ATO wins freezing orders against fighter pilot accused of training Chinese air force

Pilot Keith Hartley. Picture: thetartanterror.blogspot.com

If the coppers can’t get you, the tax man will. That’s been the case since Al Capone got banged up for tax evasion in the 1930s.

And, it’s still the case for a former British fighter pilot who has outraged Western governments for allegedly training the Chinese air force, who has just had the proceeds of the controversial business frozen by the Australian federal court.

Former RAF top gun Keith Andrew Hartley, for years based in Australia, has spent the past three years fending off allegations of betraying his country and its allies by providing “training involving the use of arms or practising military exercises” to People’s Liberation Army pilots between June 2018 and January 2022.

His Adelaide home was raided in 2022 as part of an investigation into his role in the scandal as the chief operating officer of controversial South African company Test Flying Academy of South Africa (TFASA), which has been accused of paying millions to dozens of former British flying aces to train Chinese fighter pilots.

Included are allegations Hartley and TFASA recruited former RAF pilots — offered more $500,000 per year — to help train Chinese flyers to take off and land on the country’s new aircraft carriers, now emerging as a major potential threat to Australian, US and British interests in the Pacific region.

Hartley has consistently denied any wrongdoing, and no charges have been laid. The Australian Federal Police (AFP) declined to comment on the status of their investigation into Hartley on Thursday.

But, if ASIO and the AFP miss, there’s always the ATO.

Margin Call can reveal the former jet pilot, who flew under the call sign “Hooligan”, has now had his local assets frozen by the federal court for allegedly ducking millions in local taxes related to his training business in China.

In a secret case brought by the Australian Taxation Office last month, the ATO won freezing orders against Hartley over allegations he owes more than $3m in back taxes related to his business in China. The ATO also sought freezing orders worth almost $4.2m against his privately-owned company Slugwash.

Hartley fled the country fearing arrest by Australian security services in early 2023, according to the court, and has not returned since.

Keith Hartley flying for the RAF.

The ATO presented evidence to the court that Hartley was aware ASIO and the Australian Federal Police were closing in on a case against him by November 2022, with emails to a business partner at a “procurement entity for the People’s Republic of China” saying he planned to move money out of the country in case he was arrested.

“I’m expecting to get tapped on arrival by the Aussie security guys and possibly the federal police as well,” the email said. “If they get hard, one potential outcome is a freezing of any assets that they deem have come from illegal activity. Of course, to do that they need to prosecute me successfully, which might be difficult, but I’d be prudent to mitigate any resulting risk to my assets.

“I’m happy to forgo any future dividends in exchange for removing the Aussie risks. I’ve also bounced the idea off my Aussie accountant who agrees it creates no problems with the tax man,” the emails say.

Sadly for Hartley, his accountant got it wrong.

While the ATO is still to press its case further than the freezing orders, Justice Craig Colvin said he was satisfied there was a danger Hartley would move money out of the country while the ATO pursued its case, saying the air combat trainer had taken “elaborate steps” to ensure payment for his services would not count as personable income for tax purposes.

“Working with those structures, Mr Hartley had bought two properties in the United Kingdom, three cars and had assisted in the purchase of two aircraft and two properties through the provision of loans,” Justice Colvin said in his decision.

“Mr Hartley had participated in arrangements by which there would be a ‘quiet’ contract and a ‘risky’ contract for the training of a Chinese pilot and air traffic controllers.

“In early December 2023, an amount of nearly $4m was received into the Australian bank account of an Australian company of which Mr Hartley and his stepson are directors, with outgoing international payments from that account of nearly $3.8m being made over the next six months.”

Included in the frozen assets are bank accounts under Hartley’s name and of his wife, property in South Australia, an “amateur-built aircraft kit” and two family vehicles.

Slugwash is said to hold more than $3m in cash, shares and managed investments.

The company is a trustee for a superannuation fund of which the former pilot is a beneficiary, and Justice Colvin said the ATO had presented credible evidence that Hartley had been involved in dealings with shares held by Slugwash which “suggested his purpose had been to move assets out of reach of Australian authorities”.