AFP failed to look into BHP bribery claims
Federal police made a "critical decision" not to investigate criminal allegations that Australians working for BHP Billiton had bribed officials in Cambodia, China and Western Australia and instead handball the case to the corporate regulator, which also ran no inquiry.
Confidential documents reveal how the AFP and Australian Securities & Investments Commission, with the knowledge of federal government officials, mishandled one of the nation's highest profile corporate graft cases after it was referred in May 2010 by US officials to their Australian counterparts.
US anti-corruption investigators have been investigating BHP-Billiton since 2009 - part of a continuing inquiry likely to result in BHP-Billiton receiving a huge fine - but had also told the federal police that the bribery allegations were "a matter for Australian authorities".
A source close to the US investigation called the AFP's initial decision not to take up the inquiry "inexplicable" given BHP Billiton has its headquarters in Melbourne and the firm has allegedly broken Australian criminal laws.
It was only recently that a self-initiated internal review led the AFP to re-open the bribery file and initiate a formal investigation.
The AFP declined to state why it had closed its file on BHP in late 2011, 16 months after the case was first referred to it, without conducting its own investigation. But it said in a statement it had initially assessed the matter "with the knowledge that United States authorities were investigating the matter."
The AFP said that in February, after further discussions with US investigators, it began its own inquiry into "Australian nationals identified during the US investigation".
Documents released to Fairfax Media under freedom of information laws reveal that in May 2010, Australian authorities were told that US investigators had found evidence that BHP Billiton was allegedly "paying bribes to foreign public officials". Such conduct would breach criminal laws passed in Australia in 1999.
It is understood US officials also identified a public official in Western Australia as having received potentially illegal inducements from BHP Billiton, although this is redacted in the FOI documents and the AFP stated to Fairfax Media that it could not comment on the local allegations as they "form part of the ongoing investigation".
The FOI files reveal that after the 2010 referral, the federal police spent 12 months "evaluating" possible "bribery offences or corporations law offences" without conducting any independent investigations although that included discussions with US authorities.
In May 2011, the AFP handballed the case to ASIC, a move facilitated by an unnamed senior official from the Attorney-General's Department financial crimes division.
"It was recommended by [the AFP] ... that [ASIC] take the lead role in Australian inquiries in the matter," an AFP executive briefing note from 2011 states.
"Should any criminal offences be identified by [ASIC] during their inquiries the matter shall be referred [back] to the AFP."
ASIC has no jurisdiction to investigate bribery but can investigate related corporate offences. It also conducted no in-depth investigations. According to the FOI files, "on 23 September 2011, the matter was formally rejected [for investigation] by the AFP".
BHP Billiton's aborted attempt to establish a bauxite mine in Cambodia and its hospitality program for Chinese officials at the 2008 Beijing Olympics is among the conduct being examined by the federal police.
According to diplomatic cables previously published by Fairfax Media, the Cambodian deal was personally overseen by Prime Minister and strong man Hun Sen.
The handwritten notes of a senior AFP investigator, released in the FOI files, reveal that the AFP had also identified the role of Australian officials in the deal.
"It should be noted that this matter does include senior Australian government representation as a result of BHP Billiton negotiations" the handwritten AFP file note states.
Allegations involving a West Australian public official are likely to be investigated by WA authorities because they involve state offences.
The documents reveal that instead of conducting its own investigations in 2010 and 2011, the AFP relied on teleconference briefings from the US Securities and Exchange Commission and Justice Department.
"It was anticipated that this [teleconference briefings] would enable the AFP to obtain sufficient information on which to conduct an evaluation and determine if the matter was in the jurisdiction of the AFP," an executive brief dated March 2011 states.
Three months later, an executive brief dated June 2011 reveals that the federal police "received a quantity of documents from BHP and the Attorney-General's Department in relation to the matter" and which were marked by BHP Billiton as commercially sensitive.
This appears to have further stalled the handing of the case by Australian authorities.
"Documents provided directly to the AFP contained a caveat from BHP requesting confidentiality due to commercial sensitivity," the June 2011 executive brief states.
"AFP Legal were not able to provide definitive advice in relation to disclosure. After several failed attempts to obtain appropriate advice in a timely manner, a decision was made to return the documents to the AGD [Attorney-General's department] and request disclosure by them directly" to ASIC.
In a statement, the AFP said it continued to improve the way it interacted with other agencies, including ASIC. The corporate regulator has been criticised in the past for failing to investigate serious corporate offences referred to it by the AFP investigators who charged two Reserve Bank firms, Note Printing Australia and Securency, with foreign bribery in 2011.
The move by the AFP to allow the matter to be referred to ASIC for investigation in May 2011 is described in a February federal police document as a "critical decision" but one "deemed to be consistent" with the investigative approach taken in the US. ASIC refused to answer questions about why it failed to investigate BHP Billiton.
The February federal police briefing that reveals an investigation had been finally launched states: "It is anticipated this investigation will require two to three members for three to six months to fully evaluate the matter and then, depending on the proposed course of action, require two to six members for a further three to six months."