AUSTRALIAN government officials were deeply involved in a $150 million shipbuilding deal between defence contractor Tenix and the Philippines that federal police are investigating for alleged bribery, declassified diplomatic cables reveal.
In what shapes as a second big international corruption scandal for Australia following the Reserve Bank bribery affair, cables show Australian officials knew in 2005 that an order by the Philippines for search and rescue vessels from Tenix was made without the required budgetary approvals in Manila.
This knowledge should have prompted immediate probity concerns within the Department of Foreign Affairs and Trade, which had since the late 1990s been issuing written warnings about corruption in the Philippines specifically involving government contracts.
The Tenix deals in the Philippines, which are at the centre of a police bribery probe, are sensitive for the Australian government because they were underpinned by huge Australian taxpayer grants and loans.
In recognition of the high-level Australian government involvement in Tenix's Philippine shipbuilding contracts, The Age believes federal police have sought to question former Australian trade commissioners who have served in Manila dating back to the 1980s.
Australia's trade agency, Austrade, is understood to be preparing legal advice for its former trade commissioners, according to sources linked to the agency.
Austrade, which has been badly damaged through being caught up in the RBA bribery scandal, was also particularly close to Tenix. One of the then owners of Tenix's defence business, Paul Salteri, serve on its board during the 1990s.
The Age revealed in March that police had raided the offices of former senior Tenix executives as part of the investigation into allegations Australia's biggest defence contractor paid large bribes to prominent Filipino politicians and officials to secure a 2000-01 contract to supply up to 16 vessels to the country's coast guard.
Payments under scrutiny include millions of dollars sent to politically connected Manila lawyer Romela Bengzon, who also became a director of Tenix's Philippine subsidiary.
Prominent politician Roilo Golez this year told The Age of his rejection of a 2004 offer by Tenix to provide hundreds of thousands of dollars to bankroll his election campaign.
In a statement earlier this year, a spokesman for Tenix Defence's former owners, Sydney billionaire brothers Paul and Robert Salteri, said an internal inquiry had found no evidence of impropriety in the company's overseas dealings. Tenix's defence arm was sold to British giant BAE in 2008.
The cables, which were obtained by The Age under freedom-of-information laws, show the Australian ambassador to the Philippines met the country's transport secretary in April 2005 and was told ''the original purchase order [for the vessels] had been placed without the approval of a budget by Congress''.
At the time of the Australian ambassador's meeting, the Philippine parliament had suspended repayments to Tenix for six search and rescue vessels after it was discovered that the funding for the boats had not received required approval.
Exactly how the Philippines arranged to fund the 2000-01 Tenix contract, which was supported by a $109 million soft loan from Australia, remains a mystery.
The Age believes Tenix's initial 1998 contract with the Philippines to supply two search and rescue vessels, which involved a $21 million AusAID grant and a multimillion-dollar soft loan, has not raised probity concerns.
The deal causing most concern is the follow-on 2000-01 contract arranged with the administration of then Philippine president Joseph Estrada shortly before his dismissal amid massive corruption charges.
Cables show Australian embassy officials in 2001 were already aware the Tenix contract was beset by financial problems shortly after it was signed. Various cables show Australia's ambassador and other officials raised throughout 2001 the matter of ''Tenix's stalled project'' with senior Filipino politicians.
One cable sent by the Australian embassy in Manila in February 2001 refers to a meeting with Mr Estrada's former executive secretary in which the Australian ambassador raised the project's ''current funding difficulties''.
Another cable sent later that year shows the Tenix project did proceed under the new administration of Philippine president Gloria Arroyo. Ms Bengzon, the lawyer who became a director of Tenix's Philippine subsidiary, was part of Ms Arroyo's inner sanctum. The cable, marked ''confidential'', shows Australian diplomats ''called on key ministers to acknowledge their role in advancing the proposal by the Australian company Tenix'' despite one minister expressing concern about ''the costs 'ratcheting up' ''.
The cable says ''gaining acceptance of the Tenix proposal has been a long drawn out …'' The rest of that paragraph has been redacted by DFAT on the basis its publication could harm Australia's international relations.
A 2003 email by Australia's then ambassador in the Philippines reveals then president Arroyo had decided a further proposed delivery of search and rescue vessels by Tenix would not proceed because it was not ''financially feasible''.
The police investigation into Tenix, which began in 2009 but only became public this year, continues.