Australia's top spy agency rocked by rumours of sexual misconduct

Australia's top intelligence agency is being undermind by sex scandals, nepotism and corruption according to a dossier of complaints leaked by a group of disgruntled spies.

The dossier claims that the conduct of senior staff at the Defence Signals Directorate (DSD), the equivalent of Britain's GCHQ, poses a grave risk to national security. One source said yesterday: "We are afraid that if an 11 September incident was planned in the region, then DSD is not well placed to find out what it is."

The disaffected spies allege that extramarital affairs are rife within the secretive agency, which intercepts telephone and radio communications across the Asia-Pacific region and is linked to espionage networks in Britain, the United States, New Zealand and Canada.

In one case, officers from the US National Security Agency (NSA) were severely embarrassed by a senior DSD employee who insisted on sharing a hotel room with a female colleague during an intelligence conference in America last year.

"The man's wife had accompanied him to the US on previous occasions and was well known to a number of very senior staff at the NSA," said the six-page dossier, which was leaked to several Australian newspapers including The Daily Telegraph, a Sydney tabloid. The incident prompted a formal complaint by the Americans and led to the woman being rejected by GCHQ as the nominated liaison officer for DSD.

"GCHQ pointed out that as he and his wife were well known to the senior leadership group at GCHQ, it would be too embarrassing to have him accompany her [the colleague] to official functions," the dossier said.

The same woman allegedly had an affair with another married DSD officer, who is now a high-ranking Defence Department official. He was said to be notorious for sending lurid personal e-mails to a female subordinate, 20 years his junior, under the name of "Raptor".

One DSD insider said yesterday: "How come the security vetting people never pick up this behaviour when everybody in DSD knows about it?"

In another incident, a married DSD officer, who is now occupying a sensitive overseas espionage liaison post, had an affair with a female colleague. "Due to his sexual behaviour, there is a real risk of him being compromised by a foreign government," one source claimed.

According to the document, staff feel unable to raise the complaints through official channels and morale is so low that people are leaving the agency in record numbers. The organisation, which employs substantial numbers of Britons, has 80 vacancies in its operations centre.

Some DSD managers are described as "flawed and corrupt", and there is said to be an influential group of managers nicknamed the "royal family". They socialise together, playing tennis, going out drinking and frequently visiting each other's homes, and some have allegedly had affairs with one another.

The authors of the dossier express concerns about conditions within DSD as Australia prepares to support US action against Iraq.

They say: "DSD is now an organisation in considerable decline due to the improper sexual behaviour by some of its managers, managerial incompetence, nepotism, illegal management procedures and a lack of clear direction and oversight."

The Defence Minister, Robert Hill, ordered a review of security procedures at the agency yesterday but rejected calls for an independent inquiry. Mr Hill dismissed the dossier as "a gossip sheet by some who are disappointed by failing to achieve promotions and the like". He said: "I don't really want to give it more credit than what it deserves."

But the Defence spokesman for the opposition Labour Party, Chris Evans, called for action. "DSD is one of the most critical agencies we have got," he said. "Its reputation has been besmirched and that needs to be dealt with."

DSD has two listening stations, in Darwin and in Geraldton, Western Australia. Information picked up there is processed in a high-security building at defence headquarters in Canberra.