Austrade officials raised concerns about a controversial Indian company it was promoting three years before it eventually collapsed, documents show.
In those three years, the Delhi-based Pearls Group was honoured with a New South Wales Government award and an official Queensland trade mission visit.
Documents obtained by 7.30 under Freedom of Information laws show an Austrade official raised questions about the Pearls Group of companies as far back as April 2011.
Two months later, Austrade officials in Canberra and India were alerted to media reports that Pearls Group “looks suspiciously like a Pyramid Scheme … whose downfall could wipe out the savings of millions of people”.
The Pearls Group collapsed in 2014, wiping out the savings of 50 million Indians, making it one of the biggest financial scandals of all time.
Austrade official Peter Linford first introduced the Pearls company to two Australian businessmen back in 2009, which led to the creation of the Gold Coast-based company Pearls Australasia, which was later renamed MiiGroup.
On April 6, 2011, an Austrade ministerial co-ordination officer questioned Mr Linford about some of Pearls’ bona fides, including a court order against a Pearls company, PGF.
“It appears company directors … were found in breach of regulations covering agro-based investment schemes and prohibited from dealing in securities for 10 years,” Garth Taylor wrote in an email.
Two months later another Austrade official circulated a media article from the Delhi Economic Times which outlined an unresolved Pearls court case which could lead to a catastrophic collapse.
“PACL [a group company of the Pearls Group] runs an operation that the Securities and Exchange board of India deems illegal because it considers it a collective investment scheme,” the article said.
The Australian Trade commissioner in Chennai, Michael Carter, replied “Hmmmmmmmmmmmmmmmmm”.
Mr Carter, who has since left Austrade, confirmed to 7.30 this was an expression of surprise.
The general manager of Pearls Wines, Rikhab Jain, responded to the article later in the day, dismissing it as “malicious rumour”.
“The case is now subjudiced for eight years in Supreme Court and we are confident that the what sever (sic) the outcome of the decision it will be in our favour,” he replied.
Despite these legal questions, the-then NSW premier Barry O’Farrell honoured Pearls chairman Nirmal Singh Bhangoo with an award for outstanding contribution to trade and bilateral relations on behalf of the Australia India Business Council in late June 2011.
And the then-Queensland premier Campbell Newman met Mr Bhangoo in Mumbai on November 30, 2012, as part of an official trade mission.
“The meeting was an opportunity to encourage further investment by the Pearls Group into Queensland, particularly targeting tourism and construction,” Mr Newman said in his official report to the Queensland Parliament.
Pearls lost its long-running Supreme Court case three months later, setting in train a series of events that led to the collapse of Pearls Group and the arrest of several company directors, including Mr Bhangoo, in January this year.
Austrade documents show Pearls claims to have invested $300 million in Australia by March 2010, and up to $600 million by the following year in tourism, luxury apartments and retail developments.
That is considerably more than the Indian Criminal Bureau of Investigation’s official estimate of $132.99 million invested by Pearls in Australia.
Pearls Australasia purchased the Sheraton Mirage on the Gold Coast for $62 million in 2010, which is now in the process of being sold.
Pearls investors started a class action in Australia earlier this year to claw back some of the proceeds from the sale of the Sheraton and two other properties owned by Pearls Infrastructure on the Gold Coast and in Melbourne.
Austrade has been contacted for comment.
Source: http://www.abc.net.au/news/2016-11-16/austrade-knew-pearls-group-looked-like-pyramid-scheme/8027696