Bovine blood products illegally smuggled into Australia in international conspiracy

An international conspiracy to profit from bovine blood products illegally smuggled into Australia has been unearthed in a Four Corners investigation.

The Department of Agriculture has confirmed it has seized 13,000 litres of foetal bovine serum (FBS) which it says, “pose an unacceptable biosecurity risk”.

Much of this material was originally sourced from banned South American countries with a history of potentially-devastating animal diseases, including foot and mouth.

It was being shipped into Australia using false labels. Once it had arrived, the serum was then relabelled as Australian-sourced and on-sold at significant profits.

At the heart of the conspiracy was the firm PAA Laboratories, which was based in Austria, and acquired by GE in 2011. GE discovered the scam and reported it to Australian authorities.

Four Corners has also confirmed the mislabelled serum was being unwittingly used directly with live cattle by Australia’s peak scientific body, the CSIRO, in stem cell experiments designed to create a new and more profitable breed of cattle.

The exposed cattle, which were grazed on a CSIRO research property near Armidale in NSW, were quietly destroyed in the wake of the extraordinary biosecurity breach.

“What protected Australia from foot-and-mouth was sheer luck,” said former GE Healthcare senior executive Brian Hood.

“Had any of that material that [PAA] imported contained that virus … there was effectively a wire fence separating that from the rest of Australia’s herd.”

A spokeswoman for the CSIRO said the organisation had been “alerted to a potential biosecurity risk posed by the FBS supplied over a set period of time, in relation to its country of origin”.

“CSIRO immediately stopped using the product and notified the appropriate Australian biosecurity enforcement authorities.

“We were required to quarantine, euthanise and dispose of the animals that had been exposed to the FBS product.”

‘Of course, this is all fake’

The Department is now examining internal PAA company documents which suggest a deliberate scheme dating back more than a decade designed to evade Australia’s biosecurity controls.

On February 2, 2007, PAA executive and shareholder Harry Brack told an employee to create false documents to smuggle “sauce” into Australia.

“I need a little bit of paper, as the whole thing has to be officially imported into foreign countries,” he wrote.

“Of course, this is all fake, but paper makes everything beautiful.”

The product being shipped was falsely labelled as “FACS buffer solution”, a benign laboratory fluid.

“I know that it is a tonne of work, but that is the basis of our existence,” Mr Brack wrote.

“The more paper the more believable it gets.”

From his base in Germany, Mr Brack did not respond to detailed questions from Four Corners.

A sophisticated round robin scheme

The documents under investigation by the Federal Government appear to indicate this material was to be sold not by PAA but by Diagnovum, a side company associated with both Mr Brack and PAA’s former chairman, Rainer Burian, who is also based in Europe.

Rainer Burian told Four Corners its questions were one-sided, and he extolled the quality of serum produced by his former company.

He said PAA and GE “settled their mutual claims at the end of 2013” and that “there are no [other] claims against PAA or its former shareholders whatsoever”.

Mr Burian declined to answer the program’s more detailed questions and referred Four Corners to GE, which also declined to discuss the matter.

According to the information shared by GE with the Department of Agriculture, the scheme to import the biological material was a sophisticated round robin involving the use of associated companies and suppliers, Four Corners has learned.

One entity allegedly involved was called IMEX, a trading name associated with Rainer Waldmann, who was a senior PAA figure and a manager of the Brisbane facility.

Internal corporate documents seen by Four Corners show IMEX was importing products from Diagnovum and storing them at the PAA site in Brisbane.

They also show substantial financial transactions between IMEX and one of PAA’s main serum suppliers in NSW.

Mr Waldmann declined to answer questions from Four Corners, but the program has established that Mr Waldmann’s employment was terminated by GE.

While Mr Waldmann defended his conduct, he admitted to GE he had kept secret the existence of IMEX.

He also accepted partial responsibility for the mislabelling of serum sold to a global pharmaceutical company, Merck.

An elaborate cover-up attempt

Once its suspicions were raised, GE conducted a forensic audit of PAA records, and discovered an elaborate attempt at a cover-up.

The audit turned up the minutes of a remarkable corporate meeting in September the year before, titled “clearing the systems”, and detailing that its “intention is to delete obvious origin-related information”.

The minutes record Mr Burian in attendance and attribute to him an “aim” which was to “display properly in all systems … that what has been produced in the last two years has been compliant with regard to origin”.

“The existing information (electronic or hard copy) must go: electronic data from the systems must be deleted.”

The minutes set out a nine-point plan to expunge problematic records including the deletion of catalogue numbers, lot numbers, “stock entry tables”, “the audit trail of … batch list[s]”, and states that “the veterinarian database must be secured and then deleted”.

“All sensitive emails should be secured … and then delete[d] from the server” as well as other “suspicious files”, the minutes record.

A year later, in 2012, Mr Brack also became concerned that GE might discover PAA had been trading with Cuba, a country that in the past was the subject of US sanctions.

He wrote to one colleague that “I want to … conceal it”.

“Supposedly, within the next 12 months, you need to sign a scrap of paper, that you will never ever look after a Cuban woman or smoke a Havana, let alone do business there,” he wrote.

Mr Burian told Four Corners that before the GE takeover, PAA was an Austrian company and therefore not bound by US law.

“In Austria and the European Union it is perfectly well allowed to do business with Cuba,” he said.

He also said “PAA explicitly disclosed to GE all shipments to Cuba. All these shipments contained products of non-US origin only and thus have been of no issue for the US based acquirer.”

Department of Agriculture investigating

The Department of Agriculture’s investigation of the case is now in its fifth year, but no charges have yet been laid against any PAA figures. The inquiry has been delayed by the time needed to secure overseas export records.

The Department confirmed to Four Corners that “briefs of evidence against a number of entities have been prepared and submitted to the CDPP [Commonwealth Director of Public Prosecutions]”.

The Australian Government has no jurisdiction over individuals or companies based overseas.

“Illegal importation of FBS is an extremely serious matter,” a Department spokesman said.

“The outbreak of diseases such as FMD [foot-and-mouth disease] … would have dire consequences for the Australian economy and its way of life.”

Mr Hood said he believed that more than 50,000 litres of suspect serum had circulated in and out of Australia.