Senate probe to examine Austrade over Ponzi scam links

Austrade will face a Senate estimates probe into its connection to one of the world’s biggest Ponzi scams.

Senator Nick Xenophon.

Austrade will face a Senate estimates probe into its connection to one of the world’s biggest Ponzi scams that saw 50 million Indian investors lose money and involved the transfer of hundreds of millions of dollars to Australia.

Senator Nick Xenophon yesterday said he would demand Austrade representatives attend Senate estimates hearings next month to explain the agency’s involvement in the Pearls Ponzi scam “mess” and Austrade’s ensuing lack of transparency in the matter.

“Taxpayers have a right to know whether Austrade has been involved in this, whether it’s been unwittingly compliant in this mess,” Senator Xenophon said.

Documents obtained under Freedom of Information laws show Austrade officials were involved in enticing India’s Pearls group to “invest” in Australia, resulting in up to $600 million flowing here, as much as four times more than first thought.

The documents also show Austrade officials were aware of allegations of serious problems with Pearls at least as early as April 2011, but the agency has done nothing in the five years since then to clean up the problems.

The Austrade records, although heavily redacted, show the agency gave recommendations of support to the Foreign Investment Review Board to approve about $100m of Pearls money to be brought to Australia to fund the purchase of the Gold Coast’s Sheraton Mirage Resort.

Austrade gave the Sheraton deal one of its highest “strategic ratings” and also gave its support for several Pearls founders to be granted Australian visas, which occurred, the documents show.

Austrade became involved with Pearls in February 2009, documents show, with Austrade’s Indian staff introducing Pearls to Gold Coast developers Paul Brinsmead and Peter Madrers.

With the two men, Pearls created an Australian arm, Pearls Australasia, through which it bought the Sheraton Mirage for $62m, later spending at least $20m on renovations.

Late last year the Sheraton was sold to a consortium of Chinese investors for about $140m and, following a class-action suit and court action by the Securities and Exchange Board of India, most of that money is now expected to flow back to Pearls investors.

However, there are serious questions about the location of the other $500m-odd of Pearls money brought to Australia. Austrade records show Mr Madrers and Mr Brinsmead of Pearls Australasia met the then federal trade minister Craig Emerson on April 11, 2011, to inform him “of the progress of (Pearls India’s) investments in Australia”.

Briefing notes provided to Mr Emerson by Pearls show “$600m” of Pearls money had been brought to Australia.

Austrade internal emails show numerous executives received, and discussed, an email on June 29, 2011 — less than three months after the Pearls meeting with Mr Emerson — stating Pearls was operating an “illegal real estate scheme” in India.

Austrade would not comment when asked by The Australian what action, if any, Austrade took when learning of these concerns, or what action it took following the spectacular collapse of Pearls three years later, in 2014.

An Austrade spokesman said it had investigated its dealings with Pearls but had found no wrongdoing by any employees.

“On available information no evidence has been found that would have led to a code of conduct investigation of any employees involved (noting most have now left the agency),” the spokesman said.

Although many details have been blacked out, the Austrade documents released under FOI laws highlight how important the trade agency saw the Pearls deals and how heavily it was involved.

Do you know more? klana@theaustralian