Archive for July, 2010

Somare seeks to emulate Mugabe

July 30, 2010 3 comments

Prime Minister Michael Somare has been asking his closest advisors some searching questions about octogenarian Zimbabwean Dictator, Robert Mugabe.

Seems the chief is interested in out lasting Mugabe and setting his own world records.

This is causing plenty of rumblings of dissent, as we have seen so graphically in the newspapers over the last couple of weeks.

But Somare is adamant that either he stays OR the Party and its coalition partners must agree that his crown is given it to King Authur on a golden platter.

Apparently though this is just not going to happen as the idea of a family dynasty is just about the one thing that the whole of Parliament opposes.

Senior Ministers and their supporters are determined to put an end to Somares absurd rule that they feel is trying to convert a democracy into a feudal system.

It looks like we are in for an interesting few weeks….

Michael Somare edits out O’Neill’s culpability

July 29, 2010 1 comment

In a funny twist of fate, it was Prime Minister Michael Somare who, in 2002, presented the NPF Commission of Inquiry Report to Parliament.

In the Report the Commission identified Peter O’Neill as one of three recipients of K2.5 million stolen from NPF funds.

Not only has Mr O’Neill never been charged for his part in the fraud, Michael Somare last week appointed him Finance Minister!

But maybe we should not be surprised, as even back in 2002, the PM failed to mention Mr O’Neill and his culpability in his address to Parliament (which is reproduced below)





Mr Speaker,

I rise to table the findings of the Commission of Inquiry into the National Provident Fund that was established in April 2000, after a special audit report showed that the NPF had suffered enormous losses in excess of K155 million, that it had failed to honour its reporting obligations and that it faced a 50 per cent write down in members funds.

There was also an indication that there had been gross abuses regarding an attempt to sell some property known as the Waigani land to NPF at a grossly excessive price and similar abuses regarding the construction and attempted sale of the NPF Tower (now known as the Deloittes Tower).

The Commission was established with wide terms of reference to examine all NPF’s equity investments, its purchases and management of a company called Crocodile Catering (PNG) Pty Ltd and other investments.

The Commission was asked to examine the conduct of the NPF Trustees and management to see if there were breaches of duty and other abuses and to look specifically at the Waigani land deal and the NPF Tower.

Finally, the Commission was asked to report upon the legislative structure governing the NPF and to make recommendations for structural reform.

The first Chief Commissioner, Sir Charles Maino, resigned early in the piece to contest a by-election and he was replaced with former National and Supreme Court Judge, Mr Tos Barnett. The other Commissioners were Lady Whilhemina Siaguru and Mr Donald Manoa.

The Commissioners, with Mr John Reeve as Senior Counsel assisting the Commission, set about their investigations vigorously calling in documents on 34 major topics to be investigated as well as summonsing hundreds of witnesses to give evidence.

In order to be transparent, the Commission published the Transcript of its daily hearings on the Prime Minster’s website, and gave everyone implicated an opportunity to appear and be heard.

The Commission has found that the losses suffered by the Fund were even worse than has been suspected.

The report, states that by far the main cause of the losses was NPF’s outrageous investment strategy during the 5 years under review by the Commission – 1995 to 1999. Under the chairmanship of Mr David Copland (former managing director of Steamships Trading Company Limited) NPF formulated a policy to borrow massively from the commercial banks to fund its investments in PNG resource stock, mining and exploration companies.

It bought into these investments when prices were high and it borrowed the funds when the interest rate was low. But these were volatile, risky, non-income producing investments and their price was about to tumble as the South East Asian financial crisis of 1997 – 1998 loomed.

The report also states that the NPF also invested more than K40 million of borrowed funds in a doomed attempt to take over Steamships Trading Company and Collins & Leahy Holdings, paying top market price for the stock, which was also about to fall in value.

Then three things happened: –

1. the share prices fell;
2. the interest rate on NPF’s borrowed funds rose and
3. the Kina depreciated against the Australian dollar.

NPF was trapped. As its interest rate burden rose to K1 million per month, it was obliged to transfer more and more share scrip to the banks for security.

Much of this debt was with the ANZ Bank. Just as it was becoming difficult to meet the interest payments and to honour the agreement with ANZ about the value of shares pledged as security, NPF borrowed a further K40 million from PNGBC to construct the NPF Tower.

According to the report, the NPF’s management failed to perform due diligence in relation to the investments and failed to keep the NPF Board of Trustees informed. Frequently management acquired shares without the Board’s authority and also entered agreements without authority.

The Commission has found that NPF’s senior officers – the managing directors, Messrs Robert Kaul and Henry Fabila, the Investment Advisor, Mr Noel Wright and the Corporate Secretary/Legal Adviser, Mr Herman Leahy, were in breach of duty and suggests that in some instances the actions of some of them were criminal.

The Commission has made recommendations that many people be referred to the Ombudsman Commission and some to the Commissioner of Police for further investigations.

Similarly, it has found that the Trustees are in breach of their fiduciary duty to the members for not keeping management in check and for not seeking independent expert advice before investing multi millions of Kina in risky stock.

The commission also found that the NPF management and Trustees ignored and sometimes deliberately violated the Investment Guidelines, which were laid down by Sir Julius Chan in 1993. These were designed to make sure that this superannuation fund (NPF) invested members’ funds carefully and prudentially.

One of the strangest things found by the Commission is that NPF never had the power to borrow money in the first place. The banks failed to make proper inquiries and made these vast loans, which were illegal and probably not recoverable.

When NPF’s cash crisis had brought it to the verge of bankruptcy it was obliged to sell off its assets to repay the debt, which it could no longer service. By that time, however, the share price for NPF’s narrow range of PNG resource stock was very low and when NPF tried to sell down large volumes of those shares, it brought the price down even further so that NPF realised massive losses.

The Commission has reported that while NPF was facing and addressing this crisis in 1999, its newly appointed chairman Mr Jimmy Maladina and the Legal Officer, Mr Herman Leahy (assisted by the late Mr Henry Fabila) set about defrauding the NPF of some K5 million by means of the Waigani land fraud, which the Commissioners say involved the bribery of Lands Ministers Viviso Seravo and Dr Fabian Pok and Lands Board Chairman, Mr Ralph Guise.

The Commission has laid out the evidence against these people in Schedules 5 & 6 and many others in great detail – most of it documented – and has recommended that I should refer them to the Commissioner for Police and to the Ombudsman Commission.

The Commission’s report includes charts, which trace the trail of money from the original fraudulent payments through many transactions and in and out of the books of Carter Newell Lawyers and Port Moresby First National Real Estate, to the ultimate beneficiaries, their families and companies.

Each transaction shown on the charts carries the paragraph number in the Schedule where that transaction is described.

Although the amounts lost to NPF from criminal activities are said to amount to only about K5 million of the approximately K170 million losses, it is still a significant sum which the Commission has found was stolen from NPF by those responsible for managing and safeguarding the members assets.

The Commission has presented tables of all those persons it has recommended that I should refer to the Commissioner for Police or to the Ombudsman Commission, the Law Society and other professional bodies.

I now commend this report to the house and call on the appropriate authorities to take action forthwith.

Look out Sam: Somare is licensed to kill!

July 29, 2010 7 comments

With O’Neill back as Minister for Finance we are all losers

July 28, 2010 1 comment

With Peter O’Neill installed as Minister for Finance despite the findings of fraud against him in the NPF Commission of Inquiry, it is worth reflecting on the Post Courier editorial published on the 10th of April 2003. An editorial which posed the question of where we are going as a Nation when we fail to take action against those implicated in “the greatest scandal ever in the history of PNG”

Lack of action: We are all losers

THIS is the last update we will publish on the National Provident Fund Commission of Inquiry findings.

Over the last 85 editions, the Post-Courier published 97 pages of extracts from the NPF Report as well as a Scoreboard on the referrals made to the various national institutions for further action.

The pages this newspaper had committed to the NPF Report amounted to a revenue of more than K224,000 which we did not collect.

That was the cost of bringing this report to the people of Papua New Guinea — more specifically thousands of contributors to the National Provident Fund who lost millions of kina in life savings they will never ever reclaim.

For them the only satisfaction will be to see justice done — that those responsible for this greatest scandal ever in the history of PNG face the law and answer for their actions.

We have no regrets at what may seem to be lost revenue. We did so in good faith and in the public interest because of our firm commitment to fight corruption at all levels in our society.

This may mark the end of the published extracts from the NPF Report but our commitment and resolve to rid corruption from this great nation remains as strong as ever.

We are committed to working in partnership with all our partners in the Community Coalition Against Corruption and the great Institutions of State to ensure justice prevails in PNG — for without it there is no future for our children and future generations.

We are committed to supporting all efforts being made to ensure our people live and enjoy the fruits of a just, open society with systems that ensure transparency and accountability in leadership at all levels.

A society where every man, woman and child is given an equal opportunity to realise their full potential as free citizens of this nation.

Corruption is a deadly form of cancer that is eating away at the social fabric of PNG. A major surgery is required to remove it before it engulfs the whole body and soul of our land.

There is a ray of hope out there in the community that gives us confidence that even if action on the referrals contained in the NPF Report is delayed, we know that there is a coalition of many individuals and groups in this country who have a voice loud enough to remind the institutions of State of their duties and responsibility to implement the recommendations of the report.

Today’s public forum asks the most pertinent question about the referrals: What action?

As this forum gets underway in Port Moresby, the final report of another commission of inquiry — the Commission of Inquiry into the Defence Force Retirement Benefits Fund will be presented to the Prime Minister.

We have yet to see one successful prosecution out of the NPF Commission of Inquiry Report and we have another report soon to be tabled in Parliament.

The contents of that report will remain secret until it is actually tabled in the House. Only then will we know what the inquiry has found.

Will there be another public forum to ask the same question: What Action?

Both reports are a sad indictment of the direction our country has taken in the last few years.

We say that the elite of this nation ought to feel guilty about not doing the right thing by their people.

So much hope and confidence was placed on so many of our elite citizens but they have failed their people.

All of us are the ultimate losers.

O’Neill’s appointment as Finance Minister a cruel joke from a corrupt government

July 27, 2010 6 comments

Prime Minister Michael Somare’s appointment of MP Peter O’Neill as Treasury and Finance Minister looks like an unmitigated disaster as Mr O’Neill has a very slippery past and was heavily involved in the National Provident Fund fraud.

Peter O’Neill was one of the three people who orchestrated the NPF Tower Fraud. He helped steal millions from the retirement savings of ordinary Papua New Guineans and he has never been brought to justice.

Mr O’Neill, Jimmy Maladina and Herman Leahy shared in the K2.5 million from the scam.

There was a Commission of Inquiry into the NPF.  It recommended various people be prosecuted for stealing, amongst other offences. One of them was Peter O’Neill.

In what is now known as the Tower Fraud, Kumugai Gumi were contracted to build what is now known as Deloitte Tower in Port Moresby – a large multiple story office building.  The original contract price was about K47 Million. But will Bill Skate and his boys badly managing and plundering the country, the Kina was on the slide – from 1:1 with the Australian Dollar in 1997 it had quickly slid to K1 = .75c in 1998/99

Kumugai Gumi began to hurt.  The building of the tower was not a hugely profitable project and was really a vehicle to entrench them in the market in PNG.  It was however relying upon materials from overseas, and it was going to do very badly on the project if there wasn’t a contract variation to allow an increased payment to cope with the exchange rate variation.

Herman Leahy was the in house lawyer at NPF.  The legal work on this contract was actually briefed out to a private firm – Carter Newell, a firm in which Jimmy Maladina was a partner when he was appointed Chair of the Board of NPF.  Carter Newell gave advice to NPF that NPF didn’t have to pay any extra money to KG.

Knowing this, Maladina and Peter O’Neill hatched a plan – that Jimmy would call the boss of KG in, and tell him that he would get him a contract variation of K3.3 million BUT that KG would have to ask for K5.8 million and that Jimmy would ensure that KG would be paid the K5.8 million, but that then KG would have to pay K2.5 to Jimmy (and then Jimmy was to share that with Peter and Herman).  The Japanese boss of KG, who didn’t speak English very well, refused.  Jimmy then told him that KG would never get an increase in the contract unless it was according to Jimmy’s plan.  Jimmy also told the KG boss he had friends in high places including the PM, and that the KG boss had no-one to complain to.  The KG boss left Jimmy’s office and did not agree initially to the arrangement but more pressure was later put him by Jimmy, and he eventually agreed.

So the K5.5 million was paid by NPF to KG as a contract variation, and KG duly paid Jimmy the K2.5million.  Then Jimmy shared it with Peter O’ Neill and Leahy.

The Commission of Inquiry traced the K2.5 million through Jimmy and Peter to a total of 13 more people, including Herman Leahy.  They didn’t hide their tracks well. Peter used the money to pay American express bills and his Aviat club membership etc.  All copies of bank statements and original cheques were obtained.  It also helped the Commission as KG executives agreed to give evidence against Peter and Jimmy and Herman in the hope that they would not be prosecuted.  All the evidence was put before the Commission and it recommended Jimmy and Peter and the others for prosecution.  The final report came out in 2003.

Jimmy fled the country.  Eventually he came back and he and Herman were initially charged, but their cases were individually thrown out by magistrates.

Herman was then indicted by the Public Prosecutors’ Office, which he appealed and finally after a couple of years the court decided to reject his appeal.

ONLY About a month ago it was announced in the newspapers that there would be a joint trial for Jimmy and Herman.

Peter O’Neill has NEVER been charged.

This is what the NPF Commission of Inquiry said about Peter O’Neill

“…the commission made a thorough study of Port Moresby First National Real Estate’s accounts and traced all moneys paid in and out on account of Mr O’Neill. 
This conclusively showed that Mr O’Neill had definitely benefitted from the proceeds of the NPF Tower fraud. It also showed that, despite his denial’s, Mr O’Neill is the beneficial owner of PMFNRE and that Mr Sullivan and Mr Awela are his nominee shareholders.
It is quite clear that there is a relationship between Mr Maladina and Mr O’Neill whereby they have benefitted jointly from the NPF Tower fraud.”

This is what the NPF Commission of Inquiry said about the K2.5 million

“This claim was spurious and was agreed upon between Mr Maladina and Kumagai Gumi managers (under pressure from Mr Maladina) to enable the money to be channelled through Kumagai Gumi and on paid for the benefit of Mr Maladina, with shares for Mr Leahy and Mr O’Neill (through the account of Carter Newell and PMFNRE).
NPF is entitled to recover this K2.505 million.”