Sources estimate up to $200 million in tax may have been dodged. Photo: Reuters
The gold flowed from cities across the nation, often collected in furtive deals around Brisbane's city centre and transported in suitcases and car boots. Hundreds of kilograms were changing hands every week, so much so that questions had to be asked.
It would take more than a dozen raids in two states before investigators with the Australian Federal Police, the Australian Crime Commission, and the Australian Tax Office stopped this river of allegedly illicit gold, uncovering what is believed to be one of Australia's largest organised tax frauds.
The ATO has estimated the elaborate scam cost taxpayers more than $65 million, but industry sources have put the final cost at potentially more than $200 million in faked and misappropriated GST payments.
The unfolding scandal has also provided rare insight into the murky world of private gold trading, an industry where deals worth millions of dollars are done on trust, and where even a hint of public controversy could threaten to disrupt the supply of gold to the Royal Australian Mint.
"The sheer amount of money involved in this matter, and the activity undertaken to disguise its movement, means we are treating this as an organised criminal activity," AFP commander Matt Rippon announced late last year.
The whereabouts of up to $20 million in gold and cash also remain a mystery following the failure of a business allegedly at the centre of the controversy, burning investors, self-managed super funds, and more than a dozen gold traders.
Federal investigators have refused to comment on the continuing operation, but documents filed in two civil lawsuits in Queenland's Supreme Court contain allegations embroiling a number of players in Australia's precious metals market.
In a sworn affidavit, Brisbane gold trader Robert Bourke claimed to be a "middleman" in a network of gold suppliers that collapsed in the wake of the federal investigation.
Bourke said his involvement began in December 2012 after he started doing business with Michael Kukulka, founder of Melbourne-based start-up MAK Precious Metals. Kukulka allegedly claimed to have an industry contact interested in regularly buying large amounts of gold bullion.
Escalating demand from MAK saw Bourke eventually source and transport deliveries of dozens – sometimes hundreds – of kilos of gold a week, according to Bourke's affidavit.
Kukulka also bought from other sources, including spending $1.5 million in just six days with Melbourne fraudster-turned-bullion dealer Rocco Calabrese, Mr Kukulka's bank records show.
Calabrese, aka Rocco De Gonza, had been bankrupt twice, jailed for three dozen deception offences in 2002, and convicted again in 2010 for running corporations while disqualified.
But Bourke claimed the flow of gold was disrupted in late October 2013 when the federal joint-agency Criminal Assets Confiscation Taskforce staged 14 raids in NSW and Victoria amid evidence that a "syndicate" of gold businesses had engaged in a $65 million tax rort.
Federal investigators say the scam involved altering or mislabelling pure gold bullion bars and coins – which attract no GST – as lesser-quality or scrap gold, which is taxed at 10 per cent, to claim a fake GST credit.
"Industry participants – buyers, dealers and refiners – are entering 'scheme and sham' type arrangements to obtain financial benefits [through] carousel type arrangements, where established syndicates acquire bullion and 'alter the form' to generate GST refunds, and 'missing trader' type arrangements, where there is a failure to remit taxes," an ATO spokesperson told The Sunday Age.
One industry source said there simply isn't enough privately held gold in Australia to account for the volumes being traded, suggesting the same gold was being sold over and over. "Even if you melted down all the jewellery and fillings in the country, there wouldn't be enough to cover the quantities involved," he said.
In the wake of the raids, Bourke claimed in the affidavit that Kukulka revealed to him that his industry buyer was prominent metals refinery EBS & Associates, and that federal agents had searched the company's offices as part of its investigation.
NSW-based EBS is an official refiner for the Royal Australian Mint and a major manufacturer of "investment grade" gold products. The company is also linked to major industry players Australian Bullion Company in Sydney and Custodian Vaults.
In the affidavit, Bourke alleged that he and Kukulka held several discussions about the possibility of reissuing invoices to change information about the gold that had been delivered to MAK, and then EBS, in light of the investigation.
"So we would have to look at doing every single docket?" Bourke asked. "Every single f--king one," Kukulka allegedly said in a transcript of a recorded phone call tendered to the court.
As the federal investigation continued, Bourke claimed to have received anonymous calls threatening retribution if he didn't co-operate in creating a "paper trail".
"I want you to consider your three children and understand precisely what I am talking about," one caller said, according to a transcript.
In late 2013, Bourke's ability to buy gold faltered as his company began defaulting on massive bills for gold bought on credit, according to court documents.
One Queensland-based gold trader had sold Bourke $10.1 million in gold in just six days in November but received only $1.2 million in payments. The company, after learning about the alleged relationship between Bourke, MAK and EBS, filed a lawsuit seeking a freezing order against all of them to recover the gold.
Bourke, in turn, sued MAK claiming he was still owed more than $11.3 million. The lawsuits were dismissed on technical points of law, according to court records.
Kukulka did not respond to a request for comment. A solicitor for EBS and the Australian Bullion Company denied they had been the subject of a federal investigation.
However, both Kukulka and EBS managing director Phillip Cochineas have filed affidavits responding to some of the allegations in the civil suits.
Kukulka claims MAK had paid in full for scrap "blobs" and "melted bars" of gold from Bourke and never bought bullion. Cochineas said EBS had never received pure bullion in any form from MAK.
But their claims have been contradicted by a former employee of Kukulka, who has sworn in an affidavit that MAK regularly bought pure bullion from Bourke and then sold it to EBS.
"[EBS] staff would wear normal casual clothes and come in with little luggage suitcases," Jacqueline Hughes said in her affidavit. "On two occasions that I can recall, I personally delivered gold bullion that had been delivered by Mr Bourke to the Brisbane city office of [EBS]."
Bourke's gold-trading business collapsed in April, with corporate liquidators estimating suppliers and investors are owed about $20 million in gold and cash. Many creditors hold out little hope that they will see any of their money.
For privacy and operational reasons, the ATO has refused to disclose the identity of companies and individuals facing criminal investigations and tax audits. "We have not recovered all of the $65 million and continue to work to recover the remainder," a spokesman said.
Bourke, who is also facing an $18.8 million tax bill for his company, declined to comment because he is hoping to sell his story to the media.