Australia paid companies linked to suspected drug and weapons smuggling to run offshore detention, review finds

Foreign defence secretary Dennis Richardson has released a scathing report on Australia’s offshore detention regime, finding ‘proper due diligence was lacking when it came to contracts with relatively small companies’. Photograph: Mike Bowers/The Guardian

Contractors suspected of drug smuggling and weapons trafficking were handed multimillion dollar contracts due to a lack of due diligence in the administration of Australia’s offshore detention regime, a scathing report has found.

The home affairs minister, Clare O’Neil, has seized on the findings of the inquiry to claim that the now opposition leader, Peter Dutton, oversaw “an offshore processing regime being used as a slush fund by suspected criminals” when he was the responsible minister.

Despite the damning findings, the former defence chief Dennis Richardson in his report concluded that the Australian government “may have had no option but to enter into contracts with these companies” due to the high risk environments of offshore processing.

The inquiry report was released on Monday, ahead of the home affairs department’s appearance at Senate estimates.

Richardson found that “proper due diligence was lacking when it came to contracts with relatively small companies”.

Richardson found the department had contractual relations with:

A company whose owners were suspected, through the ownership of another company, of seeking to circumvent US sanctions against Iran, and with extensive suspicious money movements suggesting money laundering, bribery and other criminal activity;

Companies under investigation by the Australian federal police (AFP)

A company whose chief executive was being investigated for possible drugs and arms smuggling into Australia, “although, at the time it would have been unrealistic to have expected those responsible for contract and procurement to be aware of this”; and

An enterprise suspected of corruption.

“Intelligence and other information, which was readily available, was not accessed,” Richardson concluded in the report. “As a consequence, integrity risks were not identified.

“With proper due diligence, Home Affairs could have considered alternative suppliers, and, if this was not possible, the implementation of mitigating measures.”

Richardson said he had seen no “evidence of any ministerial involvement in the regional processing contract or procurement decisions, and the secretary of home affairs said he never discussed such decisions with the minister for home affairs”.

“We did not come across any matter of deliberate wrong-doing or criminality.”

Richardson recommended improved due diligence activities – especially checks of information held by the Australian Transaction Reports and Analysis Centre and the AFP.

The government agreed with this recommendation, but only agreed in principle with a further call for the finance department and the Office of National Intelligence to “develop a protocol for lawfully sharing law enforcement and intelligence information with Commonwealth entities, to inform procurement and contracting decisions in high risk environments”.

“This is an extraordinary report that should have been commissioned years ago, under the former government,” O’Neil said.

O’Neil said that the Richardson report, and separate reports by Martin Parkinson and Christine Nixon, “expose Mr Dutton as a hypocrite who was overseeing a migration system that was enabling mass exploitation and abuse, and an offshore processing regime being used as a slush fund by suspected criminals, all while trading on his reputation as a tough guy on the border”.

Guardian Australia has previously reported that MTC Australia received $422m for garrison services on Nauru despite a string of scandals in the US.

A Guardian investigation revealed that MTC has been accused of “gross negligence” and “egregious” security failures in its operation of private prisons, including failings alleged to have allowed the gang-rape of a woman in detention, the murder of two retirees by escaped prisoners, and the months long solitary confinement of a US citizen wrongfully held in immigration detention.

The former Australian government continued to pay millions of taxpayer dollars to a businessman convicted of corruption to provide offshore processing services on Nauru, even after he had pleaded guilty to bribing Nauruan government officials.

In August 2020 Mozammil Gulamabbas Bhojani was convicted of paying more than $120,000 in bribes to two Nauru government officials, including an MP and government minister, for favourable deals on phosphate mining contracts for his Radiance International group of companies.

But, at the same time, the Radiance International group owned an accommodation block – the Budapest Hotel – in Anabar, in Nauru’s north, which Bhojani’s company was leasing to the Australian government for its offshore processing regime on Nauru.

The Radiance International contract for refugee “accommodation services” – worth $17.5m – continued to be paid until May 2022, nearly two years after Bhojani was convicted and handed a suspended jail sentence for the foreign bribery offences in the same country.

In August the AFP conceded it gave incorrect information to the Senate when it said it had briefed Dutton on a foreign bribery investigation into Radiance and Bhojani. Dutton consistently said he was never briefed on the Bhojani matter.