National Provident Fund Final Report [Part 83]
Below is the eighty-third 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 83rd 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].
Executive Summary Schedule 9 Continued
Ken Yapane & Associates
Ken Yapane & Associates were employed to refurbish an office on the ground floor of NPF’s Head Office. This work was not tendered and Ken Yapane was paid an exorbitant K40,000 contract sum in advance without any work being done on the office refurbishment. He paid half this amount back to Mr Maladina.
This same Ken Yapane was also involved in the NPF Tower fraud when Mr Maladina utilised Mr Yapane as a notional contractor and laundered money through his bank account to transfer money from Kumagai Gumi to Carter Newell’s office.
Mr Maladina paid Mr Yapane a generous commission for his service. The similarities between Mr Yapane’s role in the Tower fraud and this office refurbishment contract are compelling. In both cases, the payment from Mr Yapane to Mr Maladina was laundered through the Carter Newell John Losuia account then paid to Mr Maladinas company, Kuntila No. 35 Pty Ltd.
The commission has found that the advance payment to Mr Yapane of K40,000 for work he did not do was improper, that Mr Leahy was knowingly involved and that the ultimate beneficiary was Mr Maladina.
At paragraphs 9.3.5 and 9.6.1, the commission has found that:
(a) The advance payment to Mr Yapane & Associates was improper. Management, and more specifically, Mr Leahy should be held responsible as he was the one responsible for authorising this payment;
(b) Mr Leahy was responsible for fabricating the minutes of a fictitious NPF board resolution increasing his financial delegation to K50,000 in order to enable him to authorise the payment of K40,000 to Mr Yapane;
(c) Mr Leahy should be held accountable for improperly paying K40,000 to Mr Yapane because no work had been or was done;
(d) Management failed in their fiduciary duties to properly tender this job and obtain board approval for this expenditure;
(e) The fact that Mr Maladina demanded and received at least K20,000 of the fees paid to Mr Yapane is grossly improper;
(f) The evidence of criminal interest and association coupled with the evidence of similar conduct in the NPF Tower fraud involving the same persons strongly suggests that there was a criminal conspiracy to cheat and defraud the NPF involving Mr Maladina, Mr Leahy and Mr Yapane which was successfully implemented; and
(g) MR Maladina, Mr Leahy and Mr Yapane should be referred to the Commissioner of Police to consider whether criminal charges should be laid against them.
In September 1996, Hon. Chris Haiveta wrote to Mr Kaul and requested a donation towards the payment of sing-sing groups that were to perform at an NEC meeting in Vanimo.
Mr Haiveta has given evidence (Transcript p. 8477) that he asked NPF management if they could help.
He was not told that NPF was not able to help. He said (Transcript p. 8479) that at the time he requested NPF to help, NPF had previously given donations and sponsored other activities like golfing days.
Mr Kaul responded positively to this request.
At paragraph 9.7.1, the commission has found that:
(a) MR Haiveta’s request for K1600 was improper and he should be referred to the Ombudsman Commission to consider taking action for a breach of the Leadership Code;
(b) THE decision by Mr Kaul and Mr Wright to agree to the payment was a breach of their duty to the members of the fund and amounted also to improper conduct;
(c) AS Mr Kaul was subject to the Leadership Code, he also should be referred to the Ombudsman Commission.
Disposal Of Assets
During the period covered by this enquiry, NPF disposed of some office furniture and equipment through tenders restricted to NPF staff members and by “in-house” raffles to fund Christmas parties and the like. This action by management deprived members of the fund from realising maximum financial benefits from the sale of these assets.
In paragraph 10.3, the commission has found that:
The sale of NPF assets, such as the Kwila table and television and video deck, to staff without determining a reserve price for the items and without open tender, can lead to accusations of nepotism against NPF management. This method of disposal is also contrary to Government procedures on disposal of assets by organisations like NPF.
Procurement Of Computer Hardware And Software
It is relevant to note that the underlying data of members records were held in the Niugini Assets Management (NAM) operated system. At the February 18, 1993 board meeting, it was noted that NPF were in discussion with NAM to purchase NAM’s system. At the July 30, 1993 board meeting, the board resolved for management to explore other alternatives.
At the August 30, 1993 board meeting, the minutes show that management had negotiated a lease arrangement with McIntosh Securities in respect of computer hardware and software. Datec were appointed as advisers to NPF in late 1993, and undertook to review NPF’s software requirements. Datec recommended in their proposal, that following Datec’s development of the new software, NPF would be entitled to a 50 per cent interest in the proprietary rights, and that Datec would market the software to other clients.
At the June 29, 1995 board meeting, the minutes record that NPF had shifted over to the new computer system with effect from May 12, 1995. Datec recommended that NPF utilise an AS400 platform and that Datec would develop software tailored to NPF requirements. The suitability of this recommendation was not challenged by NPF.
Cost of computers
The decision to develop the company’s own software on the AS400 platform, came at a significant cost to NPF.
As at December 31, 1999, the following computer costs, including consumables, had been expended:
Software development costs between January 1, 1995 and December 31, 1999 were as follows:
Computer hardware 1995
From the authorised auditors files, NPF had the following computer hardware as at 1st January 1995.
According to the fixed assets register, NPF only acquired one computer and disposed of two computers in 1996. The disposed computers were fully written down in the books. The commission has been unable to determine what happened to these two computers.
The table below shows the status and value of computers held by NPF in 1997.
The table below shows computers purchased in 1997.
At paragraph 22.214.171.124, the commission has found that:
From the commission’s review of the pattern and manner in which NPF purchased computer equipment, we find that:
(a) The purchase of computer equipment was adhoc and did not comply with annual budgets or a specific IT plan;
(b) There is no evidence that NPF sought to negotiate better than normal prices with any supplier;
(c) From 1998 onwards, NPF purchased predominantly from Tanorama Limited and Datec, with no documented attempts to extract better prices from these suppliers; and
(d) Judging by the payment requisition records, the purchases from Tanorama Limited and Datec were made without reference to any comparison of prices from other suppliers.
There are imperfections in NPF’s accounting records for the 1998 and 1999 financial years because the fixed asset register does not reconcile with the general ledger.
The following computer items “disappeared” from the register without explanation.
- 1 Compliance Section PC;
- 3 IBM PC’s from MD’s office; and
- 1 UPS from operation.
With regard to the acquisition of other computers in 1997, NPF management obtained quotes from various suppliers before making a commitment to purchase the equipment.
There is no documentary evidence found by the commission that would suggest that NPF management or the trustees sought to establish a documented and formal purchase policy in respect of computer equipment.
The purchase of computer equipment, particularly at NPF where IT is a critical function, required careful scrutiny by management and the trustees, both in terms of enforcing an appropriate and proper functioning system, but also because of the high level of cost involved.
Computers purchased in 1998
Chq No 20953, 15-Sep, Datec (PNG) Ltd, K587,837.07(amount), K587,837.07 (capital), AS400 hardware, 9406-620-2175, approved by board, See ref 2, no other quotes attached;
Chq No 0952, 15-Sep, Tanorama Ltd K9301.67 (amount), K4789.50 (capital), two P166 multimedia packs for Ms Dopeke / J Sema, approved by Ms Dopeke, within delegation, no other quotes;
Chq No 20952, 15-Sep, Tanorama Ltd, K2220 (capital), one P166 mmx 15” monitor, approved by Ms Dopeke, within delegation and no other quotes;
Chq No 20952, 15-Sep, Tanorama Ltd, K695 9capital), HP Scan jet Desktop scanner, approved by Ms Dopeke, within delegation, no other quotes;
Chq No 20952, 15-Sep, Tanorama Ltd, K955.75, procurement plus set up, approved by Ms Dopeke, within delegation, no other quotes;
Chq No 20252, 27-May, Tanorama Ltd K21,060.86 (amount), 26,450.40 (capital), 12 P166MMX 16Mb RAM 2.5gb, 15”, approved by Mr Wright, see ref 1 below, no other quotes;
Chq No 20253, 28-May, Tanorama Ltd, K9146.40 (capital), four P166MMX 32Mb RAM 2.5gb, 15, no other quotes;
Chq No 20254, 29-May, Tanorama Ltd, K700.40 (capital), software, no other quotes;
Chq No 20255, 30-May-98, Tanorama Ltd, K1814.86 (capital), procurement charges, no other quotes;
Cheq No 20256, 31-May-98, Tanorama Ltd, K3840 (capital), set up costs, no other quotes;
Chq No 20256, 31-May-98, Tanorama Ltd, K169.65 (capital), sales tax, no other quote;
Chq No 19892, 27-Mar-98, Tanorama Ltd, 21,060.86 (amount), items detailed above, approved by Mr Wright, see ref 1 below, no other quotes
Chq No 19665, 26-Feb-98, Datec (PNG) Ltd K8667.56 (amount), K5065.54 (capital), two Datec Millennium internet and monitor, approved by Mr Wright, within delegation, no other quotes;
Chq No 2108, 24-Jun-98, Datec (PNG) Ltd, K64,129.97 (amount), K64,129.97 (capital), 10 per cent deposit on AS400 machine, approved by Mr Wright, see ref 2, no other quotes.
Purchase of AS400 machine
The purchase of the new AS400 computer hardware seems to have resulted from concerns about the “Year 2000 Bug” and the capacity and efficiency of NPF’s current computer system to cope beyond the year 2000.
Failure to seek analysis by an Independent expert
Quite glaringly, NPF did not seek independent advice about the AS400 machine. However, it is apparent that NPF relied on Datec’s recommendation. There is no evidence that NPF sought a second opinion on its proposal to purchase this AS400 machine from an independent computer consultant.
TO BE CONTINUED