National Integrity Spotlight – July 2023

22 August 2023
Cinzia Donald, Partner, Perth (Lavan) Kelly Griffiths, Partner, Melbourne Daniel Maroske, Partner, Brisbane Kathy Merrick, Partner, Sydney

This edition of the National Integrity Spotlight considers the Senate inquiry into consulting services, the latest updates from the National Anti-Corruption Commission (NACC), recent Australian Federal Police operations, the Australian Institute of Criminology report into cybercrime, the Fraud and Corruption Plan issued by the Department of Health, and recent Australian Electoral Commission (AEC) proceedings. We also consider the recent High Court case of King v Jacobs Group, the Perth Mint Select Committee, and Independent Broad-based Anti-corruption Commission’s (IBAC) Operation Sandon.

Inquiry into management and assurance of integrity by consulting services

On 17 and 18 July 2023, the Senate Standing Committee on ‘Finance and Public Administration Inquiry into management and assurance of integrity by consulting services (Consulting services)’ held a further public hearing, following its recent report, ‘PwC: A calculated breach of trust’. The hearings were primarily focussed on other large consulting firms. Amongst other revelations, it was revealed that:

  • of the 121 substantiated internal misconduct complaints made at Deloitte in 2023 at the time of the hearing, only one had been referred to a regulator.
  • EY’s Project Everest, which was a global plan to split the audit and consulting arms of EY’s business, failed earlier this year. EY’s CEO advocated against a forced ‘break up’ of consulting firms, arguing that breaking up firms would not solve issues relating to conflicts of interest.
  • Accenture, which does not operate an audit arm following a company split in 1989, advocated for a common framework for consultancy firms to support the broader industry.

Former chair of the ACCC, Alan Fels, also spoke before the Committee, and stated that the Government had become too dependent on the major consulting firms and recommended legislation to ‘break-up’ auditing and consulting arms of the major consulting firms to prevent further information compromise.

The Committee is due to provide its final report in November 2023.

NACC progress/updates

Update on referrals and assessments

As set out in our previous update, the NACC is off to a roaring start. By close of business on 14 August 2023, the NACC had received 624 referrals with around 13% of the referrals purportedly relating to matters well publicised in the media.

Once a referral is received, the Commissioner considers whether, and if so, how to investigate the issues raised by the referral in accordance with the Commission’s assessment policy. Since 1 July 2023, 282 referrals have been assessed to be outside the jurisdiction of the NACC on the basis that they did not involve a Commonwealth public official (87) or did not raise a corruption issue (195). The NACC has made 239 requests for further information, with 177 referrals in the second stage of assessment and 54 referrals awaiting assessment.

Brereton speech to UN Global Compact Network Australia

On 18 July 2023, the head of the of the NACC, Commissioner Brereton delivered the keynote address at the UN Global Compact Network’s 2023 Australian Dialogue on Bribery and Corruption. The speech provided further insight into Commissioner Brereton’s vision for the body and focused on the implications of the NACC for the corporate and consulting sectors, and legal professionals. Commissioner Brereton suggested that consulting would be of considerable interest to the NACC, particularly given the government’s reliance on external consultants to deliver Commonwealth services.

Recent AFP Operations

Operation Boscobel

Operation Boscobel, launched in 2014, was part of Taskforce Trident, a joint agency taskforce comprising members from Australian Federal Police (AFP), Victoria Police, Australian Border Force, ATO, and AUSTRAC. The taskforce investigated serious organised crime around Victoria’s ports.

The investigation was initiated after AFP received reports of a major security company allegedly making ‘off the books’ cash payments to its workers, leading to tax evasion and exploitation of employees. Taskforce Trident successfully executed search warrants and arrested six men allegedly involved in the tax fraud.

Operation Dolos-EMMA8

In August of 2022, AFP Operation Dolos-EMMA8 was initiated after an Australian bank alerted officers regarding suspicious financial transactions. The investigation revealed that between June 2021 and May 2022, a 23 year old man had allegedly received a total of $176,192 in funds suspected to be derived from criminal activities involving business email compromise frauds. It is further alleged that this individual distributed the funds across multiple accounts and later transferred the money to another individual.

In November 2022, the AFP searched a Footscray residence, seizing electronic devices and a small quantity of illegal drugs. Based on this evidence, the man was arrested on 13 July 2023 and is scheduled to appear in the Melbourne Magistrates Court on 5 October 2023.

AEC updates

Craig Kelly complaint dismissed by Federal Court

The Federal Court has dismissed a complaint made by the AEC against Craig Kelly, the former member for Hughes, alleging that he contravened the Commonwealth Electoral Act 1918 (Cth) (Electoral Act) during the general election held on 21 May 2022.

The Electoral Act provides that there must be a clear authorisation on certain political communications, with the Commonwealth Electoral (Authorisation of Voter Communication) Determination 2021 (Cth) further requiring that the authorisation must be reasonably prominent, and legible at the distance at which the communication is intended to be read.

An authorisation statement in size 8 font was included in Mr Kelly’s advertisement, which the AEC argued was not ‘reasonably prominent’ or legible. The Court found that voters who walked past the authorisation posters could easily have found, and then read, the size 8 font authorisation, if they wanted to ascertain who had authorised the poster. The Federal Court dismissed the complaint and ordered the AEC to pay Mr Kelly’s costs.

Andrew Laming fined $20,000

The AEC commenced proceedings against former MP, Dr Andrew Laming, for Facebook posts published ahead of the 2019 Federal election. It was alleged that the relevant posts were authored by Dr Laming under the guise of someone else, and had failed to adequately disclose political links.

The Federal Court determined that Dr Laming contravened the Electoral Act, finding that the predominate purpose of the posts was self-promotion, and fined Dr Laming $20,000 for three separate breaches. Dr Laming has indicated he will appeal the decision.

Australian Institute of Criminology report on cyber crime

On 27 July 2023, the Australian Institute of Criminology (AIC) released the Cybercrime in Australia report.  The report focuses on cybercrime victimisation and its repercussions, as well as providing a statistical analysis of its impact.

From February to March 2023, 13,887 individuals were enlisted from online panels to partake in a survey, which inquired about their encounters with four categories of cybercrime: online abuse and harassment, malware assaults, identity-related crimes and misuse, and instances of fraud and scams.

One of the key findings of the report was that in the 12 months prior to the survey, 47% of respondents experienced at least one type of cyber cybercrime, with a significant portion being found to be unreported to relevant law enforcement authorities, suggesting that the official statistics significantly underestimate the occurrence of cybercrime.

Department of Health and Aged Care – Fraud and Corruption Control Plan

On 12 July 2023, the Department of Health and Aged Care released its Fraud and Corruption Control Plan 2023–25, outlining its strategy for preventing, detecting, and addressing fraud and corruption.

The plan includes guidelines for personnel and stakeholders to recognise current risks and vulnerabilities, along with techniques to integrate control measures into daily activities. The overview provides details on how the Department intends to deal with prevention, detection, reports, assurance and monitoring. The report highlights key preventive measures to be implemented, for example declaring conflicts of interest and program fraud control.

The King v Jacobs Group (Australia) Pty Ltd formerly known as Sinclair Knight Merz [2023] HCA 23

On 2 August 2023, a significant legal precedent was set by the High Court in the case of The King v Jacobs Group (Australia) Pty Ltd. This case centred on allegations directed at the Australian Jacobs Group concerning their involvement in the bribery of foreign public officials in both the Philippines and Vietnam.

The Jacobs Group admitted their involvement in providing bribes to secure contracts related to philanthropic endeavours funded by either the World Bank or the Asian Development Bank. These contracts amounted to a sum of $10,130,354. Notably, the group also incurred legitimate expenses totalling $7,449,538 to fulfill these contracts.

The central question before the High Court was to interpret the concept of the ‘value of the benefit’ as outlined in Section 70.2(5) of the Criminal Code (Cth), which prescribes the maximum monetary penalty for an offence by a body corporate of bribing, or conspiring to bribe, a foreign public official.

The High Court held that the term ‘value of the benefit’ should encompass the total money received for performance of the contract (the ‘gross benefit’). This decision contradicted the interpretation presented by the New South Wales Court of Criminal Appeal, which defined this term as the ‘net’ benefit (total compensation received minus the legitimate performance costs).

Perth Mint Senate Committee Hearing

On 22 June 2023, the Senate established the Select Committee on the Perth Mint and Commonwealth regulatory compliance (Committee), to inquire into and report on the corporate and regulatory compliance of Gold Corporation and its trading entity, the Perth Mint, with Commonwealth legislation.

On 10 August 2023, the Committee convened to hear evidence from the Australian Transaction Reports and Analysis Centre (AUSTRAC), and AUSTRAC’s investigation into Gold Corporation’s compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).

AUSTRAC had previously provided submissions to the Committee that it considered Gold Corp’s independent auditor’s report from August 2020 identified concerns with the ability of the entity to adequately meet its AML/CTF obligations. AUSTRAC provided a further outline of its dealings with Gold Corporation over the period 2019, 2020 and 2021, that lead to AUSTRAC ordering an independent audit of Gold Corporation’s procedures, including the ‘know your customer’ procedures required by the AML/CTF Act. Various concerns were raised by the Committee in relation to the possibility that Gold Corporation’s processes could be exploited by international money launderers, citing reports of how the Serious Financial Crime Taskforce had previously investigated Gold Corporation and found that it was used by clients of the Euro Pacific Bank (a bank with suspected links to global organised crime syndicates and involved with tax evasion) to purchase gold bullion without conducting identity checks.

The Committee is scheduled to hear from the AFP in relation to the dealings of Gold Corporation, and to provide a final report on their findings on 13 December 2023.

Victorian IBAC Operation Sandon

The Independent Broad-Based Anti-Corruption Commission (IBAC) has tabled a special report to the Victorian Parliament that is considered to expose corruption vulnerabilities in Victoria’s planning decision-making processes.

By way of background, Operation Sandon consider allegations of serious corrupt conduct concerning councillors of Casey Council in Melbourne’s south-east, as well as a developer. The investigation considered whether the Casey councillors accepted undeclared payments, gifts or other benefits, including political donations, in exchange for favourable council outcomes. IBAC’s investigation primarily concerned four planning matters with each matter involving the Casey Council as decision-maker, and two requiring the Minister for Planning to make a determination.

IBAC determined that the evidence demonstrated the acceptance of gifts by the two councillors, in contravention of the standards required of them, including a failure to declare conflicts of interest. The investigation highlighted the following issues:

  • vulnerabilities in planning and council decisions, including in circumstances where councillors with limited expertise in planning permits and amendments were key decision-makers;
  • how political donations may be used to gain access to decision-makers by elevating a donor’s profile, and how seeking donations can compromise an elected MP;
  • integrity risks related to lobbying;
  • findings which revealed that councillors failed to declare conflicts of interest; and
  • that councillor codes of conduct vary unnecessarily between councils, and do not make clear what mechanisms are available to council officers and the public to raise concerns about councillor conduct.

The IBAC is recommending reforms to address the corruption risks identified in Operation Sandon, including:

  • the establishment of an Implementation Inter-departmental Taskforce to be chaired by the Department of Premier and Cabinet;
  • that the Minister for Local Government develop and maintain a Model Councillor Code of Conduct;
  • an amendment to the Local Government Act 2020 to specify that councils must adopt the Model Councillor Code of Conduct; and
  • the Minister for Local Government to amend relevant legislation to promote greater consistency and independent oversight of recruitment and employment of council CEOs.

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Authored by:

Cinzia Donald, Partner
Daniel Maroske, Partner
Kathy Merrick, Partner
Kelly Griffiths, Partner
Angela Szczepanski, Director
Anna Fanelli, Senior Associate
Sarah Maneckshana, Associate
Emma Bolton, Solicitor
Jethro Schoeman, Solicitor
Sian Hur, Solicitor
Sophia Liu, Lawyer
Stefani Giangregorio, Lawyer
Anastasia Tyshing, Paralegal

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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