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Corruption commission chief cancelled coercive hearings in Border Force probe

“Austal has had no contact with [the anti-corruption commission], so has no first-hand knowledge of any investigation, its status, or the substance or detail of any allegations that have been made.”

Austal is also being probed by the Australian Securities and Investment Commission for a series of misleading market announcements between 2015 and 2016, an allegation Austal denies.

Australia's Cape Class patrol boat, built by WA-based Austal.

Australia’s Cape Class patrol boat, built by WA-based Austal.

Three official sources have confirmed that in April, barrister and counsel assisting ACLEI’s Austal probe Jonathan Hyde sent a memo to Ms Hinchcliffe setting out the alleged corruption in Border Force. Mr Hyde had been leading the inquiry into the Austal claims and argued for the ongoing use of coercive questioning hearings to investigate the allegations.

Ms Hinchcliffe disagreed with the advice and removed Mr Hyde, a barrister who specialises in corruption hearings and commissions of inquiry and who also serves as a defence force judge. She also removed a second counsel assisting, Dianna Tang.

Mr Hyde was appointed by Ms Hinchcliffe’s predecessor at the ACLEI, Michael Griffin, to probe the payments to Austal but was removed two months after Ms Hinchcliffe was appointed by Attorney-General Christian Porter to be the integrity commission’s chief.

In a short statement, Mr Hyde said that “I was retained by the former commissioner Michael Griffin, AM, and terminated by the incoming commissioner, following a significant difference of opinion”.

“While I wish I could comment” further, he said he was “unfortunately constrained in what I can say.” Ms Tang, a former NSW barrister of the year, declined to respond to questions.

In coercive hearings suspects must answer questions honestly or face jail. They can also be a precursor to public coercive hearings such as NSW’s ICAC is using in its investigation into disgraced former MP Daryl Maguire.

As counsel assisting the commission, Mr Hyde had wanted to interrogate senior Border Force and Austal figures about why $39 million in “milestone” fees were paid to Austal even though the patrol boat project did not meet its milestones.

The suspect payments were discovered in 2018 by the Auditor-General, who also uncovered explicit internal Border Force advice stating the payments should not be made.

The ACLEI is a small, secretive agency with extensive powers which oversees law enforcement agencies and is a key pillar of the Coalition’s planned Commonwealth Integrity Commission. But Labor, the Greens and multiple legal experts have called it, and the Government’s proposed broader integrity commission, too weak and secretive.

Attorney-General Christian Porter appointed Ms Hinchcliffe earlier this year.

Attorney-General Christian Porter appointed Ms Hinchcliffe earlier this year.Credit:Alex Ellinghausen

Ms Hinchcliffe defended her leadership on Wednesday, saying she was trying to improve the commission’s prosecution strike rate, which was regarded even by supporters of Mr Griffin as poor during his five-year stint.

Mr Porter insists prosecution success is the key test of any anti-corruption commission, while many legal experts argue corruption is too hard to prosecute via traditional investigative means. They back the use of private and public coercive hearings to expose corruption even if prosecutions do not follow. Answers gathered under coercion cannot be used in as evidence in a court.

As well as removing Mr Hyde and Ms Tang in April, Ms Hinchcliffe also scrapped Mr Griffin’s planned public coercive hearings into corruption allegations surrounding gaming giant Crown Resorts. She removed Sydney barrister David McLure, SC, and his colleague Shipra Chordia as counsel assisting that inquiry, and instead released a limited report. That found Home Affairs gave preferential visa treatment to Crown Resorts’ high-roller gamblers, including people who had initially been refused entry on character grounds, but it made no finding of corruption.

In a statement, Ms Hinchcliffe said she could not comment on the Austal probe because it was ongoing. But she said “decisions about the investigative strategy … are based on the evidence available to ACLEI and the advice of my team”. Coercive hearings led by counsel assisting were not the only means to uncover corruption, she said.

“It is important that these other avenues are exhausted before the more significant step of instigating coercive hearings is taken.”

ASIC is investigating a series of Austal announcements to the sharemarket that coincide with the period in which two of the Australian taxpayer funded milestone payments were made, one of $31 million and one of $8 million.

The second payment was issued on June 29, 2016, the day before the company was placed into a trading halt pending a major announcement with its problematic US combat ships. Construction and design defects forced Austal to report a loss of between $116 million and $121 million.

A Sydney-based fund manager had become a substantial shareholder in January and said he felt hoodwinked by the profit downgrade. “Clearly the market wasn’t informed. As a shareholder, I wouldn’t have been there if I thought there was a major earnings shock to come.”

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One market watcher, who declined to be named, said Austal had sacked its audit team in early 2018 and the accounting treatment of the milestone payments would be central to ASIC’s investigation. In 2018, Austal changed its auditor from Ernst and Young to Deloitte. EY was contacted for comment.

Major Austal investor Blackrock met with the company on June 3 to probe the company’s business oversight, risk management and corporate strategy.

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