Millions of dollars in detention money went to Pacific politicians

A months-long investigation into the failures of Home Affairs, exposing deep flaws in the operation of Australia’s gatekeepers.See all 15 stories.

Australia’s Home Affairs Department oversaw the payment of millions of taxpayer dollars to powerful Pacific Island politicians through a chain of suspect contracts as it sought to maintain controversial offshore asylum seeker processing centres.

Financial data, internal emails and whistleblower testimony implicate Home Affairs’ lead contractors – Broadspectrum, Canstruct and Paladin – in suspected systemic misuse of taxpayer dollars in Nauru and Papua New Guinea.

The Australian Federal Police and financial crime agency Austrac have spent months probing the payments. But no charges have been laid, and sources aware of both agencies’ work, speaking anonymously to detail confidential investigations, said the National Anti-Corruption Commission or a commission of inquiry was needed to examine a money trail that spans 10 years and several governments.

Home Truths, an investigation series by The Age, The Sydney Morning Herald and 60 Minutes, can reveal that, on Nauru, a money trail that began in Home Affairs ended with multimillion-dollar payments to businesses controlled by powerful politicians and suspected kickbacks to the island’s political kingmaker, David Adeang.

Internal company emails also reveal that some taxpayer-funded services were tainted by overcharging, raising concerns among senior employees of Home Affairs’ then lead contractor, Broadspectrum.

Queensland-based family company Canstruct, which was paid $1.82 billion over five years to run the Nauru centre after Broadspectrum pulled out, confirmed that one arrangement – to pay millions to a company linked to Nauru’s then president to deliver water – had the backing of Home Affairs.

On Manus Island, Australia’s other offshore detention centre, a former director of contractor Paladin has separately alleged that millions of dollars were paid to Papua New Guinea officials via a bank account in Singapore to obtain visas and work permits for Paladin employees. Former director Ian Stewart said that when executives flagged corruption concerns with Home Affairs, they were told to avoid putting them in writing.

“It’s inconvenient to have a report like this out there, and no one wants the inconvenience of it,” Stewart said.

The revelations come as part of the Home Truths series, which has found evidence that Australia’s Home Affairs Department has failed to prevent criminal infiltration of Australia or the misuse of visas, or to manage the multibillion-dollar offshore processing system.

Home Affairs Minister Clare O’Neil said: “These allegations are extremely serious and ought to be investigated by the appropriate authorities. I encourage anyone with evidence of wrongdoing or corruption to share it.”

The Home Affairs Department defended its handling of offshore processing contracts, saying it “has a robust contract management framework ... which has matured over the past decade”. Any allegations should be referred to the Australian Federal Police or the National Anti-Corruption Commission, it said.

The commission has the power to investigate government contractors. This masthead is not suggesting that the payments were bribes, which is ultimately something that can only be proven by a court or the corruption watchdog. Rather, it is stating that the deals raise integrity concerns that warrant significant scrutiny.

But Transparency International’s Australian chief executive, Clancy Moore, said it should have been “blatantly obvious” to the government and Home Affairs officials throughout the operation of the offshore detention program that Nauru and PNG were corruption-prone jurisdictions. “The government’s own advice would’ve been to proceed with extreme caution,” he said.

Most of the suspect payments occurred while Home Affairs and its predecessor, the Department of Immigration and Border Protection, were overseen by the Coalition and long-time minister Peter Dutton, but some also happened on Labor’s watch.

The revelations pose a political challenge for the Albanese government, which has campaigned hard on integrity and has sought to position Australia as an honest broker in the face of China’s tactics of using financial inducements among Pacific Island leaders to win influence.

On top of revelations in recent days of failings within Home Affairs that have allowed organised criminals to rort Australia’s visa and migration system, the scandal also raises questions for departmental secretary Michael Pezzullo, who has led Home Affairs and its predecessor, the Department of Immigration and Border Protection, since 2014.

Lionel’s water truck

In late 2012, the Labor government reopened the Nauru and Manus offshore processing camps after a four-year hiatus, putting the immigration department in charge of implementation. The department paid private companies to run the camps.

However, contracts released under the Freedom of Information Act indicate Home Affairs, and the Department of Immigration and Border Protection before it, maintained strict control over those companies. The contracts said Broadspectrum, Canstruct and Paladin “must not enter into a subcontract without the prior written approval of the department” if the total fees from it were $50,000 or more.

Contractors and the department were also reliant on key local politicians and officials, who had control over visas, work permits and legislation that included requirements to use local contractors.

Nauru politician David Adeang.Credit: Nine

When the Nauru centre was reopened, Australian authorities already knew key Nauruan officials were suspected of being corrupt. Australian Federal Police and intelligence services had gathered information as early as 2010 that Nauru’s justice minister and political kingmaker, David Adeang, had received suspect payments from an Australian phosphate mining company, Getax.

Getax has been charged with conspiracy to bribe a public official. Adeang has previously called bribery allegations “baseless” and said they have been “consistently disproven”. He has never been charged.

Documents released under freedom of information show that the department was aware of the bribery allegations involving Adeang, who exercised significant control over offshore processing on Nauru as justice minister and a member of his government’s offshore processing working group.

Two other key Nauruans also exercised influence over offshore processing and were working group members: the secretary of the justice and border security department, Lionel Aingimea, and a public servant, Mr X, who later became a politician, who The Age, The Herald and 60 Minutes are not naming for legal reasons.

In 2018, the working group pressured the Australian government to replace Home Affairs’ contractors with Nauruan service providers. In October 2018, Adeang told the Nauru parliament how “the government of Nauru has been negotiating with the government of Australia to take over the commercial operations and services currently provided ... to the regional processing centres”.

Lionel Aingimea

The pressure on Home Affairs and its Australian lead contractors to use Nauruan subcontractors was frequent and longstanding. Leaked emails from within Home Affairs contractor Broadspectrum reveal that in his capacity as Nauru’s justice department secretary in 2015, Aingimea warned Broadspectrum’s import licence would be revoked “to enable to [Nauruan] government SOEs [state-owned enterprises] to have a bigger place in RPC [regional processing centre] supplies”.

The Home Truths investigation has seen banking records that reveal Adeang received more than $120,000 in suspect payments from offshore processing subcontractors hired by Broadspectrum and Canstruct with the approval of Home Affairs. This masthead is not suggesting these payments were bribes, only that they should be scrutinised.

Home Truths has also confirmed that companies controlled by both Aingimea and Mr X were paid sums totalling several million dollars by the Australian government to provide services to the offshore processing regime.

In Aingimea’s case, the payments to his private company commenced in early 2016. Leaked internal emails from Broadspectrum describe how “Lionel [Aingimea] approached the ops manager recently informing that he had a water truck 8000-litre available for Broadspectrum use”. Nauru has little naturally occurring water and relies on desalination, rainwater and minimal supplies of groundwater, which must be trucked around the island.

Another internal email chain describes how Broadspectrum employees began discussing “Lionel’s water truck” and the “need to get it on the books”, even though Broadspectrum was already paying another company to carry water. Broadspectrum decided it would hire Aingimea as “an alternative back-up service” and said it would assist in keeping up with the required water service delivery.

“The intention is to use both Lionel (new vendor) and the existing … service when required,” one email states.

The decision triggered alarm bells inside Broadspectrum, with a manager querying whether hiring a high-ranking Nauruan official was “in accordance with our code of business conduct”. The code “strictly prohibits improper financial or other advantages, such as bribes and kickbacks, intended to induce or reward favourable commercial and governmental decisions”.

Such concerns were ignored, according to other Broadspectrum emails. By March 2016, Aingimea had struck a deal with Broadspectrum: it would pay the company linked to him, LRC Car Rental and Construction, an estimated $500,000 a year.

Even after Aingimea was elected to parliament and appointed assistant justice minister under Adeang in July 2016, Broadspectrum emails reveal Australian taxpayers’ money continued to flow to LRC.

This masthead is not suggesting LRC did not provide the services required under the agreement, only that the agreement should have raised serious conflict of interest concerns and been declared given Aingimea’s position and influence over offshore processing.

Detailed questions were sent to Aingimea and Adeang. Neither responded.

Our subcontractor is the president

Broadspectrum was sold to a Spanish company in 2017 and pulled out of Nauru and Manus under pressure from international human rights organisations. Queensland family-owned company Canstruct replaced it as the lead contractor on Nauru. The payments to the Aingimea-linked company continued.

In August 2019, Aingimea was elected Nauru’s president, becoming the most powerful man on the island. By then, the number of asylum seekers on the island was plummeting. In May 2016, Australia held 1193 asylum seekers on Nauru, a number that steadily decreased to 107 in August 2021.

Even so, the Department of Immigration and Border Protection, followed by Home Affairs, kept paying LRC the same fees to truck water.

Financial records reveal that, between March 2016 and October 2017, Aingimea’s company received $750,000 for trucking services. After the immigration department was renamed, it paid his company an estimated $2.6 million between late 2017 and November 2022 – between $45,000 and $60,000 a month. The amount was about seven times Aingimea’s salary as the president.

Banking records suggest a large part of the money was for personal use: in 2020 the trucking firm LRC Car Rental and Construction transferred $435,000 to Aingimea’s personal bank account.

The trucking business was not the only way one of Nauru’s top politicians earned personal income from Australia’s offshore processing regime. Emails reveal that while he was secretary of the justice department and assistant justice minister, one of Aingimea’s family members ran a bakery business called Golden Food, which Broadspectrum felt it had little choice but to buy from.

Internal emails reveal that Broadspectrum employees held concerns about the accuracy of Golden Food’s invoices, but were urged to pay quickly because “Lionel owns this cafe”. Between January 2015 and November 2016, Broadspectrum, using taxpayer money, paid Golden Food more than $865,000.

This masthead does not suggest the concerns raised by Broadspectrum over the Golden Food invoices were well-founded or that the invoices were not legitimate. That issue was never investigated, let alone determined.

The company that purchased Broadspectrum, Ventia, did not respond to questions.

Canstruct said in a statement it knew LRC Car Rental and Construction “had connections with the family of Mr Lionel Aingimea” and that its use of the firm was approved by Home Affairs.

Given the small population on Nauru, “many companies are connected with family members of prominent people” including members of parliament, and it was “unsurprising and usual for all contractors operating in Nauru”, it said.

Canstruct said it “rejects any insinuation that this contractor was anything but a company that provided legitimate services and were paid accordingly and appropriately”.

However, Transparency International’s Clancy Moore said the corruption risks of dealing with politicians such as a president were “really, really high, particularly in a place like Nauru where one in four people live below the poverty line.

“We don’t know where that money goes, what was provided for that service as well. And in this instance, taxpayers’ money was wasted. They paid … more than they should have. This is a real scandal.”

A Nauru official, speaking to the Home Truths investigation on condition of anonymity, said: “We suspected that there were funny deals involving politicians behind the scenes. Now that it is clear the extent of those dealings, I’m outraged.”

An Australian doctor, Chris Jones, speaking out for the first time about his experiences treating asylum seekers on Nauru in 2018, said that with millions of Australian taxpayer dollars flowing into the island, there should be a “thriving middle class”, but instead the population was poor and local infrastructure, including the hospital, underdeveloped.

“The only thing that I saw around the periphery of the country were these garish, small, colourful slides that the government of Australia had given them for their children to play on,” Jones said.

“But there was no infrastructure at all. None at all.”

‘A piece of the pie’

The practice of high-ranking Nauru officials seeking lucrative offshore detention contracts was raised repeatedly by Broadspectrum staff.

In April 2015, the company’s managers emailed each other to raise a concern that the Nauru government was pressuring it to hire a new waste disposal and security company, JHSS.

The company was, according to an internal Broadspectrum email, “an entity directly associated with a senior government of Nauru minister”. Broadspectrum had been “directed to utilise their services”, the internal email said. In another leaked email, a Broadspectrum manager raised integrity concerns, saying it made him “nervous”.

“I see the writing on the wall and I know where this is going,” the email said. But despite the concerns, Australia’s border protection department paid the firm more than $430,000 via its subcontract with Broadspectrum.

One internal Broadspectrum email describes how another Nauruan MP also wanted “a piece of the pie”. Broadspectrum went on to create an arrangement in which department funds were used to pay a large mark-up for bottled water supplied by his company, Forever Exports.

“Fact is we pay $11 per unit, cost is $6. The minister margin is 45 per cent. I would target a 2-3 dollar reduction,” a Broadspectrum manager wrote to a colleague about the bottled water supply. In another email, dated November 2016, a Broadspectrum manager wrote of the deal: “I have some concerns that the supply chain doesn’t align with Broadspectrum’s business ethics and poses some potential reputational risk.”

Political pressure came in a number of ways. In early 2016, Broadspectrum described facing government demands to remove a laundry service provider run by an opposition politician and replace it with a firm that Broadspectrum believed was linked to government ministers.

Other public officials who pressured Broadspectrum to hire them included a senior police officer who was then in charge of overseeing offshore processing, a local politician who ran a skip bin company, and the politician owner of a car rental company who threatened to start “talking to my friends in the Australian media” if his company was not used.

Broadspectrum awarded a car rental contract worth $500,000 to that company.

An existing bread supplier was sacked and another contracted, despite questions about cost and quality, after the minister was “asking why” it had not been hired.

The Albanese government announced last month the detention centre had closed, though Home Affairs Minister O’Neil has left open a $350 million “contingency” fund to keep it ticking along as a deterrent to possible maritime arrivals.

‘I’d consider it a bribe’

Separately, at Australia’s other offshore processing centre, Papua New Guinea’s Manus Island, a whistleblowing former director of contractor Paladin claimed the company made a series of payments of more than $3 million to an account in Singapore of a businessman with close ties to senior PNG officials.

Ian Stewart says he was pressured to pay bribes and tried to report it to the government.Credit: Eddie Jim

Ian Stewart said it was one of a number of demands by PNG politicians for bribes and donations, some of which he reported to Home Affairs.

In another allegation, Stewart said an employee of Home Affairs had pressured him to use a subcontractor suspected of being a front for corrupt PNG officials.

In an interview with The Age, The Herald and 60 Minutes, Stewart said even when he made his complaints public in 2019, the department sought to play down its knowledge of corruption concerns and urged Paladin executives to pass on his concerns only in phone calls and to avoid putting them in writing. The allegation is corroborated by confidential Paladin records.

Home Affairs paid Paladin $530 million in taxpayer funds to run the detention centre for just over two years between 2017 and 2019, but from the beginning the company had difficulty with PNG officials and politicians in obtaining visas and work permits.

In 2018, Stewart was called to a breakfast meeting with a businessman and a high-ranking PNG politician to try to secure their support. He says he went to the meeting after another Paladin manager had texted him, stating: “Hi Ian, if we don’t meet the … minister, it will cause us a great deal of problems.”

Invoices from September 2018, seen by the Home Truths investigation, show Paladin made one payment of $1.5 million to the businessman via a Singapore bank account. The invoice was marked “Visas”. After it was made, “we did get work permits and visas that we hadn’t been able to get for months before”, Stewart said.

“So that [$1.5 million] seems to be an unrelated payment outside the [offshore processing] contract that impacted what we were able to receive inside the contract … I would consider that was a bribe.”

Internal Paladin records obtained by this masthead reveal that in addition to the $1.5 million payment, Paladin made another of $1.48 million, as well as a $124,000 payment variously described in records as for “visa assistance, consultation and submission”.

A November 2018 email from the businessman receiving the payments describes them as part of “an ongoing commitment made by Paladin” relating to “ongoing relationships”.

Paladin’s former chief executive, David Saul, said he was not aware of any improper payment made by Paladin to any politician or official. There had been several attempts by people purporting to be politicians to try to extract money from the company, he said, but these were simply scams.

He said the businessman who Stewart claimed had received the $3 million payments was in a legitimate marketing relationship with Paladin, and any payments to him were much smaller than claimed.

As for paying for visas, Saul said: “We paid nothing to any official and got nothing from them.”

‘We’re not aware …’

Stewart said that shortly after Paladin was appointed as a lead security contractor on Manus Island, a Home Affairs official had pressured it to use a subcontractor that Stewart said was known to be a front for corrupt PNG officials.

Stewart said another contractor on Manus Island had paid bribes via the same subcontractor.

“I’m aware some key contract subcontractors ... were the ones making the corrupt payments. We were strongly pressured to take on some of those subcontractors,” Stewart said.

“It was said to me by Home Affairs officials … that if we were just to take them on as a subcontractor, then we would have no troubles.”

Stewart described meeting a Home Affairs official at a Port Moresby hotel.

“He basically said to me, ‘Why won’t you just subcontract one of their subcontractors?’ And I said, ‘Because I believe them to be corrupt, and I’ll never subcontract him.’ He said, ‘It would be just easy if you did.’ And I said no.”

Stewart says he reported the conduct to Home Affairs, along with several approaches from senior PNG officials for bribe payments in return for visas and work permits.

“When we reported it, it was to senior people,” Stewart said, but nothing happened.

The first reports were made in 2017, he said.

When he was confronted with media reports in this masthead about allegedly corrupt approaches made to Paladin by PNG officials, Home Affairs secretary Pezzullo told a parliamentary committee in April 2019: “We’re not aware of … any demonstrable instances of likely, possible or reasonably suspected corruption.”

An internal Paladin text message after this hearing states that a Home Affairs official had phoned Paladin and said he was “concerned I would imply improper practices in PNG”.

“He would prefer phone calls,” the message says, referring to the Home Affairs official.

After these questions were raised in this masthead in 2019, Home Affairs conducted an internal audit, after which it says it improved its subcontracting processes, including requiring all arrangements of more than $50,000 per year to be approved by the department.

But Stewart alleged Home Affairs was “actively managing to keep any records of these reports off the books”.

“I think the approach of the government was to put distance between themselves and the corruption,” he said.

Department of Home Affairs secretary Michael Pezzullo in a parliamentary hearing.Credit: Alex Ellinghausen

Pezzullo maintained throughout 2019 that the department had no records of bribes or bribe attempts.

He told this masthead this week that he was proud of the department’s record throughout his tenure.

“I have always acted with integrity,” he said.

Late in 2019, Paladin lost the Manus contract.

“These contracts, they’re on a knife edge,” Stewart said. “They could be pulled by the government, either Papua New Guinea or the Nauru government could pull their support for the contracts at any time.

“So no one from the [Australian] government side wants that to happen. So, anything that could be a threat to that, such as a report of corruption, is inconvenient. I don’t think they [Home Affairs] actively managed it with an enthusiasm to actually find any truth.

“They managed it with an enthusiasm to close off the issue.”

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