A botched investigation that saw a team of Canberra-based bureaucrats raid a naval base in Victoria has led to the Tax Office ordering a high-level review of its internal crime-busting unit.
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The review came after an Ombudsman's probe into allegations the unit had gone rogue, overstepping its powers in pursuit of a former employee on a ''hunch'' the man had threatened one of their own.
The Tax Office also ordered a review of the conduct of senior officers in its Fraud and Internal Investigations Branch, which ordered the inquiries into the former colleague who was suspected of sending hate mail to a senior tax official.
The office has admitted it should have called in police to assess the case before it sent seven Canberra public servants, armed with a search warrant, to burst into HMAS Cerberus on the Mornington Peninsula in October 2011.
The officials, who had been flown from the capital to conduct the raid, scoured the man's workplace and living quarters for nine hours but found no evidence against its ex-employee who had enlisted in the navy after leaving the Tax Office the previous year.
The target of the raid, Gary Setter, has consistently denied any wrongdoing. He is now considering legal action. Another investigation by the Privacy Commissioner into the unit's conduct is under way.
The Tax Office ordered an ''independent'' assessment of the conduct of the managers who ordered the raid, rewrote behavioural standards for the fraud and investigations unit, and called in its integrity adviser, Damien Bugg, QC, to review the outfit's ''powers, processes and systems''.
In its response to the Ombudsman inquiries, the Tax Office said it relied on advice from the Attorney-General's Department that it should go it alone on the investigation and not refer it to police.
The Tax Office conceded there might be the ''possibility'' of a conflict of interest in allowing senior officials to lead the pursuit of their former colleague, who had resigned from his job as a fraud investigator in 2010.
Mr Setter had been the target of an earlier investigation after being accused of improperly accessing the tax records of members of his family and left the department before the matter was fully resolved. He told the Ombudsman he believed the internal fraud unit became convinced he was seeking revenge on the officials responsible for the first investigation.
Mr Setter complained to the official watchdog that his former colleagues pursued him on a ''hunch'' that he was the man behind a series of letters and phone calls to a senior tax official that were deemed to be threatening.
In a final determination issued last month, the Commonwealth Ombudsman said it was satisfied with the steps taken by the ATO to address Mr Setter's grievances.
