Police are investigating allegations that staff at the Lebanese consul-general's office in Sydney have been paid wages in cash while illegally claiming social security benefits.
The revelations come just days after the consul-general, Robert Naoum, returned to Sydney agreeing to pay off his unrelated debts in return for an arrest warrant being withdrawn, the Sun-Herald reports.
Police are investigating allegations that more than a dozen staff at the eastern Sydney office, collected welfare and, in at least one case, unemployment payments.
At the same time, the consul-general's office had not been paying tax, superannuation or workers' compensation for its locally engaged staff, the Sun Herald's investigative reporter Natalie O'Brien reports.
Some staff allegedly made a profit by selling cigarettes and alcohol bought within the diplomatic tax-free quota.
It is claimed large sums of cash were sent from Australia to banks in Lebanon to avoid the scrutiny of authorities. But Mr Naoum told The Sun-Herald yesterday the allegations were just "propaganda against us".
However, his spokesman agreed the office did not give staff statements of earnings; nor did it deduct any tax on behalf of employees. It was up to the employees to declare it, he said.
"We have our own system," the spokesman said. That system of paying staff was regulated by the laws of the Lebanese government.
"They work according to regulations by the Lebanese government, not the Australian government. Australia has nothing to do with how we pick and pay them or how we pay tax. This is an internal system between the government of Lebanon and its employees."
The spokesman categorically denied Mr Naoum had knowledge of any wrongdoing, and said no staff had sent cash back to Lebanon or sold duty-free goods. He dismissed the claims as an attempt to defame the consul-general and extract cash from the Lebanese government.
A spokesman for the Minister for Workplace Relations, Chris Evans, said the matters were being treated seriously and had been referred to the appropriate agencies.
In an unrelated matter, Mr Naoum, who has been consul-general since 2004, had faced being arrested and forced into bankruptcy if he did not pay tens of thousands of dollars in legal bills after he unsuccessfully tried to sue a journalist for defamation, the Sun-Herald reports.
A Foreign Affairs Department spokeswoman said Australians employed by a foreign state were "entitled to minimum employment conditions, including wages, leave and safety conditions and protection" and must pay tax.
Mr Naoum's spokesman said consulate staff had signed an agreement with the Lebanese government on pay and conditions.