AFIC used Malek Fahd Islamic School as a funding ‘milk cow’
Government goes missing again!
The country’s largest Islamic school was used as a “milking cow that never runs dry”, paying millions of dollars through interest-free loans and exorbitant, above-market-value rents to its controlling body, the umbrella organisation representing Muslims in Australia. The payments were canvassed in the Federal Court yesterday as the Sydney-based Malek Fahd Islamic School, which has more than 2400 students and 300 staff, launched a last-ditch bid to stay afloat.
Source: News Corp
The case threatens to engulf senior members of the Islamic community who were involved with the finances of both the school and AFIC.
Part of the school’s argument was that former directors of the school had breached their fiduciary duties “on a comprehensive and spectacular scale’’.
Ian Coleman SC, counsel for the school in yesterday’s proceedings, said there had been “a toxic combination of directors common to the board of AFIC and the school’’.
For some time before 2015, community leader Hafez Kassem was chairman of the school board and president of AFIC. He was sacked as AFIC president in March last year and six Islamic schools agreed to remove AFIC’s power over their finances.
The school, which now has a new board, launched an appeal in the Federal Court after the federal government cut almost $20 million in annual funding following revelations of its financial relationship with AFIC.
The school has three campuses, the first in Greenacre in Sydney’s southwest, which was leased from AFIC and allegedly used to fund the organisation.
“The Greenacre lease was treated by AFIC as a milking cow that never runs dry,” Mr Coleman said yesterday. “There was a series of spectacular rental increases — tenfold in one instance — that were made retrospective and prospective.”
The appeal followed a ruling by the Administrative Appeals Tribunal late last year backing the federal government’s decision to cut funding. The government has continued funding pending the outcome of the court actions but it would cease if the school’s appeal is unsuccessful. The school argues that since March last year no money has been paid to AFIC.
Mr Coleman told three judges in the appeal that the school faced closure if federal funding was not continued. “If the school fails in this litigation, in the financial situation it is in, the directors would have no practical alternative other than to put the school into liquidation,” he said.
While the school has ceased all payments to AFIC, the court heard it had continued to keep track of its lease payments in its accounts, a figure that has soared into the millions.
Richard Lancaster SC, acting for federal Education Minister Simon Birmingham, argued the school was still bound by its contracts to AFIC, and if funding were continued, the school would be obliged to pay its debts. “The rental obligation was discharged and replaced by a loan from AFIC to the school,” Mr Lancaster said. “It seems on the facts there was a notional payment of rent and then its replacement with debt.”
Since it was established in 1990, Malek Fahd’s former board lent more than $5m to AFIC, without interest, and at one stage paid its rent five years in advance.
When AFIC acquired its campus in Hoxton Park, in Sydney’s west, it asked Malek Fahd to pay the second property’s rent as well.
AFIC later sought a valuation for the Greenacre property that found the rent should have been vastly more, and demanded the school pay an additional sum of almost $3m. Between 2012 and 2015, Malek Fahd received more than $76m in commonwealth funding and stands to gain $19m should it be successful in its appeal.
The Federal Court bid is made more complicated by the other legal battles embroiling the school, AFIC, and AFIC’s current and former directors. A group of former executive members of the body, who were either banned or stepped down last year, allegedly changed the locks of its Sydney headquarters, declaring they had only been removed temporarily.
Keysar Trad, who was elected AFIC president last August but defeated at elections this month, has launched legal action in the NSW Supreme Court against Mr Kassem and several others.
Malek Fahd is also taking AFIC to the NSW Supreme Court seeking a repayment of funds, damages and the release from other obligations it holds. Both matters remain before the courts.
The financial affairs of six Islamic schools operated by AFIC, were investigated by the federal Education Department in 2015 after a string of senior staff members and principals were sacked, allegations of financial mismanagement and concerns over the delivery of the curriculum. As well as Malek Fahd, Islamic colleges in South Australia and the ACT had funding withdrawn.