The Australian government was left with almost 46m unusable face masks after handing $100m in Covid contracts to an obscure online retailer, who sourced the equipment via companies registered in the low-tax jurisdiction of Cyprus.
The Department of Health awarded the contracts in April and June 2020 to Australian Business Mobiles NSW (ABM), a small company whose experience lay predominantly in selling air fryers, robot vacuum cleaners, bedding and massage guns.
ABM subcontracted the supply of the PPE to two companies registered in Cyprus, owned by twins Ricky and Evan Neumann. The Cyprus-registered companies made about $40m on the deals, according to contracts and other documents seen by the Guardian.
In July, a whistleblower is understood to have raised questions to Australian Taxation Office officials about the arrangement.
According to the documents, which include the government contracts with ABM and contracts with supply companies, ABM was paid to source 50m face masks and 4m isolation gowns. Both contracts were awarded by the health department via limited tender.
Almost 46m of the masks were subsequently found to be unusable, because five of the seven manufacturers that supplied masks to ABM were deemed non-compliant with quality regulations. Deliveries to the national medical stockpile were made on mixed pallets so it was not possible to ascertain which masks in the stockpile were compliant. Of the masks that were deployed, two batches were subject to defect notices in March 2022 warning against their use in hospitals and other healthcare settings.
ABM first came to the government’s attention after an unsolicited approach was made to the office of the then health minister, Greg Hunt, offering to secure PPE in early 2020. The Guardian understands the offer was subsequently passed on to the department and Hunt then had no involvement in any further assessment or buying decisions.
A spokesperson for Hunt said many unsolicited approaches were made to the minister’s office during the pandemic and that it was standard practice for them to be referred to the department for proper assessment and scrutiny.
It is understood the current government has not initiated any process to recover the money or request replacement masks, but is exploring whether it can do so.
The Neumann brothers own a Sydney-based importing company, Intertrading Australia, but ABM signed a contract for the provision of PPE with the two Cyprus companies – called Neumer Trading and Neumer Holdings, apparently after the brothers’ names.
ABM committed to pay Neumer $91m out of the $100m received from the government, according to the April and June 2020 contracts. In turn, Neumer paid $50m for the PPE, the documents indicate, most of it to a Hong Kong company, Eric Beare Associates, which bought face masks and gowns from Chinese factories.
According to the documents, the two Neumer companies in Cyprus paid Eric Beare Associates A$19m for the 4m gowns – which the government did find to be compliant – and US$19m (then worth A$27.6m) for 42.5m face masks. Neumer bought the remaining 7.5m face masks directly from another company for US$2.6m (A$3.8m), the documents show.
That left a remaining amount of $50m from the $100m the government paid ABM, with $41m of it made by the Neumer companies in Cyprus, where secrecy surrounds company ownership and finances.
The whistleblower is understood to have raised questions over the tax arrangements for the money made from the deal.
The Guardian does not suggest any of the parties to the deal have engaged in wrongdoing.
A spokesperson for Ricky Neumann said the companies had “always complied with our obligations and deny any wrongdoing”.
“All transactions have been properly and professionally documented regardless of their location, in full compliance with local jurisdictions,” the spokesperson said. Neither Evan Neumann, ABM nor Eric Beare Associates responded to requests for comment.
PPE controversy in the UK
Neumer and Eric Beare Associates were also intermediaries for the supply of masks and gowns for two large and controversial PPE contracts in the UK awarded in May and June 2020. The British government granted those contracts, worth £203m, to a company called PPE Medpro with which a Conservative member of the House of Lords, Michelle Mone, and her husband, Doug Barrowman, were involved. The Guardian has previously revealed that PPE Medpro’s London-based supply company partner, Loudwater Trade and Finance Ltd, paid one of the Neumer companies for an introduction to Eric Beare.
Of the equipment that PPE Medpro supplied, the UK Department of Health and Social Care (DHSC) rejected the entire consignment of surgical gowns under one of the two contracts. The DHSC is suing PPE Medpro for recovery of all the £122m it paid, arguing that the gowns were unsafe. PPE Medpro is defending the government’s claim, arguing that the gowns were fit for purpose.
The deals prompted a political outcry in the UK after the Guardian reported last November that bank documents indicated that Barrowman had been paid at least £65m from the PPE Medpro profits, then transferred £29m into an offshore trust for Mone and her adult children.
At that time Mone and Barrowman, via their lawyers, denied that they were involved in the company. Mone’s lawyer said there were “a number of reasons why our client cannot comment on these issues”; Barrowman’s lawyer said a continuing investigation limited what his client could say but added that “there is much inaccuracy in the portrayal of the alleged ‘facts’ and a number of them are completely wrong”.
In response to the Guardian’s latest questions, a spokesperson for PPE Medpro, who said they also had permission to speak on behalf of Mone and Barrowman, said the Australia contracts were “completely unconnected”. They said PPE Medpro had “successfully fulfilled” its order to supply 210m face masks for the UK National Health Service “in conjunction with its consortium partners Eric Beare Associates and Loudwater Trade & Finance”.
They added that “Neumer was not known to PPE Medpro at the time of the contracts and was not part of the consortium which supplied PPE to the UK Government”.
“PPE Medpro was aware that Eric Beare Associates had supplied PPE to other countries during the pandemic. However, we know nothing of their trading partners or financing arrangements for those contracts. They were completely unconnected contracts.”
The spokesperson for Ricky Neumann declined to comment on the record about the financing of the PPE Medpro deals.
‘Serial entrepreneurs’
ABM states on its LinkedIn page that it generally sells household goods including bedding, luggage and consumer electronics.
“We specialise in creating on trend affordable luxury items that create style and comfort for the home,” it states.
The Neumann twins, who describe themselves as “serial entrepreneurs”, also do not appear to have had experience in supplying PPE before the pandemic. Their company Intertrading Australia, based in south-western Sydney, principally imports toiletries, confectionery and consumer goods. The company states on its website that it is “100% Australia owned and operated”.
The PPE deals raise serious questions about how rigorously the government conducted due diligence checks on companies it contracted with, and the prices it agreed to pay, when trying to source PPE at the onset of the pandemic.
The federal government suspended normal competitive procurement rules to award ABM the contracts, as it did with many Covid deals, under an exemption allowed to “protect human health”.
It instead set up taskforces of health and industry department officials to rapidly triage offers from potential PPE suppliers, before conducting more rigorous due diligence on their capability, history and experience.
At the time ABM was awarded the contracts, governments around the world were desperately seeking to fill PPE stockpiles, and companies that had means of sourcing it, mostly from China, could charge high prices.
The Australian National Audit Office reviewed PPE procurement in 2020 and found the contracts were generally value for money and departmental procurement planning and governance arrangements were effective.
Regarding the money allegedly made by the Neumanns’ Cyprus-registered companies, the spokesperson for Ricky Neumann said: “Global supply chains were complex and multilayered due to a lack of supply in an ever-evolving once in a generation pandemic crisis. This was a time when decisions needed to be made quickly in the interests of accessing urgent medical supplies to protect Australian frontline workers.
“We have always complied with our obligations and deny any wrongdoing. We are a global enterprise and defend our right to operate in the best geographical environment that aligns with our business objectives. All transactions have been properly and professionally documented regardless of their location, in full compliance with local jurisdictions.
“These were commercial transactions made at arms-length that were reflective of the commercial risk assumed by those parties in sourcing and funding the supply in a highly volatile global economic environment.”
ABM, Evan Neumann and Eric Beare Associates in Hong Kong did not respond to questions.
In LinkedIn posts in 2020, ABM spruiked the importance of quality and compliance, describing it as “non-negotiable” and saying it had employed “full time in house regulatory consultants and contracted doctors who check, fit test and sign off on our PPE”.
A spokesperson for Hunt defended the Coalition government’s PPE procurement and its record during the pandemic, and said Hunt or his office referred all offers of PPE to the department for assessment, without recommending any.
“This would include [the ABM approach] which to the best of our advice was not drawn to the minister’s attention and was referred by the office as part of the standard referrals process for all correspondence. To the best of our advice, the minister had and has had no previous knowledge of contact with or awareness of the firm or individuals you have raised and nor had his office.”
The current health minister, Mark Butler, said the inquiry established by the government to examine Australia’s response to the Covid-19 pandemic would “include looking at the procurement of PPE”.
The ATO said it could not confirm or comment on whether it was investigating any whistleblower questions.
“Any comment may prejudice either an actual whistleblower or discourage other whistleblowers from coming forward,” a spokesperson said, speaking generally.
“We can assure the community that we take whistleblowers and their tip-offs very seriously, and analyse every tip-off.”
