Australia handed out millions in aid contracts to company accused of bribery
Australia news Australia handed out millions in aid contracts to company accused of bribery
Exclusive: Sinclair Knight Merz, a donor to both Labor and Liberal parties, won contracts worth $489m for Asia-Pacific projects
The Australian government awarded hundreds of millions of dollars in foreign aid contracts to a company that was found to have been systematically bribing high-level Vietnamese officials .
Australian consulting firm Sinclair Knight Merz (SKM), a donor to both the Labor and Liberal parties, was a significant corporate player in the governmentâs foreign aid program for more than a decade, winning 83 contracts worth $489m for projects across the Asia-Pacific.
But Guardian Australia can reveal evidence of widespread corruption by the firm as it operated in one south-east Asian nation and allegations over dealings in another.
In Vietnam, the firm was found to have repeatedly bribed public officials to secure work on three aid projects funded by the World Bank.Australian minister claims foreign aid spending too unpopular to increase Read more
The bribery was found by the World Bank and its integrity arm to be âsophisticatedâ.
The firm masked bribes to public officials using so-called âghost contractsâ or by paying for them to go on âstudy toursâ that never took place.
â[The fir m used] comparably sophisticated means of affecting and covering up the illegitimate payments through the use of third-party agreements, ghost contracts, and fake invoices,â the World Bankâs independent integrity arm said.
Different SKM subsidiaries were used to help mask the bribes and make the payments. A range of staff appeared to have knowledge of the payments.
One staff member gave damning testimony that SKM had made âprovision[s] for illegitimate payments in all of the projects for which [the firm] tendered since 2000â.
SKM is also now facing criminal prosecution in Australia for conspiring to bribe officials in two countries: Vietnam and the Philippines.
Court documents seen by Guardian Australia allege SKM offered bribes to Vietnamese officials between 2006 and November 2011 to secure work on four infrastructure projects, including in Thanh Hoa, Da Nang and the northern mountains. The company is alleged to have offered benefits of $USD880,000 ($AUD1,193,632).
SKM also allegedly 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.
The firm is accused of offering benefits worth about PHP 6,543,578.94 ($AUD165,768.09) to âunknown public officialsâ from the Philippines working on the tender approval process for infrastructure projects. < /p>
There is no evidence SKM directly used Australian taxpayersâ money to bribe foreign officials and there is no suggestion it acted improperly to win aid contracts from the Australian government.
But the case has raised questions about the strength of Australiaâs supposedly âzero toleranceâ approach to foreign bribery and the level of scrutiny applied to Australian corporations that win big through the foreign aid program.
Australian authorities are likely to have known about the bribery allegations since at least 2012, when the firm self-reported to the World Bankâs 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.
Despite this, the government continued to contract SKM on foreign aid projects until the end of 2013, when the firm was bought out by Californian contracting giant Jacobs. The government continues to award contracts to Jacobs on defence-related projects.
In total, the company received 83 contracts worth $489m from Australiaâs aid program between 2000 and 2014, according to government figures. It worked largely on infrastructure-related aid projects, and advisory, consulting and service-oriented contracts relating to a diverse range of topics, including sanitation, energy, and health care on Nauru.
SKM was awarded Australian aid contracts specifically relating to Vietnam in 2008, 2009 and 2011, and the Philippines in 2008 and 2012.
Anti-corruption advocates have long warned against continuing to give government contracts to firms found to have paid bribes to foreign officials.
In 2016, Transparency International urged the government to legislate to bar such companies from govern ment work if they are found to have bribed overseas officials â" an approach taken in Canada and the United States.
An AFP spokeswoman said Jacobs, the company that bought out SKM, had cooperated âat all timesâ during the investigation. Jacobs said the allegations against SKM dated back 18 years and in no way reflected the ethics and practices of its firm.
âThe activities reported to authorities by SKM date as far back as 18 years ago, long before Jacobs acquired SKM in December 2013,â a Jacobs spokeswoman said. âIn no way does that conduct reflect the ethical business standards and practices of Jacobs.â
Instances of fraud or corruption in Australiaâs foreign aid program remain extremely rare, and there is strong, sometimes overbearing scrutiny on the way aid money is spent.
The Department of Foreign Affairs and Trade (DFAT) retains strong auditing and anti-fraud measures to ensure public money is not misused on aid projects. A spokeswoman described those measures as ârobustâ.Influx of refugees from Yemen divides South Korean resort island Read more
âThese include stringent accountability and transparency requirements that DFAT imposes on all implementing partners, including commercial contractors and NGOs,â she said.
âThe department has a zero tolerance policy towards fraud.â
But former AusAID official Marianne Jago, who also worked as a senior legal officer specialising in foreign bribery within the commonwealth Attorney Generalâs Department, suggested there was less scrutiny of Australian companies who use their own money to bribe foreign governments.
âWhere private companies pay bribes to foreign governments to win huge contracts, as we saw in the Wheat Board scandal, governments can feel very conflicted about their obligations,â she told Guardian Australia. âOn the one hand they have signed up to international and domestic law s that criminalise this behaviour. On the other, they really donât want this kind of thing entering the public domain, because then there will be questions about what they knew.â
Aid/Watch, an NGO that scrutinises Australiaâs aid program, said there had been a significant shift to favouring large corporates to deliver foreign aid since 2013.
The groupâs coordinator, Natalie Lowrey, said this corporatisation of aid made it more difficult to ensure accountability. NGOs who deliver government-funded aid are subject to extreme scrutiny, requiring accreditation, solid governance structures, a proven track record, and compliance with strict transparency measures, Lowrey said.
âThere is no accountability for private companies administering aid, whereas, Australian NGOs are strictly accredited,â she said.
A 2011 review of Australiaâs foreign aid program, however, found government had strong fraud controls and oversight of private contractors.
Accountability was achieved through ârigorousâ checks and balances, the review found, including through standard contract fraud control provisions and the governmentâs right to audit their work.
The review also cited examples of very effective aid which had been delivered by both private cont ractors, as well as NGOs and the UN. Jago said different governments have their own take on how aid should be delivered, and tensions have always existed between achieving good outcomes for both developing countries and for Australian companies.
âThose two things can co-exist and the data show sometimes they do co-exist very well. Thereâs no rule about whether itâs the public or private sector who should do aid. Generally good practice is that hybrid can be a really good idea,â she said.
âI think the difficulty is that when brokering and protecting good opportunities for Australian companies working overseas, governments can lose sight of other things they also need to be diligent about.â
Australian National University international development expert, Stephen Howes, said there was no real added risk in having corporations administer Australiaâs foreign aid program. He said fraud remained extremely low and the scrutiny was high.
â Itâs the risk that the aid program worries the most about, even though itâs relatively uncommon,â Howes said.In Australia's historically low aid budget, Pacific gets lion's share Read more
The decision to prosecute SKM was not publicly announced and the cases went unreported when they first appeared in a Sydney court last month.
Guardian Australia has seen documents that confirm that the claims being brought against SKM relate to foreign bribery offences under the commonwealth criminal code. The claims relate to activities in both Vietnam and the Philippines. The case is ongoing.
â¢ This reporting is supported by the Susan McKinnon Foundation through the Guardian Civic Journalism TrustTopics
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