Australian properties — including Tasmanian dairy farms, Sydney CBD apartments and even a Hilton hotel — have been secretly purchased by wealthy, sometimes controversial foreign figures, an ABC investigation has discovered.
The money came from a corrupt Chinese steel magnate, a political power couple in Sri Lanka and a former oil executive, via opaque corporate structures.
Each purchase involved multiple layers of offshore trusts and shell companies, making ownership almost impossible to track.
Unlike other countries, Australia lacks a register to show who ultimately owns property.
However, the funds behind the purchases can be traced in the Pandora Papers, a leak of nearly 12 million financial documents obtained by the International Consortium of Investigative Journalists (ICIJ) and analysed by the ABC.
Tasmanian dairy farms
In the far north-west of Tasmania, farming has been a family tradition for generations.
However, in recent years, this tradition has come under threat as the area has become increasingly popular among foreign buyers.
Locals do not always know who the buyers are, nor where their money came from.
Files in the Pandora Papers, however, reveal the sources of foreign funds behind four large-scale farms totalling more than 1000 hectares.
Public land records show it was two Australian companies, Dairy Partners Pty Ltd and Redpa Dairy Partners Pty Ltd, that bought the farms between 2014 and 2019.
However, the Pandora Papers show the money originally came from Canadian Stephen Paul Douglas de Heinrich, a former non-executive director and shareholder of the international oil producer Addax Petroleum. De Heinrich also served on an advisory board to Addax’s parent entity from 1991 to 2006.
Through the 1990s and 2000s, Addax did business in volatile places such as Iraq and Western Africa. It became the biggest independent producer of oil in Nigeria.
However, a French court was told in 2007 that two Addax Petroleum executives had paid millions of dollars of bribes in Nigeria in the late 1990s.
One was convicted of aiding and abetting aggravated money laundering for that nation’s former oil minister, Dan Etete, from 1999 to 2000.
“Dan Etete was convicted of money laundering fraud [in] France, and that was Addax’s money,” said Barnaby Pace, an investigator from the human rights group Global Witness, who followed the case closely.
“The fossil fuel industry has helped create a massive corruption problem in Nigeria.
“That’s why, despite having oil, gas and other natural resources, many Nigerians still live in poverty.”
Mr de Heinrich was not implicated in the money laundering case nor convicted of any crime and he was not an operational executive of Addax.
In 2009, Mr De Heinrich benefited from the sale of the oil company to Chinese government-owned Sinopec for more than $US7 billion.
Documents reveal the Singaporean company used to buy the Tasmania dairy farms said its “original source of funds” related to “the father’s [Mr de Heinrich] involvement with Addax petroleum”.
Millions of dollars were originally transferred from a trust-based in Bermuda to the Singapore company to invest in Australia through the newly established Australian companies, Dairy Partners and Redpa Dairy.
The De Heinrich farms were sold back into the hands of local owners this year, for $27 million, nearly double their original purchase price.
Behind the Hilton Hotel
There are also figures with concerning backgrounds who have used opaque offshore trusts to hold their Australian properties.
In Sydney’s CBD, commercial real estate worth hundreds of millions of dollars has been quietly purchased by a mysterious Singapore-based company, Bright Ruby Resources.
In 2015, Bright Ruby bought the Sydney Hilton Hotel on George Street for $442 million, a record price that year.
Prior to that, it bought two other Sydney office towers, 10 Barrack Street, for $62.5 million, and 231 Elizabeth Street, for $201 million, both of which have since changed hands.
Files in the Pandora Papers reveal the six layers of companies and trusts between Bright Ruby and its ultimate owner, corrupt Chinese steel magnate Du Shuanghua.
The company Mr Du founded, Rizhao Steel Holding Group, became one of China’s largest private steel manufacturers.
However, in 2010, Mr Du was embroiled in a high-profile bribery and espionage case involving Rio Tinto executives.
At that time, he testified in a closed trial to giving $US9 million in bribes to one of the executives of the British-Australian mining giant.
Four Rio Tinto employees, including one Australian, Stern Hu, were later sentenced to between seven and 14 years in prison.
However, Mr Du was never prosecuted.
At the same time, Mr Du was being investigated by the Chinese government for his involvement in the Rio Tinto case, leaked documents show he was beginning to set up offshore trusts and entities to hold his riches.
Bright Ruby Resources served as an important investment vehicle for Mr Du to manage his wealth.
The Sydney commercial real estate purchases by Bright Ruby were among a number of major global investments Mr Du made in the past decade.
A 2017 corporate diagram showed Bright Ruby at the bottom of a long chain of other corporate entities, including four based in the British Virgin Islands and another based in the Cayman Islands.
Internal reviews of Mr Du, conducted by his Singapore-based wealth management firm, flagged him as a “high-risk” client and a “PEP” (politically exposed person) through his connections to a former Chinese president.
“While Hu Jintao had officially retired from his principal public duties as president and Chinese Communist Party Secretary General, he still retains considerable influence within the Chinese state and Chinese Communist Party,” one of the reports concluded.
Mr Du and Bright Ruby did not respond to requests for comment from the ABC.
Two luxury apartments in a sought-after building at the heart of Sydney’s CBD are also among the properties bought by powerful foreign interests.
For more than two decades, power couple Thirukumar Nadesan and Nirupama Rajapaksa, have set up anonymous offshore trusts and shell companies to acquire millions of dollars of artwork, luxury apartments, cash, securities and other assets.
Ms Rajapaksa is a former deputy minister in the Sri Lankan Parliament and the niece of Sri Lanka’s president, Gotabaya Rajapaksa.
The Sri Lankan Prime Minister, as well as the finance, youth, and home affairs ministers, are also members of the Rajapaksa family, a centralisation of power that has caused concern among civil rights activists.
Ms Rajapaksa’s husband, Mr Nadesan, a real estate entrepreneur, was charged with misappropriating $1.7 million in state funds in 2016, but denies any wrongdoing. His trial is set to be heard in November.
The Pandora Papers reveal how the couple bought the apartments in a 48-story residential tower called The Peak in the late 1990s, under a company currently registered in Samoa, Chalan Oil Exploration. The apartments were advertised as having fantastic wrap-around city views.
Chalan Oil Exploration was ultimately owned by a trust that benefits the couple’s children and has also been used to purchase UK properties in secret. A 2011 email suggests the family fortune could exceed $US160 million ($219 million).
Mr Nadesan and Ms Rajapaksa did not respond to questions from the ABC.
Australia provided $28.1 million in direct aid to Sri Lanka in 2019-2020, almost half of which was to build “effective governance”.
Dirty money, ‘UBOs’
Experts warn Australia is becoming an increasingly attractive destination for questionable or even illicit finance.
Lakshmi Kumar, a policy director at Global Financial Integrity, says opaque corporate structures allow illicit funds to push up property prices.
“Over the long-term, there are concerns [that] you are effectively pushing out people from the property market — everyday citizens, people in Australia, who would otherwise want to invest,” Ms Kumar says.
Ms Kumar is concerned Australia has failed to follow allies — such as the United Kingdom and the United States — which have established registries to reveal the ultimate beneficial owners (UBOs) behind companies.
“More and more of these countries set up registries,” Ms Kumar said.
“Then, as a criminal actor, you still want to find ways to hide your money.
“And then Australia becomes an ever more convenient solution.”
Greens Senator Peter Whish-Wilson agrees Australia’s laws are not strong enough.
“An estimated billions of dollars flow into Australian real estate that’s dirty money,” Senator Whish-Wilson says.
“And that money pushes up house prices. It makes houses less affordable for your average Australian.”
Senator Whish-Wilson sat on a recent senate inquiry, which found major deficiencies in government oversight.
“There remains doubt as to whether the Treasury has the knowledge, experience and information-management systems to appropriately regulate foreign investment in Australia,” the inquiry’s main report found.
The Treasury and Foreign Investment Review Board (FIRB) have defended their ability to screen foreign money behind purchases.
FIRB chair David Irvine told a Senate Estimates hearing last year: “I’m satisfied that, certainly in most cases, we get a reasonably accurate picture of the ownership.”
After the Panama Papers exposed global tax avoidance and illicit finance in 2016, then assistant treasurer Kelly O’Dwyer said Australia needed a register of beneficial owners.
“It means it is a lot easier to expose wrongdoing or fraudulent conduct,” Ms O’Dwyer said at the time.
“It makes it much easier to disrupt illicit financial flows and it makes it much, much harder to engage in tax avoidance.”
Five years later, Australia still lacks its own UBO register.
Treasurer Josh Frydenberg declined to answer on the record the ABC’s detailed questions, including when the government would introduce a register.
Mr Frydenberg told the ABC the Morrison government was spending more than $480 million to consolidate Australia’s business registers.
“This modernisation will both significantly improve the operability of Australia’s existing business registers and enable the development of a beneficial ownership register,” he said.
A spokesperson for the Department of Home Affairs said the government was taking a phased approach to reforming its anti-money laundering and counter-terrorism regime.