Govt determined to pursue missing Woodlawn millions
Statement by Minister for Public Enterprises Rt Hon Mekere Morauta, KCMG MP
I have spoken previously about the areas where this waste and neglect, and indeed corruption, was most prevalent and caused the most damage – in the State Owned Enterprises supervised by the Independent Public Business Corporation under the stewardship of the suspended Member for Angoram and his outrigger Mr Glen Blake who during that time claimed to be (and probably still is) the Somare family financial adviser.
Since we were elected in August last year, much of the focus of my efforts, as Minister for State Enterprises, has been on finding out how big a mess the State Owned Enterprises are in; and where they have lost money, how that money was lost, where the money went to, and to try to get as much of that lost money back as we can.
Mr Speaker, this is public money we are talking about, which should have been used for the benefit of all Papua New Guineans, building roads and bridges, schools and hospitals, but which instead has been frittered away, wasted, lost through incompetence, or in some cases, simply stolen.
We quickly discovered that one of the worst State Owned Enterprises in this respect was Motor Vehicle Insurances Limited, which we all know as MVIL. Mr Speaker, MVIL has a vital function within government and as the third party motor vehicle insurer, it must maintain large financial reserves in order to pay out insurance claims for years into the future.
This made MVIL a tempting target for highly dubious so-called “investment managers” from overseas to extract a large slice of MVIL’s investment funds, 96 million kina, and place that money at the disposal of these “investment managers”, initially in a bank account in a New South Wales country town. Regrettably, Mr Speaker, the “investment managers”, Woodlawn Capital Pty Ltd, appear to have been ably assisted by the then Managing Director of MVIL, Dr John Mua, in their endeavours to extract money from MVIL.
When this 96 million kina was “invested” with Woodlawn in July 2009, Woodlawn Capital Pty Ltd had been incorporated for only a few weeks; it was a classic “two dollar company” – that is, it has a paid up share capital of only two, one dollar shares; it did not hold any financial services licence which, under Australian law, every such investment manager must have; and it had no other funds under investment.
It would seem ridiculous for any rational businessman to invest any funds, let alone 96 million kina, with such a company with no history, no backing and no licences, but that is what Dr Mua and MVIL did in 2009.
Mr Speaker, this has not been an easy task, but we are not giving up. And unfortunately, in this we have not always been assisted by everyone at MVIL.
We required Woodlawn to repatriate the total funds to PNG and terminate the investment arrangement, but we received nothing but obfuscation, delay and a refusal even to give us the most basic information about how much of the original investment of 96 million kina is left, or where the funds may be held.
We have complained to the corporate regulator in Australia, ASIC, about Woodlawn’s actions in claiming to hold an Australian Financial Services licence when it did not, and dealing with investment monies when unlicensed. These are clear breaches of Australian securities law.
Mr Speaker, we had been most concerned that all or nearly all of the 96 million kina invested with Woodlawn over two years ago may have been lost. A couple of months ago it appeared that Woodlawn was suggesting it would return only a few million dollars, perhaps only 10 or 15 percent of the original investment , to MVIL. It would be a sad day for Papua New Guinea if we were to lose about 80 million kina to crooked investment advisers overseas – money which should be available for the benefit of the people of PNG and improving their living standards. This is the sad legacy of the Somare regime’s years of waste, neglect and corruption.
However, Mr Speaker, there is some light at the end of the tunnel. With the totally un-cooperative approach from Woodlawn, we had no option but to instruct our legal advisers in New South Wales to commence legal proceedings against Woodlawn and its two directors, McNamara and Breen, to recover the money they had illegally obtained.
Following the institution of legal proceedings, I have now been informed that the New South Wales Supreme Court ordered the remaining MVIL investment portfolio frozen, so Woodlawn and its directors cannot deal with those funds, and Woodlawn has been required to give full information about the current value of the MVIL investments managed by Woodlawn.
While this may sound positive, it is not all goods news. Legal action is expensive, and it is possible, or likely, that more legal action will need to be taken before we get our money back. Also, while we do not yet know precisely how much money is left, it seems that it could be somewhat less than 30 million Australian dollars, which would mean a loss of about one quarter of the original investment two and a half years ago, since 96 million kina then equalled about 40 million Australian dollars.
Of course we are not conceding that this money is necessarily lost – we will do everything we can to pursue Woodlawn for the full value of our investment and the damages we have suffered, but we obviously do not know yet how successful we will be.
This MVIL saga is, Mr Speaker, another example of the Somare regime’s scandalous misuse of public funds – not as newsworthy, but just as bad in its own way, as the Falcon jet fiasco. The people of Papua New Guinea deserve better, and we are making sure they get better than that, by making these most strenuous efforts to get back this money which has been extracted from the public purse.