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Secret cables lift the lid on the detention of two executives, writes Matt O'Sullivan.
It was several days before Christmas 2009 when Daniela Marsilli and Tristan Freeman were pulled aside at Ho Chi Minh City's international airport for questioning.
The Qantas executives were due to board flights home for well-deserved holidays in Australia after toiling for several years as senior bosses of Vietnam's second-largest airline, Jetstar Pacific. In an emotional separation, they were barred from leaving, forcing their young families to fly home without them.
So began a six-month ordeal for the Australians, which included grillings at the hands of Vietnam's feared secret police, the Ministry of Public Security.
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Yet their predicament did not surprise some workmates in Vietnam, who had first become concerned in early 2009 about what might unfold. They feared that Australians sent to the developing nation to help run Qantas's part-owned budget offshoot could be detained because of multi-million dollar losses.
Months later, Qantas management commissioned its then chief risk officer, Rob Kella, to begin a risk assessment of Jetstar Pacific. His findings are commercial-in-confidence.
But it was all too late. The Australians' brush with the iron hand of the Communist Party apparatus and the deep uncertainty took a toll on their state of mind. It also reinforced the dangers for foreign companies of doing business in a developing country where the state can criminalise ordinary commercial activities.
Their living nightmare has been cloaked in secrecy ever since.
The two executives at the centre of the diplomatic storm jumped on the first flight out of Ho Chi Minh once the travel ban was lifted on June 29 last year. They are now back in senior positions at Qantas's headquarters in Sydney.
Marsilli, a former boss of the Adelaide charter airline National Jet, is at Qantas's engineering division; Freeman, 38, is in a strategy role.
Qantas says neither wants to talk about their traumatic experience.
But secret diplomatic cables obtained by the Herald under freedom-of-information laws give a rare insight into the frantic efforts involved in winning their release.
It also reveals the sensitivity of a case that went to the highest echelons of government.
When they were finally allowed to return to Australia last year, Qantas insisted that the Ministry of Public Security's investigation ''was quite separate to any commercial relationship between State Capital Investment Corporation and Qantas''. The SCIC is the investment arm of Vietnam's communist government and the largest shareholder in Jetstar Pacific. Qantas is the other shareholder with a 27 per cent stake.
But one of the diplomatic documents reveals that a deal between Qantas and the SCIC did play a part in helping to lift the travel bans on Marsilli and Freeman.
Three days before the pair's final meeting with a two-star general from the secret police, Qantas and the SCIC ''reached agreement on a commercial package that would also count as mitigation under Vietnamese law, so allowing the travel restrictions on Tristan Freeman and Daniela Marsilli to be lifted''.
The revelation about the deal with the SCIC is contained in a secret document stamped ''consular media talking points'', which was co-authored by Bassim Blazey, a senior official from the Department of Foreign Affairs and Trade in Canberra. It was sent to federal ministers' offices on June 30 last year.
The two Qantas executives found themselves at the centre of the diplomatic storm in Vietnam after Jetstar Pacific lost $US31 million on fuel-hedging contracts in 2008. The names of Marsilli and Freeman - as the chief operating officer and chief financial officer - were on the contracts.
Airlines regularly enter hedging contracts to stabilise the volatile cost of jet fuel. But Vietnam is a country that is only slowly opening the door to capitalism and where the loss of money at a state-owned enterprise - even a relatively small amount - can be a capital offence.
Throughout most of their ordeal, Marsilli and Freeman had no idea when they would be free to go or whether they would be held personally responsible for the losses at Jetstar Pacific. Although interpreters were provided, they did not have access to lawyers at some interviews.
Qantas says the ''commercial package'' referred to by DFAT was a heads of agreement, which gave a ''commercial framework governing the expectations'' of the two shareholders and their continuing involvement in Jetstar Pacific. It will not reveal further details because they are ''commercial-in-confidence''.
However, Qantas confirmed to the Herald last year that it did extend ''for a number of years'' a put option shortly before the two executives were released. Put options are used to attract investors by giving them the opportunity to recall their investment if the company fails to live up to expectations.
It is important because, if Qantas had exercised the option, it would have meant that the investment arm of Vietnam's government would have had to find about $43 million to pay the Australian airline.
As much as parts of the Vietnamese establishment might have wanted Qantas out, an exercising of the option is likely to have meant the SCIC would have had to seek financial help from their political masters in Hanoi.
The Australians' shock detention prompted Qantas to set up a high-level taskforce. Those tasked with trying to bring them home included Steve Jackson, Qantas's chief of security and a veteran of the Australian Federal Police, David Epstein, the head of corporate and government affairs, and Brett Johnson, the general counsel who flew regularly to Vietnam in the early days to get a handle on the legal side of the case.
Apart from Epstein, a former adviser to Kevin Rudd, the rest of his government relations team knew little about what was going on.
DFAT also involved heavyweights such as Blazey, the former head of the Howard government's Iraq Task Force. Described as a ''hard-core DFATer'', Blazey keeps a low profile despite serving in a top post in the department's south-east Asia bilateral branch. Graeme Swift, Australia's consul-general in Ho Chi Minh, was also heavily involved because most of the action was in Vietnam's financial capital.
Public information about Marsilli and Freeman last year might have been scant, but the secret cables reveal the high level of work going on behind the scenes. In just one month, DFAT churned out 18 secret cables, email conversations and so-called ''consular media talking points'' about the two executives' plight.
One of them is so secret it is classified AUSTEO, which stands for Australian eyes only. Such classification of cables from the Australian embassy in Hanoi is rare.
The department has ruled 12 of the cables should be ''totally exempt'' from release to the Herald, citing concerns Australia's relations with Vietnam could be damaged. DFAT said the documents detail its ''dealings, opinions of and relationships with Vietnamese officials and their activities''.
Qantas has also sought secrecy. It has told the department that ''release of the material could reasonably be expected to affect its business affairs, both in Vietnam and other regions''.
One of the cables deemed ''commercial in confidence'' - dated June 4, 2010 - details an email conversation about a letter received from the SCIC. That same day Australia's ambassador to Vietnam, Allaster Cox, met Vietnam's Finance Minister, Vu Van Ninh. The SCIC answers to Vietnam's Finance Minister.
Less than three weeks later, Qantas and the SCIC, the majority shareholder in Jetstar Pacific, reached the agreement on the ''commercial package'' that would help lift the travel restrictions on the Australian pair.
Then, on June 29 last year, a ''confidential'' DFAT cable shows Marsilli and Freeman fronted a meeting before a two-star general, Tran Trung Dung, and a colonel, both from Vietnam's feared secret police.
''Having concluded their assistance with the investigation, the two Australians were advised by the Vietnamese authorities … that they were free to depart,'' states a DFAT document on June 30, 2010.
It highlights the ''wide coverage in Vietnamese and Australian media'' and shows the Australian ambassador was involved in a ''series of meetings between Qantas and senior Vietnamese officials over the period''.
But DFAT has completely blacked out another cable revealing an ''unofficial translation'' of the Qantas executives' meeting with the secret police.
Qantas refutes any suggestion that a settlement was reached to free its two executives. But it has confirmed that the Ministry of Public Security ''had regard'' to the heads of agreement with the SCIC when deciding to allow Marsilli and Freeman to leave Vietnam.
''Officials believed that it showed the commitment of both joint venture parties to the commercial viability of Jetstar Pacific. This is what is referred to as potential mitigation in the DFAT cable,'' Qantas says.
''Under Vietnamese law, investigators examining financial losses are entitled to consider the commercial circumstances and commitment of relevant parties to running a viable business when deciding whether an investigation should proceed.''
The investigation into the losses at Jetstar Pacific was originally the job of Vietnam's Economic Police. The fact that the Ministry of Public Security later became involved reveals the high stakes, as well as the fear and intimidation brought to bear.
The secret police invokes terror in the minds of the Vietnamese public. Regarded as a law unto its own, the Ministry of Public Security is a secretive part of the communist machinery in a country where the buck stops with the military and the party president and prime minister.
The two Australians' brush with the shadowy side of Vietnam's political and judicial system might now be behind them. But it has again highlighted the risks for Australian companies of doing business in developing countries

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I would also not be surprised if JQ used futures (or perhaps a swap) which locked in the price (rather than options) as managing an option position would be a little harder than just putting a futures / swap position on and walking away. A futures position would give you certainty so you can budget more accurately.

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Could be " come back time " for said writer of letter,

Different country and different laws but now back in Aus thanks to the ALAEA via Pprune

Lot's of waiting may have been worth it.

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In order to keep periodic engine maintenance and implement the plan to charter and purchase more aircraft, Jetstar Pacific (JPA) needs some 55-60 million dollars. JPA commits to pay all the debts to Vinapco prior to July 31, said Le Song Lai, General Director of JPA, who is also the Deputy General Director of the powerful State Investment Capital Corporation (SCIC) which specializes in making investment in enterprises with state’s capital.

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How did the ALAEA get a hold of the confidential EMail ???????
splashman is offline Report Post Reply

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JETSTAR is supporting a shake-up in the ownership of its trouble-prone Vietnamese offshoot, Jetstar Pacific, in a deal that will result in it and the national flag carrier Vietnam Airlines carving up the Asian nation's travel market into low-cost and premium segments.

Under a tentative agreement still months from completion, the Vietnamese government will transfer a 70 per cent stake in Jetstar Pacific held by its investment arm to Vietnam Airlines. Jetstar's parent, Qantas, is expected to increase its holding from 27 per cent to 30 per cent.

Jetstar's chief executive, Bruce Buchanan, said the airline was supportive of a change in the ownership but he emphasised yesterday that ''there is a lot of water to go under the bridge with those discussions''.

''We have a lot of success in executing two-brand strategies … and we think that could be leveraged in Vietnam for a lot of benefit not only for the Vietnamese industry there, but also Vietnam Airlines,'' he said.

The Vietnamese government has initiated the ownership changes after several years of controversy for Jetstar Pacific. Last year two Jetstar-appointed executives at the Vietnamese airline were banned from leaving the country for more than six months while police investigated fuel-hedging losses.

The budget airline has not turned a profit since Qantas bought into it in 2007.

Mr Buchanan said he did not anticipate difficulties from Vietnam's dominant airline taking majority control of Jetstar Pacific, likening it to Japan Airline's stake in the yet-to-be launched Jetstar Japan.

''Irrespective of our partnership and how else we can create benefits for the other partners, we have to stay true to the ultimate brand promise,'' he said.

Although the Vietnamese shareholder selects Jetstar Pacific's chief executive, the Australian airline maintains an influence by appointing the chief financial officer and other executives. Qantas also has two seats on a six-member board.

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WTF are these idiots doing?

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