National Provident Fund Final Report [Part 85]
Below is the eighty-fifth and final 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 85th and final 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 Tender Procedures and Nepotism Continued
In paragraph 22.214.171.124, the commission has found that:
(a) The evidence before the commission clearly indicates that Mr Wanji’s conduct in his dealings with Laiks Printing, a company in which he was a shareholder, director and a cheque signatory, was improper. Mr Wanji stood to benefit from NPF, when he obtained quotes from Laiks Printing and recommended Laiks Printing to supply stationery and office supplies. This was not disclosed to the NPF by Mr Wanji;
(b) It is likely that moneys were paid to Laiks Printing well in excess of the fair value of goods and services provided by them
Warenam Office Supplies
There were 12 purchases from this company to a value of K80,982.26.
Mr Alopea, the proprietor and manager of Warenam Office Supplies, voluntarily provided details of 16 secret payments to Mr Wanji totalling K12,530 during the period May 3, 1999 to June 14, 2000.
However, in actual fact, Mr Wanji received only K11,280.
Due to a loss of records at Warenam Office Supplies, other payments to Mr Wanji prior to May 3, 1999 could not be ascertained. Mr Wanji has admitted, in his evidence to this commission that these payments were made to him, personally, by Warenam Office Supplies, before May 3, 1999.
At paragraph 126.96.36.199, the commission has found that:
(a) There was an agreement between Mr Wanji and Joe Alopea of Warenam Office Supplies that contracts would be awarded to Warenam in exchange for secret commissions paid by Warenam to Mr Wanji;
(b) On some occasions the secret commission was factored into the price paid by NPF;
(c) The relationship between Mr Alopea and Mr Wanji was criminal in nature. Mr Wanji received more than K11,280 from which he personally benefited. Mr Alopea and Mr Wanji should be referred to the Commissioner for Police for investigation.
Country-wide Business Supplies
The commission has found that Mr Wanji received commission from Christopher Enara of Country-wide Business Supplies.
The commission inquired into Cando Investment and Stephens Enterprises. The investigations showed Mr Wanji received corrupt commissions from these companies.
At paragraph 188.8.131.52, the commission found that:
(a) Given the weak internal control procedures, Mr Wanji used to decide, almost at will, how much to buy and from whom during the period covered. These weak controls resulted in Mr Wanji obtaining benefits from suppliers including the purchase of stationery and office supplies from his company, Laiks Printing;
(b) The benefits Mr Wanji received from the suppliers were in fact “bribes” or “commissions” and not loans;
(c) The commission considers that there is sufficient evidence of criminal offences of the nature of conspiracy to defraud. The commission recommends that Mr Wanji be referred to the Commissioner for Police for further investigation.
Funds obtained from NPF housing advances scheme Cando Investments
Mr Wanji applied for and received K2200 from the NPF Housing Advance Scheme for repair and maintenance work to his house, to be carried out by Cando Investment, which had quoted for the work. However, this money was not used for the said work on the house.
Mr Wanji claimed he engaged another contractor to do the quote, which was completely different from the quote used to obtain the money.
He then requested and benefited from the refund from Cando Investments.
At paragraph 184.108.40.206, this commission has found that:
Simon Wanji dishonestly obtained the payment of K2200 from Cando Investments for his own benefit. The money had been provided by NPF to Cando Investment for a different purpose.
A similar situation occurred with two other NPF officers, Max Noah and Kanora Aua, who requested money from the Housing Advances Scheme and used the money for other purposes than they stated in the request form.
At paragraph 13.8.5, this commission has found that:
(a) NPF advanced the funds for specific work to be carried out by Cando Investments. However, Mr Wanji, Mr Noah and Mr Ava obtained the funds from Cando Investments and either used the funds for a different purpose or arranged for the work to be carried out by a different contractor or both, which was contrary to the purpose for which NPF advanced these funds;
(b) Cando Investments appears to have been a facilitator of these arrangements, taking a 10 per cent commission. The funds should have been reimbursed to NPF but Cando Investments failed to do this and in repaying funds to the NPF member, enabled that person access to his funds not available to other members;
(c) The payments from NPF to Cando Investments may have been made on false representation. Cando Investments may have facilitated obtaining from NPF under this false representation and later paid those funds (less commission) to the NPF member;
(d) The commission considers that there is sufficient evidence of criminal conduct and recommends referral of the following persons to the Commissioner for Police for further investigation as to whether the offence of obtaining money by false pretence or by fraud or conspiracy to defraud has been committed. Simon Wanji, Max Noah, Kanaro Ava and Pere Enara of Cando Investments;
(e) The following matters should also be referred to the Police for investigation:
- Suspicious payments made by suppliers to Mr Wanji;
- Mr Wanji’s dealings with Laiks Printing and Bubia; and
- Mr Koae’s dealings with Bubia.
At paragraph 14, the commission concludes::
The commission’s investigations have shown that at the beginning of the period under review, there was some attention given to calling for tenders and seeking competitive quotations for procurement of some of the goods and services examined in this report.
As time went on, these frail attempts to comply with proper procedures lapsed and management increasingly ignored the concept of obtaining competitive quotations.
Management also ignored the need to keep the NPF board informed or seek its approval.
This gross laxity allowed the development of nepotism and criminal acts to defraud the NPF.
It is a very sad story for which NPF senior management is primarily to blame. The NPF trustees, however, had a fiduciary duty to ensure the fund was well managed and its finances were protected.
They failed this duty totally. The abuses were so noticeable that the trustees’ failure to notice and address it, constitutes a breach of their fiduciary duty to the members of the fund and may constitute a breach of the Leadership Code by all trustees who held office during the period under review. This matter should be referred for consideration by the Ombudsman.
Schedule 10 Exemptions:
On June 29, 1981, a general exemption was granted to all organisations which were engaged in:
(i) Agriculture industry organisations involved in production of crops or livestock;
(ii) Agriculture processing organisations (including veneer and plywood industries) who are involved in the first stage of processing of agriculture and livestock products, but excludes industries involved in the production and/or processing of fish and other forest products.
This exemption was continued by a series of extensions. On September 30, 1993, Sir Julius Chan exempted all coffee growing and processing establishments “until further notice”.
These general exemptions and extensions for these classes of establishments ignored the very different types of employees in the industries, which ranged from low paid casual rural workers to skilled managers and accountants. Under the exemptions all employees were precluded from joining and contributing to NPF.
Coffee Industry Corporation (CIC) proposes a superannuation scheme
This differentiation in types of employees was highlighted when CIC endeavoured to set up its own superannuation scheme for its skilled employees in January 1996.
The NPF board directed management to recommend that the Minister should lift the exemption in relation to the coffee industry so that appropriate employees could join NPF and so employer contributions could be enforced, but enforced fairly “noting the seasonal nature of the industry”.
Exemption lifted throughout coffee industry
Minister Haiveta lifted the exemption as it applied to all establishments in the coffee industry, without regard to the different classes of employees, leaving NPF to sort out with individual employers which employees would be covered.
This ad hoc decision-making was unsatisfactory and did not address the same problem, which applied to other exempted agricultural industries.
At paragraph 9.1.2, the commission found that:
(a) Because of the predominance of low paid seasonal rural workers and the low product prices, it was decided to grant relief to this sector by way of a general exemption to those organisations in the agriculture industry and processing. However, there were other employees who were employed by these agriculture establishments who were located and employed in urban areas and were receiving higher urban wages. When granting the exemption to the agriculture sector in 1993, this difference should have been taken into consideration so that those higher paid employees in urban areas are given the opportunity to contribute to the fund;
(b) When the exemption applying to the coffee industry was lifted in May 1996, the difference between permanent, urban, casual and rural employees was again not sufficiently addressed and the lifting of the exemption simply applied across the board to all establishments in the coffee sector. This led to ad hoc decision making and confusion in the application of the Act.
Specific Exemptions Already Granted
According to documents obtained from the Office of Legislative Counsel, the following establishments have been exempted by the managing director under Section 42 of the Act, as they had superannuation schemes at least as favourable as the NPF scheme and the Minister was satisfied the employees wished the exemption to be granted: Bougainville Copper Ltd exempted in 1984 and again in 1986.
Ok Tedi Mining Ltd was exempted in May 1991. From February 1994 until late 1997, the NPF board and management made half-hearted attempts to encourage the unions to lead the OTML employees into the NPF, as OTML management had expressed its willingness. It seems Mr Leahy, Mr Paska and Mr Leonard failed to follow through on this matter. Despite being exempted under Section 42 of the Act, OTML remained liable to report on its superannuation scheme as directed pursuant to Section 43. This was not followed up by NPF.
At paragraph 10.2.1, the commission found:
(a) The statutory instrument does not expressly exempt OTML from Section 43 of the Act; Management failed to advise OTML of this factor during their discussions;
(b) Trustee Leonard failed in his fiduciary duty to the board and NPF by not completing the task given to him by the board through a proper board resolution and his failure to advise the board on the progress or otherwise, about OTML staff move to join NPF.
(c) All trustees and NPF management failed in their duty to proactively pursue the possibility of engaging OTML employees in the NPF scheme.
(d) The exempted establishments remained bound by Section 43 to report to NPF as directed. NPF failed to follow through on this aspect.
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.