Forking out $1.2bn to build a hospital then flogging it for zero must surely make the NSW government the most hopeless dealmaker in Australian history. Then letting the buyers sell it – along with another 41 hospitals to the Cayman Islands – puts the federal government in a nearby league. Michael West reports.
In the face of utter dismay from those who find it hard to believe that the NSW government leased Sydney’s Northern Beaches Hospital for zero, we publish today the Land Titles searches which prove it.
Suave corporate types having their way with unwitting bureaucrats and politicians is nothing new. Yet, this is quite possibly the worst deal in the history of Australian politics, certainly the most bizarre transaction this reporter has seen in a a lifetime covering business, politics and privatisations.
The deal – for this large and valuable chunk of state land – was done for the princely price of $1 (on demand), which begs the question, has the NSW government actually demanded its pound of flesh? The $1 a year in rent since 2018, that is, as laid out in the lease? The documents do say “If demanded”.
It is no wonder the transaction documents were so hard to find, embarrassing as they are. And it was not us who found them but rather the source for this story, Andrew Gill, whose family has fought for justice since the 14 year old son Josh passed away in 2021 after a stint at the Northern Beaches Hospital.
They brought a private criminal prosecution against the operators in February 2022. The case was settled within a few weeks of it commencing with no money going to the Gill family.
“Several months after the case was settled, the NSW government announced a $11.4 million to boost Northern Beaches youth mental health services. This was to include “four dedicated acute paediatric specialist mental health beds at Northern Beaches Hospital, which will provide for the establishment and operation of the beds.”
Gill had searched the public register of the Land Titles Office. “The trick was to search the legal entity of the operator as the land title folio reference is hard to find because it was converted crown/state land.”
“I’m calling on the government to provide immediately a full and complete (and unredacted) Project Deed document and all schedules to that Deed – all documents are to be unredacted.”
The tragic story of the Gills’ quest for justice for their son was published here yesterday. They say that the hospital should never have been privatised to be run for profit and should, like the Macquarie Base Hospital, be put back in public hands.
The state of NSW had spent $1.2bn in public money building the hospital and surrounding roadworks. Land titles documents show they leased the hospital – with all its operating theatres, private clinics, public wards and retail venues – to the foreign financial players for 20 years for the token sum of $1 a year. The carpark is leased for $1 a year for 40 years.
But the controversy over the privatisation took a strange turn in the wake of the leases to Healthscope. At the state level, the strategy had been to restructure the local hospital network so the other two hospitals on the peninsula were shut, Manly and Mona Vale, handing an essential services monopoly to the private operators as all traffic would be funnelled directly to the new hospital at Frenchs Forest, 13k from Sydney’s CBD.
Healthscope had been listed on the ASX, and itself had been juggled through the hands of private equity players twice. This had made it a plaything for investment bankers as Australia’s super fund investors had been enticed into buying the stock yet, when it performed poorly it was taken private on the cheap and refloated on the ASX again for a profit for its financiers (and losses for the super funds).
Then, in early 2019, a few months after the $1 leases were signed on the Northern Beaches Hospital and carpark, the American financial engineering juggernaut Brookfield launched a takeover bid on the ASX for Healthscope and its 42 hospitals.
A dark and secret labyrinth
Although the other 41 hospitals were private hospitals (still subsidised by the public through the private health system) the NBH was a hybrid asset, a public/private hospital. In order for the takeover to proceed – as Brookfield is a Canadian operator listed on Wall Street – it required the approval of the federal government, via Treasury’s Foreign Investment Review Board (FIRB), which it duly procured.
FIRB is something of a rubber stamp when it comes to foreign takeover players. So, even though Brookfield has a history of tax avoidance in this country, FIRB approved the $4bn takeover and the Northern Beaches Hospital was bound for control in a tax haven from that moment.
Andrew Gill says the transactions not only lacked transparency but left these vital public assets in the hands of those who had little accountability.
“The hospital is owned by a Cayman Island listed entity and is not accountable to our local, state or federal democratic system.
“There is no way of knowing how much the government pays the private company that operates the public portion of the hospital. When you request such information from it or the government, they both claim that it is commercial in confidence!
“This is our money being paid to a company whose sole motive is to make profit in the context of caring for sick people. Surely this information is front and centre public.”
In order for the financiers to conceal the financial transactions, Brookfield came up with a structure which is virtually impenetrable in which to secrete its Australian assets.
Buried in the disclosures to the ASX is this:
The ultimate controlling company which can be searched on public databases is the entity, BCP VIG Holdings L.P, whose address is Ugland House, Grand Cayman, a building which accounts for the corporate addresses of thousands of other companies.
The ultimate parent company in Australia is ANZ Hospitals Topco, owned by BCP VIG Holdings in the Caymans. The operating company appears to be NBH Operator Co Pty Ltd, which is owned in turn by an NBH Holdco Pty Ltd, in turn owned by ANZ Hospitals Topco.
There were another two shareholders in this entity besides BCP VIG. These are ANZ HT – owned also by Brookfield HSO Co-invest II LP – and ANZ Hospitals BTCO Pty Ltd.
Why such a tortuous corporate structure? To hide things. Indeed the Caymans company is a dead end in public terms because there is no duty to disclose either shareholders or directors in Cayman Island entities. This is also why it is still not known who the financial beneficiaries are of the controversial $80m sale of Australian water rights to a Caymans company set up by former minister, now Shadow Treasurer Angus Taylor, by the department run by former prime minister Barnaby Joyce.
But we digress. The problem with this grand failure of accountability in privatising public assets is that, as Andrew Gill says, hospitals are not like other financial assets in that the principal duty of care ought to be the health of patients. The principal duty for corporate directors – particularly in the aggressive pursuit of profits which is the business of private equity players – is to maximise wealth for shareholders.
Since the Brookfield structure was set up the only significant person with a health or hospital background is gone.
Originally, the board comprised Eleni Labridis (ex financial engineering group Babcock & Brown, and Alinta), Richard Holbeach (who is a mergers and acquisitions specialist with a power industry background and who was involved with the public float of Medibank) and David Allison (finance background who has been involved with Healthscope since from 2003 to 2018).
Steven Rubic, the former chief executive, has a track record in the private health sector but he has been replaced by Greg Horan who has a coal industry background and was formerly head of Brookfield Asset Management’s private equity division.
These are the people who have been controlling the Healthscope hospitals in Australia. But who controls them? We don’t know this as searches end in the dark zone for corporate accountability which is the Caribbean island of Gran Cayman.
From the Northern Beaches of Sydney to the Northern Beaches of George Town, Cayman Islands
Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences.