The federal government’s anti-corruption agency has ducked out of a battle with News Limited and The Australian in a move that sources in the Victoria Police are seeing as a response to media and political pressure.

This is the latest development in the knotty case of Australian journalist Cameron Stewart’s scoop of August last year, in which he broke the news about a counter terrorism operation on the very morning of raids in which four men were arrested, accused of plotting to bomb an army base.

The aftermath of that story, which won a Gold Quill in the recent Melbourne Press Club awards, is shaping to be one of the most sensitive and controversial episodes in recent journalistic history, as well as a case study in relationships between journalists and their sources and the rivalries between police forces.

In his acceptance speech at the Quills, Stewart referred to “a very, very difficult and ugly legal battle behind the scenes … which  for reasons of legal confidentiality, which has been slapped on me by certain organisations, I cannot say a thing about tonight”.

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That legal battle is at least partly about a joint report into the source of Stewart’s leak by the Australian Commission for Law Enforcement Integrity, which is responsible for countering corruption in the Australian Federal Police and the Victorian Office of Police Integrity.

The co-authored report, a draft of which was shown to The Australian some weeks ago as part of the normal processes of administrative law, is apparently highly critical of Stewart and the newspaper, as well as identifying a Victoria Police officer believed to be Stewart’s source. That person has been stood down.

I understand the person is described as having been cultivated over a long period by Stewart, and is responsible for more than one leak.

The joint OPI-ACLEI report was to have been tabled in state and federal parliament last month but The Australian obtained a Federal Court order prohibiting the publication. All these developments were reported on Media Watch a couple of weeks ago.

But now documents on the court file dated March 31 show that ACLEI has broken ranks with the OPI and cut a deal with The Australian. ACLEI is released from the action, in return for agreeing not to publish any of the information they have obtained about the newspaper during their investigation. ACLEI has also agreed to allow The Australian to review any report it writes that refers to the paper or its employees.

Meanwhile, the Victorian Office of Police Integrity still intends to fight the court order hard with a view to releasing the report as soon as possible. The case is listed for a directions hearing tomorrow afternoon.

The view from Victoria is that since this battle began, The Australian has used its editorial pages to campaign against the Office of Police Integrity in an unprecedented fashion, with a view to exerting pressure. The ACLEI move is being interpreted as a response to the fear of a similar campaign.

It’s not hard to see why this view has emerged. Over the past few months The Australian has given front page coverage to the OPI, including prominent reporting of claims that racism in the Victoria Police has been inadequately investigated.

These are legitimate stories. But to my own knowledge the main source for the reports, community lawyer Tamar Hopkins, has been trying to get coverage of them for years and has been largely unsuccessful. Suddenly last month, The Australian was all over her.

Meanwhile there is no doubt the OPI has had its troubles recently, and has a great deal at stake.

The Australian editor Paul Whittaker has previously claimed the whole affair is influenced by “a historic animosity with The Australian for our long-standing push for a royal commission into police and official corruption in Victoria, as well as a high degree of inter-agency rivalry between the AFP and Victoria Police”.

Maybe. But one thing is clear: law enforcement in Victoria is in particularly murky waters at present.

Earlier this week ACLEI spokesman Nick Sellars told Crikey the reason The Australian had “released ACLEI from the injunction” was that the agency had now decided to write its own report into the investigation of Stewart’s leak. This was being done because “from an administrative law perspective” the original report was flawed in that it was not clear which agency was making which allegations against Stewart and The Australian.

But asked when the new ACLEI report would be written, Sellars said “we don’t have a target time frame for that at the moment”. Nor could he guarantee that it would be made public. Asked if the move represented a breach between ACLEI and the Victorian Office of Police Integrity, he objected: “I think that’s what the police call verballing.” He went on to say there was no acrimony in the parting of the ways.

But background sources from both sides of the divide make it clear the whole matter is the subject of considerable tension between the two anti-corruption agencies, with the Victorians regarding the Feds’ actions as “strange” and a response to pressure from The Australian. On the other hand, sources inside The Australian describe the report at the heart of the injunction as a shoddy and inaccurate piece of work. The view from inside the newspaper is that ACLEI has made a decision to distance itself from its contents.

Meanwhile, most of the Federal Court file, including several affidavits, is being kept confidential, with an unusual level of sensitivity being displayed when access is sought. As a result we cannot be clear about the parameters of the case. By all accounts the draft report at the centre of the battle is not long, yet the court file is apparently fat with affidavits.

Taking a step back, what is this all about? And should Stewart have received one of Australian journalism’s highest awards for his scoop?

While Stewart’s original story was a great “get”, and in the morality of the newsroom that is its own justification, there was no enormous public interest involved. The news of the raids would have become public a few hours later in any case. Meanwhile, Victorian Police Commissioner Simon Overland claimed at the time that because The Australian was available in Melbourne some hours before the raids took place the paper had jeopardised the operation and the safety of police.

The raids were the culmination of Operation Neath, a seven-month joint investigation between the Victoria Police, ASIO, the NSW police and the NSW Crime Commission. We now know Stewart, having approached the Federal Police armed with information from his initial source, was then given briefings on the condition The Australian held off publication.

The Victoria Police claimed the newspaper broke an agreement that the paper would not be available on Melbourne’s streets before the 5am raid. The Australian denied this.

But the exact nature of that agreement, and whether The Australian breached it, is one of the issues now in dispute. The paper certainly went to considerable lengths to delay the appearance of the story in Victorian editions of the paper, and keep it off the website. Nevertheless copies of the paper were available in Melbourne before the raids took place.

Meanwhile, as soon as Stewart approached the Feds, ACLEI and the OPI began an investigation into the source of the leak. By all accounts, they did not take long to conclude they had discovered the source — and that person’s career is wrecked as a result.

I understand that part of the report now the subject of the court action concerns the nature of Stewart’s dealings with the source over a considerable period of time.

This is not the first time that Stewart’s sources of information within the Victoria Police have come under investigation. In February 2008, Stewart wrote a stunningly accurate piece predicting what charges would be laid  against Victorian Assistant Commissioner Noel Ashby, police union official Paul Mullett and police media director Stephen Linnell. The three men had been the subject of an OPI  inquiry into leaks that resulted in a murder suspect being tipped off about an investigation.

As a result of Stewart’s story, a complaint was made that the Office of Police Integrity was leaking to him. The OPI made it clear it thought the source was more likely the three men facing the charges, or their advisers. The sequence of events according to the director of police integrity, George Brouwer, was laid out in the 2008 annual report of the special investigations monitor. Brouwer said:

“[The deputy director of the OPI] Mr [Graham] Ashton, met with The Australian reporter Cameron Stewart on 1 February 2008. OPI agreed to this briefing on the basis that Mr Stewart was preparing a thematic feature article to be published following the tabling of my report in Parliament. Mr Stewart had apparently sought his own legal advice prior to the meeting and it was clear that he was of the view that charges of attempt to pervert the course of justice were likely to be recommended against Mr Mullett, and possibly Messrs Ashby and Linnell.

Mr Stewart enquired about any other general themes the Director intended to highlight in the light of the evidence that had emerged from the public hearings … No information was provided to Mr Stewart … No advance copy of the report was given to Mr Stewart, nor was an advance copy given to any other person.

On the evening of 4 February 2008 Mr Stewart contacted Mr Ashton and advised that The Australian planned to publish what Mr Stewart referred to as a ‘speculation piece’ and asked Mr Ashton to confirm that the charges that were subsequently described in an article appearing on 5 February 2008 would be recommended … Mr Ashton declined to make any comment and urged Mr Stewart not to run the article in the form proposed …

Mr Stewart’s article appeared on 5 February 2008 in The Australian and, as described above, was picked up in later editions of The Age. None of the articles attribute the speculation about charges to any source, anonymous or otherwise.

Upon reading the article, Mr Ashton, through [OPI’s media liaison person], Mr Paul Conroy conveyed to Mr Stewart his concern that the article did not clearly reflect Mr Stewart’s earlier advice that its content was speculative. Mr Stewart confirmed that the content of the article was speculative based on legal advice he had received.”

[The email]

On 6 February 2008, Mr Stewart sent an unsolicited email to Mr Ashton and Mr Conroy containing the following text:

Dear Paul and Graham,

I see the Police Association is trying to accuse the OPI of leaking information in relation to news reports on Tuesday about the likely contents of the Wilcox report.

I would like to make it clear to that [sic] my report in The Australian was not based on any alleged OPI leak.

I apologise for any inconvenience which my story has caused at your end and trust that this note will help set the record straight.

Yours sincerely

Cameron Stewart

Associate Editor, The Australian

When he was before the OPI hearing in that case, Mullett defended his own conduct in plying Ashby for information by claiming the leaking of top-secret operational information was part of the “nature and culture of policing in Victoria”.

Charges against Mullett were later withdrawn, and the case against Ashby collapsed because the OPI made a simple legal error of failing to properly swear in its investigator before its public hearings, igniting calls for the OPI to be replaced by a broader anti-corruption body such as NSW’s ICAC, or by a Royal Commission.

Murky waters indeed. One way or another, once the Federal Court action proceeds, we should all find out more.

Several attempts were made to contact The Australian editor Paul Whittaker over the past few days, and he made several attempts to return my calls. Unfortunately, we did not succeed in connecting before deadline.