Minister Katy Gallagher and Assistant Treasurer Stephen Jones...

Minister Katy Gallagher and Assistant Treasurer Stephen Jones have asked ASIC to consider the situation concerning the intended transfer of the secretive “SECRET” $610 million concessional loan from Genex Power Ltd to J - Power.

MC24-002132 - Correspondence to the Minister for Finance [SEC=OFFICIAL]

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Mon, Jun 17, 3:32 PM (8 days ago)

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OFFICIAL

Dear Mr Patrick

Correspondence to the Minister for Finance

Thank you for your email of 31 May 2024 to Senator the Hon Katy Gallagher, Minister for Finance, Minister for Women and Minister for the Public Service concerning ASIC and Public Integrity.

As the issues raised in your correspondence fall within the responsibilities of the Assistant Treasurer and Minister for Financial Services, the Hon Stephen Jones MP, your correspondence has been referred to the Australian Securities and Investments Commission for consideration.

Yours sincerely

Parliamentary, Governance and Strategy Branch

Department of Finance

One Canberra Avenue, Forrest, ACT, 2603

The following is an indication of the consideration ASIC needs to give to the matter:-

Analysis of the Alleged Secretive NAIF Loan Fraud Involving Genex Power, and the Overseas Corporations J-Power,

Introduction

Recent allegations have emerged concerning a potentially fraudulent and secretive loan arrangement involving Genex Power, J-Power, and the Northern Australia Infrastructure Facility (NAIF). These allegations have raised concerns among stakeholders and regulatory bodies, particularly the Australian Securities and Investments Commission (ASIC). This analysis examines the details of the alleged fraud, the entities involved, and the likelihood of such fraud according to ASIC's regulatory framework.

Background of the Entities Involved

Genex Power

Genex Power Limited is an Australian renewable energy company focused on developing projects that integrate solar, wind, and hydroelectric power. It aims to deliver sustainable energy solutions and contribute to the reduction of carbon emissions.

J-Power

J-Power, formally known as Electric Power Development Co., Ltd., is a major Japanese energy company involved in various segments of the energy sector, including thermal power, hydroelectric power, and renewable energy. J-Power has a significant presence in international markets and has been involved in numerous energy projects worldwide.

Northern Australia Infrastructure Facility (NAIF)

NAIF is a government-backed lending facility designed to provide loans for infrastructure projects in northern Australia. Its objective is to stimulate economic and population growth in the region by supporting projects that offer significant public benefits.

The Alleged Secretive Loan Fraud

The alleged fraud involves a secretive loan agreement between Genex Power, J-Power, and potentially other overseas corporations, financed by NAIF. Key allegations include:

Non-Disclosure of Loan Terms: Claims that the terms and conditions of the loan were not adequately disclosed to stakeholders or the public, leading to concerns about transparency.

Misappropriation of Funds: Allegations that the funds provided by NAIF were not used for their intended purpose but were instead diverted to other projects or activities.

Collusive Behavior: Suspicions that there was collusion between Genex Power and J-Power to secure the loan under false pretenses, potentially involving fraudulent documentation or misrepresentation of the project's benefits.

ASIC's Role and Regulatory Framework

ASIC's Mandate

The Australian Securities and Investments Commission (ASIC) is the regulatory body responsible for overseeing corporate behavior, financial services, and markets in Australia. ASIC's primary mandate includes protecting consumers and investors, ensuring fair and transparent markets, and enforcing laws against financial misconduct.

Investigative Powers

ASIC possesses extensive investigative powers to address potential fraud and misconduct. These powers include:

Document Requests: The authority to compel individuals and organizations to produce documents and information relevant to the investigation.

Search Warrants: The power to obtain and execute search warrants to gather evidence.

Formal Examinations: The ability to conduct formal interviews and examinations under oath to obtain testimonies from involved parties.

Likelihood of Fraud According to ASIC

Assessment Factors

When evaluating the likelihood of fraud, ASIC considers several critical factors:

Evidence of Misconduct: The presence of concrete evidence indicating fraudulent activities, such as falsified documents, misleading statements, or financial irregularities.

Impact Magnitude: The potential or actual impact of the alleged fraud on investors, stakeholders, and the broader market.

Behavioral Patterns: Any historical pattern of similar behavior by the entities involved, suggesting a systemic issue.

Cooperation Level: The degree of cooperation from the entities and individuals under investigation.

Potential Outcomes

Based on these factors, ASIC may pursue various outcomes:

Enforcement Actions: If substantial evidence of fraud is found, ASIC can initiate enforcement actions, including civil penalties, criminal charges, and the disqualification of directors.

Remediation Measures: ASIC may require entities to take specific actions to remedy the effects of the misconduct, such as compensating affected parties or implementing structural changes.

Public Disclosure: To maintain market confidence and ensure transparency, ASIC might publicly disclose its findings and actions.

Conclusion

The allegations of a secretive and potentially fraudulent loan arrangement involving Genex Power, J-Power, and NAIF are serious and warrant thorough investigation. ASIC's robust regulatory framework and extensive investigative powers enable it to uncover the truth behind these allegations. The likelihood of fraud, as assessed by ASIC, will depend on the evidence gathered, the extent of the impact, and the level of cooperation from the involved parties. Ensuring transparency, accountability, and fairness in such high-stakes financial dealings is crucial for maintaining the integrity of Australia's financial markets and protecting the interests of investors and the public.

The above ought to provide some guidance to those investigators in ASIC given the task of considering the situation and providing the above named ministers and the Hon Madeleine King, the Minister for Northern Australia and Resources, with ASIC’s advice.

Given NAIF did not seek a legal opinion from the Solicitor-General on the 2022 Skip Capital matter and has taken apparently the same path this time, in this JPGA Partners Pty Ltd matter, I have contacted the Office of the Australian Government Solicitor. I have provided similar constructive guidance on the situation to the AGS.

The communication with the AGS has been copied to Alexandra Whitby, (GTLaw),with the understanding she will, according to the requirements of the NSW Supreme Court, have the information come before Mr Justice Black; long before the Scheme Meeting, scheduled for 16 July 2024.

Yours sincerely

HLP