AusAID has told ACIJ that it was wrong in its previous answer about who owned the international development company GRM International until the end of last year.

In our first article in the Who profits from our Foreign Aid? series, we reported that GRM International, which has received more than a billion dollars worth of projects over a decade from AusAID, was owned until December 2009 by Consolidated Press International Holdings based in the Bahamas tax haven.

CPIH is the ultimate holding company for James Packer’s private empire including the secret family trusts that receive the company profits. During the period in which it was owned CPIH, GRM International also received hundreds of millions more from USAID, the UK Department for International Development and the European Union.  Some of their contracts in the Solomon Islands, Afghanistan, Nigeria and elsewhere were for building financial transparency and accountability.

The question we asked was: such set-ups for tax minimisation purposes are common in international company business – but is it acceptable for major recipients of Australian government contracts to operate in this way?

AusAID requires major contractors to inform them about their ultimate holding company and provide copies of recent financial accounts. AusAID told ACIJ that GRM International had told them that their ultimate holding company was Consolidated Press Holdings, an Australian company that holds Packer’s worldwide casino interests but that is not at the top of the company chain of companies. (See chart in our earlier article).

So it seemed that either GRM International had either misled AusAID or AusAID had given us the wrong answer. Either way, we needed to follow up.

Finally, AusAID came back to us last week with a correction. An AusAID spokesperson said: “To correct our previous answer, prior to GRM’s ownership change in late 2009, AusAID had been aware that Consolidated Press International Holdings Limited was GRM International’s ultimate owner.”

AusAID reminded us that: AusAID has had no direct commercial relationship with GRM’s ultimate owner. AusAID’s contractual dealings have been with GRM.

This answer seems to miss the point of AusAID asking about the question about ultimate owners in the first place. There are good policy reasons for wanting to know beneficial ownership. Suppose a contractor was linked to arms dealers? Or organised crime? (We are not suggesting that this is the case here.)

But in this case it is clear that GRM International was very much embedded in the complicated web of Packer companies and GRM senior executive Darryn Purdy himself was frank about the fact that the company was financially run from Packer headquarters. “We manage the business and manage the work that we have, but how that’s reported into the broader aspects of these companies, that then goes to [Consolidated Press].”

So where are the owners of GRM International based now? While some of GRM’s new shareholders are based in Australia, some are based in Dubai. These include Kim Bredhauer, who continues to be managing director but moved to a Dubai marine development on the day of the sale. Dubai is so rich that it does not need an income tax system. Another shareholder company is based in the British Virgin Islands tax haven. Bredhauer was not available for interview.

We asked AusAID when it became aware of the change of ownership and whether any financial checks of the company have been carried out after the sale but these questions have not yet been answered.

While AusAID does not have a problem with contractors being based in tax havens, some NGOs definitely do.   Transparency International’s executive director Greg Thompson says:  “If aid companies are receiving money including for strengthening financial systems then they should lead by example by being transparent and open about their finances”. Recognising that some will defend secrecy on the grounds of commercial confidentiality, Thompson argues “… those principles should not interfere with the more general principles of transparency and accountability. All those managing Australian government funds should be subject to the same principles of disclosure” with flows of money and terms of contracts, disclosed to those at the grassroots.

Jack de Groot, CEO of Catholic Aid Agency Caritas agrees:  “Some of the government’s aid program has been about building taxation systems in developing countries that help in securing government revenues. It would be an appalling irony if a provider of such a consultancy or capacity building program squirreled its profits in a tax haven to avoid paying what is their responsibility to pay – and from the government they were receiving the funding from in the first instance.”

Meanwhile, GRM continues to do well in the new financial year with more than $14 million new contracts for its work in PNG and Solomon Islands. It recently put in a new proposal under its head contract for AusAID’s technical assistance in Afghanistan program Development Assistance Facility for which it has already received $13,000,000. In an unusual move, AusAID put out its new proposal for independent appraisal by its old accountants, Ernst and Young.

Wendy Bacon is Director of the Australian Centre for Independent Journalism