Free Beer & Sex by Mike Dixon - HTML preview

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12 Sea change


So you are fed up with your boring office job and want a change.  Wouldn't it be nice to live in one of those fabulous tourist destinations where it's summer all year round?  How about going into the diving industry?  You could buy a boat and take tourists to the Great Barrier Reef.  Or you could establish a yachting business in the Whitsunday Islands.  You might even set up a backpacker hostel.

Many of my friends in the tourist industry had professional qualifications.  Some had worked as accountants.  Others had escaped from government offices.  Some were failed academics.  Most were wandering souls.  Few of us realised we could be competing against hardened criminals when we left our cosy middle-class jobs for a more eventful lifestyle.

I'd heard of money laundering but had never given it much thought.  Put in simple terms.  Money laundering is what happens when dirty money from illegal operations (e.g. drugs) is processed to make it appear legitimate.  Just imagine that you set up a business and find yourself competing against people who don't care if they make a profit.  Their sole concern is to launder money.  They'll undercut you at every opportunity and intimidate your staff.

I got to know a couple who had escaped the stress and strain of the big city for the peace and tranquillity of North Queensland.  They'd earned enough as financial advisers to buy a backpacker hostel located in a veritable tourist paradise.  Rainforest, tropical islands, scuba diving ... everything you could wish for.

It didn't take them long to realise that all was not well in paradise.  Like other hostels, they had a backpacker bus which called at the central bus station.  There was, of course, competition for customers.  They expected that but what they encountered came as a shock.  Hostels were competing to offer the lowest price.  One was a huge resort and it was prepared to put people up for free!

Nothing made sense.  The resort's previous owners had gone bust.  They'd spent a fortune and had failed because there weren't enough tourists to support their lavish project.  My friends started to make enquiries.  With their professional background, it wasn't difficult to discover what the new owners had paid and how they had raised the finance.  A considerable bank loan was involved.  There was no way they could service the debt from their takings.  The logical conclusion was that they'd soon be bankrupt like the previous owners but that didn't happen.  Even with a ridiculously low bed price they stayed afloat.

What about restaurant and bar taking ... could they be sufficient?

That seemed unlikely.  If you want to make money from booze and food it doesn't make sense to put up your customers at a give-away price.  My friends went round to have a look.  They discovered a lot of activity but not enough cash flow to satisfy the bank.  While sipping drinks beside the bar they were recognised by one of the owners and told, in no uncertain words, that they should stop snooping around and clear off.

Months went by and the situation got worse.  Fights were breaking out at the bus station and one driver was injured when he was hit by a backpacker bus.  The region's reputation as a tourist destination was under threat and the local authorities took steps to calm things down.  They called a meeting of the warring parties and picked a hotel as a suitable venue.

The day of the meeting duly arrived and the participants turned up at the appointed hour.  It wasn't difficult to tell them apart.  The shire council people wore suits and the hostel owners were dressed in the smart casual attire that was fashionable in the tourist industry at the time.  They contrasted with the partners in the big resort who wore silk shirts, gold medallions and expensive watches that dangled ostentatiously from their ample wrists.  The meeting got off to a bad start and ended abruptly when one of the hostel owners had a beer glass smashed in his face.

The attacker was a senior partner in the resort.  A charge of assault was brought against him and he was summoned to appear in court.  But, before that could happen, he fled the country to avoid arrest on drug-related charges.  Interpol entered the act and he was extradited back to Australia.

As far as I can make out, he and his partners were working a scam that went something like this.  The resort was purchased at a time of high inflation with money loaned from the bank.  Black money from the sale of drugs was passed off as hostel takings and used to service the debt.  Interest payments are tax deductible so nothing was lost to the tax office.  If everything had gone according to plan, the black money would have reappeared as legitimate capital gain when the property was sold.