The CSIRO has denied it duped the pharmaceutical giant Novartis into buying a compromised anti-counterfeit device to protect millions of medicine vials.
A Fairfax Media investigation in April revealed that DataTrace DNA, a joint venture between CSIRO and another company, Datadot Technology, misled the Swiss multinational by passing off cheap Chinese chemicals as its own "trade secret" formula.
But the deputy chief of the government's peak scientific organisation, Mike Whelan, told a Senate Estimates committee that CSIRO's internal investigation had found no evidence that it had deceived or wilfully misled DataTrace or Novartis over the supply of materials.
"Secondly we have identified no evidence that CSIRO officers deceived or wilfully misled DataTrace or Novartis with respect to the security level of the solution offered by DataTrace to Novartis," he said.
Mr Whelan said the organisation was continuing its investigation into the allegations, but defended the sale of its 50 per cent share in DataTrace three months after signing the deal with Novartis.
"The allegation that CSIRO seeked [sic] to capitalise on the alleged deception of Novartis through the sale of CSIRO's interest in DataTrace is also false," he said.
He said there was nothing unusual about CSIRO "selling down its shareholding" in a company.
In 2010, DataTrace DNA Pty Ltd signed a five-year deal with Novartis to supply a custom-designed high-security forensic "tracer" that would protect its vials of injectible Voltaren from being copied, filled with a placebo and sold by crime syndicates.
But despite a deal to supply a unique tracer code, DataTrace issued Novartis cheap tracer it had bought in bulk from a Chinese distributor.
The sale of counterfeit medicines has become a booming black market and a significant global health problem. Interpol seized 3.75 million units of fake drugs in 2012.
The invention sold to Novartis - a microscopic chemical powder painted on the neck of its Voltaren ampoules - was supposed to protect against such counterfeit attacks.
Instead Novartis was given a widely available tracer material that was only suitable for low-risk applications with no security concerns.
Damning internal documents seen by Fairfax Media showed DataTrace and some of the most senior officials at the CSIRO knew that Novartis was being misled in a deal believed to be worth $2.5 million.
As a result of the Fairfax Media revelations DataDot was placed into a trading halt and the company launched an internal investigation. Federal Science Minister Don Farrell also called for CSIRO to investigate the allegations.
When questioned by Senator Richard Colebeck at Monday's estimates committee about why he did not launch an independent investigation, Senator Farrell said an internal review was appropriate because other third parties were also conducting investigations.
Sign up for CIO Asia eNewsletters.