The former senior West Australian public servant at the centre of an alleged rorting scandal in Tokyo has agreed to pay the state back $540,000, Premier Mark McGowan has told State Parliament.

Key points: The Corruption watchdog claimed Craig Peacock used his role to enrich himself

The Corruption watchdog claimed Craig Peacock used his role to enrich himself Japanese massages, a drink-driving charge and tax evasion were among his alleged rorts

Japanese massages, a drink-driving charge and tax evasion were among his alleged rorts The settlement does not stop the WA Government from pursuing further action

A Corruption and Crime Commission (CCC) report released in March claimed corrupt behaviour by the state's former trade commissioner in Japan, Craig Peacock, over more than a decade had cost taxpayers more than half a million dollars.

It claimed he used his role to enrich himself, benefit his friends and to cover up a drink-driving accident in a state-leased car which landed him in a police cell.

The report claimed that in 2015, Mr Peacock used state resources to arrange for two Legislative Council members, Phillip Edman and Brian Ellis, to have $700 massages at a Japanese bathhouse known as a "soapland".

A governance audit of the management of the Tokyo office is currently being undertaken. ( ABC News: Jake Sturmer )

Text messages obtained by the CCC as part of its investigation showed Mr Edman said to Mr Peacock that he wanted to go to a geisha bar and that "the boys are sexually frustrates [sic]".

He later stated in the text messages:

"Never had a Japanese honey before"

and

"Your [sic] our best trade commissioner".

Tax evasion, false documents among alleged rorts

Mr McGowan told a budget estimates hearing the alleged rorting of allowances by Mr Peacock included falsifying official documents, misappropriating expenses, tax evasion and double dipping.

Mr McGowan said the state solicitor had begun recovery proceedings against Mr Peacock, including freezing his assets in Australia and Japan, and the funds would be recovered.

Craig Peacock was accused by the CCC of acting corruptly, costing WA taxpayers $540,000 in the process. ( Supplied )

"I can inform the house that the state solicitor has reached an out of court settlement with Mr Peacock," he said.

"He has agreed to pay $540,000 in reimbursement back to the State of Western Australia."

"And this does not stop the state of Western Australia from pursuing further action against Mr Peacock if investigations uncover any additional allegations of financial wrongdoing."

Mr Peacock will have to put the money into an account nominated by the state solicitor.

Overseas offices under audit

KPMG was conducting a governance audit of the management of the Tokyo office during the years of alleged rorting, between 2008–17, and the firm would also audit all eight of the state's overseas offices.

Mr McGowan told budget estimates a governance and reporting branch had been created within the Department of Jobs, Tourism, Science and Innovation.

He said the Department of Premier and Cabinet had introduced a "comprehensive governance framework" and it undertook periodic data matching to identify potential fraud.

WA Police Commissioner Chris Dawson has said police would look at whether there were any avenues for a criminal investigation.

Police Commissioner Chris Dawson said police were investigating if Mr Peacock could be prosecuted. ( ABC News: Eliza Laschon )

Administration of the Tokyo Office was the responsibility of the Department of the Premier and Cabinet, before changes to the machinery of Government in 2017 transferred the office to the Department of Jobs, Tourism, Science and Innovation.

It was at that point the serious misconduct was first noticed by a department employee.

The matter was then referred to the CCC.

Mr Peacock was sacked in February.