Home > Corruption, Papua New Guinea > National Provident Fund Final Report [Part 65]

National Provident Fund Final Report [Part 65]

November 4, 2015 Leave a comment Go to comments

Below is the sixty-fifth 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 2002/3.

NPF Final Report

This is the 65th 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 Michae-Somare.

Executive Summary Schedule 6 Continued 

Findings 

Further investigations, described in sub paragraphs 12.4.11.1 to 12.4.11.31 enabled the commission to make findings item by item as reported in those sub paragraphs. The results of the examination of these items recorded in Ledger 18 between August and December 1999 are set out at paragraph 12.4.11.34 as follows.

Summary at December 31, 1999

(i) As reported above, the balance of funds on Ledger 18 as at October 1, 1999, was a debit of K341.61 and the only ongoing investment sourced from funds earlier credited to Ledger 18 was the K1.5 million face value in Treasury Bills;

(ii) Between October 1, 1999 and December 31, 1999, the only funds credited to Ledger 18 aggregated K47,500 and those funds were derived by journal transfer from two other Ledgers – K27,500 from Ledger 8 and K20,000 from Ledger 23. The transfer from Ledger 23 is only of incidental interest but that from Ledger 8 is of great relevance in tracing the proceeds of the NPF Tower fraud.

Most importantly both these journal transfers according to the PMFNRE cashbook, were “TRANSFER REF PON” clearly indicating Mr O’Neil-directed the transfers and had dominion over the funds;

(iii) As reported at paragraph 12.4.3, the total funds credited Ledger 8 were K55,000 of which was NPF Tower fraud money and the K32,000 of Aviat Club “Calcutta” money won by Mr Fabila aggregating K87,000.

Payments were made from Ledger 8 as follows:

npf 65 a

The residua-K27,500 was journal transferred to Ledger 18 on the same day the cheque was paid to Ferragamo Limited.

The K25,500 said to have been paid for Mr O’Neill’s outgoings plus the K27,500 transferred to Ledger 18 account for K52,000 of these funds which is K20,000 more than the “Calcutta” money. It follows that if the funds transferred to Ledger 18 were applied for Mr O’Neill’s benefit, then Mr O’Neil-must to the extent of that spending, have benefited from up to K20,000 of the NPF Tower fraud moneys as credited to Ledger 8. If, the whole of the K32,000.00 income and outgoings on the Aviat Club Calcutta is disregarded as it should be, then the limit of Mr O’Neill’s benefit would increase to a ceiling of K27,500

The commission finds that Peter O’Neil-benefited from K20,000 of the NPF Tower fraud money as credited to Ledger 8 and later transferred to Ledger 18. 

(iv) On the expenditure side, it is clear that in addition to the opening debit of K341.61 these funds were expended for the following purposes:

a) Payment to Mr O’Neill’s ANZ Bank Account: There was a single payment of K30,000;
b) Cash payments to Mr O’Neill: There were cash payments of K10,000 and K1000 for the late Lucas Senar’s funera-aggregating K11,000 made to Mr O’Neill;
c) Airfares: There were five payments of K402.60, K402, K402.60, K3,197.40 and K665.60 for the benefit of Mr O’Neil-and apparently at his expense for a Mr P. Wong and a person with the initials “PK” aggregating K5070.02;
d) Amex Card: There was a payment of K1000. for Mr O’Neill’s ANZ Bank Amex Card;
e) Miscellaneous: A miscellany of small payments were made to:

KPMG – accounting fees for South Super stores K425;
AC Fox & Associates searches K198;
October water and sewerage bills K247.67;
Mr O’Neill’s Cellnet phone K125.33;
Hitron to relocate Mr O’Neill’s cable TV K110;
Aviat Club Membership K275;
December water and sewerage bills K214.78;
Brian Bel-for gas K98.78; and
Port Moresby Locksmith K269.50.
Total: K1964.06

The only payments which cannot be seen to be for Mr O’Neill’s benefit or for the benefit of companies with which Mr O’Neil-is associated are the AC Fox search fees, the Aviat Club membership, Brian Bel- gas charges and the Port Moresby Locksmith charges. These account for K742.50 of the total K1904.06. Invoices could be obtained for these from the suppliers to indicate who initiated the payment and for whose benefit these were for;

(v) The total expenditure in the period was thus K49,034.26 as against receipts of K47,500 resulting in an overspending of K1534.26 which when added to the opening debit of K341.61 meant Ledger 18 had a debit balance of K1,875.87 as at December 31, 1999.

All of this expenditure of K49,034.26 between October 1, 1999 and December 31, 1999, was for Mr O’Neill’s benefit save the K742.50 referred to in (iv) above and there is every reason to believe that if the invoices are obtained that would also have been spent for Mr O’Neill’s benefit.

Put simply the clear appearance is that Ledger 18 was Mr O’Neill’s ledger; and.

(vi) As reported at (iii) above, Mr O’Neil-benefited to the extent of up to K20,000 from the NPF Tower fraud moneys transferred from Ledger 8 to Ledger 18.

We will return to what occurred in relation to Ledger 18 after December 31, 1999, later in this report.

Findings

(a) Ledger 18 was Mr O’Neill’s ledger;

(b) Mr O’Neil-received the benefit of K20,000 or K27,500 of NPF Tower fraud money transferred from Ledger 8 to Ledger 18.

Ledger 21 – K18,423 

As described in paragraph 12.4.12, it is likely that this ledger, which records only two transactions represents a payment of VAT of K808 which is of no relevance to the commission’s inquiries.

Ledger 23

As described in paragraph 12.4.13 the K20,000 transferred to this ledger is not related to the commissions terms of reference.

Ledger 25 

PMFNRE produced no documents regarding the two transactions on this ledger, which seem to be related to sales tax payable on the PMFNRE “commission” for the Investment Corporation sale of Ilimo Farm.

Ledger 24 

On October 29, 1999 a deposit of K2,421,824 was credited to Ledger 24 by PNGBC cheque for K2,321,824 and Mr Maladina’s company Ferragamo’s cheque for K100,000. Paragraph 12.4.15 traces the source and history of that deposit and shows that on October 29, 1999, PMFNRE sold three Treasury Bills as follows:

npf 65 b

The discounted price of K2,321,824 was paid to PMFNRE and credited to Ledger 24 as was the K100,000 from Ferragamo.

K1 million of the funds, which purchased these Treasury Bills consisted of Mr O’Neill’s own money. K1.5 million of the funds which purchased the other two Treasury Bills was sourced from a combination of:

K10,838.33 – Mr O’Neill’s housing allowance and his K390,000 payout; and
K485,453.34 – Mr Maladina’s Tower fraud money and the redeemed Nambawan Finance IBD (which also contained fraud money).

Clearly the funds credited to Ledger 24 contained a mixture of Mr O’Neill’s own funds and NPF Tower fraud funds including Mr Maladina’s proceeds from the frauds.

The reconstructed Ledger 24 is shown at paragraph 12.4.16 is as follows:

npf 65 c

Each item is examined in paragraph 12.4.16. To make sense of the transactions in Ledger 24, it helps to consider the acquisition of Resource and Investment Finance Ltd (RIFL) by Bluehaven No.67 Ltd which is detailed at paragraph 12.4.17.

Acquisition of RIF-by Bluehaven No.67 

By March 1999 PNGBC was the sole owner of RIF-and it was transferred to Finance Pacific on June 28, 1999, in consideration of K2,280,365.

The signatories to the share transfer included Mr O’Neil-for Finance Pacific. This was part of the corporatisation project and RIF-was now ready for sale to a private buyer. The purchaser was to be Bluehaven No.67 Ltd, which was held out as purchasing on behalf of Pacific Helicopters a company owned by Malcolm Smith Kela. In fact, Mr O’Neill held a substantial interest in Bluehaven No.67.

The other interested party was Jimmy Maladina (through Ferragamo Ltd).

Mr O’Neill gave evidence on – Transcript pp. 7903 – that he was dismissed as executive director of Finance Pacific, without notice on August 23, 1999. His signature appears on the contract of sale to Bluehaven No.67 dated August 24, signing on behalf of Finance Pacific, one day after his dismissal. In fact, the evidence is clear that the sale agreement document was not even drafted unti-August 25, 1999. Mr O’Neill has failed to provide a satisfactory explanation for this clearly improper conduct. Even if he was still executive director of Finance Pacific when he signed the sale agreement (which seems impossible), why did he not disclose that he held a very substantial interest in the purchaser, Bluehaven No.67.

The evidence regarding the signing of the sale agreement and the interests represented by Bluehaven No.67 are fully detailed in paragraphs 12.4.17.2 and 12.4.17.3.

Quite clearly, great efforts were made to conceal the involvement of Mr O’Neil-for obvious reasons and to hold out that the sole purchaser (through Bluehaven No.67) was Pacific Helicopters.

At paragraph 12.4.17.4, it is shows that the deposit of K110,000 was paid by Carter Newel-and the balance of K2,794,342 was raised as follows:-

“(i) As reported in 12.4.15(b) and (c) above and 12.4.16 (c), the K2.5 million face value in Treasury Bills was sold by PMFNRE to PNGBC and the sale proceeds of

K2,321,824 credited to Ledger 24;

(ii) As reported in 12.4.16(a) above, K250,000 was paid to PMFNRE by Pacific Helicopters and credited to Ledger 24;

(iii) As reported in 12.4.16(b) above Mr Maladina’s company Ferragamo Limited paid K100,000 to PMFNRE which was credited to Ledger 24;

(iv) The aggregate of payments received and banked by PMFNRE on October 28, 1999 (the Pacific Helicopters payment) and on October 29, 1999 (the Ferragamo and PNGBC payments) was, as we have already seen only K2,671,824 and it was al-credited to Ledger 14 as the first cashbook entries on 1st November 1999;

(v) The total funds of K2,671,824 was exactly K122,518 short of the K2,794,342 required;

(vi) PMFNRE, as we have earlier seen, was not averse to “borrowing” the funds in its No.2 Trust Account and making “loans” and had done so in the form of the unreimbursed “Adjustment” items and the two IBD’s of K600,0000 with PNGBC. RIF-as we have seen was a liquid “cash” company and could easily and quickly be cash stripped once acquired to return any funds made available by PMFNRE;

(vii) PMFNRE accordingly provided the difference from its trust funds and as the funds credited to Ledger 14 were insufficient to make the required payment of K2,794,342 – the PMFNRE cheque by which it was paid – PMFNRE cheque #382541 for K2,794,342 was kept wholly “off-book” and treated as an “Adjustment”.

(viii) As we have shown at 12.4.16(d) above, this PMFNRE cheque #382541 was used to purchase a PNGBC bank cheque #0536056 dated October 29, 1999, for K2,794,342 drawn in favour of ANZ Bank and which was banked at ANZ Treasury, Pacific Place, Port Moresby.

The “lure” which motivated the parties concerned to collect these funds together and purchase the shares in RIF-was that it was a cash rich company available for a very cheap price which could subsequently be stripped of its assets to repay the moneys contributed by Mr Smith Kela, Mr O’Neill and Mr Maladina who would then have acquired a licensed financial institution for virtually no cost.

The problem as pointed out in paragraph 12.4.17.5 was that section 63 of the Companies Act would make it very hard for them to get their money back. The price paid for the RIF-shares was represented by RIFL’s assets. If the purchase amounts were treated as a loan to RIF-which could be repaid there will have been an offence against Section 62 Companies Act. If it is treated as capital, then returning the purchase money would be reduction of the capita-of RIFL, which can only be done by acquiring shares or by redemption of shares in accordance with the Companies Act.

This question of the attempted return of funds used to purchase RIF-is considered in paragraph 12.4.17.6.

Findings 

At paragraph 12.4.17.7, the commission has found as follows:

PMFNRE Receipt No.706886 for K122,518 was for RIF-cheque #12104 repaying part of the purchase price of RIF-shares provided by PMFNRE.

At paragraph 12.4.17.8, the commission has found as follows:

(a) RIF-drew on its IBD asset and cash funds to return K122,518 to PMFNRE which was part of the funds provided by PMFNRE to enable Bluehaven No.67 Limited to purchase shares in RIFL;

(b) RIF-had further withdrawn another K500,000 from its IBD assets but for some reason, the payment of that sum to Remington Limited ( a company Mr O’Neill says he was buying) was aborted.

“Carryover” items 

The commission at paragraph 12.4.18 continued to study the items, which were “carried over” after December 31, 1999 into 2000 in order to further assess Mr O’Neill’s explanation. At paragraph 12.4.18, it studied carried over adjustment items, which had not been credited to any numbered ledger and some items in numbered ledgers.

PMFNRE No.2 Trust Account to May 2000 

At paragraph 12.4.19 the commission examined the No.2 Trust account to May 2000 in order to:

  • trace further dealings with the Tower fraud money (much of which was used for the purchase of RIF-by Bluehaven No.67);
  • Locate Mr O’Neill’s own funds; and
  • Ascertain what parts of the RIF-purchase money were returned to PMFNRE.

Twenty six “off book adjustments” transactions were examined, numbered (a) to (z) as follows:

(a) Cheque # 26785 – K5000 – December 21, 1999,
(b) Cheque #36699 – K2000 – January 7, 2000;
(c) Credit – K7000 – January 7, 2000;
(d) Cheque #26786 – K500,000 – December 21, 1999,
(e) Credit – K500,000 – January 5, 2000;
(f) Cheque #36701 – K10,000 – January 10, 2000;
(g) Cheque #26766 – K250,000 – December 7, 1999;
(h) Cheque #36706 – K500,000 – January 13, 2000;
(i) Credit K750,000 – January 28, 2000;

TO BE CONTINUED

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  1. November 5, 2015 at 12:01 pm

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