The Crikey/ACIJ series on Australian companies profiting from the foreign aid budget is a welcome discussion of the rapid privatisation of services in Australia and overseas, an area largely ignored by the mainstream media.
The Crikey/ACIJ series on Australian companies profiting from the foreign aid budget is a welcome discussion of the rapid privatisation of services in Australia and overseas, an area largely ignored by the mainstream media. The market, lightly regulated or not, is simply accepted by most commentators as the best way to order society and generate economic prosperity. There is no indication that the federal election campaign will question these assumptions.
Guy Rundle correctly wrote recently in the The Age that Kevin Rudd (and therefore Julia Gillard) believed “core economic processes could not be challenged, and that social power could not, and should not, be more widely distributed”.
My investigation of various levels of Australian society — from detention centres to military services and infrastructure to aid projects — reveals an extreme privatisation agenda by stealth with virtually no public or media scrutiny. The nation is increasingly controlled by unaccountable corporations either based in Australia or off-shore.
The ideology of selling off essential assets or services is bi-partisan and reveals a callous disregard for the lives of those being controlled by faceless businesses. It has become an article of faith for the corporate press to “let the market” decide rather than examining whether services will actually improve and society benefited.
America is increasingly moving down the path of privatising key roads and infrastructure, a trend Australia is seemingly keen to follow. The inherent dangers were clear to see, wrote Mother Jones in 2007, revealing how the general public was often shafted behind those who could afford the expensive toll-roads, hospitals and other important services.
Ageing infrastructure and a lack of government willingness to publicly invest almost guarantee the welcoming arms of corporations with the public interest far from their priority. It’s not uncommon for the same companies being paid to advise governments how to structure privatisation deals then double-dip by investing in the projects themselves.
The lesson from the US, ignored in Australia, is that the rate of privatisation is increasing as government oversight is either undercut or simply overwhelmed. A recent report by humanitarian aid watchdog Development Initiatives found an ever-increasing global budget to deliver aid and conflict relief but little ability to accurately determine where all the money was going and to whom. Waste remained endemic.
I wrote recently in Crikey about the re-opening of the Curtin Detention Centre. Back in May virtually no reporters acknowledged that British multinational Serco, with a history of troubling allegations by detainees in their care, would be running the facility. Nothing has changed since. Only the Greens complained in mid-July with the Labor government’s $100 million boost for expanded detention centres but again there was no mention of the company benefiting from the money.
I continue hearing serious allegations of mistreatment by Serco staff at Villawood detention centre and Christmas Island. The Commonwealth Ombudsman’s office began an investigation in May to determine whether Tamil asylum seekers were held in detention for too long. Tamils told the Refugee Action Coalition that Serco management on Christmas Island refused them blankets and warm clothes during a hunger strike.
ABC TV’s Hungry Beast briefly mentioned Serco’s role in Australia last year and explained how the company is employed by the ADF, runs prisons in South Australia and Western Australia and is “one of the two favoured bid consortiums for the new Sydney metro rail line”. It’s little known in Australia that KBR, formerly connected to Dick Cheney’s serial over-charging company Halliburton, controls some of the country’s key infrastructure. The firm faces serious allegations of mismanagement in Iraq, alleged rape of KBR employees in Iraq, gross negligence across the Middle East and use and abuse of private mercenaries in US war zones.
Jul 28, 2010
AusAID has told ACIJ that it was wrong in its previous answer about who owned the international development company GRM International until the end of last year, writes Australian Centre for Independent Journalism's director Wendy Bacon.
AusAID has told ACIJ that it was wrong in its previous answer about who owned the international development company GRM International until the end of last year.
In our first article in the Who profits from our Foreign Aid? series, we reported that GRM International, which has received more than a billion dollars worth of projects over a decade from AusAID, was owned until December 2009 by Consolidated Press International Holdings based in the Bahamas tax haven.
CPIH is the ultimate holding company for James Packer’s private empire including the secret family trusts that receive the company profits. During the period in which it was owned CPIH, GRM International also received hundreds of millions more from USAID, the UK Department for International Development and the European Union. Some of their contracts in the Solomon Islands, Afghanistan, Nigeria and elsewhere were for building financial transparency and accountability.
The question we asked was: such set-ups for tax minimisation purposes are common in international company business – but is it acceptable for major recipients of Australian government contracts to operate in this way?
AusAID requires major contractors to inform them about their ultimate holding company and provide copies of recent financial accounts. AusAID told ACIJ that GRM International had told them that their ultimate holding company was Consolidated Press Holdings, an Australian company that holds Packer’s worldwide casino interests but that is not at the top of the company chain of companies. (See chart in our earlier article).
So it seemed that either GRM International had either misled AusAID or AusAID had given us the wrong answer. Either way, we needed to follow up.
Finally, AusAID came back to us last week with a correction. An AusAID spokesperson said: “To correct our previous answer, prior to GRM’s ownership change in late 2009, AusAID had been aware that Consolidated Press International Holdings Limited was GRM International’s ultimate owner.”
AusAID reminded us that: AusAID has had no direct commercial relationship with GRM’s ultimate owner. AusAID’s contractual dealings have been with GRM.
This answer seems to miss the point of AusAID asking about the question about ultimate owners in the first place. There are good policy reasons for wanting to know beneficial ownership. Suppose a contractor was linked to arms dealers? Or organised crime? (We are not suggesting that this is the case here.)
But in this case it is clear that GRM International was very much embedded in the complicated web of Packer companies and GRM senior executive Darryn Purdy himself was frank about the fact that the company was financially run from Packer headquarters. “We manage the business and manage the work that we have, but how that’s reported into the broader aspects of these companies, that then goes to [Consolidated Press].”
So where are the owners of GRM International based now? While some of GRM’s new shareholders are based in Australia, some are based in Dubai. These include Kim Bredhauer, who continues to be managing director but moved to a Dubai marine development on the day of the sale. Dubai is so rich that it does not need an income tax system. Another shareholder company is based in the British Virgin Islands tax haven. Bredhauer was not available for interview.
We asked AusAID when it became aware of the change of ownership and whether any financial checks of the company have been carried out after the sale but these questions have not yet been answered.
While AusAID does not have a problem with contractors being based in tax havens, some NGOs definitely do. Transparency International’s executive director Greg Thompson says: “If aid companies are receiving money including for strengthening financial systems then they should lead by example by being transparent and open about their finances”. Recognising that some will defend secrecy on the grounds of commercial confidentiality, Thompson argues “… those principles should not interfere with the more general principles of transparency and accountability. All those managing Australian government funds should be subject to the same principles of disclosure” with flows of money and terms of contracts, disclosed to those at the grassroots.
Jack de Groot, CEO of Catholic Aid Agency Caritas agrees: “Some of the government’s aid program has been about building taxation systems in developing countries that help in securing government revenues. It would be an appalling irony if a provider of such a consultancy or capacity building program squirreled its profits in a tax haven to avoid paying what is their responsibility to pay – and from the government they were receiving the funding from in the first instance.”
Meanwhile, GRM continues to do well in the new financial year with more than $14 million new contracts for its work in PNG and Solomon Islands. It recently put in a new proposal under its head contract for AusAID’s technical assistance in Afghanistan program Development Assistance Facility for which it has already received $13,000,000. In an unusual move, AusAID put out its new proposal for independent appraisal by its old accountants, Ernst and Young.
Wendy Bacon is Director of the Australian Centre for Independent Journalism
Jul 23, 2010
Who profits from our foreign aid? Today, continuing Crikey's special coverage, we
Who profits from our foreign aid? Today, continuing Crikey‘s special coverage, we carve up the cake to show who’s getting what from Australia’s foreign aid budget.
The biggest benefactors are not who you think. Rather than the big NGOs, who actually get very little government aid money to deliver programs, the little-known Coffey International tops the list (we’ll delve into them next week). Here are the key findings:
- Corporations get the majority of Australian aid contracts and nearly 85% of the value of those contracts
- Six corporations get between them more than half of the value of the contracts
- The corporate share is even larger when you consider the university sector also is nearly always under pressure to include corporate-style profit margins as they seek to compensate for government funding cuts
- Coffey International gets the largest share and in one year got 37% of the value of the contracts
- A dramatic shift from NGOs to corporates took place over the Howard years — before 2003, NGOs got a larger share of contracts
- The aid budget has increased under the Rudd government but for the most part it has been business as usual
- The proportion of aid contracts going to corporates has slightly declined under Labor with most of the shift going to individuals rather than aid NGOs
- Many individuals are also trading as small businesses but if the business only appeared to have one or two individuals, these contracts have been included with individuals
- Contracts often last for several years so some trends across the years may simply reflect that the companies have plenty of work on the books.
|HASSALL & GHD||$170,341,030.60||4.54|
|TOTAL — BIG CORPORATES||$2,248,146,817.66||59.87|
No. and % of total contracts by sector — 1/07/07 to 30/6/10
|Category||No. of contracts||%|
|Other govt departments||67||1.24|
|Unis and other educational bodies||308||5.70|
|NGOs and business associations||339||6.27|
|Other development agencies||55||1.02|
How we did the analysis: A new Australian tender database was created in 2007 and the old one was phased out. For this reason, it is not possible to analyse the earlier contracts. The Senate does publish the contracts but only ones above $100,000 which eliminates a lot of contracts and money.
You can only download a limited number of contracts from the www.tenders.gov.au website in one go, so we downloaded the database in sections and created a new Excel file. We then coded the database according to the type of supplier — corporate, individual and so on. We were then were able to create the charts and the tables and identify the big contractors. We know from our research that the database is not entirely accurate or up to date — but with a sample of more than 5000 entries, the trends are clear.
*Wendy Bacon is the Director of the Australian Centre for Independent Journalism and Shu Shu He is studying a Master of Arts (Journalism) at UTS. Read previous articles in the ‘Who profits from our foreign aid?’ series here.
Jul 21, 2010
The Australian Centre for Independent Journalism’s Wendy Bacon and Michelle Stephenson look at who gets what slice of the Australian aid pie.
One of the earliest forms of public accountability rested on the idea that the public should know how government money is spent. The latest version of that accountability in Australia is the tender database, which records who gets what government contracts.
Earlier in our special report on Who Profits from our Foreign Aid? we reported on some AusAID entries in the database that were unhelpfully vague. As we investigated further, we found other entries that are misleading or wrong, undermining the little transparency that does exist.
Last week, we reported on two big private aid companies, GRM International and GHD. This week we move onto two public companies, Cardno and Coffey International, and look more at who gets what slice of the Australian aid pie.
Public companies have to disclose more information than private companies but they also have pressure on them to maximise profits and returns to shareholders.
Like GHD, Cardno, Australia’s third biggest aid contractor, began life as a humble Australian engineering company but turned into a global services company winning more than $500 million of AusAID contracts over the past three years.
The company has bucked the financial downturn in 2009-10, predicting a final record profit of more than $36 million, thanks partly to a merger with Entrix, a US-based environmental company and oil spills specialist hired by BP to help with its Gulf of Mexico spill.
Public/private partnerships are at the core of Cardno’s success story with new AusAID, US AID and European Union aid contracts as well as 100 projects under the federal government’s $3.2 billion school stimulus package.
Cardno has interests in everything from conflict resolution to law and justice, tourism, financial development, HIV AIDS and bridge building. Aid and development contracts contribute about 35% of the company’s overall revenue. That’s not ongoing guaranteed income, managing director Andrew Buckley points out, but he acknowledges the advantage of less-squeezed public clients in recession.
While Buckley agrees the bottom line is shareholder return, he argues profits won’t grow if Cardno fails to deliver effective aid.
Profitability and aid delivery go together. The word “transparency” appears frequently in Cardno’s corporate communications. According to the latest company magazine Cardno Connect:
“It is no longer socially acceptable for private corporations to operate independently of public scrutiny, indeed they are now obligated more than ever to make sustainable business decisions and act in a manner that demonstrates good corporate citizenship. Corporations today are judged and held accountable by the repercussions of their actions by both shareholders and communities alike; indeed whole teams are dedicated to the task of maintaining a positive corporate image.”
But there are limits to transparency. Asked whether he agrees companies such as NGOS should be required to publish financial statements about aid projects, he declines; it’s “up to AusAID”.
Cardno has blossomed under the rise of technical assistance aid, which rose to nearly 42% of the aid budget under the Howard government and has still been 34.5% under Labor. Over the past three years, Cardno has won close to $100 million for contracts involving the Australia-Indonesia basic education fund and $60 million to alleviate poverty in the Indonesian province of Nusa Tenggara. Between 2003 and 2009, it received $158 million to manage the PNG law and justice program.
In September 2009, it got $50 million project from the US President’s Emergency Plan for Aids Relief Fund to build alliances between public and private sectors. For the past five years, it has led European Commission projects to help China introduce law reforms for integration into world trading systems.
The company’s annual review reports that while the market for international development remains strong, profits are down because of ‘timing of contract” issues. Asked what this refers to, Buckley explains the company hasn’t been able to replace a large USAID project on land title reform in Afghanistan with another big project.
Jul 16, 2010
ACIJ’s Michelle Stephenson and Wendy Bacon begin our corporate aid snapshots with GHD International, in the latest installment of Crikey's Who Profits From our Foreign Aid? series.
Earlier in the week, we began our Who Profits from our foreign aid? series with an in-depth case study of GRM International that grew from a cattle company to a global aid player with almost no media scrutiny.
We are still waiting for answers from AusAID about whether or not it knew GRM was owned until the end of 2009 by a holding company for the Packer secret family trusts, and what financial checks AusAID carried out on GRM’s new ownership structure.
Meanwhile, Crikey now moves on to some snapshots of other for-profit aid companies.
No one is suggesting that ‘for-profit’ companies cannot play a role in aid delivery, particularly with large infrastructure projects. But Australia’s aid industry was mostly privatised during the Howard years without public debate and we are raising questions about the accountability and transparency of our program.
As Public Interest Advocacy Centre’s CEO Robin Banks put it last week:
“Transparency and accountability are critical to the effective operation of any government program, whether it is delivered by government, by for-profit services or by non-profit services. This is equally important in the aid and development area, perhaps even more so as many of the programs or services are delivered outside Australia and are, therefore, less able to be directly observed in operation by the general public and by funding bodies.”
Today we begin our corporate aid snapshots with GHD International — a giant engineering company operating in water, energy and resources, environment, property development, and transportation markets in more than 15 countries.
2009 was a good year for GHD despite the slowing global economy. According to their website, GHD’s income grew to $1.1 billion, up 18% on 2008.
GHD received more than $163 million in AusAID contracts between 2007 and 2010. This, however, represents only half of more than $230 million overall from a number of government departments with over $85 million from Defence, for which GHD is a preferred supplier.
Nearly $60 million of the AusAID contracts are for a water and sanitation project aimed at bringing clean water to the people of the Mekong Delta. In a partnership with the Vietnamese government, the project won an Engineering Victoria award earlier this year. More than $50 million is to develop partnerships with the Chinese government.
Until 2008, most of GHD’s development focus was on its core business of engineering, at which time they took over Canberra’s biggest service delivery company Hassall and Associates, which received over $51 million in aid contracts between 2007 and 2010.
Whereas most of GHD’s contracts were in infrastructure, Hassall has a major focus on technical assistance in the Pacific with contracts in Tonga for fisheries, in Vanuatu for land reform, policing in East Timor as well as community development in the Philippines and governance in China.
GHD has 6500 employees, with operations in 15 countries including the United States, China, India, Vietnam and many subsidiaries. Its last group accounts filed with the Australian Investment and Security Commission (ASIC) are its 2009 half yearly ones which declared $35.9 profit up from $33.9 million for the 2008 half year. GRM’s billion dollar income is rapidly increasing and was up 18% in 2009.
The group accounts do not reveal where the profits come from and how much the aid sector contributes. When asked if the company would agree to transparency of contracts and finances, Sonia Adams, GHD’s corporate manager of marketing and business development, said:
“If that was part of the conditions of the terms of the tender and we agreed with those conditions and we wanted to bid for the work then we would do it with the understanding that that would be the case”.
GHD took a strategic move into China in the late 1990s and, as their business there expanded since 2004, the aid work followed: “Doing aid work does mean that build close relationships with both private sector and government and of course it gives you visibility because the projects are exceedingly important to the infrastructure to that country, but it is just part of the offering we would take into any new region that we entered,” said Adams.
The five-year $50 million Australian Government, AusAID initiative Australia China Environment Development Program is designed to improve environmental protection and natural resource management, focusing particularly on water and policy development.
The AusAID China program began in 2007 and what followed was a trickle down effect with an expanding presence and a slew of private contracts. Projects such as lake developments and urban planning for new towns, giving them added financial benefit.
One of GHD’s customers in China is a Chinese coal company, which with their help has taken its 50 million-tonne production to 100 million tonnes and has plans to take it to 200 million.
GHD’s ties to China continued to grow with an AusAID contract for $19 million for an vocational education and training project a month after they took over Hassalls.
Other GRM Energy Projects
- GHD have a long term involvement in feasibility studies, development and finance raising for a controversial open cut mine in Bangladesh which involves the relocation of thousands of people
- Coal and gas developments in Queensland
- Off-shore gas developments in West Papua
- Expanding coal exploration in NSW’s Hunter region with Shenua Watermark a major Chinese coal and electricity company
- GHD are hoping to expand their Defence building to the Middle-East Malaysia and New Zealand
- GHD prepared the Gunns Pulp Mill social impact statement which was criticised by the Tasmanian Council for Social Services
Jul 14, 2010
Wendy Bacon and Flint Duxfields report for the Australian Centre for Independent Journalism for the second installment in Crikey's Who profits from our foreign aid? series.
Yesterday we detailed how GRM International grew from a cattle company to a big player in global aid delivery. Today we detail GRM’s movements during the GFC.
With Packer shedding assets and money during the GFC, the Packer guarantees that had supported global aid company GRM International in gaining government contracts and sister company Austrex in its export contracts during their period of rapid growth were no longer secure. James Packer was now concentrating on his casinos.
Behind the scenes in the Brisbane headquarters of GRM and Austrex, plans were under way for GRM’s managing director Kim Bredhauer, directors David Crombie and Kenneth Warriner and their business associates to buy the companies from Packer. But timing, in the midst of the GFC, was tough.
While very successful in winning aid contracts, GRM is not a sure bet. As the annual report of its UK-based arm noted “any change in the aid delivery policies of the British, Australian or Swedish aid governments would have a significant impact upon future revenue earning potential”:
While ASIC records provide no information about GRM’s finances, the UK group accounts are more revealing. Despite the hundreds of millions dollars flowing through the group, it only ever declares small profits in the UK. In 2008, GRM International Group Ltd ( UK) declared only about $2,300,000. No breakdown is provided about what part of the business generates these profits, although more than 40% of turnover is said to be in Asia, including China.
If the contracts were going to continue to flow, ongoing guarantees were needed. Enter investment banker Andrew Morgan and John Eales, ex-captain of Australian Rugby Union team, who, along with Bredhauer, were the private aid company representatives on Downer’s Aid Advisory council. Eales and Morgan set up Catapult partners, which arranged and financed the two buyouts of GRM and Austrex, to date the only business activity advertised on the Catapult website.
The government-owned Export Finance and Insurance Corporation (EFIC) provides finance and insurance solutions to help Australian exporters who cannot get bank finance to develop their overseas business. It promotes itself as a lender of last resort. On the board of EFIC is president David Crombie, a current director and shareholder of GRM and its managing director before the Packer family bought the company.
He is also president of the National Farmers’ Federation and was described as a Packer employee by the Financial Review in 2006. According to ASIC records, he was also a director of Austrex until he resigned in September 2009.
Two new companies — Global Agtrade and International Project Holdings (IPH) — were set up. IPH (since renamed GRM International Holdings Pty Ltd), which now controls the group, has multiple owners with private companies of Bredhauer and director of Consolidated Pastoral Holdings Kenneth Warriner holding substantial shares. Some shareholders are based in Australia while others live in Dubai and one company is based in the British Virgin Islands tax haven.
Just one week before Christmas, Andrew Morgan became a director of Austrex, which two days later was sold by GRM International Holdings in London to Global Agtrade of which Morgan is a director and shareholder. On December 23, Austrex reported to ASIC that EFIC now held a $100 million charge over all its assets.
On December 22, Packer sold GRM International Holdings in the UK and all the rest of its subsidiaries to IPH. At the same time, Bredhauer moved from Brisbane to a marina in Dubai.
Two months later in February 2010, IPH reported to ASIC that EFIC now also held a $40 million charge over its assets including all its operations involved in delivering aid for AusAID, the UK Department for International Development and the European Union. Ten days later, Crombie and Eales became directors and shareholders of IPH, the new controlling company of GRM.
No public announcement was made about the EFIC loans until April 2010 when EFIC issued a media release announcing a $10 million insurance bond to GRM. According to EFIC, this “revolving” loan, allows “certain [GRM] group companies” within Australia and abroad, to call on the Australian government to “provide advance payment and performance bonds on its behalf”. So far, the loan is being used for bond to secure a contract for GRM to set up a facility for farmers in the United Arab Emirates.
No public information has ever been released about the Austrex loan. When questioned about the loan, EFIC spokeswoman Jennifer Whittle told the ACIJ that the guarantee facility was not publicly reported at Austrex’s request. Neither EFIC nor the company will reveal the amount of the Austrex assistance. When first asked about it, Morgan, now a director of Austrex, said the industry is highly competitive market. “We’d prefer that the EFIC support that it gives to Austrex aren’t put out in the paper. They help us and we don’t want our competitors to get the same sort of help.”
According to GRM’s deputy managing director Darryn Purdy, obtaining the EFIC loan to cover the company after the sale was standard operating procedure.
“You have to have working capital to successfully operate and deliver capital, and it’s certainly a standard process in business.”
But Luke Fletcher, spokesperson for Jubilee Australia, a development NGO that has spent the past six years monitoring EFIC, says providing finance to a company so that a sale can proceed is outside EFIC’s mandate.
“EFIC is set up … to support export trade contracts and assist with providing products that remove some of the specific commercial risks and difficulties from exporting. It is not set up to provide general financial assistance, financial viability or solvency to companies generally involved or having an undefined exporting profile.”
According to Whittle, EFIC’s relationship with the companies only began after the GRM and Austrex sales had gone through. But Morgan, who arranged the loans, told the ACIJ that the applications for financing had been submitted “many months before” the sale, saying this was “normal with this kind of credit support”. He wouldn’t reveal how much the loan is for, though he said it was “nowhere near $100 million”, which is the amount of the charge over Austrex’s assets. He said the EFIC financing was only necessary because of the sale: “Under Consolidated [Press Holdings] it wasn’t necessary.”
While he said the buyout could have gone through without the EFIC loans, Morgan acknowledged that the process would have been a lot more difficult.
“It’s always a stressful time doing these transactions and the most stressful thing is to line up your financing,” says Morgan. “EFIC gave us a fair bit of confidence that we could actually transact.”
Did it make any difference that Crombie was on the board of EFIC? Morgan, who described Crombie as one of the “straightest corporate people in Australia”, said: “It’s probably counted against us because we had to jump over all that stuff …because we had to prove that even more. EFIC’s a very conservative organisation.”
Despite being a director of GRM, EFIC board member Crombie denied there was a potential conflict of interest regarding the loans’ approval.
“I have absolutely nothing to do with the management of GRM nor with the management of EFIC,” he said.
But according to documents lodged with ASIC, Crombie has been a director and secretary of GRM International Pty Ltd since 1977 and since the loan was approved has taken up a directorship and a 10% share in the company’s new owner, GRM International Holdings Pty Ltd.
Crombie told the ACIJ he was surprised to learn the ASIC documents still list him as a secretary of GRM.
“I understood I wasn’t [the company secretary], I’ve since checked and found that the documents do say that, but I haven’t acted as secretary for something like 20 years,” said Crombie, who insisted that all interests he had in the companies were declared to EFIC. “Of course any conflict of interest was declared, that’s standard procedure.”
Crombie said he declared a “previous interest”, not a present interest in Austrex because he said he was involved in that company “a long time ago”.
Austrex’s financial accounts have always clearly listed Crombie as director and despite submitting a signed letter to ASIC in September last year recording his resignation Crombie told the ACIJ he resigned from the Austrex board more than 20 years ago:
“This was another administrative oversight where my resignation was not confirmed,” he said, admitting that he and Austrex were to blame for failing to ensure the records were up to date. “I’ve not had any engagement with Austrex for over 20 years. This is ancient history.”
Whittle confirmed that Crombie had registered his directorship in GRM when he joined the EFIC board and had reminded the board of this when the loans came before it for ratification. Whittle told ACIJ that she had no record of Crombie having ever declared an interest in Austrex.
According to Whittle, both transactions were delegated to EFIC staff because they were below the threshold required for the board to be directly involved in approving the loans. She said the level of the threshold was confidential and was adjusted every six months.
GRM and Austrex no longer operate out of the same office although there are still connections — Morgan and Eales are involved in both companies and Warriner who, under new owner Terra Firma, has continued as managing director of Consolidate Pastoral Holdings is a director and substantial share holder in the new GRM holding company. Crombie and Bredhauer are now not only directors but also shareholders in GRM.
The 2009/2010 financial year has been another good one for GRM with $89 million worth of new AusAID contracts for legal development, financial strengthening, auditing, training, customs and excise projects in the Solomon Islands, Indonesia, PNG and East Timor. This is on top of more than $100 million worth of old contracts transferred to the new owners. They have even diversified with a $3 million contract to manage real estate for the Customs and Border Protection Service.
Meanwhile, the Solomon Star reported that a deal for Austrex to export 1000 cattle to the Solomons Islands still awaits finance.
If you’re interested in working for GRM, there is an AusAID-funded job being advertised in the Solomon Islands for a resource manager to support the development of the tax system. It comes with more than $50,000 accommodation and travel benefits — more if you have children. As you will not be living in Australia, you won’t have to pay tax. You need to nominate your monthly fee and if you prefer to work through a trust, you need supply the name of your trustee company.
Jul 13, 2010
When James’ father Kerry Packer purchased both companies in 1993, GRM was an agricultural company managing rural investments and thousands of cattle in Queensland. Here's how it grew from a cattle company to a Foreign Aid giant.
Yesterday, we kicked off our Who profits from foreign aid? series with a breakdown of GRM’s corporate structure; today we report on how it grew from a cattle company to a big player in global aid delivery.
Until Christmas last year, if you visited GRM International in Lennox Tower in Brisbane’s CBD, you were greeted by large photos of smiling brown faces, signalling the company’s interest in international development. What was not obvious was that you were also at the headquarters of one of Australia’s biggest agricultural export offices, Australian Rural Exports Pty Ltd or AUSTREX as it is known.
Austrex describes itself as a “leading Australian exporter of agricultural products, specialising in the supply of livestock, genetic products, meat, dairy ingredients, grains and seeds to all major markets around the world” with global operations including in China and the United Arab Emirates.
GRM and Austrex not only shared the same office but they were intertwined in other ways. The registered offices of both companies were at Packer headquarters in Park Street, Sydney. They also share several common directors including current GRM managing director Kim Bredhauer and pastoralist Ken Warriner, managing director of 17 massive cattle properties held by Consolidated Pastoral Holdings.
GRM International Pty Ltd was also a shareholder in Austrex and they were both owned by another GRM company in London, which reported on their activities jointly in the one lot of company accounts.
When James’ father Kerry Packer purchased both companies in 1993, GRM was an agricultural company managing rural investments and thousands of cattle in Queensland. Someone who knows better than anyone just how important the Packer connection was to GRM and Austrex is National Farmers Federation president David Crombie. A former managing director of GRM, Crombie is still on the GRM board.
During a speech he delivered to the Australian Association of Agricultural Consultants in April last year, Crombie spoke about the impact of the Packer family takeover:
“GRM had the capacity to take on more ambitious projects, projects from which we were previously precluded on account of the performance guarantees and bonds required, our properties were absorbed into the Consolidated Pastoral Group and the exporting company (Austrex) expanded its reach.”
As aid delivery shifted from large NGOs and government partnerships to “for-profit” companies after the mid-1990s, GRM grew rapidly, especially from 2003 onwards.
GRM had long been involved in the Middle East and was quick to see the business opportunities provided by Australia’s involvement in the war in Iraq. In a rare media mention of Kerry Packer’s involvement in the company, The Financial Review reported in 2003 that GRM owner Packer and CEO Bredhauer had a meeting with the then Minister for Trade, Mark Vaile, to lobby for contracts in Iraq.
Bredhauer told the ABC that GRM was confident enough to set up an office in Iraq anyway: “There will be imports of cattle and possibly sheep into Iraq, their agricultural sector including their dairy, sheep and cattle sectors have been run down … There would hopefully be some prospect for our trading company, but certainly the possibility of being involved in helping to build and run an abattoir or repair something that’s already there.”
In January 2004, Vaile announced that GRM had won a USAID contract to advise the Coalition Provisional Authority in Iraq on how to shift the controversial “oil for food program” to normal distribution.
Back in the Asia-Pacific region, GRM won contracts to deliver major projects for an Agricultural and Development project and Targeted Training in PNG, policing and education in Vanuatu, capacity building in East Timor basic education in the Philippines and a large agricultural project in Cambodia. In 2005, GRM was ranked fourth in income received from Australian government aid contracting and moved to top ranking after it took over another big contractor Melbourne Development Institute (previously part of Melbourne University private). A key to its success was the huge contracts to manage RAMSI Australia’s ongoing intervention in the Solomon Islands.
With so much publicly funded business, it was not surprising that Bredhauer developed close government links. He accompanied the then Queensland Premier Peter Beattie on a trade mission to the Middle East and was appointed to the then Minister for Foreign Affairs and Trade, Alexander Downer’s Aid Advisory Council, which the Rudd government disbanded.
As aid developed into a competitive global market, GRM took over an agricultural consulting company in Sweden, a meat company in the Netherlands, an agricultural company in the UK, and set up a joint operation with a landscape development company in Dubai. In the UK, they have been a pioneer in “for-profit” aid delivery, winning a UK Department for International Development (DFID) £20 million contract to develop democratic governance in Nigeria and another for supporting investment in the meat and leather industry, also in Nigeria. GRM is now involved in DFID projects in Southern Afghanistan, a £70 million project to strengthen law, justice and financial accountability systems in the Congo, justice and policing in Yemen and a number of European Union agricultural projects in Southern Africa.
GRM has claimed to be working in 60 countries employing a 1000 people on more than 100 projects ranging from animal exports to improve genetic standards in Sri Lanka to resorts with their partner Green Concepts in Kuwait.
So how does a company with such interlinked activities keep its aid business interests separate from its other global export operations? While it’s true that most of the money is used for subcontractors with specialist skills, many aid contractors are now dependent on big companies such as GRM for ongoing work.
The ACIJ asked AusAID if GRM has ever declared potential conflicts of interest in countries in which it conducts agribusiness or its associated companies operate businesses.
AusAID replied that it was “unable to respond to this question without undertaking extensive research, involving reviewing all tenders submitted by GRM International Pty Ltd over many years”. The ACIJ followed up with questions about whether AusAID kept records of conflicts of interest and asked if GRM had declared any conflict of interest in relation to specific agricultural contracts. No answer has yet been received.
GRM’s most recent takeover was of the Effective Development Group (EDG), a company that specialises in the monitoring and evaluation of aid projects. Some of EDG’s contracts appear to involve the evaluation of projects conducted by GRM itself. The ACIJ asked AusAID about these and was told that these projects were not for monitoring and were not “independent evaluations”. The ACIJ also asked about another EDG project for education in Vanuatu but was told it had been incorrectly attributed to EDG on the tender database and was actually for GRM International.
James Packer takes over
Until October 2008, all was going smoothly for GRM International under the new Rudd government. It won $187 million in new AusAID contracts in the 2008 /2009 financial year.
By then Kerry Packer had died and son James had taken over. James was reported to have splurged on a $50 million yacht, a $60 million private jet and $38 million London flat. The difference between GRM aid recipients and its owners was vast.
In 2007, James Packer spent $3 billion on five US casino properties, just as the global financial crisis was beginning to bite.
By October 2008, Brisbane’s Courier Mail reported that Jamie Packer’s private interests were reported to be losing $6000 a minute. CPH was shedding assets including its interest in Challenger Financial services. A $50 million yacht was sold and a private jet was put on hold. CPH held onto its casino interests in Australian, UK, Macau and Las Vegas although they too were losing hundreds of millions of dollars. Consolidated Press International Holdings pulled out of another big casino deal on the grounds that it did not want to disclose information about its secret family trusts in the Bahamas. Crown Casino shares were falling.
In March 2009, to the regret of his father’s old friend Consolidated Pastoral Holdings and GRM director Kenneth Warriner, Packer sold the huge land holdings to British private equity firm Terra Firma for $425 million. At the time, it was falsely reported by the London-based Financial Times that GRM was also to be sold to Terra Firma. In a rare media mention of the company, the Financial Times notes: “CPC owns 17 properties totaling five million hectares, and following the 1993 purchase of the international agricultural consulting and management company, GRM International, CPC became responsible for the management of more than 300,000 cattle across north Australia.” No media outlet mentioned GRM’s role in aid delivery.
If this report had been correct, not only had a massive junk of Australian land but also hundreds of millions of AusAID, EU, DFID and World Bank aid contracts would have ended up with Terra Firma, which is owned in the Cayman Islands tax haven and owns EMI records and lots of property in Germany. As it happens the reports were wrong and GRM and Austrex remained Packer companies until the end of 2009.
For GRM, however, 2008/9 financial year was a good one with $187 million worth of new AusAID contracts rolling in. How much of that is profit, however, it is not possible to say as the accounts of the GRM Unit trust are not published.
Jul 13, 2010
One dangerous anomaly is that the refugees may well end up living in better conditions than most Timorese, which would be difficult to avoid.
The kind of boomerang aid described by Bernard Keane (Who profits from our foreign aid?) is common practice for much Western government aid to the undeveloped world, most obviously and obscenely in the case of the US, whose aid is largely tied to US companies and US products.
Among a long list of notorious practices would be the Bush-era aid linked to anti-abortion laws in the recipient country and USAID to Israel, which is mostly manifested in armaments purchases. Iraq is another obvious abuse and misuse of aid, which, at its peak, accounted for the majority of the USAID budget supporting a barely credible litany of incompetence, waste and corruption in rebuilding educational and medical facilities and water infrastructure. Such projects usually excluded non-American bidders and sometimes used a no-bid mechanism. In Agfhanistan at least 40% of aid is returned to the donor via outsourcing to companies and consultancies from the donor country.
Beyond the Halliburtons (a commonality in many of the cases referenced above) there are ostensible charities, indirectly supported by US funds, such as CARE whose modus operandus was revealed to be that
“… the United States government buys the goods from American agribusinesses, ships them overseas, mostly on American-flagged carriers, and then donates them to the aid groups as an indirect form of financing. The groups sell the products on the market in poor countries and use the money to finance their antipoverty programs”.
Note the double dose of subsidy to American farmers — most of the surplus food was heavily subsidised in the first place — and a double or triple whammy in denying market access for undeveloped countries’ agriculture, often the only tradeable commodity they could use to haul themselves out of poverty.
Clearly the US employs USAID for dual purposes of foreign policy and aid/development but with the latter of distinctly secondary political weighting. Worse perhaps than the waste and faux aid, is the reputational and institutional damage done in recipient countries, and in turn, in citizens in Western donor countries who can be forgiven for “compassion fatigue”, if for the wrong reasons. (But we should not tar with the same brush some prominent and successful NGOs such as Oxfam, World Vision and Médecins Sans Frontières who do honourable service around the globe.)
The US may be one of the worst culprits of aid abuse but it is not the only one.
It is timely to discuss the failure of aid to East Timor. Over years of UN supervision, billions of dollars were spent. Some of this dosh was used to keep the “in country” staff, i.e. prosperous Westerners, in the style of life they expect, and some of this trickled down to the locals via the service industry such as home-keeping, cooking, nannies/amahs, etc. When the UN pulled out of East Timor in 2005, the withdrawal of this low-level income was keenly felt, especially as there was nothing to replace it and much of the work was by women (and thus the earnings were mostly retained for family support).
But these types of transient low income service jobs are hardly what is meant by “commercial opportunities, skills formation and capacity building”. As to all those things which East Timor, one of the poorest and least developed countries in the world, needed and still needs: roads, bridges, clean water, power, sewers and perhaps most important of all, schools and teacher training? Almost zip. Billions of dollars over many years and a truly shocking record of lack of achievement in these basics. The Wikipedia version is a whitewash: “From 2002 to 2005, an international program led by the United Nations, manned by civilian advisers, 5000 peacekeepers (8000 at peak) and 1300 police officers, substantially reconstructed the infrastructure.” Some cynics might say that Australia doesn’t do infrastructure so it was no surprise.
Also no surprise that more unrest and violence broke out in 2006, destroying what little infrastructure the country had. Australia should be ashamed of its lead role in the UN operation and the post-UN history, notwithstanding the culpability of Timor Leste’s own leadership and Portugal’s historic neo-feudal rule. Even our role in what one hopes may be their financial saviour, the offshore oil and gas projects, is dominated by self-interest and greed. Only international pressure finally shamed Australia into agreeing to a 50:50 share of royalties in place of the previous usurious 80:20 split (in Australia’s favour) that had been extracted/imposed during Timor’s weakest period. (So much for the Australian notion of a fair go!)
So, to the issue of a potential regional refugee processing centre in East Timor. Put to one side all the contentious questions of the likelihood, appropriateness or effectiveness of the idea. It is feasible that such a centre could be a job generator for the Timorese who have crippling levels of unemployment and poverty, notwithstanding several problems inherent in the concept. One dangerous anomaly is that the refugees may well end up living in better conditions than most Timorese, which would be difficult to avoid.
But with some imagination — and a lot more actual implementation than shown in the UN days — it could be co-ordinated with reconstruction of one of our closest neighbours in dire need of poverty alleviation and stabilisation. No doubt some such schemes involving various promises of linked development aid are being proffered to the Timor government. On the other hand our track record, in Timor itself, and other regional neighbours, is not convincingly positive and would require us abandoning the US model of foreign aid we have been using in PNG. One could go further and say that the notion is patronising and offensive given that Australia, without the bounty of natural resources, would indeed be the poor white trash of Asia-Pacific.
On Monday the Timor parliament voted against adopting Australia’s concept but the government and its PM and President have yet to decide whether to rescue or turn back the sinking vessel of Australian refugee policy currently drowning from impoverished lack of credibility and humanity.
Dr Michael R. James is an Australian research scientist and writer.
Jul 13, 2010
Some important issues are just too slippery, too remote or too big to wrap your head around. Foreign aid is one of them.
Some important issues are just too slippery, too remote or too big to wrap your head around. Foreign aid is one of them.
The fact that a big slice of Australia’s $4.3 billion (yes, billion) foreign aid budget is pocketed by a handful of largely invisible companies should ring alarm bells within government.
The fact that one of the biggest of those companies files no public accounts with Australian regulators and was, until recently, domiciled in an international tax haven should ring more alarm bells.
Very few people question Australia’s responsibility to provide aid to under-developed and developing countries. But the importance of that responsibility, and the size of the aid budget, means accountability, transparency and probity must be overriding — and clearly that is far from happening, as highlighted by this week’s joint investigation by the Australian Centre for Independent Journalism and Crikey.
We kicked off our series yesterday with this line:
The central question at the heart of this web of complex company structuring is this: such set-ups for tax minimisation purposes are common in international company business – but is it acceptable for major recipients of Australian government contracts to operate in this way?
As Bernard Keane wrote yesterday, under the government’s commitment to increase foreign aid to 0.5% of Gross National Income, the current figure of $4.3 billion is scheduled to rise to $8-9 billion in five years’ time.
Now’s the time to read the fine print on Australian’s foreign aid billions.
Jul 12, 2010
For nearly a decade one of Australia’s most successful aid companies and its biggest casino operator were owned by the same company.Wendy Bacon and Flint Duxfield tell the untold story of GRM International.
If you ask most Australians who delivers Australian government aid overseas, they’ll most likely list big, well-known Australian NGOs such as Oxfam, World Vision or Caritas. Most would be surprised to know that for nearly a decade one of Australia’s most successful, although little-known, aid companies and its biggest casino operator were owned by the same company.
We’ve studied the company records of one of Australia’s biggest foreign-aid companies — GRM International Pty Ltd. Until December last year, GRM International was fully owned by the Bahamas-based company Consolidated Press International Holdings (CPIH) — a key company in the private empire of one of Australian richest families, the Packers.
The central question at the heart of this web of complex company structuring is this: such set-ups for tax minimisation purposes are common in international company business — but is it acceptable for major recipients of Australian government contracts to operate in this way?
GRM International handles hundreds of millions of dollars worth of government contracts each year. Yet, according to its most recent financial statements, GRM International Pty Ltd doesn’t make a profit and hasn’t had any employees since 2005.
The company has filed identical financial accounts to Australian Securities and Investment Corporation (ASIC) since 2005. These accounts show that it hasn’t reported a single cent’s turnover for over a decade, despite acknowledging in ASIC documents that 94 people worked for the company in 2005.
It’s just one of many surprises and inconsistencies that surround the company, which was sold by the Packer family to some of the company’s directors, managers and business associates in December of last year.
The accounts are surprising because, according to Australian government records, GRM secured more than a billion dollars worth of AusAID contracts between 2001 and 2010, as well as income from its agribusiness activities.
A large amount of this money has been for “technical assistance” in the form of short-term contracts for expert advisers. This form of aid is more common in Australia than in other OECD countries and has been criticised by a recent review of Australian aid to PNG as often ineffective, wasteful and lacking in accountability.
GRM’s highest-profile jobs have been for managing the civilian end of the Australian-led Regional Assistance Mission to the Solomon Islands (RAMSI). GRM has received hundreds of millions of dollars to hire judges, magistrates, public servants, court officials, the Ombudsman and the RAMSI public relations team, advise on financial policy and manage the local prison.
All of these contracts are published on the federal government’s tender database but details are often vague, such as just over $350,000 over two years to “strengthen accountability” and another million for “governance and related activity”.
Even the deputy managing director of GRM International, Darryn Purdy, who until the sale was its Asia-Pacific regional director, said he had no idea why GRM had filed accounts listing zero profit. He directed the ACIJ back to Consolidated Press Holdings headquarters where the company’s accounts were handled.
“Maybe ASIC data is not up to date … I guess what’s happened would be that the results have been consolidated upwards into the Packer account as opposed to being reported separately,” said Purdy. Purdy then suggested that Consolidated Press should explain the anomaly.
“We manage the business and manage the work that we have, but how that’s reported into the broader aspects of these companies, that then goes to [Consolidated Press].”
A spokesman for Consolidated Press, Glen Wein, who was a director of GRM until the sale, refused to comment on the matter, referring the ACIJ back to GRM. “I’m sure we have complied with all our legal requirements. We don’t comment on our filings, you’ll have to speak to the company about that.”
In September last year, when the ACIJ asked ASIC for an explanation of the identical GRM accounts, a spokesperson said ASIC could not comment for “operational reasons”.
Secretary of most of Packer family private companies at the time, Robert Davis, who signed the accounts, declined to speak to ACIJ. Managing director of GRM Kim Bredhauer, who sat on then Minister for Foreign Affairs and Trade Alexander Downer’s Aid Advisory Council, was also not available for interview despite repeated requests from the ACIJ.
The answer to the empty accounts is explained by the fact that GRM International Pty Ltd is a trustee company, not an ordinary proprietary company. Trustee companies, which are not uncommon in the world of business, allow the company to carry on all its activities on behalf of its owner, the GRM Unit Trust, the operations and beneficiaries of which remain secret. (Only once has the existence of GRM Unit Trust been acknowledged on the tender database and this was in relation to a Department of Foreign Affairs and Trade (not AusAID) contract to manage Australian/Arab countries scholarship scheme.)
Until late 2009, GRM Pty Ltd and the GRM Unit Trust were part of a complicated chain of companies that led from Australia to the UK company GRM International Holding Company Ltd, which was owned by Australian company Revlake Pty Ltd, which was owned by another Packer company, Taringah, which in turn was owned by Consolidated Press Holdings. All these companies were until December 2009 ultimately owned by the Bahamas-based Consolidated International Press Holdings Ltd (or CPIH). (If it seems complicated, as you can see from this diagram (click on the chart for the large version) it is!
According to a 2004 Federal Court tax case, the then head of the company Kerry Packer moved CPIH to the Bahamas from the UK in 1990 following the advice of his tax advisers Ernst and Young after changes to UK laws aimed at recouping more tax from foreign companies.
From 1993 until the end of 2009, the GRM group were part of a private empire consisting of hundreds of subsidiaries including cattle stations, abattoirs, live meat and other agricultural exports, yachts, ski resorts, and property development.
Through its shareholding in public companies, CPH has played a significant role in Australia’s media, financial services and through Crown Ltd, owns casinos in Australia, Macau, Las Vegas and the United Kingdom. These interests, along with a stake in US-based debt collecting company Encore Capital were all beneficially held by the Packer family’s secret Bahamas holding company CPIH.
As Paul Barry reported last year in his book Who wants to be a billionaire? CPIH is the holding company for the secret family trusts set up by James Packer’s grandfather, Frank, in the 1950s. In October 2009, Packer companies withdrew from a costly bid for a US casino company on the grounds that the trusts’ secrecy, which was paramount, could be breached if James Packer’s sister, Gretel, and other family members were questioned by the Pennsylvania Gaming Board.
GRM International Holdings (UK) was previously called Asiamet (No. 1) Resources Pty Ltd. Asiamet was familiar to Australian tax lawyers because it was one of several Packer companies involved in a series of tax court cases about the transfer of losses between companies sharing a common ownership to gain maximum tax advantage. When the High Court knocked back some tax loss arrangements between another lot of Packer companies, the Packer family’s tax advisers created Asiamet (No.1) later renamed GRM. (The cases later lapsed.)
Secret trusts and complex company structuring for tax minimisation purposes are common in international company business. So is it acceptable for major recipients of Australian government contracts to operate in this way?
AusAID’s contracts are managed according to the Commonwealth Procurement Guidelines. For large contracts, AusAID says it requires contractors to provide information on their financial status, ultimate ownership and other related entities and the previous three years’ accounts. It hires accounting firms to assess these. So assuming it was given correct information, AusAID should have been aware of the company’s structure and ultimate ownership structure.
The ACIJ asked AusAID when it was aware GRM International was owned by CPIH and if it was aware that it was based in a tax haven and that it owned casinos. A spokesperson for AusAID said: “AusAID has been aware for many years that Consolidated Press Holdings (CPH) was GRM International’s ultimate owner.” It did not respond to the question about the tax haven or the casinos other than to say: “AusAID has had no direct commercial relationship with CPH. AusAID’s contractual dealings have been with GRM International.” ACIJ has contacted AusAID to confirm that it was not aware of CPIH’s role but as yet has received no reply.
GRM company records are themselves inconsistent. The UK GRM International Holding incorrectly lists the Australian company CPH as its ultimate holder. But other companies in the group, including GRM International Pty Ltd, correctly listed Bahamas-based CPIH as the ultimate holding company.
ACIJ also asked AusAID about the company records showing no employees, to which AusAID replied: “AusAID has regular direct dealings with GRM personnel. How GRM reflects this in its reporting to ASIC is a matter for GRM and ASIC.”
So what do others concerned about Australian aid policy think? We asked several experts to comment on the general principles.
Transparency International’s executive director Greg Thompson says that transparency of financial information and ownership is important because developing countries often don’t have resources for strong tax regimes. Transparency International would prefer to see tax havens closed but where they do exist, it favours a mandatory register listing all beneficial owners. If aid companies “are receiving money including for strengthening financial systems then they should lead by example by being transparent and open about their finances”.