China state-owned lender firm named in Parliament for deliberately bankrupting Australian company

A Chinese state-owned financier bankrupted an Australian company by misdirecting payments in a deliberate attempt to take ownership, Parliament has heard.

Documents tabled in Federal Parliament on Tuesday afternoon reveal China Taiping Insurance Group last year engaged an Australian public relations firm to advise on “media control” as one of its entities launched a “takeover” of superannuation fintech Sargon Capital.

Sargon was placed into receivership by a subsidiary of China Taiping in January 2020, after the Chinese backers claimed that payments for interest for the September and December quarters in 2019 were not made on time.

Liberal MP Tim Wilson tabled the documents on Tuesday afternoon.Credit: Alex Ellinghausen

But internal documents from both Sargon and China Taiping appear to suggest that all payments were made weeks before receivers were called in. The documents have sparked allegations that the payments were deliberately redirected to present a failure to service debt, allowing for the appointment of an administrator and then a liquidator.

Sargon, whose board included entrepreneur Phillip Kingston, former Crown Resorts chairman Rob Rankin and ex-Senator Stephen Conroy, received considerable negative media attention last year as it fell into receivership.

Documents tabled in Parliament by Liberal MP Tim Wilson show China Taiping Insurance Holdings, whose parent company is 90 per cent owned by China’s Ministry of Finance, engaged the services of Australian public relations firm BlueChip Communication as its sister company launched the takeover.

There is no suggestion that Bluechip Communication or its staff were aware of the claims about unpaid debts or were involved in any wrongdoing.

In a speech to Parliament tabling the documents, Mr Wilson said if an Australian company was maliciously liquidated at the direction of a Chinese state-linked entity “this House would be rightly outraged”.

“Speaker, documents have come into my possession that appear to indicate that there was a deliberate campaign to trigger the receivership of Sargon by China Taiping,” Mr Wilson said.

In an email to senior executives dated January 30, 2020, the China Taiping Insurance Holding’s chief representative in Sydney, Domingo Xu, said it hired BlueChip to provide “relevant opinions and suggestions on media control”.

“Due to the rise of right-wing forces in Australia and the unstable political relations between China and Australia, the Australian media is full of negative reports about China recently, including espionage cases, Wuhan pneumonia to name a few,” Mr Xu said.

“The takeover of Sargon by Taiping Financial Holdings may be used by some anti-China media in Australia, which will affect the brand and reputation of China Taiping in Australia, and then may affect the development of our insurance business in Australia.”

The internal documents show the company wanted the media to refrain from referring to “China Taiping” but rather two other arms of the company – Taiping Trustees and Taiping Financial Holdings.

In an email to China Taiping on the same day, BlueChip Communication’s managing director Carden Calder said the “least desirable outcome is any negative mention of China Taiping or for China Taiping to be seen prominently to be driving this – to minimise risk we recommend immediate action”.

She recommended pursuing a “small target” strategy by establishing the “distinction between brands and minimising comment that might bring attention to the brand”. The PR firm also said the company should avoid or minimise “on the record” comment but it may be required to provide “off the record comment” and “guidance” to journalists.

In an email the next day, Ms Calder said she had been in contact with the communications firm for receivers McGrath Nicol, who acknowledged it was an “unusual case”.

“One of the best defences is offence – for McGrath Nicol formally, or others informally, to establish clearly with media what led to the recovery action by your associated entity, for them to use the name Taiping Trustees or Taiping Financial NOT China Taping in backgrounding media, and for the events that lead to the appointment of receivers to become public,” Ms Calder wrote.

The internal documents also reveal that China Taiping and BlueChip Communication were in contact in late 2019 about Sargon Capital.

“Late last year you alerted us to potential legal action again [sic] Sargon by an associated entity but I believe you were not privy to the next steps to recover the investment (presumably the promissory note referred to above) not the imminent appointment of receivers,” Ms Calder said.

“Sargon have been mentioned in previous media as under pressure, with doubt cast on their viability and long term prospects. Additionally, some of the named acquisitions in recent media are the subject of negative industry speculation and rumour.”

A voluntary administrator’s report to creditors last year raised concerns about Sargon’s losses of up to $38 million, its rapid expansion and the inability to raise capital in a pre-initial public offering in late 2019. The report said that interest payments for the September and December quarters of 2019 were not made on time, but administrators were only told of a $4.4 million payment in December, 2019, after the release of the report.

Documents from inside the China Taiping companies reveal that they acknowledged receipt of the payment for the fourth quarter of 2019 almost a month before receivers were called in, despite later claiming that the payment had not been made.

“Please note that the Taiping Securities Fund Account under Taiping Trust has received the interest from Sargon Australian Superannuation Project for the fourth quarter, totalling HK$10,054,644.81,” a Taiping Assets Management employee emailed on January 2, 2020.

After the appointment of administrators to Sargon Capital, its subsidiaries were forced to enter voluntary administration and as a result, its superannuation trustee businesses were sold to a holding company financed by US credit fund Vista Credit Partners in May, 2020. Westpac, which was Sargon’s main lender, recovered most of the leftover money from the sale.

China Taiping’s companies last year launched an unsuccessful attempt to freeze Mr Kingston’s assets in the NSW Supreme Court, and $46,000 in costs were awarded to the former Sargon director.

Mr Kingston said he could not comment on “matters potentially relevant to active litigation or investigations”.

“I can confirm that Sargon had paid sufficient funds to cover all interest payable as at 31 December 2019 under the Promissory Note with China Taiping,” he said. “I and other directors and officers of Sargon have always been consistent on this.”

Mr Kingston has also blamed Ashurst, a law firm advising the China Taiping entity, for appointing receivers.

“By evidently failing to make any basic inquiries into their own client’s loan facilities and equity structures, they inadvertently destroyed their own client’s assets,” Mr Kingston said in a blog post in March.

Ashurst was contacted for comment.

Receiver Shaun Fraser, from McGrath Nicol, said the appointment of receivers was the “only available option to the lender after efforts to engage with Sargon on the payment defaults and the issuing of formal demands by the lender’s lawyers proved fruitless”.

“Throughout this time Sargon was unable to clarify how it would resolve the default,” he said.

“It is important to understand that Taiping Trustees was fully entitled under its loan facility and related security agreements to appoint Receivers for the purpose of preserving its own position and pursuing the recovery of funds.”