A company that was part-owned and directed by the federal government's chief indigenous adviser, Warren Mundine, helped broker a highly questionable deal that gave a mining company access to an Aboriginal sacred site in outback Western Australia.
The revelation raises questions about Mr Mundine's past business relationships and comes as he seeks to drive reforms to ensure good governance in Aboriginal corporations through his role as head of Prime Minister Tony Abbott's Indigenous Advisory Council.
Documents show Indigenous Investment Management Pty Ltd, part owned by Mr Mundine at the time, was hired in 2010-11 by listed miner Reward Minerals to convince the Western Desert Lands Aboriginal Corporation to drop its opposition to a mine at Lake Disappointment, a sacred site for the Martu people of the Pilbara.
Confidential advice to the Western Desert corporation board from its own lawyers described the mining proposal negotiations as having "no validity" and stated directors and executives were at risk of breaching their legal obligations to act honestly and not in self-interest.
Fairfax Media can also reveal the deal was compromised because a senior executive from the Western Desert corporation held a secret stake in IIM during stages of the negotiation process and after a mining agreement was reached.
Mr Mundine said he had no business dealings with the Western Desert corporation. But corporate documents make clear his former company was involved in one of its mining deals and that he has been involved in businesses with a senior executive from the corporation and its former chief executive.
The Western Desert corporation's mining deals have earned the Martu people it represents about $50 million. Despite the money, Martu communities remain impoverished and the Western Desert corporation faces questions about its handling of funds.
The non-profit corporation last year spent $2.4 million on its 10 employees and paid a further $537,000 to its directors. It also authorised $1.6 million in cash payments to individuals, some of which breached Commonwealth laws.
About $500,000 that was handed out to individuals, including some Western Desert corporation board members, came from the 2011 Reward Minerals deal.
IIM and its Perth affiliate, Azure Capital, according to former director Clinton Wolf, approached Reward Minerals in 2010 to offer their help in reaching a deal with the Western Desert corporation.
Company documents show IIM's directors and shareholders included Mr Mundine, Mr Wolf, who was the Western Desert corporation's chief executive until 2008, and Azure Capital founder and Future Fund director, John Poynton.
They also show the Western Desert corporation's chief financial officer, Tony Wright, held a stake in IIM at various times during the Lake Disappointment negotiation. His interest was obscured by a series of shelf companies registered to his Perth address that also involved Mr Wolf.
IIM and Azure succeeded in getting the Western Desert corporation to drop its opposition to Reward's mine proposal. In 2009, the Native Title Tribunal found in favour of the Western Desert corporation's rejection of an initial bid by Reward.
A confidential July 2011 memo from the Western Desert corporation's in-house lawyers - who were unaware of Mr Wright's secret shareholding - declared the Reward negotiation process invalid, compromised by potential conflicts of interest and improper voting procedures at meetings.
The lawyers warned the Western Desert corporation's directors and executives they risked criminal and civil prosecution due to the conduct of the Reward negotiations.
"It is the legal unit's view that WDLAC is in breach of the majority of its legal obligations," the legal advice states. "Some examples of these duties include … duty of honesty, acting in the best interests of the corporation and not personal self interest."
After the Western Desert corporation approved Reward's bid in December 2011, the mining company issued five million share options worth several million dollars to IIM's "affiliate", Perth advisory firm Azure Capital, owned by Mr Poynton.
An application to deregister IIM was made a few months earlier, once the Western Desert corporation board had signalled they would approve Reward's offer.
Another Western Desert corporation deal involved a $21 million payment from Rio Tinto to keep quiet during its sale of a uranium deposit in 2008. A current business associate of Mr Mundine's, corporate advisor Joe Procter, was paid a $2.35 million fee by the Western Desert corporation.
The Rio deal required the Western Desert corporation and Martu people to stay silent while the mining giant sold its uranium deposit to a Canadian miner for about $500 million.
Mr Wolf said mining deals had given the Martu people hope of a better future. He said Mr Mundine was not involved in the Reward negotiations despite being a director of IIM at the time.
Mr Wolf said Mr Wright's involvement in IIM was for him to provide advice on tax obligations and not to be involved in the Reward negotiation.
Western Desert corporation chief executive Noel Whitehead said he acted to inform the federal regulator as soon as he learned the Reward proceeds had been spent in breach of the law.
The regulator, ORIC, has confirmed this and said the Western Desert corporation put in place procedures to rectify the matter.
Mr Whitehead said the Reward process had been reviewed by independent lawyers to ensure a transparent process.
The story Mine deal allegations against Warren Mundine and Aboriginal corporation first appeared on The Sydney Morning Herald.