The opportunity to start a business that had Indigenous employment and training at its centre was something Wonnarua man Scott Franks couldn’t turn down.
It was a proposal that appealed to his cultural obligations and meant he could turn a profit while helping other First Nations people get a leg up.
“[Indigenous people] establish a business so that our core principles of sharing and caring evolve. It’s for the next generation. We always think like that,” Mr Franks said.
An archaeologist and environmental consultant, Mr Franks had two decades of business experience running his own consultancy before he was approached to be part of a new business.
In 2021 Glad Indigenous was created, a joint venture between Glad Holdings (part of the Glad Group of companies) and Scott Franks to service contracts for cleaning and security of government buildings.
Scott Franks wanted Glad Indigenous to provide employment and training opportunities to First Nations people. (ABC News: Geoff Kemp)
Since 2015 the federal government has prioritised spending federal money with Aboriginal and Torres Strait Islander businesses, like Glad Indigenous, as part of the Indigenous Procurement Policy (IPP).
Under the policy, government departments have a target to spend 2.5 per cent of their yearly procurement budget with businesses that are at least 50 per cent First Nations owned.
By joining forces to create Glad Indigenous, both Mr Franks and the Glad Group could benefit from the IPP.
It would mean having access to an established business model to win contracts and generate more employment and training opportunities for Indigenous staff.
Glad Holdings would then handle the business administration of Glad Indigenous, for an agreed monthly fee and percentage of each contract.
“The goals of the Indigenous Procurement Policy is to ensure that Aboriginal prosperity grows in a society where we can design and build businesses so that we can look after our own people, our communities,” Mr Franks said.
“We would always be best placed to look after local communities and employ our people.”
Glad Indigenous provided cleaning and security services in multiple government buildings. (ABC News: Geoff Kemp)
To win IPP contracts, businesses are required to be at least 50 per cent Indigenous owned and controlled. As the 51 per cent shareholder and CEO of Glad Indigenous, Scott Franks thought there was no way his business could be ‘black cladded’.
“I was already very aware of black cladding, and I wanted to make sure that this one was set up properly,” Mr Franks said.
Scott Franks says Glad Indigenous was handling millions in contracts for the federal government, but internally the business was fraying.
“The reality is the profit margins on the contracts was about 1.6 per cent,” Mr Franks said.
“When I started seeing the overheads coming through, I mean, I was shocked.”
Company control reaches court
In 2023, Glad Holdings launched an application to wind up Glad Indigenous in the Supreme Court of New South Wales.
The court heard issues had arisen between the shareholders, including concerns about tender compliance, profitability, and disagreements over staffing.
The court also heard evidence that $130,000 was taken from the business account by the minority shareholder without notice, and that Glad Holdings and Mr Franks disputed the circumstances of the transaction.
“[The minority shareholder] has given evidence that this transfer was made in partial repayment of a loan or series of loans that the Glad Group had made to the Company,” the judgment reads.
Scott Franks ended up fighting for Glad Indigenous in the Supreme Court of New South Wales. (ABC News: David Sciasci)
“Mr Franks gave evidence that the directors of the Company had never resolved to borrow money from Glad Holdings … Mr Franks does not accept that the Company was indebted to Glad Group in the amount claimed … or at all.”
“Mr Franks seeks to ensure that the Company’s account cannot be treated as simply another repository of funds for the Glad Group.”
Scott Franks says the profit margins on contracts handled by Glad Indigenous were very small. (ABC News: Mark Moore)
The Supreme Court application by Glad Holdings to wind up Glad Indigenous was ultimately dismissed with costs, but the business had suffered significant financial losses through the court process.
“For someone who stood in the New South Wales Supreme Court in front of a judge and pleaded your case, it’s an incredibly daunting, overwhelming process,” Mr Franks said.
“It’s very emotional because you can see your livelihood just whispering away.”
The business of ‘black cladding’
Scott Franks believes Glad Indigenous is an example of “black cladding”, because despite the fact that he was the majority owner and the CEO, in practice he was not in control of his company.
“In effect the minority partner is controlling or taking control of the company,” Mr Franks said.
“They’re restraining the voice, the actions and the control of the Aboriginal or the 51 per cent shareholder.”
Scott Franks describes the court process as “incredibly daunting”. (ABC News: Geoff Kemp)
Following another legal challenge over an unpaid accounting bill, Mr Franks said Glad Indigenous was deep in the red and unable to be restructured. He then made the decision to shutter the business out of necessity.
“The company was broke. It couldn’t pay its bills,” he said.
Despite the business winding up over two years ago, a page for Glad Indigenous is still listed on Glad Group’s website.
In a statement, a Glad Group spokesperson said it was unable to comment on the matter.
Glad Indigenous was “certified” by Supply Nation as being majority Indigenous owned and controlled, but Scott Franks says he was usurped by his business partner. (ABC News: Mark Moore)
While Scott Franks has been able to largely recover from the loss of his business, he still feels deeply for his former employees.
“It was a shocking event knowing that you’ve had to make a decision to take the livelihoods away from 40 employees in a moment of time and they don’t even know it’s coming.”
How big is black cladding?
The scale of the problem of black cladding is difficult to measure, as there is no official data.
Recent research from the Australian National University analysed almost a decade’s worth of IPP contracts and found that less than a third went to businesses that were majority Indigenous owned.
Dr Christian Eva from ANU has done extensive analysis of the IPP and where billions of dollars are ending up. (ABC News: David Sciasci)
Sinead Singh is the founder of the Indigenous business consultancy First Nation Start Up, and says she frequently encounters black cladding in the sector.
“What we’re seeing across the sector is that people are taking more opportunities from Indigenous businesses, and it’s becoming more of a regular occurrence,” Ms Singh said.
“We’re seeing a huge increase in these opportunities. We’re seeing an increase in more Indigenous businesses being established. But then what we’re not seeing is [more] ethical business deals.
“The real issue lies with individuals wanting to basically have a piece of a procurement opportunity that wasn’t made for their benefit.”
Sinead Singh (left) is frequently approached by businesses looking to work with Indigenous businesses. (ABC News: Glen Mullane)
The government has funded not-for-profit Supply Nation to manage a directory of registered Indigenous businesses for the last decade.
Indigenous businesses can also become certified with Supply Nation after the organisation reviews documents, including evidence of shareholding, financials and governance documents that attest to ownership, management decision making, and structural control.
Kate Russell has been the Chief Executive of Supply Nation since 2023. (Supplied: Supply Nation Facebook)
A spokesperson for Supply Nation did not answer questions on how many cases of black cladding it substantiates each year, but said all complaints were investigated, and businesses audited once a year for compliance.
“All stakeholders with an interest in supporting genuine Indigenous-owned business and the growth of the sector have a responsibility to mitigate against fraud and protect the reputation of the sector,” the spokesperson said.
Loopholes risking an “economic stolen generation”
The federal government’s Indigenous Procurement Policy has long been sold as a key measure for closing the gap.
Nearly $15 billion has been spent through the policy over the last decade, but there are persistent concerns that black cladding means a significant portion of that money never reaches Indigenous hands.
Sinead Singh says the impact of black cladding leads to more than lost income for Indigenous communities.
Sinead Singh says the government, the department, and Supply Nation all carry responsibility for the rise of black cladding. (ABC News: Glen Mullane)
“We operate on what we call the cultural circular economy approach. Not everything is measured by the amount of money that we have in our hands at the end of the day.
“Our wealth is based off of our health, our social well-being, our elders, how they’re treated, how our communities look after our children,” Ms Singh said.
“When we look at something as simple as the monetary gains and also the opportunities that come through IPP, people don’t see that very basic resource of money has such a huge knock-on effect to … the sustainability of our cultural circular economy approach.”
Since the loss of the Voice referendum, the Albanese government has prioritised economic development as its key Indigenous affairs policy. (ABC News: Peter Garnish)
The federal government has moved to “strengthen” the policy and from July 1 businesses will be required to be 51 per cent Indigenous owned and controlled.
Scott Franks, whose business already met that threshold in 2023, says the changes don’t go far enough and governments need to do more to crack down on black cladding.
“We’re creating this new economic stolen generation … it comes back to this policy. It’s wrong. It’s not fit for purpose here,” Mr Franks said.
“The government needs to accept [its] responsible here. Because they’ve allowed it to happen.
“Why won’t [they] stand up and say, ‘guys, this is black cladding. You’re not a black business, you’re actually a shadow director controlling a black business for your own benefit, and until that’s resolved, you’re blacklisted.’
“You want to be black? Be blacklisted.“
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