Clive Palmer’s private company Mineralogy has been accused of wrongfully siphoning more than $12 million from his Chinese business partners, with some of the funds allegedly used to cover political expenses for the costly federal election campaign by his Palmer United Party.
The Federal Court in Perth was told yesterday that there were “serious questions” about the unauthorised use of large sums of money that Chinese-backed CITIC Pacific had put aside in a bank account for the operation of a port at its Sino Iron mining project in Western Australia.
Some of the transactions raised in the Federal Court are likely to be referred to police for formal investigation. Mr Palmer, who yesterday launched defamation proceedings in Brisbane against Queensland Premier Campbell Newman over an unrelated claim that the tycoon was trying to buy politicians, did not respond to questions from The Australian about the court proceedings.
The lawyer acting for CITIC, Andrew Bell SC, told the court that some of the money had been used to pay thousands of dollars to a PUP candidate, as well as taxi travel costs for party officials to attend the scrutineering of last year’s Senate vote count.
CITIC also claimed that Mineralogy, which is Mr Palmer’s flagship investment company, had used the money to fund legal battles against CITIC itself, including a $700,000 Supreme Court challenge last year.
More than $12m was transferred out of the account in two transactions of $10m and $2.16m last August and September, with Dr Bell saying no invoices or remittance advice had been produced in relation to the two transfers.
The transactions occurred shortly before the federal election, when the PUP was fielding candidates throughout Australia and running a massive advertising campaign. Mr Palmer claims to have spent between $10m and $12m on the federal election, which secured him the seat of Fairfax and helped elect two PUP senators. He is thought to have spent millions more in the rerun of the Senate election in Western Australia, which resulted in the election of a third PUP senator.
Among those allegedly being paid with the CITIC funds was Vimal Sharma, a Mineralogy executive who was an unsuccessful candidate for the PUP in the West Australian seat of Cowan.
Dr Bell said there was a need for a “searching inquiry” and a “forensic accounting exercise” to track down the allegedly missing money.
An affidavit sworn in Brisbane by a solicitor for CITIC, Bruce Wacker, disclosed that more than 1200 “bundles of documents’’, which Mr Palmer’s company had been ordered to disclose in relation to how it had spent CITIC funds, were now under scrutiny.
Mr Wacker’s affidavit to the Federal Court stated that two cheques totalling $12,167,065 were described by Mineralogy as “being for purported ‘Port management services’, however, no documentation has been disclosed in support of these payments’’.
“Each of these payments has been cleared from the bank account as evidenced by the bank statements,’’ Mr Wacker said.
“The payment ledger, bank register and bank statements do not disclose the recipient of these funds.’’ The millions of dollars in funds had been set aside by CITIC to cover the day-to-day expenses of operating, maintaining and repairing facilities at the port at Cape Preston used by the Sino Iron project.
But CITIC told the court that Mineralogy did not currently oversee those functions, and questioned how Mineralogy could have accrued more than $20m in administration costs over three years given it was playing no material role at the port.
“(Mineralogy) levied increasingly exorbitant amounts of so-called administrative costs in excess of something like $23m over three years, and have wholly failed to account for that expenditure,” Dr Bell said.
While Mineralogy and CITIC are engaged in a separate legal battle over the rights to the port, Dr Bell said the fact Mineralogy was not operating the port during the years in question was not in dispute. “When Mineralogy has not been there, how could they have legitimately incurred and expended around $20m in respect to administration costs?”
Dr Bell said CITIC had queries about the amount of salaries paid with the fund, given the limited functions Mr Palmer’s company had at the port. He said a “significant” amount of the funds had been used for salaries, including for Mr Sharma, without any descriptions of what the employees were doing or why they were needed when Mineralogy had no active role at the port.
The court also heard that the port administration funds were also used to make a donation of more than $13,750 to the Australian Fencing Federation.
A senior office bearer in the West Australian Fencing Association is Mike Dunham, who is employed as one of Mineralogy’s in-house legal counsel. In hundreds of pages seen by The Australian, numerous expense items for everything from superannuation payments to document-shredding services and telephone bills are listed. But CITIC says many of the expenses were not authorised under a deed between it and Mineralogy. Dr Bell claimed the funds had also been used to pay engineers employed to carry out work at other tenements held by Mr Palmer, which were not related to the CITIC tenements. CITIC and Mineralogy are set to enter arbitration next week and should that process find money has been spent incorrectly, it is believed CITIC will consider the potential for pursuing a criminal prosecution.
Mr Palmer has previously urged CITIC to pay him hundreds of millions of dollars to prevent the sacking of hundreds of his staff. He warned in an affidavit in a separate matter last year that the continued operation of his Queensland refinery “including the livelihood and employment of approximately 1000 employees and contractors, is dependent upon Mineralogy receiving royalties from (CITIC Pacific)”.
He has also said he would not stand by and see “Australian interests raped and disrespected by foreign-owned companies”.
The parties have fallen out over the amount of royalties owed to Mr Palmer and are engaged in a fight for control of the project, which relies on iron ore from tenements controlled by Mineralogy. The project began exports late last year, some four years behind schedule and more than $US6bn over budget.