Home > Corruption, Papua New Guinea > National Provident Fund Final Report [Part 18]

National Provident Fund Final Report [Part 18]

Below is the eighteenth part of the serialized edited version of the National Provident Fund Commission of Inquiry Final Report that first appeared in the Post Courier newspaper in 2002/03.

NPF Final Report

This is the 18th extract from the National Provident Fund (now known as NASFUND) Commission of Inquiry report. The inquiry was conducted by retired justice Tos Barnett and investigated widespread misuse of member funds. The report recommended action be taken against several high-profile leaders, including former NPF chairman Jimmy Maladina. The report was tabled in Parliament on November 20 by Prime Minister Sir Michael Somare.


Mr Wright handled the loan negotiations and reached agreement with PNGBC as to its terms in June 1997.

The loan establishment fee was K375,000 which was debited to NPF’s interest income account. Messrs Kaul and Frank attested the Board of Trustees’ seal to the agreement on 17th June 1997, entirely without the authority of the NPF Board.

These decisions were never ratified1 by the NPF Board resolution so the loan agreement between NPF and PNGBC remained illegal because, firstly, NPF lacked the power to enter into an agreement to borrow and, secondly, because the agreement which was actually signed, lacked NPF Board approval. PNGBC’s lack of due diligence was surprising.


(a) Mr Kaul’s request to Minister Konga for NPF to borrow K50 million from PNGBC had not been considered or resolved by the NPF Board. This amounted to improper conduct by Mr. Kaul and a breach of his fiduciary duty to the members of the Fund.
(b) Minister Konga was also guilty of improper conduct in approving Mr. Kaul’s request without sighting an NPF Board resolution and without seeking advice from the DoF.
(c) Mr Wright’s application to PNGBC for the loan facility had no authority from the NPF Board.
(d) PNGBC was negligent in not requesting a copy of the NPF Board approval and the Minister’s approval before approving the loan facility of K50 million. PNGBC also failed to perform due diligence in relation to NPF’s power to borrow.
(e) PNGBC’s analysis of the loan application was flawed.
(f) Mr. Wright’s conduct in accepting the loan facility on behalf of the NPF Board and authorising payment of the K375,000 establishment fee without consulting the Board, was improper.
(g) The conduct of Messrs Kaul and Frank in applying the NPF seal and executing the loan facility agreement without the authority of the NPF Board, was improper.
(h) The improper conduct and breach of duty by Messrs Kaul and Wright leave them open to personal liability for loss suffered by members of NPF and, in the circumstances, it is unlikely they could defend themselves against an action by claiming to have “acted in good faith”.


At the 4th July NPF Board meeting, the Board was given the barest details of the loan agreement and was not asked to consider the tenders. Also it was not told that Gadens Lawyers had established The Tower Pty Ltd and transferred title to it and would act for NPF on the construction contract despite the fact that Gadens also acted for PNGBC on the loan facility agreement.


(a) Management was grossly negligent in allowing The Tower project to proceed with:-

-Inadequate planning (no financial planning)
-No financial evaluation
-No commitment for equity participation
-No commitment for leasing
-Insufficient due diligence

This amounts to a breach of common law duty by Mr. Wright and of fiduciary duty by Mr. Kaul.

(b) Messrs Kaul and Wright failed in their duty to keep the NPF Board fully informed of the progress of The Tower development.

(c) The Trustees in office at the time were in breach of their fiduciary duty to the members by failing to insist on a full report and full disclosure from management and for failing to inquire into and inform themselves on these issues. Their failure in these respects amounted to improper conduct.


Paragraph 7 of Schedule 2B, describes how the NPF Board simply “rubber stamped” management’s recommendations on:-

(a) awarding the K45.447 million building contract to Kumagai;
(b) entering into the K50 million loan facility with PNGBC and
(c) appointing Century 21 with exclusive marketing rights.

Management did not point out to the Board that the loan agreement was based on a fluctuating Indicator Lending Rate (“ILR”) + 0.5 percent interest over 10 years which could leave NPF exposed to a massive increase in its debt burden if interest rates rose (which in fact happened when the ILR rose from 8.5 percent in mid 1997 to 21 percent in 1998). This was gross dereliction of duty by management.

The Commission notes that the Rider Hunt feasibility study of September 1996 assumed a flat interest rate of 9 percent to be set off against projected rental income when calculating net annual income from The Tower. It seems the Trustees were happy to proceed on the basis of gross rental figures.


(a) The management and Trustees in office at the time, were in gross breach of their duty and fiduciary duty respectively by:-

(i) giving so little consideration to:-
– the Kumagai K45,447,338 building contract
– the K50 million PNGBC loan agreementand failing to obtain adequate expert advice.
(ii) engaging a photographer without calling for tenders.
(iii) appointing Century 21 without going to tender.

(b) The management and Trustees failed to perceive the dangers of agreeing to pay fluctuating interest at ILR over 10 years and failed to consider the effect of sudden changes in ILR on their financial calculations. This was a major cause of the financial loss NPF suffered on The Tower project.

(c) These breaches of duty by management and of fiduciary duty by the Trustees, exposes them to personal liability for the losses incurred by the members as a result of these breaches of duty. It is unlikely that they could avoid liability by claiming to have “acted in good faith”.


The fine-tuning of the documentation between PNGBC, Gadens and Mr Leahy continued through August and September as described in paragraph 7.1.7. It was still assumed that the borrower would be The Tower Pty Ltd.


On 8th September 1997 after the 1997 National Elections, Mr Kaul requested Ministerial approval of the PNGBC K50 million facility giving brief details, but providing no critical analysis and with no mention of the rate of repayment or the security to be offered.

Acting Minister Hon. Roy Yaki sought DoF advice. After almost one month of consideration at various levels, DoF finally provided advice, which merely summarised Mr Kaul’s brief. It presented no financial analysis, cash flow projections or assessment of NPF’s capacity to service the debt. The loan was then approved by the then new minister for Finance and Treasury, Hon. Iairo Lasaro.

This was a devastating failure of proper process. Neither NPF nor the PNGBC had addressed issues which were critical to the financial viability of the project and this failure was not picked up and addressed by anyone involved in the departmental and Ministerial approval process.


(a) Mr. Kaul’s brief to Minister Hon. Roy Yaki requesting approval of the K50 million PNGBC loan was totally inadequate, leaving out vital information that was required totally inadequate, leaving out vital information that was required.
(b) The DoF failed to critically analyse NPF’s proposal and failed to request that further information be supplied to enable a proper assessment to be made. The DoF failed its duty in recommending Ministerialapproval in these circumstances.


After work commenced, there were immediate problems regarding the foundations, which required pilings at an estimated additional cost of K2 million and a 50 day delay (later extended to 86 days). This was reported to the October NPF meeting (see Schedule 6 where this matter is investigated).

The final cost of strengthening the foundations was K2,725,236 plus redesign work costing K212,496.

This, plus the fact that BSP had refused to purchase equity in The Tower, strained the financial viability of The Tower project. Gaps in legal documentation were still preventing NPF from drawing down on the facility.


To get the project back on track, NPF agreed to an acceleration payment of K1,400,000 and the adjusted contract price as at 15th April 1998 was K47 million. NPF was, by then, meeting progress claims by PAC the project manager at the rate of K3 million per month.


In paragraph 7.1.11, Schedule 2B describes how PNGBC agreed to Mr Leahy’s request to substitute NPF for The Tower Pty Ltd as the borrower in the contract documents because of last minute tax advice. The change was agreed without any thought about whether NPF had the power to borrow.


By June 1998, the following legal documents were in place, preparatory to NPF drawing down on the facility:-

1. Floating Kina Loan Agreement between PNGBC and the NPF Board of Trustees drawn by Gadens Lawyers – attested by Mr Henry Fabila and Mr Herman Leahy (This document is dated the 4th of May,the day before the instrument of Mr Fabila’s appointment was signed and gazetted on 5th May 1998).

2. Fixed and Floating Charge between The Tower Pty Limited (Mortgagor), NPF Board of Trustees (Debtor) and PNGBC – attested by Mr Robert Kaul and Mr Herman Leahy.

3.Unlimited Guarantee between the NPF Board of Trustees and The Tower Pty Limited (Debtor and Guarantor) and PNGBC attested by Mr Robert Kaul and Mr Herman Leahy.

4. Mortgage between The Tower Pty Limited (Mortgagor), the NPF Board of Trustees (Debtor) and the PNGBC over Allotment 16 Section 5 Granville (the consolidated description of The Tower site) attested by Mr Robert Kaul and Mr Herman Leahy.

5. Equitable Charge from NPF Board of Trustees to PNGBC over 4,108,779 shares in Highlands Pacific Limited (“HPL”) attested by Mr Robert Kaul and Mr Herman Leahy.


Paragraph 9.4 recounts the detailed evidence how Mr Herman Leahy falsely certified 2 resolutions of the NPF Board allegedly passed at a meeting on 5th May 1998, which purportedly authorised NPF management to negotiate and sign the loan facility agreements with PNGBC. The certificate, dated 22nd May 1998, was clearly false and it was used to entice PNGBC to allow the first draw down on the facility.


The document certified by Mr. Leahy on 22nd May 1998 was false. He should be referred to the Commissioner for Police to consider whether he should be prosecuted under the Criminal Law.

The first drawdown of K21,598,271 occurred on 17th July 1998.


At this stage, the builders, Kumagai, began making a claim for additional costs and currency fluctuations, which were resisted by NPF.

This matter was raised in the June / July 1998 management report, as was the possibility of a sale of equity in The Tower to the PNGHB.

Mr Leahy falsely referred to a meeting between himself and Mr Greg Emilio, the Managing Director of the PNGHB which Mr Emilio denies ever took place.

At the 115th NPF Board meeting on 1st September 1998, the propriety of the un-tendered contract with Century 21 for management of The Tower (previously signed by Mr Wright) was criticised and it was resolved to obtain legal opinions about the possibility of seeking other quotations on the contract. Mr Wright, whose wife was employed by Century 21, strongly opposed this course.


At the 115th and 116th NPF Board meetings in September and November, the first steps in a fraudulent Waigani Land scheme involving Messrs Leahy and Maladina, were put in place.


At the 116th NPF Board meeting held on 22nd December 1998, Kumagai’s currency fluctuation claim was discussed. PAC advised that such a claim was not provided for in the contract but recommended agreeing to a settlement in order to prevent a possible walk away by Kumagai. The Board resolved to accept an increased final price of K50.5 million.


The first draw down of K21,598,271 occurred on 17th July 1998. By December 1998, the total draw down was K44,352,334 which required interest payments in December of K712,133, at 21 percent ILR.

As the building neared completion, NPF would be paying off K1 million per month and it still had no committed tenants to generate income.


On 19th January 1999, Prime Minister Skate appointed Mr Jimmy Maladina as Chairman of NPF and the new NPF Board was in place. The Commission finds that at this stage, Messrs Leahy and Maladina were conspiring to defraud the NPF in several ways:-

* Fraudulent sub-contract payments through Kumagai and Ken Yapane and Associates during the construction of The Tower;
* The Waigani Land scam whereby land secretly owned by Mr Maladina was intended to be sold to NPF at an inflated price, and whereby Mr Maladina gained an improper commission from exorbitant land valuation fees );
* An inflated commission payable to Mr Sullivan of PMFNRE on the sale of equity in The Tower to PNGHB and
* Fraudulent payments through Ken Yapane and Associates for fictitious office refurbishment for the benefit of Mr Maladina and his associates.


After NPF’s offer to settle the Kina fluctuation claim by increasing the contract price to K50.5 million, Kumagai rejected it but made a counter offer of K51.3 million. Hiding these facts away in a schedule to the Board papers and without referring to them, Mr Leahy recommended to the newly appointed Trustees that they authorise management to settle the claim for between K53-55 million. Upon tha deliberately wrong advice, the Board resolved that management should negotiate settlement at K54 million.

The actual payment is dealt with at paragraph 13.7. The full details of this and other Tower-related frauds upon NPF are described in Schedule 6.


On 25th January 1999, Mr Fabila, without the knowledge of the NPF Board, sought and obtained the approval of Minister Lasaro to extend the PNGBC facility by K5 million to K55 million and to extend the overdraft facility by K5 million. DoF provided a positive recommendation to the Minister, which merely parroted NPF’s brief and provided no critical analysis.


(a) Mr. Fabila was in breach of his fiduciary duty to the members of the NPF in seeking approval from the PNGBC to increase NPF’s loan facility by K5 million and extending its overdraft facility by K5 million without obtaining approval from the NPF Board.
(b) Mr. Fabila was in breach of his fiduciary duty by seeking Ministerial approval for NPF’s varied loan arrangements without obtaining approval from the NPF Board.
(c) Mr. Fabila was in breach of his fiduciary duty in not informing the NPF Board about the contents of the PNGBC letter dated 25th January 1999 regarding the interest cost of The Tower loan.
(d) The DoF was in breach of its duty by failing to critically analyse NPF’s request to the Minister and in merely summarising NPF’s request in its recommendations to the Minister.

When Mr Fabila sought a further increase in the overdraft to K8 million a few days later and to increase the FDL to K59 million, PNGBC requested some hard financial details including a revised cashflow, details of confirmed tenants, a revised profit and loss statement for The Tower and a copy of the PwC Report.

Mr Fabila was not able to provide all the required information. He told PNGBC that the revised construction cost was K54.11 million, including K3.3 million to settle Kumagai’s claim. NPF’s loan relationships with both PNGBC and ANZ were in a fragile state, with PNGBC threatening to dishonour an NPF cheque for K368,071.57 made out to ANZ Bank for line fees. This is a clear indication of how serious the loss of fraudulently obtained payments aggregating some K2.5 million was to NPF at this critical time.

In fact, NPF was relying on an increase in the PNGBC overdraft to remain “financial” and an increase in the FDL facility in order to complete The Tower.


(a) The only thing stopping NPF’s Tower construction project from financial collapse in early 1999 was continuing support from PNGBC.
(b) NPF’s management of The Tower construction was in such disarray that Mr Fabila was unable to produce even basic details required by PNGBC to enable it to consider extending the loan facility.
(c) There were no committed tenants and no profit and loss statements or financial projections for The Tower.


Both lender banks, ANZ and PNGBC, were reassuring themselves that NPF’s financial crisis could be
solved by selling The Tower, the proceeds of which would be used to retire debt. They would have gained further reassurance when Mr Leahy reported in his June / July report that the PNGHB was interested in acquiring 50 percent equity in The Tower Pty Ltd and this prospect was kept alive for the next few weeks.

Unfortunately, it was not true.

Schedule 2B devotes some time discussing the pressure being put upon the PNGHB to sign the contract because the possibility of that sale going through led NPF management to ignore proper laws and procedures and led PNGBC to ignore the fact that neither the NPF Board or the Minister had approved the K9 million additional loan. The K40 million expected on the sale to the PNGHB would solve NPF’s calamitous cash crisis, which threatened both NPF and the PNGBC. These matters and the fraudulent conspiracy involved in this proposed sale, are dealt with in more detail in Schedule 6. They are touched upon in this report because of their relevance to the PNGBC loan facilities.

Paragraph 13 of Schedule 2B provides details of a fraudulent scheme worked up by Messrs Maladina, Leahy and the Chairman of the PNGHB, Mr John Orea and Mr Maurice Sullivan of PMFNRE. The scheme involved Mr Orea manipulating the PNGHB to purchase 50 percent equity in The Tower Pty Ltd and for NPF to pay Mr Maurice Sullivan of PMFNRE a 5 percent (K2 million) Commission on the deal.

That commission would subsequently be laundered through the accounts of PMFNRE and Carter Newell lawyers and then divided between the conspirators and Mr Peter O’Neill (see Schedule 6). Mr Fabila, who placed his signature on some of the crucial documents, claims to have been duped by Mr Leahy but the Commission has found that he had some knowledge of serious improprieties occurring which he chose not to question or expose, probably in order to safeguard his job.


Messrs Maladina, Leahy, Orea, Sullivan and Fabila should be referred to the Commissioner for Police to consider whether charges of criminal conspiracy, attempted fraud or other offences should be brought against them.

The details of the fraudulent scam are further outlined in paragraphs 13.2, 13.3 & 13.4, showing how NPF Board approval was obtained to sell 50 percent of the equity in The Tower Pty Ltd for K40 million and how no mention was ever made to the Board of the K2 million commission for Mr Sullivan.

With the fraudulent scam in place it merely required the sale to the PNGHB to be completed. Here the conspirators struck trouble because the managing director of the PNGHB, Mr Robbie Kaivepa, and its legal officer, Mr Erastus Kambur, were men of integrity who realised it would be against the best interest of the PNGHB.

As part of the scam, Mr Orea (who stood to benefit personally) had already agreed to the purchase as Chairman of the Harbours Board, though he had no authority to do so. Mr Kaivepa rejected this as invalid and obtained legal advice that the PNGHB lacked the legal power to make the purchase. Three (3) Ministers wrote letters dated 22nd and 23rd March 1999, in identical terms, approving the sale (Ministers Lasaro, Pok and Auali).

These letters were intended to demonstrate that there was strong political support for the transaction. As PNGHB management remained firmly opposed to the deal, Mr Leahy wrote a letter on 10th June 1999 vaguely threatening future legal consequences.

The sale and the scam came to naught when at its meeting on 17th July 1999, the PNGHB accepted its
management’s firm and honestly reasoned recommendation to reject the proposition to acquire 50 percent of The Tower equity.


The bank approval for these variations was subject to proof of NPF Board approval and also of NPF’s power to borrow. This constituted a problem, firstly, because the NPF Board had not approved the variations, as Messrs Leahy and Fabila had acted without authority in accepting the increase in the facility and, secondly, because NPF did not possess the power to borrow.


The Commission’s findings clearly show the irregularities which had occurred in relation to this facility:

(a) The approval to sell a 50 percent equity in the NPF Tower, signed by Minister Lasaro dated 22nd March 1999, which was faxed by Carter Newell Lawyers to NPF on 1st April 1999, was drawn up by Carter Newell and backdated to 22nd March 1999.
(b) The approvals by Ministers Lasaro, Pok and Auali to sell to PNGHB, all dated 22nd March 1999,
were also drawn up by Carter Newell, for the purpose of applying pressure on the management and
members of the PNGHB to approve the purchase of 50 percent of the NPF Tower.
(c) Mr Leahy acted unprofessionally in drawing up a certificate recording a circular resolution of the NPF Board dated 26th March 1999 without indicating that it had not been ratified by the Board at a properly constituted meeting and that it was therefore not a valid Board resolution.
(d) Mr Fabila failed his fiduciary duty as a Trustee and his duty to the NPF Board by seeking an increase of K9 million in the PNGBC Tower FDL facility in excess of the amount approved by the NPF Board.
(e) The payment to Kumagai authorised by Mr Fabila on 31st March 1999, was part of a scam involving Messrs Leahy and Maladina to fraudulently obtain K2,505,000 for Mr Maladina’s benefit. On the face of the documents, Mr Fabila was also involved (See Schedule 6). Those involved should be referred to the Commissioner for Police to consider prosecution.
(f) The procedure of obtaining approval for multi million Kina transactions concerning The Tower and other matters by way of circular resolution to be ratified later at the 118th NPF Board meeting in April 1999, was an abuse of process for which management and the Trustees must bear responsibility.
(g) The responsibility for the scam involving the 5 percent (K2 million) commission to Mr Sullivan of PMFNRE lies with Messrs, Leahy, Maladina and Sullivan. On the face of the documents, Mr Fabila was also involved.
(h) Mr Fabila as managing director and Mr Maladina as chairman, knowingly withheld from the NPF Board that Mr Fabila had signed an agreement to pay Mr Sullivan of PMFNRE a 5 percent commission on the sale of the 50 percent interest in The Tower. This was a breach of fiduciary duty by Messrs Fabila and Maladina.
(i) The scam to defraud the NPF over the sale of the NPF Tower amounted to a criminal conspiracy and Messrs Leahy, Maladina, Fabila, Sullivan and Ms A. Sariman should be referred to the Commissioner of Police to consider bringing criminal charges.
(j) Messrs Leahy and Maladina and Ms Sariman should also be referred to the Law Society of PNG to consider disciplinary measures.
(k) The PNGBC was remiss in failing to follow up its inquiry in April 1999 about NPF’s power to borrow, especially as it had knowledge of a previous legal opinion that NPF had no such power.
(l) The NPF Board was in breach of S.61(2) of the PF(M) Act when management (Messrs Fabila and
Leahy) accepted the increase in the PNGBC (Tower) FDL without obtaining prior approval from the NPF Board and the Minister.


This was the first meeting at which the Board was given full details about the loan facility and the
PNGBC conditions attached to it. It showed also that the NPF management was still holding out hope that the sale of the 50 percent equity in The Tower to PNGHB would succeed. The minutes show that the Board had considered Kumagai’s proposal to extend the completion date to 30th June 1999 but had firmly rejected it. It instead insisted on completion by the agreed date being 30th May 1999 or it would seek liquidated damages for any overrun.


At meetings in May 1999, between PNGBC and NPF it was agreed that Mr Mitchell would continue negotiations with Mr Hersey of PNGBC. Negotiations seem to have gone well between May and October 1999.


Despite pressure from Mr Leahy on 10th June 1999, threatening legal consequences if the PNGHB withdrew from the transaction and despite a similar letter from Fiocco Posman Kua Lawyers, the PNGHB met on 17th July 1999 and finally and firmly rejected the proposal. This brought to a close Mr Maladina’s fraudulent scam to obtain the K2 million commission through Mr Sullivan of PMFNRE.

This outrageously excessive commission agreement had never been disclosed to the NPF Board. By contrast, when there was a later offer by another potential buyer to purchase The Tower for K69 million, the commission, which was to be only K775,000, was immediately disclosed to the NPF Board.


Prior to June 1999, management, under Mr Rod Mitchell, had begun providing fully informative briefings to the Board in monthly papers. As at 30th June 1999, the Board received a performance analysis on The Tower including debt servicing cost, valuation, current leasing and expected income, schedule of overheads and return on book value. Mr Mitchell recommended selling The Tower.

The brief included documentation of an offer from Finance Pacific to purchase NPF’s BSP shares and assume NPF’s debt to PNGBC for K60 million which was exactly equal to NPF’s debt to PNGBC on The Tower FDL. By 5th August 1999, NPF had accepted the offer as The Tower was then costing NPF K1 million per month and its sale was crucial to NPF’s debt reduction strategy.

In August and September, NPF pursued the Government to revalidate its guarantee for the Roadstock to enable it to be assigned to PNGBC and asked PNGBC to capitalise the K900,000 per month interest debt in the meantime.


At the 29th September NPF Board meeting, many serious complaints were aired about NPF affairs,
including matters related to the Waigani Land and NPF Tower frauds. These were followed up at the
October special Board meeting. Accusations were made against Mr Maladina and Mr Leahy.


By mid June 1999, although NPF was still in very difficult financial circumstances, with the unsold Tower still draining off interest payments at K1 million per month, the new management team, under Mr Mitchell, advised by Mr Paul Marshall of PwC, had brought financial procedures under control and were progressively reducing the burden of debt by a concerted effort to sell off assets. These strategies had been formulated and implemented in consultation with Mr Hersey of PNGBC.


It therefore came as a shock when Mr Rimbink Pato, the Executive Chairman of Finance Pacific, move to appoint an “Informal Administrator” to take control of NPF in order to protect the interests of PNGBC (a member of the Finance Pacific Group). The Finance Pacific Group was NPF’s major creditor with claims against most of NPF’s assets as security for The Tower FDL.

As part of a Skate Government restructuring of financial institutions, the PNGBC, MVIT, Agricultural Bank, National Investment Corporation and the Resources and Investment Finance Ltd were brought under the control of a newly created body, Finance Pacific Investments Ltd under the Executive Chairmanship of Mr Rimbink Pato.

Paragraph 17.1 describes how Mr Pato undermined the job tenure of the Finance Pacific Group General Manager, Mr Ken Bromley, in October 1999 and then appointed him as “Informal Administrator” of the NPF, claiming to be entitled to do so in order to protect the assets of NPF pledged as security for the K60 million owing to PNGBC on The Tower FDL facility.

Mr Pato clearly expected Mr Bromley to accept his directions to take control of NPF’s major assets on behalf of Finance Pacific, which controlled PNGBC. As an inducement (or possibly a veiled threat) it was pointed out to Mr Bromley that this appointment gave him an opportunity to demonstrate his higher managerial skills.

The report details the hard line adopted by Mr Pato and the pressure put on Mr Bromley to dismiss Mr Mitchell and oppose the appointment of PwC to “ensure an independent assessment of NPF’s viability over the coming six to twelve months” (paragraph 17.11). Early relationships between Mr Bromley and senior NPF management were strained and objection was taken to his presence at Board meetings. NPF quickly got legal advice, which confirmed that Mr Pato lacked the power to appoint Mr Bromley as Informal Administrator. However, largely because of the patient and understanding approach taken by Mr Bromley, NPF agreed to cooperate.

Luckily for NPF and its members, Mr Bromley was a man of integrity who formed a beneficial relationship with Messrs Mitchell and Marshall and adopted a patient “hands off” approach, as he saw that NPF was applying open, transparent procedures and following the rules of good corporate governance. It had also formulated and was conscientiously performing appropriate financial strategies, which were rapidly bringing NPF under proper financial control and reducing its burden of debt. Mr Bromley saw that those policies and strategies were working for the interests of both PNGBC and NPF’s members.

The fact that Mr Pato and his deputy Mr Hersey were not happy with this turn of events but wished to apply non-legal pressure on NPF management and NPF’s assets, indicated that they had a different and improper agenda.

Mr Bromley wrote four (4) reports to Mr Pato on the progress of NPF’s financial restructuring, the soundness of PNGBC’s security situation and the progress towards retiring the NPF debt to PNGBC.

They were all positive reports, which virtually precluded any possible attempt by Finance Pacific or PNGBC to deal with NPF’s assets.

Paragraph 17.18 of Schedule 2B, quotes an unused “draft” paragraph written by Mr Bromley that exposes the pressure, which was brought to bear on him by Finance Pacific and hints at hidden agendas.


(a) A concerted attempt by Finance Pacific to destabilise NPF by arranging for the dismissal of Mr Rod Mitchell was thwarted by the fact that Finance Pacific’s “Informal Administrator”, Mr Ken Bromley, was a man of integrity who realised that with appropriate encouragement and guidance, NPF’s new management and Board would bring NPF’s finances under control.
(b) NPF management under Mr Mitchell, assisted by Mr Paul Marshall of PwC, formulated sound financial strategies and obtained sound legal advice regarding the limit of Finance Pacific’s powers to take control of NPF’s assets.
(c) When Messrs Bromley, Mitchell and Marshall of PwC combined to ensure NPF was allowed time to implement its strategies, it was in the best legitimate interests of Finance Pacific as a concerned creditor and of NPF and its members. This combination of three men of integrity, armed with sound legal advice, brought Finance Pacific’s plans to a halt.
(d) The attempt by Mr Rimbink Pato of Finance Pacific to gain control over NPF’s assets, exceeded the legal powers of Finance Pacific and amounted to improper interference with the management of NPF. As Mr Pato was subject to the Leadership Code, his conduct should be referred to the Ombudsman Commission to consider his liability for breaches of the Leadership Code.


Finally, the report concludes by detailing the failure of PNGBC to follow up on knowledge it had (corporately) obtained by at least 14th August 1998, that there was competent legal opinion that NPF had no power to borrow, pledge assets or give guarantees.


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  1. August 31, 2015 at 12:01 pm

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