A special Dateline investigation reveals senior lawyers detailing how to avoid detection when laundering money into Australia and beyond.
Airdate: 
Tuesday, June 23, 2015 - 21:30
Channel: 
SBS

A private investigator filmed secretly at a leading law firm in Papua New Guinea, revealing a trail of corruption and influence peddling involving politicians, bureaucrats and lawyers.

The investigator posed as a fund manager looking to invest in PNG during an initial appointment with Young and Williams Lawyers.

He was working for the NGO, Global Witness, and later handed the footage to SBS and Fairfax.

The law firm is owned by Australian Greg Sheppard and his business partner Harvey Maladina.

They have represented high profile clients, including the current PNG Prime Minister Peter O’Neill.

Several of their clients have faced corruption charges, so the investigator is looking to find out if their practices are above board.

“All those sorts of mobilisation fees really ought to originate from off shore,” Sheppard tells the investigator when asked about politicians looking for bribes over the sale of land.

“It’s something that needs to be handled very, very carefully.”

“You’ve got to make sure it’s not going to be attacked as money laundering… if you were to pay seven figures to anybody, the world would fall in on top of you,” he says.

“Small dribs and drabs are the only way to go... anyone who says seven figures, they are inviting prosecution.”

Greg Sheppard is the father of three members of the popular Brisbane band Sheppard, and owns the business behind it.

He was until recently a director of Wilson Protective Services, a subsidiary of Wilson Security, which is the company that runs the Australian detention centres on Manus Island and Nauru.

His resume also says he’s a former Queensland Crown Prosecutor and his website says he was awarded an OBE and the Companion of the Star of Melanesia for his distinguished service to PNG.

He’s lived and worked in PNG for more than 25 years.

In conversation with the investigator, he states that he’s not advising the potential investor to break the law.

“I’m approaching it from a lawyer’s point of view, I don’t want to advise you to do anything illegal,” he says.

“It would have to be something that didn’t raise suspicions, something that was ostensibly commercial.”

The Australian Federal Police estimates more than $200 million of corrupt money is laundered from Papua New Guinea into Australia every year.

Sheppard’s business partner Harvey Maladina is even more bold in explaining how to do business PNG-style.

“Just look after the top guy, normally it’s the minister,” is his advice re payments. “It shouldn’t be [normal], but it is.”

“If you’re a politician, it’s the quickest route to being a millionaire here.”

Maladina is from a highly influential family – his father and brothers were involved in politics.

The conversation turns to how bribes are disguised - Maladina discusses using inflated legal bills.

“If you engage us, we engage him,” he says. “We do our bills... you pay us, and we send his money off to Australia, to his Australian account.”

“Is he happy to adjust the bill so that it’s higher so you can get the money out to Australia?” asks the investigator.

“Sure,” replies Maladina.

He also mentions a high profile Australian QC who helps facilitate the process.

“Normally it’s through the law firms, they don’t usually question that,” he says.

“The door is pretty wide open if you’re a foreign corrupt official looking to move your dirty money into Australia,” says Jason Sharman, a money laundering expert at Griffith University in Queensland. “The risks of detection and being caught are almost zero.”

“Australia is complicit in this through its inaction or through turning a blind eye,” he says.

And there’s speculation Canberra doesn’t want to rock the boat because of the detention centre on Manus Island.

“I think the recent deal over Manus Island... has added another element there where the Australian Government definitely doesn’t want to irritate the PNG Government for fear of that deal unravelling.”

Dateline put a series of questions about bribery and money laundering to both lawyers. Read their responses in full.

Harvey Maladina replied saying, “The allegations are not true… at no time did I make or insinuate that illegal payments can be made through my firm.”

Greg Sheppard told us he considers the allegations to be false and that any comments would be given within the overarching requirements of PNG laws.

Watch the full investigation at the top of the page. This story was later awarded a Finalist Certificate in the New York Festivals TV and Film Awards.

Clarification: Dateline referred to Jimmy Maladina as a Government Minister – this has been corrected to Government Adviser for this online version which is otherwise unchanged from broadcast.

Greg Sheppard's Response

I do not recall meeting with anybody identifying themselves as a representative of “New Botany Fund” on the date you mentioned, or at all.

I have since receiving your email checked all of my firm’s records and can confirm that New Botany Fund was never at any time a client of this firm and therefore, no legal advice was given to it through its representative.

I am often approached informally by a variety of people who are not clients to share aspects of my knowledge and practical experience in PNG, and in these areas of the law. My comments on these occasions are by the very nature of the exchange, general, hypothetical and merely descriptive. I always assume that those who ask me for this kind of information are doing so to broaden their understanding of the issues and practices here under the relevant laws. It is illogical to think someone would be looking for this type of information to ensure their conduct is illegal. Any information I share, is in the context of the overarching requirement to comply with the laws of PNG.

If your anonymous source was one of these people, I regret that he did not clearly understand this.

I consider the allegations contained in your letter to be false and highly defamatory, and you ought not to publish them.

I reserve all of my rights pertaining to this matter, and have forwarded a copy of your email and this reply to my solicitors.

Harvey Maladina's Response

These allegations are not true.

I met an American businessman at the Airways Hotel in Port Moresby last year but at no time did I make or insinuate that illegal payments can be made through my firm or through my Partner Mr Greg Sheppard.

I told him that yes through the media I have read that this was common in PNG but that was it.

We (Greg & I) have been in practice now for over 30 years and we have never assisted anyone bribe or facilitated an illegal payment from the firm or through my partner Greg Sheppard. I recall this expatriate asking me how he could bribe the Minister for Forest. I declined to comment for the reason because I have never made or assisted in this illegal practice before and never will in future.

I have never introduced this person to Greg; any suggestion that I introduced this person to Greg through me is an outrageous lie. I met him once for a short meeting and have never met him again since.

It is quite extraordinary that you have been able to make a story line from this meeting that implicates my partner and me of these ludicrous bribery and money laundering insinuations.

Papua New Guinea Law Society Response

In the wake of public outcry, the PNG Law Society (PNGLS) is obliged to publicly state its position with regards to the recent SBS Dateline program aired regarding comments by two very Senior Lawyers. The footage shown on the SBS Dateline program has gone viral and the social media has escalated the issue and people have expressed various views and comments.

PNGLS first and foremost respects the freedom of speech of all persons.

PNGLS is concerned that the comments made by the two Senior Lawyers, though isolated to their firm, does have a far wider impact on the profession as a whole. In recent years the legal profession has been under so much scrutiny and criticism and this latest development does nothing to dispel the growing view about lawyers in this country and this  is where the PNGLS is very concerned.

Lawyers have not only a legal duty to uphold the Constitution and the laws of this country but ethical and moral duty as well to ensure that their engagement in the wider community where they ply their trade is done without compromising the oath they took when they get admitted to the bar. The Professional Conduct Rules sets the benchmark for the measurement of the minimum standards required of  lawyers.

For lawyers to encourage the flaunting of the laws of this country or a foreign country or engage in conduct likely to invite ridicule and criticism to the profession and practice of law is viewed with disdain and not welcomed by PNGLS.

The explicit and graphic nature of the video footage aired by SBS concerning the two Senior Lawyers can only invite investigations into the law firm concerned by appropriate authorities.

Allegations about money laundering is serious and a transnational issue and both the PNG and Australia Governments should immediately investigate and see if there is any truth in the manner in which the subject was discussed by these two Lawyers. This process is important to ensure that all persons concerned are cleared of any such serious allegations.

The profession has been under so much pressure in the last few years due to serious allegations against Lawyers and the public perception of the profession has taken a real battering. PNGLS has a duty towards its members to ensure that such matters are addressed appropriately and in a timely manner.

At the same time PNGLS also has a duty towards the two Senior Lawyers concerned and it will write to them and invite them for their explanations on the comments they made which was aired by SBS Dateline. It is imperative that everyone bear in mind that due processes must be followed and the sensitive issues that have arisen are handled delicately and in an orderly manner.

AUSTRAC (Australian Government Transaction and Reports Analysis Centre) Response

Background comments:

Papua New Guinea is a near neighbour and important bilateral and regional partner.

We treat seriously any allegations that Australia is harbouring proceeds of corruption from PNG or that such proceeds are being laundered in Australia.

Australia has a robust anti-money laundering framework to deter and detect money laundering, based on international standards. We are committed to ensuring Australia is not a safe haven for the proceeds of corruption.

Banks and other regulated businesses are required to have appropriate controls to counter the money-laundering risk posed by corrupt foreign officials and politicians, including customer identification and financial transaction and suspicious matter reporting requirements.

Consistent with our commitment to tackle corruption domestically and overseas, Australian agencies work closely and cooperatively with PNG authorities to combat corruption.

Australia is investing considerable resources to strengthen PNG’s capacity to combat corruption, including assistance to strengthen PNG’s anti-money laundering framework to comply with FATF standards and its capacity in the area of proceeds of crime and investigation.  This includes support to build PNG police capacity to detect and investigate cases of fraud and corruption.

Q1: What processes are in place to track the flow of money from PNG to Australia?

Australia’s AML/CTF regime includes a range of measures to address and mitigate the risk of overseas entities (including individuals) misusing the Australian financial system.

Australia’s regime is based on international Financial Action Task Force (FATF) standards which require businesses to adequately identify customers and to determine whether those customers should be subject to additional checks.  

Customer identification requirements

Australia's AML/CTF laws require reporting entities (including banks and casinos) to have in place rigorous customer identification procedures appropriate to their particular business. These procedures are designed to identify overseas customers who may pose an increased money laundering risk and include appropriate systems to detect and report any suspicious transfer undertaken by their customers.

AUSTRAC closely regulates reporting entities in Australia to promote compliance with these customer identification obligations.

Financial transaction and suspicious matter reporting requirements

AUSTRAC’s reporting entities are required to report certain threshold transactions, as well as international funds transfers and suspicious matters.  

Reporting entities are required to report to AUSTRAC any suspicious activity undertaken if the entity has reasonable grounds to suspect that the activity may be related to a money laundering or any other offence under a Commonwealth, state or territory law.

Where AUSTRAC receives intelligence relating to possible instances of corruption, bribery and money laundering, AUSTRAC refers the information to relevant partner agencies, including the Australian Federal Police, intelligence agencies and, where appropriate, the Department of Foreign Affairs and Trade (DFAT), and/or relevant international partners.

Q2: Is cracking down on money laundering between PNG and Australia a priority? Experts have told us Austrac and other authorities are turning a blind eye due to sensitivities between Australia and PNG due to Manus Island.

The Australian Government is working to enhance our joint disruption efforts to ensure that Australia is not a safe haven for the proceeds of corruption.

Domestically, agencies such as the Attorney-General’s Department (AGD), the Australian Federal Police (AFP) and the Australian Transaction Reports and Analysis Centre (AUSTRAC) collaborate closely to ensure that Australia has a robust anti-money laundering framework to deter and detect money into Australia.  

Australia is also committed to assisting our foreign partners such as PNG.

The Australian Government supports Papua New Guinean authorities to detect, investigate and prosecute cases of corruption.

The Australian Attorney-General’s Department and AUSTRAC are helping to harden the PNG financial system against money laundering, corrupt activity and terrorist financing through the Combating Corruption Project.

Australia's Attorney-General's Department, AUSTRAC and the Australian Federal Police are providing specific expertise to strengthen PNG's anti-corruption efforts.

This work is part of Australia's increased commitment to supporting good governance in PNG through Australia’s aid program.

Credits

 

Transcript

Papua New Guinea is a land of great beauty with a rich culture. It's also rich in resources. The country's a magnet for wheeler-dealers looking to make a profit. So perhaps not surprisingly corruption here is rife.

SAM KOIM, PNG ANTI-CORRUPTION TASKFORCE: In the course of our investigations, we have also uncovered instances of corruption that reaches right to the top.

The Australian Federal Police estimate more than $200 million of corrupt money is laundered from PNG into Australia every year.

PRIVATE INVESTIGATOR: Okay.

A private investigator armed with a secret camera is on his way to meet with a leading law firm.

PRIVATE INVESTIGATOR: Thank you very much indeed.

He's working undercover, posing as a fund manager looking to invest in PNG. He makes an initial appointment.

PRIVATE INVESTIGATOR: I'm here to see Greg.

WOMAN: Who shall I say it is?

He's working for NGO Global Witness - investigating this prestigious law firm. Owned by Australian Greg Sheppard and his business partner, Harvey Maladina, the legal firm has represented high-profile clients, including the current Prime Minister, Peter O'Neill. Several of their clients face corruption charges, so the investigator is looking to find out if their practices are above board.

WOMAN: How do you take your coffee?

PRIVATE INVESTIGATOR: With a bit of milk and one sugar. Greg, this is incredibly kind of you, thank you.

GREG SHEPPARD: Gretchy! Did you forget about me? I’ll have the same, exactly the same.

PRIVATE INVESTIGATOR: Thank you.

Greg Sheppard is an Australian lawyer who has been living and working in PNG for more than 25 years.

GREG SHEPPARD: I made about 4 million bucks before I was 30 so I was the cleverest guy on earth until I lost it all. I’m your typical boomster who busted.

PRIVATE INVESTIGATOR: What did you lose it on?

GREG SHEPPARD: Real estate.

PRIVATE INVESTIGATOR: Must be more interesting. Women, wine, rock and roll…

The meeting is supposed to be about high finance but the conversation quickly turns to music.

PRIVATE INVESTIGATOR: I’m completely bemused cause I saw your gold record in there.

GREG SHEPPARD: Yes, yes it’s not a gold it’s platinum. These are my children, and they're in a band which is just going crazy at the moment in terms of record sales.

The band he's referring to is Sheppard. They've gone platinum with their catchy songs. The Brisbane-based band now tours the world performing. Three of the band members are Sheppard family siblings. Lawyer Greg Sheppard is their dad.

GREG SHEPPARD: Catchy as Asian flu. It spent three weeks around Easter time at the number one position in Australia.

PRIVATE INVESTIGATOR: Are you also in the band and write the music or are you just the proud parent?

GREG SHEPPARD: I own it, right.

PRIVATE INVESTIGATOR: Okay.

GREG SHEPPARD: I set it up as a family business.

PRIVATE INVESTIGATOR: Okay.

GREG SHEPPARD: And I control it through a Singapore company called Empire of Song, Chinese.

PRIVATE INVESTIGATOR: That’s beautiful actually.

GREG SHEPPARD: I play a very important instrument in the whole thing, it’s called the negotiable instrument, I sign all the cheques.

Greg Sheppard's resume says he's a former Queensland Crown Prosecutor. Records show he's been the director of more than 50 companies since the late '80s. Currently, he sits on the board of Air Niugini and until recently he was a director of Wilson Protective Services, the subsidiary that runs the Australian detention centre on Manus Island and Nauru. Mr Sheppard's website says he was awarded an OBE and the Companion of the Star of Melanesia for his distinguished service to Papua New Guinea. As the secretly recorded discussion continues, the talk turns to politicians looking for bribes.

PRIVATE INVESTIGATOR: I've spoken with three or four people who've got land to sell and they said well there’s going to be some big mouths to feed.

GREG SHEPPARD: Some ministerial approvals.

PRIVATE INVESTIGATOR: Some ministerial approvals!

GREG SHEPPARD: It’s something that needs to be handled very, very carefully, all those sorts of mobilisation fees really ought to originate from off shore.

PRIVATE INVESTIGATOR: Bluntly, are we likely to get any kind of commercial steer from the minister?

GREG SHEPPARD: Yes

PRIVATE INVESTIGATOR: So they’ll have businesses set up then? Okay… because I would struggle with a brown bag situation.

GREG SHEPPARD: Nah…

PRIVATE INVESTIGATOR: I imagined it was a little more nuanced and finessed than that, but I don’t know…

GREG SHEPPARD: I don’t know what it is either… you have got to make sure that it’s not going to be attacked as money laundering.

PRIVATE INVESTIGATOR: Yeah.

Sheppard then moves on to how one might make the necessary payments.

GREG SHEPPARD: Look, if you were to pay seven figures to anybody, the world would fall in on top of you. The small dribs and drabs are the only way to go.

Greg Sheppard states he's not advising the investor to break the law.

GREG SHEPPARD: I’m approaching it from a lawyer’s point of view, I don’t want to advise you to do anything illegal. It would have to be something that didn’t raise suspicions, something that was ostensibly commercial, the days of banging a million bucks into his secret numbered account in Singapore is over.

JASON SHARMAN, MONEY LAUNDERING EXPERT: Australia has a lot of dirty money sloshing around in the country. It's a lot higher than most Australians would assume and a lot higher than the Australian Government is prepared to admit.

Jason Sharman is an expert in money laundering. He's spent years investigating money obtained by dubious means and how it then ends up in Australia.

JASON SHARMAN: I wasn't surprised about the level of corruption in Papua New Guinea but I definitely was surprised that this dirty money ended up in Australia.

He believes professionals like accountants, lawyers and real estate agents are acting as conduits to move large amounts of money between countries illegally without fear of detection.

JASON SHARMAN: They're saying ‘Well if the government doesn’t care about this, I’m not going to ask too many awkward questions of my clients either’.

The proximity between PNG and Australia means most major Australian law firms have bases here. And the Federal Government provides more than half a billion dollars a year to this impoverished nation. When the recent budget squeeze saw other country's aid's budgets slashed, PNG's barely budged, a reflection of the strategic and diplomatic importance of PNG to Australia. The relationship heightened by PNG's hosting of the detention centre on Manus Island.

TONY ABBOTT, AUSTRALIAN PRIME MINISTER: Well I hope you always think of Australia as best friend.

As well as meeting Greg Sheppard, the investigator also met his law firm business partner, Harvey Maladina. He's from an influential family, his father and brothers were involved in politics. Harvey Maladina is even more bold in explaining how to do business PNG style.

PRIVATE INVESTIGATOR: I think the mechanism that we're looking for… because we have some big mouths to feed, okay.

HARVEY MALADINA: You want to do that payment off shore.

PRIVATE INVESTIGATOR: I want to follow the route that's already been followed, that’s tried and trusted, that’s safe.

HARVEY MALADINA: I can do it.

PRIVATE INVESTIGATOR: There's some mouths to feed at ministerial level, do you understand what I'm saying?

HARVEY MALADINA: That normally happens around here. You hit the top guy, just look after the top guy. Normally it’s the minister…

PRIVATE INVESTIGATOR: So this is normal?

HARVEY MALADINA: It shouldn’t be but it is.

He then suggests meeting with his well-connected brother.

HARVEY MALADINA: My brother is a close friend of the prime minister, he's a hustler.

PRIVATE INVESTIGATOR: He’s a hustler?

HARVEY MALADINA: Yeah.

PRIVATE INVESTIGATOR: So is Peter very…

HARVEY MALADINA: Very loyal to him.

PRIVATE INVESTIGATOR: Very loyal, yes.

That brother, Jimmy Maladina, was a government adviser. Recently he was convicted of corruption. He's expected to be sentenced in the coming weeks. So once bribes are negotiated, how are they disguised?

PRIVATE INVESTIGATOR: Would you like to just quickly run through what we're doing?

HARVEY MALADINA: Yeah sure.

Harvey Maladina discusses using inflated legal bills.

HARVEY MALADINA: If you engage us, we engage him and when we do our bills, we do one bill to you and you pay us and we send his money off… to Australia, to his Australian account. He’s billed us more.

PRIVATE INVESTIGATOR: So is he happy to adjust the bill so that it’s higher, so that you can get the money out to Australia?

HARVEY MALADINA: Sure.

He also mentions a high-profile Australian QC who helps facilitate this process.

HARVEY MALADINA: We normally engage a guy called… normally if it’s through the law firms they don’t usually question it.

Jason Sharman says this method, although illegal, is surprisingly common.

JASON SHARMAN: If you want to move money from Papua New Guinea to Australia, you get a lawyer friend in Australia to do some work for you and the lawyer friend charges way more than those services are actually worth but you can use this inflated bill as a cover for moving dirty money from Papua New Guinea to Australia. Australia is complicit in this through its inaction or through turning a blind eye.

If correct, why has it not been a priority for authorities to crack down on this behaviour?

TONY ABBOTT: I hope you always think of us as family. Increasingly close family.

There's speculation Canberra doesn't want to rock the boat because of the detention centre on Manus Island.

JASON SHARMAN: I think the recent deal over Manus Island and the accommodation of the asylum seekers has added another element there where the Australian Government definitely doesn't want to irritate the PNG Government for fear of that deal unravelling.

SAM KOIM: That is not something that should hold Australia over the barrel for corruption issues that are plaguing this country.

Sam Koim is the head of the anti-corruption body in PNG.

SAM KOIM: Corruption is the direct cause of poverty.

He says his organisation hasn’t received any government funding since they brought corruption charges against the Prime Minister, Peter O'Neill. The charges were later dismissed. He's calling on the Australian Government to follow Switzerland and the US's lead and crack down on this illegal behaviour.

SAM KOIM: I believe that Australia knows certain transactions originate from illicit sources. And Australia has that information at its finger tips but has not done anything.

JASON SHARMAN: You know you have the stigmatised tax havens that you see in John Grisham novels and James Bond films and Australia in some way, when it comes to foreign corruption, is acting in the same manner as those countries. And I guess we have to ask do we really want our country to be aiding and abetting that sort of criminal conduct abroad.

HARVEY MALADINA: There’s a lot of money coming in and if you are a politician it's the quickest route to being a millionaire in property. I’m going to be a politician too.

Dateline put a series of questions about bribery and money laundering to both lawyers. Harvey Maladina replied saying, the allegations are not true, at no time did I make or insinuate that illegal payments can be made through my firm... Greg Sheppard told us he considers the allegations to be false, he says his comments on these occasions were hypothetical…

PRIVATE INVESTIGATOR: The cost of business here is, leaving aside all the bribery and all that it’s just actual resources of hotels, transport, phones, terrible internet, all those things…um, but I still think…

GREG SHEPPARD: But then the rewards are huge, everything is an elephant here, there’s no pygmies.

PRIVATE INVESTIGATOR: It’s one of the most litigious societies I have ever been in.

GREG SHEPPARD: Isn’t it wonderful! What do you think I’m here for, my health?

Reporter
MEGGIE PALMER

Story Producer
GEOFF PARISH

Story Editors
MICAH MCGOWN
RYAN WALSH

Thanks to
TVWAN
FAIRFAX MEDIA

23rd June 2015