Paladin, controlled by Mr Thrupp, a former Australian soldier, and his business partner Ian Stewart, has also recently purchased the contentious PNG security outfit Black Swan, a company repeatedly forced to deny rumours it has links to the family of Prime Minister Peter O’Neill.
On the ground at Manus, where Paladin is responsible for security, IT, local transport and some site management at the East Lorengau Transit Centre, Hillside Haus and West Lorengau Haus, refugees and asylum seekers complain of broken amenities and non-existent services.
“Australian taxpayers are expending a huge amount of money but we don’t see much of it being utilised on the ground in Manus,” said Abdul Aziz, a Sudanese refugee who has been on the island for five years.
“The maintenance service is very poor … and they have not bought any new equipment in many years,” says Mr Aziz.
This was confirmed by a UNHCR report published last July which noted rooms at the East Lorengau camp were below international shelter standards for accommodation over three months, while other areas had leaking pipes, a lack of fire alarms and showers that were not working.
The report did however note improvements in other areas like the ratio of toilets and the general accommodation conditions in other camps.
Calculations by the Financial Review indicate Paladin is being paid on average $20.8 million a month by the government to provide security at all three sites and manage the East Lorengau Transit Centre. That amount has risen 48 per cent from an average of $14 million a month last year. A Home Affairs spokesperson said there were now 422 people housed at the three camps – 213 at East Lorengau, 111 at West Lorengau and 98 asylum seekers at Hillside Haus.
That means on a daily basis it now costs the Australian government over $1600 to house each refugee on Manus, not including food and welfare services, more than double the price of a suite at the Shangri-La hotel in Sydney.
Typically, profit margins are as much as 40 per cent on these contracts because of the risks involved. However, Paladin’s margin is “unbelievable”, according to one source familiar with the this type of work. That’s because the company uses mostly local staff and its security guards earn about $2 an hour.
The company is believed to have just over a dozen expatriate staff, who might be earning $150,000 each. Home Affairs says it provides security, transport, IT services and emergency management. Even if you build in generous contingencies for evacuations, emergency response teams and local consultants, Paladin’s total costs are estimated to be less than $3 million a month. That means they are pocketing more than $17 million a month to manage the East Lorengau centre and secure the three camps, which have been used as primary accommodation for refugees and asylum seekers since the offshore processing centre at the nearby Lombrum naval base was closed in October 2017.
Despite calls for greater openness around Australia’s offshore refugee centres, the Home Affairs Minister, Peter Dutton, has refused to release any detailed breakdown of Paladin’s contract, arguing it could harm relations with PNG. The AusTender site provides only dates and headline amounts for the contracts.
This adds to the overall lack of transparency around those benefiting most from Australia’s policy of housing refugees and asylum seekers offshore.
As a group of companies, Paladin is little more than a series of post boxes at registered offices in Singapore and Hong Kong and that beach shack down a dirt road on Kangaroo Island in South Australia.
Its Singapore entity Paladin Holdings Pte Ltd, which is the ultimate beneficiary of all the government contracts, has registered capital of just $US50,000.
That’s less than the average Australian corner store and very thinly capitalised for a group receiving more than $20 million a month from the federal government.
It raises questions on how it came to win such a lucrative contract.
If paid in full, Paladin is scheduled to earn more from the federal government over the 22 months to June 30 than accounting giant Ernst & Young received over the previous five years.
Given the size of the contracts, it is also unusual that so little is known about the two men at the helm of the company.
Mr Thrupp, 38, and Mr Stewart, 41, have no social media profiles and the Paladin website does not contain a biography for either man. In a war archive compiled by UNSW Canberra, a then 19-year old Mr Thrupp boasted about being among the first Australian troops into East Timor in 1999 and spoke of himself as not “your average shallow, narrow-minded soldier”.
“Being shot at and being afraid for your life is a really character building experience … moral fibre and all that stuff,” he said.
Company filings show Mr Thrupp has had business interests in PNG since 2010, when he set up Paladin Solutions there with a British director, Patrick Barrett, who was based in Port Moresby.
He took sole ownership of the company in 2012 and a year later transferred control to Paladin Hong Kong.
In 2014 Mr Stewart, then 36, joined as a director. Little is known about Mr Stewart, who was born in Burnside, Adelaide but is a British national. And last November, he stepped down as director from Paladin’s PNG subsidiary.
According to court documents, in 2015 the pair were working in connection with the ASX-listed construction company, Decmil, which was doing building work on Manus.
Two years later the pair would have a contracts worth almost double that of Decmil, a company with a market capitalisation of $185 million.
Court documents, company filings and interviews with insiders indicate Paladin was ill-equipped to deliver such large contracts, a view shared by one person with direct knowledge of how it was awarded.
“There was pressure put on the Department [now Home Affairs] by the PNG government to ensure Paladin was appointed,” said the source.
He said the contract with Paladin was about ensuring more employment for PNG nationals, while also “creating a vehicle that allowed Australian government money to flow to interests in PNG”.
The person says the Paladin contract came about due to a general annoyance in PNG that the Australian government largely awarded contracts to multinational companies and little of the economic benefit stayed in PNG.
It also came about after previous contractor, Transfield, bowed to public pressure and opted out of the lucrative but controversial work. Transfield, which changed its name to Broadspectrum, had managed the offshore processing centre at Lombrum until October 2017 when refugees and asylum seekers were moved to the three camps at Lorengau. The previous year, the PNG supreme court had declared the offshore processing centre illegal and Broadspectrum’s new owner, Spanish firm Ferrovial, made it clear it would not manage these type of facilities in the future.
That opened up an opportunity for lesser known players like Paladin and more local involvement.
In September 2017, Paladin Solutions PNG, wholly owned by Paladin Holdings in Singapore, won a $72.7 million contract with Home Affairs, later extended to a total value of $89 million for providing garrison services at East Lorengau Transit Centre through to February, 2018. The Singapore parent would later go on to win a second contract, eventually valued at $333.5 million, to provide garrison services at East Lorengau and the other sites from February, 2018 to June this year.
In the weeks before winning the initial tender, Mr Thrupp and Mr Stewart reached out for “urgent help” to Craig Coleman a consultant and former Australian army major, according to court documents.
The documents, filed in the Federal Court of Australia by Mr Coleman as part of an employment dispute following his dismissal, claim just three weeks before being awarded the September 2017 contract Paladin was “not well prepared to perform the role provided for under the Proposal”.
“Paladin did not have the corporate structure, human and other resources or processes that would permit it … to perform the roles required under the Proposal,” he alleged.
Mr Coleman, who declined to comment on the case when contacted by the Financial Review, has alleged Paladin submitted tender documents that were “fundamentally misleading, inaccurate, incorrect or wrong”.
He said address, organisation and company information given to the government was wrong, as was the description of the relationship between the various Paladin entities.
The statement of claim also said Paladin had broken PNG immigration law by deploying employees to PNG under “false and deceptive circumstances”. In other documents, it emerged Mr Coleman alleged the company’s PNG arm had made “ex-gratia payments”.
The parties are now locked in a protracted dispute where Paladin has denied or asked for further explanation about the allegations, while lodging their own cross claim against Mr Coleman.
In the cross claim, Paladin allege the airing of another claim by The Australian newspaper around its employment of a person convicted of drug use, resulted in Mr Thrupp being banned from PNG.
In a statement to the Financial Review, Paladin clarified that Mr Thrupp’s APEC Permit (a regional visa) has been cancelled and since then he had not tried to re-enter PNG.
The cancellation highlights the sensitivity surrounding the booming private security industry in PNG where tensions between foreign operatives and locals have emerged.
The growth of the private security industry has made it arguably the third-largest employer in the relatively impoverished country, and the number of private security guards is estimated to be more than the combined number of police, defence and correctional services personnel.
“There has been a proliferation of these private security companies and massive investment from the political elite and this is all happening in a weak regulatory environment,” says Sinclair Dinnen, senior research fellow with the ANU’s Department of Pacific Affairs.
One firm that has been at the centre of the controversy is Black Swan, which was set up by Australian Brian Kelly and PNG /Australian businessman Francis Kramer, the relative of firebrand opposition Member of Parliament Bryan Kramer, who was a director of the firm until 2012. Kelly soon became the sole owner.
Since then Black Swan has won lucrative government contracts including for security services at the APEC regional forum last year and for local company Remington Technology, which is part-owned by Prime Minister Peter O’Neill.
Black Swan has fended off constant accusations that it has direct ties to government officials. In 2016, Mr Kelly fronted news cameras to dispel the rumours that the firm had direct government connections and encouraged anyone to confirm this by examining public filings.
“Black Swan certainly has a reputation for being very close to key figures in the political elite, including the Prime Minister and his family, but that’s the gossip and, as ever, difficult to pin down,” says Mr Dinnen.
“Ownership of companies is often fairly opaque and not helped by regular changes in ownership in many cases “
As of July 2018, public filings show Mr Kelly transferred his shares in Black Swan to Paladin Singapore. Mr Kelly stepped down as a director to be replaced by Craig Thrupp, Mr ,Stewart and a PNG local Kisokau Powaseu. Two months earlier in May 2018, Mr Powaseu was appointed a director of Paladin PNG.
Late last month, PNG news service EMTV reported that Mr Powaseu, a former PNG Defence Force Officer, had been detained and charged by the National Fraud and Anti-Corruption Directorate with 106 counts of misappropriation and one count of money laundering. Mr Powaseu allegedly transferred about $500,000 from a Defence Force trust account to other accounts for his own use. Paladin say the alleged corruption happened before his involvement with the company and it was their “understanding” the charges “were no longer being pursued by legal authorities”.
According to his LinkedIn page, Mr Powaseu was a pilot and Lieutenant Colonel, who rose to be commanding officer of the PNG Defence Force’s Air Transport Wing and worked for a time in the ministry of defence. He was also a law lecturer at the University of PNG. On Facebook, he said he completed a Masters of Law at Melbourne’s Monash University in 1997 and lived in Hawaii for a period around 2013.
Mr Stewart resigned in November from both the Black Swan and Paladin Solutions PNG boards.
With five months to run until the contract is up for renewal it remains to be seen whether Paladin can retain the lucrative work. In the meantime, Mr Dutton will come under pressure to provide more details about the contract.