The arms trade is known for being one of the most corrupt of all legal international trades.
UK research shows that this corruption drives and distorts arms procurement decisions. Arms purchases that were not previously being considered can suddenly appear on the agenda.
Before delving into AUKUS, an egregious distortion in Australian defence procurement, it's worth revisiting the original - subsequently reneged - French submarine contract.
The research shows that submarines, in particular, are a procurement area where a very high proportion of the small overall number of deals involve major corruption.
French multinational Naval Group had been wrangling with Malcolm Turnbull’s government for almost two years trying to get the formal contract signed.
In August 2018, Scott Morrison became PM.
Soon after, Naval Group hired David Gazard well-connected lobbyist, former Liberal candidate, and close friend of Scott Morrison, to help them get the deal over the line.
Within months, the Morrison government had signed the contract.
In early 2019, the ABC reported, ‘Naval Group confirmed the arrangement but did not disclose how much Mr Gazard’s company was being paid for its lobbying services’.
Mr Gazard’s company, DPG Advisory Solutions, declined to comment to the ABC about its role. Subsequent and recent similar questions have been put to Mr Gazard with no response.
At the time Australia put Naval Group on the shortlist, the company was under investigation for corruption in three other arms deals: two for submarines (Pakistan and Malaysia) and one for frigates (Taiwan). The Abbott government would have known this.
These were not minor corruption cases: all involved murder.
French authorities commenced another corruption investigation into Naval Group (submarines; Brazil) in late 2016, after Australia had awarded Naval Group the deal, but before we signed the contract.
How did the Abbott, Turnbull and Morrison governments shortlist, select, and then sign a contract with a company being investigated in four separate corruption cases?
Such is the MO of Australia’s Defence Department.
BAE Systems Australia is Defence’s largest contractor and has been for six of the past eight years.
BAE Systems is set to be a significant beneficiary of AUKUS. It has already been handed a £3.95 billion (A$7.5 billion) contract for the detailed design phase of the AUKUS submarines.
BAE Systems provides perhaps the best-known example of systematic high-level arms industry corruption.
Britain’s series of arms deals with Saudi Arabia was, and remains, its biggest ever arms deal. It earned BAE Systems at least £43 billion in revenue between 1985 and 2007, with further deals still ongoing. The deal included £6 billion pounds in ‘commissions’ (bribes), paid to the Saudis.
In addition, during the 1990s and 2000s, in ‘a deliberate choice that came from the top’ BAE Systems maintained a shell company registered in the Cayman Islands called Red Diamond Trading. This vehicle channelled hundreds of millions of pounds of bribes around the globe to key decision makers in a succession of arms deals.
The Guardian’s BAE Files contain 15 years of reporting on this subject.
Now let’s consider Australia’s largest ever surface warship acquisition, the Hunter class frigates, designed and built by BAE Systems.
Our national audit office was scathing of this procurement process. Last May it noted numerous serious governance failures, including key accountability documents going missing. The primary legislative requirement of providing taxpayers with value for money had been ignored.
After the release of the audit office report, deeper investigation has uncovered further serious conflicts of interest.
Defence had appointed former senior BAE personnel and advisers into important roles overseeing the evaluation of frigate tenders, without making those appointments public.
Defence also hired one of those former senior BAE managers to negotiate the frigate deal with BAE on behalf of Defence.
More detail about this extraordinary story is here.
It has also been revealed that BAE Systems was given the Hunter class frigate contract despite ‘long-running concerns’ inside Defence about BAE’s alleged inflation of invoices by tens of millions of dollars on the earlier Adelaide class of frigates.
Detailed allegations of fraud in the Adelaide-class contracts, including by Thales Australia, were published in three separate articles by the Weekend Australian in May 2019.
A Defence internal audit had reportedly found that BAE’s contract was ‘riddled with cost overruns, with the British company consistently invoicing questionable charges’.
Defence launched a second investigation.
18 months later, in response to a question put to them, Defence about the outcome of its second investigation. This was their response:
“An independent internal review of this matter found no evidence of inappropriate excess charges by BAE and Thales. The investigation did find some minor administrative issues which have been subsequently addressed through additional training. This training is now part of the normal cycle and is routinely refreshed.”
The “independent” review was conducted in secret by an existing defence contractor. His report was not made public.
Defence said “no evidence” was found of inappropriate excess charges. Yet the allegations were apparently so serious they were referred to Defence’s assistant secretary of fraud control who then referred several matters to the Independent Assurance Business Analysis and Reform Branch of Defence.
FoI requests about this have been blocked by Defence which is refusing to release a single page.
An appeal was submitted, Defence blocked that too. There now is an appeal to the Information Commissioner.
If this was merely “a minor administrative issue” that has been resolved by “additional training”, why the aggressive blocking of any release of information through FoI?
Another example of undue influence and the revolving door – that of former CEO of BAE Systems Australia, Jim McDowell was previously reported here.
This does not imply any illegality on the part of Mr McDowell, it's merely listing an array of his government appointments – not all of them – to highlight the extensive influence that just one person can have.
Jim McDowell had a 17-year career with BAE Systems including a decade as its chief executive in Australia, then two years running its lucrative Saudi Arabian business. He resigned from BAE in Saudi Arabia in December 2013.
In 2014, McDowell was appointed by the Coalition to a four-person panel undertaking the First Principles Review of Defence. This Review recommended sweeping reforms to the Defence Department, including its procurement processes, which have largely benefited major arms companies.
In 2015, the Coalition appointed McDowell to a 4-person expert advisory panel overseeing the tender process for the original submarine contract. When he announced McDowell as being part of this panel, Defence Minister Kevin Andrews didn’t mention McDowell’s long history with BAE Systems, which had ended only 18 months earlier. It was highly relevant, as BAE designs and manufactures Britain’s submarines.
In late 2016, then-defence industry minister Christopher Pyne hired McDowell as his adviser to develop the Naval Shipbuilding Plan. The appointment was not announced publicly. At that time, McDowell was also on the board of Australian shipbuilder Austal.
Under the Shipbuilding Plan, Austal subsequently won a contract to build six more Cape-class patrol boats while BAE Systems won the biggest prize, the Hunter-class frigate contract.
After the frigate deal was announced, South Australian premier Steve Marshall hired McDowell to head his Department of Premier and Cabinet. SA was the state that gained most from the shipbuilding plan.
In 2020, McDowell left the South Australian public service to become CEO of Nova Systems, a key defence contractor.
Last year, McDowell moved back through the revolving door into a senior role with the Defence Department. He is now Deputy Secretary for Naval Shipbuilding and Sustainment, reporting directly to defence secretary Greg Moriarty.
When appointed, McDowell said his new role was an opportunity he couldn’t turn down because it ‘provides the ability for me to shape the future of Australia’s shipbuilding and sustainment’.
McDowell’s long list of sensitive senior appointments should not have been possible. He cannot be the only person in the country qualified to undertake each of these roles.
This was a brief discussion of some aspects of the undue influence of the arms industry in Australia. These issues are raised in this AUKUS context because there has been almost no commentary about the likely influence of the arms industry in the AUKUS deal, nevertheless the possible future influence of former politicians, such as Scott Morrison.
The planning for AUKUS began under the Trump Administration, but Morrison didn't negotiate with President Trump. His AUKUS ally was Mike Pompeo, the former CIA director who Trump promoted to Secretary of State. According to Paul Kelly in his 2022 book, Morrison's Mission, Pompeo and Morrison shared phone calls every week and had a very intimate collaborative relationship, which Kelly attributed to their shared faith as both men are born-again evangelical Christians.
Other commentators believe their weekly discussions were concerned more with AUKUS than Jesus. The unholy trinity who secretly created AUKUS were Morrison, former British PM Boris Johnson and Pompeo.
After the debacle of the 2022 Election, Morrison retired to the backbench while he pursued opportunities in global geostrategic affairs related to AUKUS, often teaming up with Mike Pompeo. It was his “dear friend” Mike Pompeo, in his role as Chair of the Strategic Advisory Board of the Hudson Institute’s China Centre, who invited Morrison to join the Strategic Advisory Board in November 2022.
On 23 January 2024, Morrison announced his departure from Parliament to take up:
‘...“a series of global strategic advisory roles and private boards, focused on the U.S. and Indo-Pacific” and drawing on his experience and networks in the region, in particular through AUKUS and the Quad diplomatic partnership.’
The private boards were American Global Strategies and DYNE Ventures, which also employed Mike Pompeo as a strategic advisor. DYNE Ventures boasted that it expected to profit from Mr Morrison’s role as architect of AUKUS.
A week after Morrison’s resignation, The Australian Citizens Party (ACP) wrote to the National Anti-Corruption Commission (NACC), requesting it to investigate former Prime Minister Scott Morrison’s decision to join private companies that will profit from the massive defence expenditure resulting from his decision to establish AUKUS.
ACP research director Robbie Barwick explained the ACP was referring Mr Morrison to the NACC because he was climbing aboard the AUKUS gravy train to personally cash in on his policy:
However, in this case, it is too shameless, and the stakes are too high — his agenda pushed us towards war with China! So, the ACP is asking the NACC to investigate Morrison and his buddy Mike Pompeo, and whether their current private business arrangements may have in any way influenced their secret plot which put the Australian taxpayer on the hook for $368 billion that they and their cronies are tapping into post-government.
Said Barwick:
Consider the optics here. The former Australian Prime Minister joining American Global Strategies! That is emblematic of everything that's happening to this country.
Given the intimate relationship between these two – they both secretively plotted to get AUKUS up – and now, hand in hand, they're moving into the private sector to make money out of AUKUS. We think that this smacks of potential corruption. And the NACC, the National Anti-Corruption Commission, needs to look at that relationship between Mike Pompeo and Scott Morrison.
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