] investigation or from the [Asian Development Bank] – AusAID would review the situation.”

“We recommend the chief operating officer write to SKM advising we will review our relationship if new adverse information comes to light.”

Australia is supposed to have a zero-tolerance approach to foreign bribery. Transparency International has previously called for the federal government to automatically bar companies from government work if they are found to have engaged in bribery.

SKM was bought out by Californian contracting giant Jacobs in late 2013. It self-reported the bribery to the World Bank’s integrity arm, which has a formal information sharing agreement with the federal government.

The Australian federal police (AFP) began investigating the allegations in July 2013. The company was subsequently charged with foreign bribery offences.

The Department of Foreign Affairs and Trade said it could not comment on the individual case, for risk of compromising investigations or legal proceedings. The department said it had zero tolerance for any fraud or corruption, including bribery.

“Any allegation of fraudulent or corrupt activity is taken seriously,” a spokeswoman said. “Where fraud or corruption is suspected or alleged, the department investigates and, where substantiated, seeks recovery of funds and the application of appropriate penalties, including prosecution of offenders.”

The department noted that SKM had self-reported the foreign bribery concerns in 2012. It had also commenced an independent inquiry and reported itself to the World Bank, the federal police, and the Asian Development Bank.

“There is no evidence that any DFAT funds or activities were involved.”