Gouging Government: how a billion-dollar job agency dudded taxpayers, then the super funds

by | Nov 16, 2021 | Economy & Markets

Sharemarket pirates have cashed in on Australia’s unemployed. They are targeting the disabled and the elderly next. Callum Foote and Michael West investigate the monumental fee gouge by freshly floated APM and other job agencies.

This one really went through the roof, if you were hanging by the ankles from the ceiling. A total dud.

The billion-dollar sharemarket float of APM, as predicted here, tanked from day one on the ASX. It was no surprise. They are flogging a dying business model in JobActive contracts. It was way overpriced.

This investigation into the privatisation of Australia’s jobless sector by Stephanie Tran and Callum Foote demonstrates just how flawed is the JobActive program, indeed bound for the dustbin of government outsourcing history as both sides of the political aisle concur it is time for a new system.


Yet Goldman Sachs and the other cuff-linked buccaneers spruiking this public float didn’t even bother propping it up on debut, such was their bull market apathy and the avalanche of punters scratching for the exits.

The Perth-based government contractor hit the ASX boards at $3.55 a share a few days ago, dived 5% on day one and, at the time of publication today, was languishing at $3.10, having been shellacked another 7% this morning.

Thank you Goldman Sachs, thank you PwC, EY, Gilbert & Tobin. Thank you UBS and Credit Suisse. No doubt your $44m in fees will be put to good use in the luxury goods sector.

Once again Australia’s superannuation managers, those fatly remunerated guardians of our wealth, have been taken to the cleaners, sucked in by the “deal porn” in the financial press and slick capital marketeering by the merchant bankers.

Winners and losers

APM has wiped out almost half a billion dollars in market value since listing. Yet there are some winners besides the umpteen losers, namely the financial spruikers and the private equity mob from Chicago which flipped its stake in little over a year into Australia’s drowsy super funds.

The losers are taxpayers and the unemployed, the former grifted by APM and its multinational peers in government contracting which don’t pay much tax but make lavish profits from government contracts, and the latter – as demonstrated in the MWM report – subject to a tick-and-flick scheme which does nothing for long-term jobless and structural unemployment and under-employment.

Yet gouging the government is big business these days and this float is really a sign of the times. The brokers flogged it on this very basis, that the trend to government outsourcing would continue apace. Indeed, although Jobactive is almost over, APM has its eyes set on Australia’s old and disabled next: Home Care schemes and NDIS.

Political donations then government contracts

This has been a textbook raiding of the public purse. Along with the other Jobactive providers, APM gives donations to the two main political parties and gets massive government contracts, solid predictable revenue which they leveraged to go on a takeover spree for other, smaller government contractors.

During the pandemic, barely a dollar out of pocket, then onto the sharemarket to dump the stock into the institutions. Wait till the 276m shares in promotor stock comes out of escrow next year.

It is no small irony that such profits are screwed out of government. Indeed they are talking in their marketing materials about a lip-smacking rise in public funding of the NDIS from $26bn next year to $32bn in 2025.

How slick it all was. Private equity mob Madison Dearborn Partners (MDP), which nabbed its majority stake from another privateer called Quadrant, takes $643m in the sharemarket bonanza, $44m went to the brokers, MDP looted another $18.5m in “transaction costs” and $73m for “shareholder interest expense”.

What a party. The $965m in “shareholder loans” means they never paid much in the way of tax. The usual suspects were there for their pound of flesh: PwC charging $1.8m as investigating accountant and whatever, $3m for legal advice from Gilbert and Tobin and $1.6m for EY.

It goes on. What a paradox. Yes, APM has diversified beyond Australia and Jobactive but essentially here is a company which has made huge profits from a failed government scheme to help the jobless, and then hits the sharemarket up to take retail punters and dopey institutional investors to the cleaners.

That is how to capitalise on failure, how to commercialise government ineptitude and bankrupt neo-liberal philosophy of privatisation. They have shone the light, cashed out, half a billion in wealth ripped up in just a few days.


Callum Foote reports: Together, APM and Serendipity are the second-largest JobActive providers by value of government contracts. Together, these companies have collected $876 million in JobActive service fees since the program’s inception in 2015.

The JobActive system is set to expire in 2022, when the federal government will institute the New Employment Services Model (NESM). The main change from JobActive will be that under the NESM, individuals who are deemed as ready to work will only be required to interact with a government-run app rather than an employment services provider.

This significantly reduces the client pool from which APM can collect service fees. Instead, APM will be relegated to servicing people who are harder to place into work. These individuals have traditionally made up a significantly smaller portion of their JobActive income.

APM’s prospectus provides little analysis on the potential loss of revenue from the change to the NESM despite notes that “under the new model service providers will only provide services to jobseekers requiring greater levels of support to find employment”.

However, APM forecasts that whatever reduction in caseload will be more than made up for by FY2024, when the group estimates a half billion dollar rise in revenue across its Australian business from FY2020.

This may be the result of the NESM payment structure which will allow “support providers to deliver more intensive services for jobseekers who need the most assistance.” APM is also anticipating a $200 million windfall, partly arising from forecast costs associated with the transition to the NESM.

While the prospectus claims that “there is no assurance that APM will be awarded contracts under NESM on the same or equivalent terms to its existing contracts under Jobactive, or at all”, APM has committed to significant Coalition donations in previous elections.

According to the AEC’s Transparency Register, APM was a significant political donor during the 2019 election, contributing $119,673 to the Liberal Party and just $22,372 to the Labor Party.

Click here to read the full report.

Michael West

Michael West

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences. You can follow Michael on Twitter @MichaelWestBiz.

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