The immigration worker alleged slack security
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Immigration staff engaged in "unprofessional behaviour" towards applicants, a Home Office inquiry says.
But it found there was no evidence of the "sex for visas" scam alleged by a whistleblower earlier this year.
The investigation was prompted by allegations made to the Sun by an ex-employee at Lunar House immigration centre in Croydon, south London.
The inquiry criticised behaviour such as making contact outside the office and making fun of passport photographs.
No 'corruption racket'
The Sun had reported claims by Anthony Pamnani, an ex-administration officer, that women were helped to stay in the UK in return for sex.
He also alleged security checks were lax, making it easier for potential terrorists to sneak into the country.
A top official in the Home Office's Immigration and Nationality Directorate (IND) conducted the inquiry into the allegations against his organisation.
Tim Gbedemah, the IND's non-executive director, said: "I have found no evidence to support the Sun's central allegation that there was a corruption 'racket' in the Public Enquiry Office (PEO) involving 'sex for visas'.
"I have not found any evidence that female applicants were receiving more favourable or unfair treatment for any reason.
"I have, however, concluded that a few PEO staff were engaged in unprofessional behaviour towards applicants, including bypassing the queue, making contact outside the office, and inappropriately displaying and making fun of passport photographs.
"The lapses of behaviour and shortcomings in process and supervision that the inquiry has identified are serious."
'Lazy' colleagues
The inquiry follows allegations made by the 23-year-old whistleblower. He said he left his job in disgust at staff behaviour, which included pinning up passport pictures of women considered "ugly".
"One girl came in and told us an admin officer had visited her flat and they had slept together. She got indefinite leave to stay," Mr Pamnani told the Sun.
He also claimed attractive applicants were seen first and that Brazilian women were given longer stays in the country than their boyfriends for no reason.
He said staff were too lazy to check passports for criminal convictions, but the final straw had come when colleagues were given instructions to let in more eastern Europeans at the expense of south Asians.
Mr Gbedemah's report says: "I have recommended that an investigation continues into one specific allegation against a single member of staff about whom, it was alleged to the inquiry, an applicant made claims involving sex two or three years ago."
'Suggestive remarks'
About 12 staff bypassed normal procedures some 400 times to bring applicants to the front of the queue, the report said.
"Of these five, including Anthony Pamnani, had selected applicants who were predominantly - more than 70% - of a single sex, four choosing mainly women, one choosing mainly men," said Mr Gbedemah.
"In several of these cases, the unprofessional behaviour alleged by The Sun is the most likely explanation."
Staff claimed colleagues had chatted up female applicants, with one caseworker emailing up to a dozen applicants after the conclusion of their case, the report said.
In 2005 two complaints were made about security guards making "sexually suggestive" remarks to women queuing, it said.
'Credible witness'
Mr Gbedemah, whose report includes 23 recommendations, said Mr Pamnani had admitted he had not told the management about the corruption alleged by the Sun, adding: "I do not doubt that had he done so, management would have taken such a complaint or allegation very seriously.
"I have found Anthony Pamnani himself to be a generally credible witness, especially regarding those allegations where he admitted involvement himself."
Shadow immigration minister Damian Green said the report was "yet another blow to the credibility" of the Home Office, adding that he was particularly alarmed that some staff were not carrying out security checks.
"The current chaos is unfair to the taxpayer and everyone else involved in the immigration and asylum system," he said.
The public inquiry office at Croydon has 140 staff and processes 120,000 cases a year.
Immigration Minister Tony McNulty has stated that if immigration officials were found to have operated the scam, they could face criminal charges in addition to disciplinary action.