In April 2020, with Australia gripped by the pandemic’s early, frenzied stages, a group of doctors wrote an alarming letter to the then prime minister, Scott Morrison.
Frontline medical staff, they warned, were being placed in significant danger by the lack of quality personal protective equipment.
“We are fearful for our safety and wellbeing during this pandemic,” the letter said. “International experience has shown that we are a very high risk group for Covid-19 infection, illness and death.”
The doctors begged for good personal protective equipment and urged the government to “immediately communicate” concerns about any potentially unsafe products.
“We need transparency and consistency concerning PPE standards and supply. Reductions in PPE standards to address supply issues should be communicated honestly,” they wrote.
“These measures will help to build trust, allay fears and enable frontline workers to adapt our way of working to manage risk.”
Three weeks later, Australia signed the first of two massive PPE contracts with a largely unknown company, Australian Business Mobiles (NSW) Pty Ltd.
Its previous experience included selling robot vacuum cleaners, air fryers and other household goods.
ABM had come to the government’s attention after an unknown individual made an unsolicited approach to the then health minister, Greg Hunt. As was standard practice with all unsolicited approaches received during the pandemic, Hunt’s office referred it on to his department to assess.
Like many pandemic-era deals, the ABM contracts were awarded outside normal procurement processes. Using an exemption designed to “protect human health”, the government was able to handpick companies such as ABM without open tender, instead conducting its due diligence and buying decisions through taskforces of health and industry department officials.
The arrangement allowed the government to secure supplies at speed, as other governments were also doing in the global scramble for PPE.
But the speed of the process left the government open to deals that ended up wasting a huge amount of taxpayers’ money.
According to documents seen by the Guardian, including the government contracts and those between suppliers, ABM was paid $100m to source 50m face masks and 4m isolation gowns through two government deals in April and June 2020, both made by the health department via limited tender.
The contracts transformed ABM from a relatively obscure online retailer to a vast importer of medical equipment.
When ABM’s mask deliveries began to arrive in the national medical stockpile in April 2020, quality and compliance problems soon emerged. The government discovered that, of the seven manufacturers whose products ABM imported, five did not comply with Australian standards, either because they failed to meet blood penetration requirements or did not meet labelling rules.
The mask deliveries were made on mixed pallets, leaving the government unable to efficiently isolate compliant stocks.
The Therapeutic Goods Administration issued defect notices warning that masks that had already been rapidly deployed to healthcare workers were not to be used in clinical settings. That included patient or caregiving scenarios, in hospital wards, operating theatres, general practice, nursing homes or during home care.
The government decided that all the remaining 45.7m masks delivered by ABM were unusable and could not be deployed. No problems were identified with the 4m gowns imported by ABM.
The revelations raise new questions about the extent of due diligence applied to Australia’s pandemic-era deals for PPE, medical devices and testing equipment.
Questions over tax
The Guardian understands that on 18 July this year a document was handed to Australian Taxation Office officials by lawyers representing a whistleblower.
It asked the ATO to investigate questions over the tax arrangements associated with the PPE deals.
Documents seen by the Guardian show that ABM entered into a contract to buy the masks and gowns from two Cyprus-based companies controlled by twins Ricky and Evan Neumann for $91m.
In Cyprus, a low tax rate is payable by foreign-owned companies and most details of company ownership and finances remain secret.
The Cyprus companies were called Neumer Holdings and Neumer Trading, an apparent reference to the twins’ names. In turn they bought the masks and gowns, mostly from a Hong Kong-based company called Eric Beare Associates, for $50m, according to the documents.
The Guardian does not suggest any parties to the deals engaged in wrongdoing.
A spokesperson for Ricky Neumann said all obligations had been complied with and denied any wrongdoing. She said the Australian transactions were made at arm’s length and reflected the risks each party took for sourcing and funding the supply of PPE in the highly volatile global economic environment at the start of the pandemic.
Neumann’s spokesperson said the 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,” the spokesperson said. “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.”
Neither ABM nor Eric Beare Associates responded to requests for comment. In LinkedIn posts, the owner of ABM, Jack Reuben, spoke of the importance of PPE standards and compliance to his business.
“Quality and compliance is non-negotiable,” he said, in a post spruiking ABM’s PPE products in 2020. “Which is why some of the worlds largest multi nationals have put their faith in us, in some of the most uncertain times.
“We have full time in house regulatory consultants and contracted doctors who check, fit test and sign off on our PPE.”
It is not the first time Reuben’s businesses have attracted controversy. His company ABM is behind an online retail business, bdirect.com.au, that has received a string of past complaints online about the quality of its products and business practices.
Customers of bdirect.com.au have complained for years of faulty products, exorbitant fees and poor customer service on the website’s usual offerings: air fryers, bedding and robot vacuum cleaners.
Reuben was embroiled in a brief public spat two years ago when he confronted a Channel Nine television crew filming one of his associates, Dr Daniel Aronov, a cosmetic surgeon, outside a Sydney cafe.
Reuben sought to guard Aronov from the cameras and struck the Channel Nine reporter twice in the cheek. The television crew and reporter later confronted him about his online retail business and its litany of bad reviews. Reuben apologised for striking the reporter.
“I’m embarrassed about the way I behaved,” Reuben said. “I’ve had nothing but flak from everybody in the community since then. I’m completely distraught. I have nothing but sincere apologies to you.”
The Neumann twins, meanwhile, have kept their names largely out of the public eye.
They describe themselves in online business profiles as “serial entrepreneurs” involved in discount retail and distribution.
One of their companies, Intertrading Australia, buys up discontinued lines and products and resells them in bulk to major discount chains. The company is based in Campbelltown, in south-western Sydney, and stocks goods in a 20,000 sq metre warehouse in the industrial suburb of Smeaton Grange.
Neither Intertrading nor the other Neumann businesses advertise any pre-pandemic experience with medical devices, although Intertrading does distribute toiletries, cosmetics, dental care and personal hygiene products.
Limits to scrutiny
Unlike in the UK, scrutiny of pandemic-era contracts has been relatively muted in Australia.
Data shows the government received a staggering 4,076 unsolicited approaches from suppliers of PPE and other medical equipment during the pandemic. Some of those approaches were made directly to Hunt’s office.
A spokesperson for Hunt said the minister’s office referred all offers of PPE or other assistance, including those put to him by Labor MPs, to the health department and then had no involvement in any further assessment or buying decisions.
That included ABM’s offer to secure 50m masks and 4m gowns, which Hunt’s spokesperson said was “to the best of our advice … 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 spokesperson said.
In order to move rapidly, the government suspended procurement rules and instead set up taskforces to assess the PPE suppliers’ capability, history, price and capacity to secure products at a time of global shortages.
Suppliers whose offers passed an initial triage stage then underwent due diligence checks by procurement taskforces staffed by officials from the industry and health departments. Those assessments were conducted exclusively by the departmental taskforces, rather than the minister’s office.
The taskforces helped secure more than 2bn units of material for the national medical stockpile.
The Australian National Audit Office has previously scrutinised pandemic-era procurement and found the processes were largely sound and effective, that purchases were made after approval by the appropriate departmental delegate, and were largely value for money.
Guardian Australia has previously reported other cases where the federal government may have neglected basic due diligence in its global rush to secure supplies.
In 2020, the health department gave potentially lucrative contracts to a small Queensland company named Promedical Equipment Pty Ltd, which had no experience in importing diagnostic devices.
Promedical, which previously sold cryogenic treatment, massage therapy and erectile dysfunction machines, was asked by the government to source 500,000 test kits at Australia’s greatest time of need.
The shipments failed to arrive at key points during the pandemic, prompting the heath department to withhold payment. The company was later fined for false and misleading advertising, claiming it had test kits that were endorsed or approved by regulators in Australia and the US.
Prof Peter Collignon, a leading infectious diseases expert at the Australian National University, said the pressure to bring in PPE during the pandemic had been significant.
But he said that should not have left healthcare workers exposed to defective mask products unnecessarily, saying simple tests, including for fluid resistance, could have been done much more quickly.
“If you are getting large volumes of something that you regard as really important – be it vaccines, drugs or masks – they’ve got to fulfil the basic criteria of the regulator and be shown to do that,” he said.
“[Frontline health workers] are using these things because [they] think they work. If [they] find in retrospect they don’t in some important way, that’s a real problem.”
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 Covid-19 pandemic has been the most significant global crisis that we have faced in decades,” he said.
“The government has established an independent inquiry … to help better prepare and protect our country for the future.”
The ATO said it could not 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 tipoffs very seriously, and analyse every tipoff.”
