A former diplomat has slammed public servants' "willingness to lie", after an investigation into claims he was pressured to break the law ended because of a lack of evidence.
The Greens have used the case to push for a whistleblowers' authority independent from the bureaucracy.
Peter Ellis, who headed Australia's aid program in East Timor, was removed from the embassy in Dili after he refused to lie to a human rights group about why AusAID broke its contract in 2005. Public servants who lie can be fined or sacked under Commonwealth law.
AusAID later told the organisation, Forum Tau Matan, its $65,830 grant was cancelled because it had signed a petition asking Australia to respect East Timorese sovereignty while negotiating gas rights.
The Australian Public Service Commission investigated the incident, but found insufficient documents to prove what Mr Ellis was initially told to say. It noted Mr Ellis was motivated by his "conviction that he was legally and ethically obliged" to be honest. But it agreed with the Foreign Affairs Department that public servants did not have to give "transparent reasons" for funding decisions.
Documents seen by The Canberra Times show Mr Ellis discussed the contract breach with Australian ambassador Margaret Twomey on May 25, 2005. In a file note that day, he said Ms Twomey told him "being less than honest" was a tool of the "diplomat's trade". Ms Twomey later denied making the statement, saying her comments were part of a "brainstorming" session and not an order to lie.
The documents also show AusAID assistant director-general, Alan March, suggested Mr Ellis tell Forum Tau Matan there was "no single reason" it was stripped of funding.
However, Foreign Affairs officials later confirmed to the Senate the contract was broken because of the petition. The commission found it was "probable" Mr Ellis's clash with Ms Twomey contributed to the rare decision to deny him a posting extension, a decision he says cost him about $100,000. But it accepted Ms Twomey's explanation she had other concerns about Mr Ellis's performance.
AusAID did not record why it refused the extension, but later said one reason was its officers in Dili were inexperienced, "given the political crisis and the violence that occurred in East Timor in 2006".
Mr Ellis, who now works overseas as a governance adviser, said AusAID's explanation was "an embarrassing mistake", given it decided to end his posting months before the East Timor crisis unfolded. "[It] is a clear sign that the AusAID executive was grappling for excuses after the fact," he said.
"Public servants were prepared to lie to cover up an awkward ministerial decision that they considered was too robust and likely to attract criticism internationally and domestically. [I] had to go to extreme measures to stop this deception from happening."
Neither the Foreign Affairs Department nor the commission interviewed him about his whistle-blower report. They instead consulted only the senior officers he made the claims against.
Greens Senate candidate Kerrie Tucker said the Ellis case showed the need for an independent whistle-blower authority "able to report directly to Parliament".
"If we are going to have a public service which is able to be frank and fearless, you have to have good whistleblower protection." Meanwhile, the organisation at the centre of the dispute has since rejected a World Bank grant because some of the money came from Australia.
Forum Tau Matan cancelled the contract, saying it would prefer to act with "freedom, self-respect and dignity" than accept the funds. Its coordinator, Joao Pequinho, told The Canberra Times the grant, which would have been used to train young East Timorese leaders, was worth $US20,000 ($22A,000). His organisation was happy to work with institutions "which share our goals". "However, experience has taught us that AusAID has different objectives, and we prefer not to receive funding from them," he said. Neither the commission nor AusAID would comment.