WHEN one of India's largest property companies decided to invest in the Gold Coast in 2009, it was seen as a sign that perhaps the worst was over for the city's struggling property market.
Little did anyone realise the property giant that the Australian Trade Commission had introduced to the city was hiding a dirty secret that first reared its head a decade earlier.
Pearls Group, now deeply embroiled in allegations of operating an $11.5 billion Ponzi scheme that is said to have duped 55 million investors, bought the Sheraton Mirage Resort for $62.5 million from the receivers to a Raptis Group subsidiary in November 2009.
The deal paved the way for a $26 million refurbishment of the ageing resort in the first real sign that foreign investors saw the Coast as a value market at a time when Australian banks were shunning major investments in the city.
A little over five years later, Sheraton Mirage was on the market with buyers expected to part with $120 million or more for the prized beachfront asset.
Expectations were exceeded when Aquis Group, headed by Chinese billionaire Tony Fung, contracted to buy the property for $160 million last May.
Fung, who had already made a splash in tropical north Queensland with plans for a major casino development near Cairns, had visions of an extensive redevelopment of the Sheraton Mirage Resort, including a new casino at a time when the Newman Government was promoting a tourism-led recovery for the state.
But just as quickly as he had jumped on the Sheraton Mirage deal, Fung pulled out late last year. The timing couldn't have been more obvious.
In August, key executives of Pearls Group were under pressure to pay back investors after losing an appeal to India's Securities Appellate Tribunal.
The directors of PACL Ltd, formerly known as Pearls Agrotech, were ordered to repay $11.5 billion to investors, which included interest and recovery costs, within three months or risk recovery proceedings by the market regulators.
Matters came to a head in January when four key executives, including Pearls Group founder Nirmal Singh Bhangoo, were arrested and detained for questioning by authorities.
The scam is alleged to have involved PACL tapping into the hopes and dreams of regional Indian communities with promises that they could one day own their own plot of farm land.
PACL, which spread its tentacles through a broad network of agents, was promising high returns to investors by rehabilitating degraded land which they would later own through their investment.
PACL even lured Aussie cricketer Brett Lee, and other high profile Indian cricketers, as brand ambassadors to build its credibility.
The unregistered scheme has been operating since the late 1990s, even after Securities and Exchange Board of India (SEBI) raised concern about it in 1999.
It wasn't until 2014 that the scheme began to unravel with SEBI ordering the scheme to be wound up. Last year's failed appeal against the winding up order has set in motion enforcement actions by the authorities against PACL's directors.
Among the areas of interest for authorities is $130 million in funds invested by the Pearls Group in Australia, through a subsidiary formerly known as Pearls Australasia.
The entity, renamed MiiGroup in 2014 after Pearls' issues gained notoriety in the popular Indian press, has distanced itself from the problems facing its largest shareholder.
A spokesman says Pearls Infrastructure Projects Ltd (PIPL) is a passive investor in MiiGroup, not a majority investor, and is not involved in the day-to-day operations of the Australian company, which is headed by Peter Madrers and Paul Brinsmead.
"There is no impact on the group," the spokesperson says in relation to the matters faced by Pearls Group.
While the funds used to acquire the Sheraton Mirage are of interest to the Indian authorities, there has been no official recovery action two years after an investigation was first mooted.
MiiGroup says it has not had any contact from Indian authorities regarding the issues facing Pearls directors, although the company spokesperson says MiiGroup is happy to co-operate with any investigation.
Since the collapse of the $160 million Sheraton Mirage sale late last year, MiiGroup has taken the property off the market.
The company spokesman has denied suggestions that it could be subject to a fire sale in light of the major shareholder's ties with PACL. However, she concedes any asset is for sale at the right price.
MiiGroup, through its affiliates MiiProperty and MiiHome, currently has work in hand totalling $500 million.
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