Kevin Rudd affordable housing scheme link to Indian Ponzi rort
FEBRUARY 9, 2016 12:00AM
The family behind one of the world’s biggest alleged frauds — which saw more than 50 million Indian investors burned to the tune of $10 billion — directly benefited from a controversial affordable housing scheme introduced by the Rudd Labor government.
Indian authorities are investigating the collapse of a New Delhi-based Ponzi scheme, Pearls Group, with its head, Nirmal Singh Bhangoo, and three key executives jailed in recent weeks.
In 2009, Pearls Group established an Australian arm, Pearls Australasia — now called MiiGroup — with the aim of investing money it had raised in India, and teamed up with current Gold Coast-based developers Paul Brinsmead and Peter Madrers.
At the time, Mr Brinsmead and Mr Madrers were seeking business opportunities because their Tweed property development company, Resort Corp, had collapsed six months earlier owing about $300 million.
Pearls Australasia had Mr Bhangoo, his son Harvinder Singh Bhangoo, son-in-law Gurpartap Singh, Mr Brinsmead and Mr Madrers as founding directors. At the same time as Pearls Australasia was being founded, Queensland developer David Devine, having moved on from his successful listed house and land company Devine Homes, had set up Metro Property Development. Pearls Australasia became the first development partner of Metro, with those companies co-developing up to $1bn worth of properties, including four Brisbane high-rises and a house and land subdivision in Melbourne’s outer north.
The $3.5bn National Rental Affordability Scheme was implemented in 2009 with the aim of tackling housing affordability faced by lower-income earners. Under the scheme, owners of approved NRAS units were paid $10,000 a year by the government in return for letting out their property at 20 per cent or more below market rates.
The NRAS scheme was widely criticised and an Australian National Audit Office review found the government had undertaken no assessments to determine what impact the scheme had on housing affordability, and large numbers of subsidised apartments were occupied by wealthy fee-paying foreign students.
Mr Devine declined to comment yesterday regarding specifically how many of the properties in those developments were NRAS-compliant, saying it was “confidential” information, but he said units in a number of his developments had been offered via NRAS.
In January 2014, Metro issued a press release stating it had signed 110 NRAS leases, and had put up for sale 174 new apartments under NRAS, in its Brisbane Bowen Hills development Madison Heights, developed with Pearls Australasia.
Other Brisbane developments by the companies include the 14-level Brooklyn on Brookes in Fortitude Valley and 195-apartment Bowen Hills-based The Chelsea.
Mr Devine said he had become aware of the allegations facing Pearls Group only after his company had ceased working with them, “about two years ago”.
“Pearls in India founded a company in Australia (Pearls Australasia) and we did our first four projects with them,” he told The Australian.
“They put money into a couple of projects … and we found out (about the Ponzi allegations facing Pearls India) after we parted ways.” The group learned of the allegations after “someone did a search and it popped up two years ago”.
In September 2014, Pearls Australasia changed its name to MiiGroup Holdings and removed all references to Pearls Group, India and Mr Bhangoo, but the structure and control of the company remained largely unchanged.
Mr Bhangoo’s daughter Barinder Kaur and her husband, Harsatinder Singh Hayer, also joined the company as directors.
In 2013, Indian authorities had publicly raised concerns about Mr Bhangoo and Pearls Group, for which Australian cricketer Brett Lee was a “brand ambassador”. There is no suggestion Lee had any knowledge at the time that the company was allegedly engaged in fraud.
Mr Brinsmead declined to comment on when he and MiiGroup became aware of allegations facing Mr Bhangoo and Pearls Group. He also declined to comment on whether the group had been contacted by Australian authorities over the activities of Mr Bhangoo and Pearls Group.
MiiGroup and Mr Brinsmead have said “individuals and companies” associated with Pearl Holdings in India had “no control” and “do not take part in any day-to-day operations” of MiiGroup. “Any allegation MiiGroup Australia is an Indian company or a subsidiary of an Indian company is false,” the MiiGroup said.
Archived web documents show Pearls Australasia describing itself as “the Indian-backed developer owned by Nirmal Singh Bhangoo’s Pearls Global”.
Indian authorities allege Mr Bhangoo’s Pearls Group funnelled at least $130m into Australia. Their investigations will probe Pearl Australasia’s purchase of the Sheraton Mirage on the Gold Coast in 2009.