By Nick McKenzie, Richard Baker, John Garnaut. Published by The AGE National on 23 June 2015.
In 2013, the private sale of an unassuming five storey apartment block near Monash University in Caulfield stunned local observers. Even in Melbourne's booming property market, the $22.5 million price tag for a building designed like an IKEA cupboard seemed well above the odds. That's because it was.
Named Dudley House by developers keen to imbue it with a sense of grandeur, it seems the last place to host any untoward dealings. But the sordid tale of this building highlights one reason that federal treasurer Joe Hockey is so concerned about the foreign funds flowing into an already overheated property market, as well as why local and international corruption fighters say Australia has become an investment hot spot for the crooked and corrupt.
An eight-month Fairfax Media investigation has traced suspicious money flows, court files and corporate records across three continents to uncover why Dudley House's purchase price was so high.
Its sale was part of a global money laundering and bribery scheme engineered by greedy local developers and powerful officials overseas who pocketed $4.75 million in bribes on this single deal.
Fairfax Media has also discovered that some of these same figures are linked to tax haven companies which are also behind the purchase of around $80 million in Australian properties.
By following a complex money trail - which, in a curious twist, includes front companies set up by a Singaporean wedding-cake maker – Fairfax Media has identified the foreign officials who appear to be using Australia as a money laundering hub.
There are also Australian facilitators tied to these suspect dealings, including Melbourne man Peter Mills, who once did a stint in Pentridge prison for corporate fraud. Mills was recently quizzed in a civil court case about whether the $4.75 million generated by inflating Dudley House's sale price was used "to grease palms" overseas.
His reply was short but surprisingly honest. "Yeah, I think so".
Financial laundromat
For a country whose leaders claim it to be a world leader in integrity, Australia is developing an ugly reputation.
In 2012, PNG's chief corruption fighter labelled Australia the "Cayman Islands" of the Asia Pacific, due to the ease in which PNG politicians could invest their ill-gotten wealth in Australian property.
The Chinese government has more recently launched its own campaign, warning that crooked officials are taking refuge and squirelling away embezzled funds in Australia.
Fuelling this developing scandal have been incentives, including fast-tracked Australian residency visas, for overseas businessmen who invest large amounts here.
Earlier this year, Joe Hockey himself intervened to force one of China's richest men to divest a $39 million Sydney Harbourside pad because he'd tried to use front companies based in tax havens to avoid foreign investment restrictions. Last month Fairfax revealed that another Chinese businessman hid behind an elderly Melbourne couple to disguise the purchase of an even bigger mansion in the same neighbourhood, the $52 million Altona.
Only last month, the Paris-based anti-laundering agency, the Financial Action Task Force, warned that "Australia is seen as an attractive destination for foreign proceeds [of crime], particularly corruption-related proceeds, flowing into real estate, from the Asia-Pacific region."
The Dudley House deal is the clearest example to date. But it would have almost certainly remained a secret without Melbourne tradesman John Bond.
The Malaysian connection
Bond, 53, is a man who doesn't walk away from a fight. The barrel-chested former suburban footballer helped manage a jail for young offenders before starting his own window and door company. When the window-maker won a lucrative job to help outfit Dudley House, he dreamed of dramatically expanding his business. But employees need to be paid. And after working on the development for many months, Bond, along with his own staff and dozens of other contractors, were owed several million dollars.
"They [the developers] kept putting it off. It became one week. Then one month. Then six months. And I thought to myself, something is terribly wrong here. They seem like they are never going to pay us."
The 'they' were Melbourne developers, Chris Dimitriou and Peter Mills, along with their joint venture partners – two mysterious Malaysian businessmen.
These two businessmen, Yusof Gani and Ahmad Azizi, appeared keen to keep a low profile in Australia.
"We knew they were influencing things behind the scenes, but I never met them," says Bond. "All I know is that they are powerful back in Malaysia."
Emails uncovered by Fairfax Media and sent to the Malaysian pair suggest this low profile was aimed at avoiding scrutiny by the Australian Foreign Investment Review Board.
In one missive, their Australian manager, Dennis Teen, suggests that Gani and Azizi understate their true investment in the Dudley House development by falsely nominating Teen as the majority shareholder.
"The maximum for each individual foreigner without FIRB approval is 15 per cent," wrote the manager in one email, so he suggested the Malaysian duo claim their shareholding was only "14 per cent."
"I'm agreeable," one of them replied.
In Malaysia, Gani and Azizi have a much bigger profile. Each has been anointed a "Dato" by the Malaysian government -- the Malaysian version of a knighthood.
Facebook posts show Azizi and his two sons, Erwin and Erwan, mixing with the elite and getting around in Porches and Ferraris. Erwan hangs out at the Kuala Lumpur Porsche club. There is plenty of international travel, including a family trip to Paris.
In Malaysia, where wealth and political connections go hand in hand, the Azizis didn't just have the funds to invest in a multi-million dollar Australian property development. They also had the contacts to pull off a remarkable deal: the sale of this development to the Malaysian government at a massive mark-up.
According to confidential documents, it was Dato Azizi's Porsche-loving son Erwan who facilitated this deal via a network of contacts connected to a multi-billion dollar Malaysian government institution called MARA.
Created in 1965 with the noble aim of helping the rural poor, MARA is a household name in Malaysia. But MARA's decision to buy Dudley House through a subsidiary, MARA Inc, shows how far it has strayed from its core values.
The right price
The property that John Bond had helped to build was worth $17.8 million and Mills, Dimitriou, Azizi and Gani were, according to paperwork, intending to sell it for this amount.
But, around the time that the Porsche-driving Azizi junior helped introduce certain Malaysian officials to the deal, the sale price was suddenly inflated by $4.75 million.
As the two Datos' Australian manager Denis Teen later explained in civil court proceedings lodged on behalf of the Dudley House creditors: "If we didn't agree on the $4.75 million, we would not have the deal".
This inflated sale price of $22.5 million should have increased the prospect of tradesman like John Bond getting paid. But Bond's fears that he and his fellow creditors were about the be ripped off dramatically increased when the Australian developers Mills and Dimitriou appointed an administrator, indicating their company would not be able to pay the bills of the tradesmen who built Dudley House.
By 2013, Bond had spent two years working on the project. He was broke and desperate. His tipping point had come when his son, Cooper, asked his dad to pay for a trip to an interstate football carnival to represent Victoria.
"I couldn't afford it," says Bond quietly in an interview with Fairfax Media. "I had to borrow money from my own parents to send Cooper to Darwin."
The experience left Bond determined to find out who had got rich from Dudley House while he was left facing ruin.
Harking back to his days as a suburban footy player, he pushed back. Hard. With several other creditors, he went to the Victorian Supreme Court, and demanded the appointment to the project of a new liquidator, Pitcher Partners boss Andrew Yeo.
Yeo assigned the case to a bright young Pitcher Partner employee, Odie Henzel, and told him to start digging.
With his well cut suit, neat hair-cut and quiet demeanour, Henzel and Bond could not be more different. But the financial analyst and the window maker soon struck up a rapport. Incensed at Bond's treatment, Henzel joined the mission to unearth the secrets of Dudley House.
Among a cache of documents, Henzel discovered a strange email. It was dated March 8, 2013 and sent by a man purportedly working for Malaysian government officials. It stated that in return for the Malaysian government agency MARA buying Dudley House, a payment of "AUS$4,785,000 in the form of introduction and consultancy fees" would have to be wired to a mysterious Singapore shelf company.
Taking the cake
Fairfax Media tracked down the director of this company to a cake shop in a busy, upmarket Singaporean shopping strip. Her name is Hanna Kamruddin and she nervously revealed she'd been appointed a director of the shelf company after her brother, a Harley Davidson-riding Malaysian called Hishan Kamruddin, introduced her to three men who wanted an offshore company and bank account set up. Hanna Kamruddin agreed to help them in return for $1000. "I'm so naïve," she said when asked about the arrangement.
"When I look back it was a very stupid decision."
Kamruddin insists she does not know the identity of the Malaysians who paid her the $1000.
But she remembered one thing. They were somehow linked to a Malaysian government agency.
Corporate records in Australia reveal more about those linked to front companies directed by the young cake maker. One of the firms was taken over by several powerful Malaysian officials: a former politician turned MARA Investment chairman, Dato Mohammad Lan Bin Allani, and a MARA chief executive, Dato Halim Bin Rahman.
When contacted by Fairfax Media, Allani said he couldn't recall the Dudley House dealings, even though he visited Melbourne to inspect the property in May last year, according to a Malaysian Consulate website. He said he was involved in setting up offshore companies in tax havens as a "convenient" way of selling property bought by the Malaysian government. When questioned about his knowledge of any alleged kickbacks, the former politician hung up the phone.
The front companies directed by the Singapore cake maker aren't the only suspicious corporate vehicles Malaysian officials have used to purchase Australian properties. A company called Thrushcross set up in notorious tax haven, the British Virgin Islands, was used to purchase Dudley House, along with a $23.5 million property on Swanston Street, near Melbourne University. (Dato Azizi's son, Erwan, signed some of the paperwork associated with the deal.)
Malaysian officials from MARA have also used other shelf companies in Singapore, which is also regarded as a tax haven, to purchase properties in Queens Street and Exhibition Street in Melbourne's CBD for around $40 million.
The circuitous path of the $4.75 million dollars generated by inflating the price of Dudley House also points back to the Malaysian government. The money was paid by the Dudley House developers for non-existent services, including "professional advice" and "consultancy and advisory fees."
Corporate records reveal that the firms behind these sham invoices are closely linked to several powerful Malaysian figures, including another top MARA official. The liquidation proceedings lodged in the Victorian Supreme Court after John Bond and Pitcher Partners' intervention provide further evidence that the $4.75 million was paid as bribes.
When quizzed directly about these apparent "kickbacks" in court, developer Chris Dimitriou stated: "To the best of my knowledge, that $4.8 million went to Malaysian parties." Dimitriou refused to answer any of Fairfax Media's questions.
His fellow developer Peter Mills was more forthcoming, telling Fairfax Media in a phone interview that the deal was corrupt.
"I suppose I have to [take responsibility]. But no one told me about it beforehand. Otherwise, I wouldn't have gone along with it."
Zero consequence
While Fairfax Media's investigation has revealed that at least some of those involved in the Dudley House deal have engaged in serious criminal conduct, nobody has been, so far at least, called to account by authorities in Australia or Asia.
To this extent at least, they join hundreds of allegedly corrupt investors confident they can park their ill gotten gains in properties in Sydney, Melbourne or elsewhere.
Australian resident Denis Teen, who managed the local affairs for Dudley House's Malaysian developers, was also called to the stand in the liquidation proceedings. He spoke quickly, appeared nervous and denied knowledge of any corruption (a denial he repeated to Fairfax Media). But his testimony still provided insights into the way he and his partners do business.
"We are not saints," Teen told the court. "We just want a deal done."
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