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National Provident Fund Final Report [Part 83]

November 26, 2015 1 comment

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.

Findings

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.

NEC Secretariat

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.

Findings

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.

Findings

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:

npf 83 c

Software development costs between January 1, 1995 and December 31, 1999 were as follows:

npf 83 d
At no point did NPF management seek board or Ministerial approval for the extra expenditure, other than obtaining original approval to utilise K219,000 for the first phase of this project.

Computer hardware 1995

From the authorised auditors files, NPF had the following computer hardware as at 1st January 1995.

npf 83 a

1996

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.

1997

The table below shows the status and value of computers held by NPF in 1997.

npf 83 b

The table below shows computers purchased in 1997.

npf 83 e
Findings

At paragraph 12.4.1.1, 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.

1998

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.
Total: K707,814.54

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

National Provident Fund Final Report [Part 80]

November 23, 2015 Leave a comment

Below is the eightieth 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 80th 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

1999

Outsourced legal fees for 1999 are reported in paragraph 6.4.7.

The state of the NPF records makes it difficult to separate fees for general work from investment related legal work so they are considered together.

The total comes to K442,648.12 plus $A871.90 paid to 11 different firms.

The massive amount of K202,023.46 went to Carter Newell (and an extra K17,602.58 described at paragraph 6.4.8).

Maladinas Lawyers was paid K17,653.50 for work which should have been handled “in-house”, including K5000 for fees relating to the Employers Federation challenge to Mr Maladina’s appointment, which should not have been paid by NPF at all.

Both large and small matters were briefed to Carter Newell in 1999.

Findings

(a) Substantial fees were again paid to offshore legal firms in relation to the $A bond (Allen Allen & Helmsley) and the Cue Energy Resources situation (Freehill Hollingdale & Page) on the basis of their complexity and the need for specialised legal expertise;

(b) Fees paid domestically for board restructure advice (from Allens Arthur Robinson) and some of the work referred to Maladinas, Fiocco Posman & Kua and Carter Newell, were properly outsourced because of the complexity and the need for specialised legal expertise;

(c) There is insufficient detailed evidence to enable the commission to comment on matters referred to other firms;

(d) There is a discernable trend whereby more work was referred out to external lawyers, which should have been capably handled by NPF’s “in-house” lawyers; and

(e) The level of fees suggests that matters of lesser significance were also referred to Pattersons, Henaos and Young & Williams.

The commission summarises the evolving situation regarding outsourcing legal frees at paragraph 6.5.

Summary

In the period under consideration, external legal fees paid by NPF for work outsourced grew in the period under review as follows:

npf 80 a

To a very large extent, the massive increases in 1998 and 1999 reflected the need to obtain expert and specialised advice in relation to legal transactions in which NPF became involved.

It is equally apparent that there was an increasing trend to brief out to external lawyers matters, which should have been within the competence of NPF’s “in-house” legal staff. This was reflected in the legal fees paid in 1998 and 1999.

The clear major beneficiary of that trend was Carter Newell Lawyers and, to a lesser extent, Fiocco Posman & Kua and an even lesser extent, Maladinas.

At paragraph 6.4.8.12, we said there may have been further legal fees paid to Blake Dawson Waldron and Carter Newell after August 31, 1999 and that this might explain the difference of about K21,000 in fees referred to on that page.

Additional payments

From NPF’s cheque payment records, the commission further extracted the following payments, which were made after August 31, 1999, and not included in earlier material.

Gadens Lawyers  (Adding to paragraph 6.4.8.1 and Transcript p.7589)

A payment of a further K2342.95 was made on December 21, 1999 for advice for Ambusa on its copra oil purchase and sales agreement and operations management contract.

Blake Dawson Waldron (Adding to paragraph 6.4.8.6 & Transcript p.7592)

Two further payments were made:

(a) on November 8, 1999, for K9995.56 for advice as to a dispute with Boroko Motors; Pacific Finance Superannuation Fund; debt restructure and a review of Garry Jewiss’ contract with Crocodile Catering;

(b) on December 6, 1999, for K26,743.77 payable to Blake Dawson Waldron Melbourne Australia office, for advice on the sale of shares in Cue Energy Resources.

Carter Newell (Adding to paragraph 6.4.8.7 and Transcript p. 7595)

Three further payments were made:

(a) on November 8, 1999, for K6048.04 for advice as to exemptions under Part VII of the NPF Act and for Mr Mitchel’s employment contract;

(b) on December 2, 1999, for K4087.79 for advice on NPF’s Investment Portfolio involving Deutsche Morgan Grenfell; and

(c) on December 21, 1999, for K7466.75 for advice and work done on the sale of shares to NPF in Kundu Catering; general matters on NPF Tower leasing and a claim by Cue Energy Resources.

The supporting vouchers and invoices are Part M of CD1226. The aggregate of these further payments was K56,648.56 and results in the difference of K21,000 becoming an excess of K25,000.

The commission’s accounting advisors have stated that this difference is probably explained by the manner in which NPF has treated the VAT component in the payments made.

Investigations

In late 1999, the finance inspectors and then the NPF board itself, carried out inquiries into irregularities concerning Mr Maladina and Mr Leahy which included questions about their conflict of interest in briefing legal work to Carter Newell, in which firm Mr Maladina was a partner and Mr Leahy’s wife, Angelina Sariman, was employed.

Although their clear conflict of interest was raised with them, Mr Maladina and Mr Leahy vigorously denied any conflict. Failure to put legal outsourcing out to tender was not, however, raised by the inspectors.

As reported in paragraph 6.6.3, NPF started to brief Carter Newell only after Ms Sariman commenced work with that firm. She was recorded as the work author for 46 of the first 50 new files Carter Newell opened for NPF.

A calling for tenders for legal work was belatedly raised in October 1999 by Mr Giregire and an advertisement was placed in the newspapers.

Findings

(a) Mr Leahy’s conflict of interest regarding outsourcing legal services to Carter Newell is clear. When Mr Leahy briefed out work to this firm where his wife was employed as a lawyer. This amounted to nepotism.

(b) When Mr Maladina became chairman of the NPF Board of Trustees, a further conflict of interest clearly arose, as he was also a partner in Carter Newell;

(c) When Mr Leahy referred legal work to Carter Newell, of which the chairman, Mr Maladina, was a managing partner, it was clearly nepotism. This was also improper conduct by Mr Leahy and a breach of his common law duty to the NPF board;

(d) Mr Maladina never declared his conflict of interest to the board of trustees. This amounted to improper conduct and a breach of his fiduciary duties to the members of the fund;

(e) Mr Maladina, as an equity partner in Carter Newell, benefited from legal work being referred by Mr Leahy to Carter Newell;

(f) Mr Leahy benefited by having his wife employed and continuing to be employed for reward by that firm;

(g) Paying overseas law firms through NPF’s account with Wilson HTM Brisbane, breached the BPNG Foreign Currency Exchange Act and was therefore illegal; and

(h) Management breached normal government tender procedures by not going out to public tender for the provision of legal services.

Procurement Of Security Services Pre-1995

The commission’s terms of reference requires it to examine the procurement of security services for the period commencing January 1, 1995 until December 31, 1999. To understand the situation at the beginning of 1995, however, it is necessary to look briefly at earlier events.

Awarding and terminating NPF’s contract with Kress Securities

On October 7, 1993, Mr Kaviagu, the NPF financial controller, awarded a contract to Kress Security Services beyond the scope of his delegated authority and without following proper tender procedures and evaluation. On December 8, 1993, Mr Kaul issued a memorandum directing that tenders for security services must be submitted to him, with recommendations, for his approval.

On December 21, 1993, Mr Kaul declared the Kress contract to be null and void and put the contract out for be re-tender. Kress refused to tender but sued NPF for breach of contract instead. This matter was eventually settled out of court, with NPF awarding a 12-month contract to Kress, (plus K4000 damages in March 1994), for all NPF’s investment properties except head office. NPF also paid K4000 to Kress in damages.

1995

Thus, at the commencement of the period under review, on January 1, 1995, there were two security firms contracted to NPF.

  • Moresby Guards — head office; and
  • Kress — all other properties.

The contracts were to expire in March 1995 and tenders were called from a list of firms. The only tender received for the head office was from Moresby Guards. Kress was the lowest of five tenderers for the other properties.

At the NPF board meeting on April 27, 1995, Kress was awarded the contract for all properties, including head office, at a cost per guard of K14,892 per annum.

Findings

(a) The only security contract let in 1995 was to Kress Security for all NPF properties. Tenders were called and Kress Security was the lowest tenderer. Only one tender was received for NPF head office security and no competitive bids were sought, even from Kress Security. There was non-conformity with prescribed tender procedures but it seems clear that the rate offered by Kress Security was the lowest;

(b) The NPF Board of Trustees was clearly informed and involved and itself made the decision to contract Kress Security.

1996

Kress Security was the only security provider for all NPF’s properties throughout 1996, however, Mr Kaul became dissatisfied with Kress’ performance at the head office.

On July 29, 1996, Mr Kaul received a letter from a firm called Metro Security Services Pty Ltd with a proposal to provide security at a cheap rate of K1.70 per hour. Without performing any due diligence, Mr Kaul then recommended to the NPF board that Metro Security replace Kress at head office. At the 103rd board meeting, on October 10, 1996, the Board resolved:

“to replace the current security service with another security service organisation to be decided on by the management”.

This was a full delegation of its role in this matter to management.

On October 25, 1996, Mr Kaul gave Kress three months notice, terminating its head office contract from January 26, 1997. He expressly assured Kress it would continue to provide security for NPF’s other properties.

The commission has examined records of the payments to Kress throughout 1996 and finds that they were in order. The details are set out at paragraphs 7.4.3.1 and 7.8.3.2.

Findings

(a) The amounts paid to Kress Security for head office security services in 1996 was K29,142.80. This compares to the figure shown in the 1995 Income and Expenditure Statement and the same figure for the comparables in the like statement for 1997;

(b) The amount shown by Century 21 statements for rental property security in 1996 was K148,226.41 as against K149,491 shown in the Income and Expenditure statements. Again, the minor differences are probably explained by the fact the commission’s figures are on a cash basis and those in the Income and Expenditure statements were probably made on an accruals basis; and

(c) No new security contract was actually let in 1996, but after being fully informed the NPF board delegated the decision to management.

1997

Contract with Metro

Mr Kaul awarded the head office contract to Metro on November 19, 1996, to commence on January 26, 1997. Mr Frank then wrongly drafted the contract to also include five other NPF properties over which the Kress contract was still in force. This resulted in double security for some weeks until Metro agreed to withdraw from the extra properties on payment by NPF of K4694.75 compensation.

The commission’s research into payments for security in 1997 is set out at paragraphs 7.5.4, 7.5.5, 7.5.6 and 7.5.7. There appear to be no anomalies except two unexplained payments totalling K11,800 to a company named Phantom Security Services Pty Ltd. No invoices exist for this alleged service. The documents show that Mr Leahy was involved in this matter.

Findings

(a) Tender procedures and requirements were totally ignored by NPF management in the letting of security services in 1997;

(b) The amounts paid for head office security in 1997 were K5395.80 to Kress Security and K35,770.95 to Metro Security aggregating K41,166.75. This compares to the figure shown in the 1997 Income and Expenditure statement of K38,593 and the same comparable figure in the like statement for 1998;

(c) The amounts paid for other security services were Kress Security K11,372.40 (for Nine-Mile) and Phantom Security K11,800 for the Kaubebe St property plus the amount shown in the Century 21 statements for rental property security in 1997 of K150,112.80 aggregating in all K169,435.20. This matches the figure shown in the 1997 Income and Expenditure statement of K169,435 and the same comparable figure in the like statement for 1998;

(d) The only changes which took place in the area of continuous security work in 1997 were:

(i) Metro Securities replacing Kress Security as the provider of security at the NPF head office; and

(ii) Kress Security being given additional security work at Nine- Mile housing project.

(e) No tenders were called in 1997 to provide security and there was no competitive bidding obtained for either of the changes in (c) above; and

(f) There was no competitive bidding for the “one-off” job of “Eviction/Demolition” for which Phantom Security was paid.

1998

This was a stable year in security services. Metro continued to provide security services for the head office throughout 1998 for a total fee of K51,246 and the payments disclose no anomalies.

Security services for all other NPF properties were provided by Kress. Kress received the sum of K145,702 through Century 21 for providing this service.

Findings

(a) The amount paid to Metro Security for NPF head office security in 1998 was K31,905.60. This matches the actual figure of K31,906 shown in the 1998 Income and Expenditure statement but not the comparative figure of K33,361 shown in the statement for 1999. The probable reason is that the latter figure for the second half of December 1998 was probably included even though it was paid in 1999; and

(b) The amount paid to Kress Security for all other security services in 1998 was K145,702.

1999

As previously discussed in paragraphs 3.4.1 – 3.4.5, 1999 was the year when NPF property management services were totally restructured with the termination of Century 21’s long standing exclusive management contract.

This was replaced by the awarding of contracts to Gemini and Haka and the lucrative NPF Tower contract to PMFNRE.

This process was marked by Mr Leahy’s interference in the competitive tendering process, which Mr Fabila accepted and facilitated.

1999 was also the year when Mr Maladina was appointed chairman of NPF at the instigation of the then Prime Minister Hon Bill Skate and it was the year when Mr Maladina and Mr Leahy pursued fraudulent schemes against the NPF with the knowledge and acceptance of Mr Fabila.

These same lawless tendencies also characterised the arrangements for security services in 1999.

TO BE CONTINUED

National Provident Fund Final Report [Part 79]

November 20, 2015 1 comment

Below is the seventy-ninth 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 79th 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

Property mentioned at the 99th NPF Board meeting

The property was mentioned at item 5.10 of the minutes of the 99th NPF Board meeting on 23rd February 1996 but not in relation to the proposed sale to Mr Paska, which was consequently not discussed at Board level.

Mr Paska contracts to buy

Mr Leahy prepared a contract of sale and forwarded it to Mr Paska who signed the contract and returned it to the NPF Managing Director, Mr Kaul, on 6th December 1996, saying he had rented the property to tenants and that all rent collected would be remitted to NPF. He said that he was anticipating final settlement 2 weeks from the date of his letter.

Mr Paska makes part payment and seeks Ombudsman Commission approval

There was some delay while Mr Paska sought to obtain a bank loan but, meanwhile, he paid K24,000 to NPF on 10th July 1997 as a deposit on the purchase.

On the same day, he wrote to the Ombudsman Commission seeking approval to buy the property. He stated that the NPF Board had “approved consideration of my interest in acquiring the property”. He also said he had obtained legal advice that there was no conflict of interest. Mr Paska did not advise the Ombudsman Commission that he had already signed the contract of sale and been receiving rent on the property since December 1996 and that he had paid K24,000 towards the purchase price.

Mr Leahy communicates with Ombudsman Commission

On 11th July 1997, Mr Leahy wrote to the Ombudsman Commission in support of Mr Paska, saying that following his expression of interest, Mr Paska had been asked to make an offer to the Board and that he had offered K96,000. Mr Leahy falsely said that this offer had been approved by the Board in Mr Paska’s absence. At this stage, the Board had not considered Mr Paska’s offer.

During early August, the Ombudsman Commission sought details from Mr Leahy of the Board resolution approving the sale to Mr Paska (These inquiries were followed up by a formal letter on 22nd August 1997). As there had not yet been such a resolution, Mr Leahy proceeded to manipulate the NPF Board in order to bring such a resolution into existence.

Mr Leahy manipulates NPF Board to retrospectively create a resolution approving the sale to Mr Paska

The NPF Board held its 108th meeting in Kavieng on 22nd August 1997, and it seems as though a late item was introduced, orally, as there was no mention of it in the pre-prepared management papers. The item sought to amend the minutes of the 99th Board meeting held some 18 months earlier on 23rd February 1996. This meant that Item 5.10 of the earlier minutes was replaced with a new item 5.10 that purported to describe how Century 21 had been listing the property for K110,000, that there were interested buyers but “the sale price appeared to be beyond market valuation”, that an offer of K96,000 to purchase from Mr Paska was tabled and discussed by the Trustees to ensure it was fair market value and that it was resolved to accept Mr Paska’s offer (Century 21 later refused to confirm its alleged role as stated in the amended minute).

It is recorded that the Board resolved at the 108th meeting to approve the amendment to item 5.10 of the minutes of the 99th meeting and that Mr Paska was not present during the 108th meeting.

Mr Leahy provides misleading statement to the Ombudsman Commission

In answer to the Ombudsman’s letter of 22nd August 1997, Mr Leahy replied on 23rd September 1997, enclosing a signed extract of item 5.10 of the minutes of the 99th NPF Board meeting held on 23rd February 1996. The extract was certified by Mr Leahy on 23rd September 1997, as if it were an item recorded at the 99th meeting on 23rd February 1996.

The item so certified, was the amended item, which had been resolved on the 27th August 1997, at the 108th Board meeting.

Quite clearly, this was a false representation deliberately designed by Mr Leahy to deceive the Ombudsman Commission. Mr Leahy’s conduct was unprofessional. This Commission has recommended that he be referred to the President of the Papua New Guinea Law Society and the Ombudsman Commission for further investigation.

Mr Paska withdraws offer to purchase and PNGTUC becomes the purchaser

Despite these false representations designed to encourage the Ombudsman to approve the sale to Mr Paska, the Ombudsman Commission still delayed its ruling. Mr Paska then withdrew his offer to purchase the property at the 110th meeting on 11th December 1997. He requested that the sale be made to the PNGTUC instead for K96,000. Mr Paska, who is the General Secretary of the PNGTUC, was present at that meeting and did not declare his conflict of interest.

Delay in executing contract

PNGTUC paid a deposit of K9,600 in February 1998 and remained in possession of the property receiving rent for it. Despite considerable correspondence between NPF and PNGTUC and exchange of documents, the contract was not finally executed until 6th November 1998. This was an extraordinary long delay, considering that the PNGTUC had already been allowed to take possession (which was highly irregular) and was receiving rent for the property.

The settlement of this transaction was continually postponed as the PNGTUC experienced difficulty securing the required financing. Meanwhile, however, the rent received accumulated and they enjoyed the benefit of it.

On 18th September 2000, NPF’s new legal counsel, Mr Kamburi, issued a “Notice to Complete Settlement” to PNGTUC. On 11th October 2000, PNGTUC responded that K61,950 had been collected in rent, that K4,000 had been spent on improvements and K52,000 was held in trust. PNGTUC (unsuccessfully) sought a rent sharing agreement with NPF.

The sale was finally settled on 20th October 2000 and PNGTUC paid the full balance of the K96,000 purchase price. There had been no independent valuation of the property and the 1995 proposed purchase price of K96,000 had not been reassessed during the 5 years to the settlement date.

Reluctant payment of rent by PNGTUC

On 10th January 2001, after NPF had instituted legal proceedings, PNGTUC paid NPF K50,000 of the rentals they had previously collected. The letter enclosing the bank cheque for that partial rent payment concluded:-

“the balance will most probably be in the vicinity of K10,000 – K15,000 … Hopefully this amount will be settled sooner rather than later”.

Findings

(a) The disposal of Allotment 13 Section 73 Korobosea failed to comply with Government tender procedures. The Board and management staff may be held responsible by members of the Fund for any loss incurred in the sale of this property.

(b) No valuation of the property was made to determine the commercial value of the property.

(c) The sale of this property to PNGTUC and the conduct of NPF management in their handling of this sale in the face of Mr Paska’s conflict of interest was nepotistic and improper.

(d) Although Mr Paska had previously declared his conflict of interest as a Trustee and contracted purchaser, he was also General Secretary of the PNGTUC but did not abstain from discussing on the sale of this property to PNGTUC and was therefore in a conflict of interest situation.

(e) The long delay in completing the conveyancing enabled PNGTUC to rent the premises and receive K61,000. NPF instituted legal proceedings against PNGTUC. In January 2001, PNGTUC still owed between K10,000 – K15,000 to NPF.

(f) Mr Leahy engineered the approval by a new Board resolution on 22nd August 1997, which created a substitute minute of the meeting of 23rd February 1996 intending to mislead the Ombudsman Commission. He should be referred to the PNG Law Society to consider whether disciplinary measures should be imposed upon him.

(g) The Ombudsman Commission should be notified about the events leading up to the amended Board minute, which was created specifically to mislead the Ombudsman Commission. They should be asked to consider whether an offence has been committed and / or whether there is a gap in the legislation, which may require legislative amendment.

Concluding comments

Mr Paska’s initial expression of interest to purchase the property was done openly and he disclosed his conflict of interest in a frank and refreshing manner. Based on his own evidence to the Commission and on the evidence of contemporaneous documents produced, he was acting honestly and transparently, though he was clearly not aware of the law of Trusts.

At that stage, Mr Leahy should have pointed out that it would be inappropriate for Mr Paska as a Trustee to buy any portion of the Trust property and it would amount to a breach of fiduciary duty by Mr Paska and a breach of duty by management to sell it to him.

In any event, it would have been particularly necessary, in these circumstances, to get an independent valuation and to advertise for tenders. Instead, Mr Leahy struck a purchase price based on the land and construction costs and prepared contract documents, without doing either and without referring the matter to the Board. Mr Paska was allowed into possession before executing the contract documents, well before settlement took place. He then rented out the property taking the benefit of the rent for himself. It would have been a simple and inexpensive procedure to have placed an advertisement calling for tenders at that time, but that was not done.

Mr Paska’s disclosure to the Ombudsman was not complete and Mr Leahy’s manipulation of the NPF Board to be able to provide the Ombudsman Commission with a “manufactured” resolution apparently approved 18 months earlier in February 1996, was improper.

When Mr Paska withdrew from the purchase in December 1997 and “handed it on” to the PNGTUC as purchaser, he ignored the fact that he remained in a position of conflict as a Trustee of NPF (the vendor) and general secretary of the PNGTUC (the new purchaser).

The fact that the NPF management and Trustees allowed the completion of the settlement to drag on until 20th October 2000, with rent of K61,000 accumulating in PNGTUC’s hands, was a very serious beach of common law and fiduciary duty to the members of the Fund. That this neglect of duty was occurring in favour of Trustee Paska, initially as purchaser and then as secretary general of the substituted purchaser, was nepotistic and improper conduct.

PROCUREMENT OF LEGAL SERVICES

The Commission makes a detailed analysis of NPF’s “in-house” legal service capacity from January 1995 through to December 1999, noting that there were always two full time “in-house” lawyers and sometimes three. Having studied the individual experience and capabilities of the “in-house” lawyers employed during the period, the Commission concludes that throughout this entire period, NPF had the capacity to carry out all routine PNG domestic legal work, “in-house”. There was, however, always the need to brief out work of more complexity or involving specialist skills or international connections.

NPF had no system or practice of monitoring the legal work briefed out to external lawyers or of calling for tenders. It was simply left to Mr Leahy’s discretion.

Outsourced legal services during 1995 & 1996

The study each matter outsourced to each firm, year by year.

For 1995 and 1996, outsourcing was modest and justifiable, considering the nature of the matters outsourced.

1997

Analyses outsourcing of general matters and investment related matters. Outsourcing of general matters was very modest and mostly, appropriate.

Findings

The Commission has found:-

(a) The general pattern for legal fees in 1997 was to outsource complex matters or those matters requiring specialised legal expertise.

(b) Goroka matters were briefed out to Pryke & Co.

(c) Fees paid to Warner Shand and for a ‘lost certificate’ to Carter Newell, should have been handled “in house”.

Investment related matters in 1997 are reported upon in paragraphs 6.4.4 to 6.4.4.4, which analyse the fees paid to each firm involved. By far, the greatest fees were paid to Carter Newell. However further study showed that K38,376.12 of these fees were for services provided by Carter Newell for the ANZ Bank regarding loans to NPF. The Bank billed these fees to NPF in the normal course of banking business.

It is notable, however, that the first record of NPF itself briefing Carter Newell, occurs soon after Mr Leahy’s wife commenced working for Carter Newell, after their return from Mr Leahy’s study leave in July 1997.

Findings

(a) The general pattern regarding investment related fees in 1997, was to outsource complex matters or those requiring specialized legal expertise, coupled with the “briefing out” of the conveyancing settlement in Lae.

(b) The Bomana conveyancing matter, the Gordons lease and the insurance policy documentation could have been done in-house.

(c) The Commi-ssion cannot explain why the accounts show an expenditure on outsourced legal services of only K61,483 when the voucher evidence clearly shows that an expenditure of K68,646 actually occurred.

1998

The general fees for 1998 are reported in paragraph 6.4.5.1 through to 6.4.5.3. After commenting upon figures which had been wrongly recorded, the only matter of significance is the sizeable sum of K27,389.84 paid to Carter Newell for which NPF was not able to supply vouchers.

Findings

(a) After deducting disbursement and similar fees NPF’s total expenditure on outsourced general legal fees in 1998 was K29,705.34.

(b) By far, the greatest fees were paid to Carter Newell (K27,389.84) for a mixture of specified and unspecified matters. As the vouchers were not available, the Commission is unable to determine whether the fees paid to Carter Newell were for complex matters or matters requiring specialized legal skills. Evidence from other sources indicates that at least some of these matters should have been done by NPF’s in-house lawyers.

(c) The outsourcing to Fiocco Posman and Kua and to Pryke & Co. were in order.

The investment related outsourced legal fees for 1998 are reported in paragraphs 6.4.6 to 6.4.6.8, firm by firm. After wrongly recorded items were deducted, they still totalled a massive K244,780 plus a further A$33,541.65 and US$24,183.39.

On a firm-by-firm basis, the aborted AUD Bond issue accounted for over K72,000 of the Kina fees and another heavy expenditure concerned Crocodile Catering (Some of this was sourced from funds held offshore with Wilson HTM).

A large part of the K27,389.84 briefed out to Carter Newell was capable of being handled “in-house”. Once again, NPF was unable to produce vouchers for matters briefed out to Carter Newell.

Findings

(a) A substantial part of these 1998 investment related legal fees paid both onshore (to Gadens Ridgeway and Allens Arthur Robinson) and offshore (to Clifford Chance, Corrs Chambers Westgarth and Troy & Gould) were related to the AUD Bond.

Some part of the fees paid onshore (to Carter Newell) and offshore (to Deacon Graham James) were related to the Maluk Bay venture.

(b) These referrals were clearly made on the basis that the matters were complex and required specialized legal expertise.

(c) There are also some instances of domestic referrals where, in our view, the work should have been able to be performed by NPF’s in house legal staff and should not have required reference to external lawyers.

TO BE CONTINUED

National Provident Fund Final Report [Part 68]

November 9, 2015 Leave a comment

Below is the sixty-eigth 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.

This conclusively showed that Mr O’Neill had definitely benefitted from the proceeds of the NPF Tower fraud.

NPF Final Report

This is the 68th 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 6 Continued 

(b) The K250,000 paid to Bank of Hawaii was for the benefit of South Super Stores Limited and both Peter O’Neill and Nathaniel Poiya received a direct benefit as this payment reduced their direct personal liability under their respective guarantees given to Imak International Limited;

(c) The K60,000 came from Carter Newell and was credited to this Ledger 18. The evidence of Mr Barker regarding that money was false and knowingly false. It is recommended that if Mr Barker ever returns to PNG he should be referred to the Commissioner for Police with a view to his being charged with perjury under the Commissions of Inquiry Act;

(d) The K60,000 paid into Ledger 18 from Carter Newell was part of the proceeds of the Waigani Land fraud. It was later combined with other moneys to enable Mr O’Neill’s children’s company LBJ Investments (see paragraph 12.4.20.9) to buy Remington Ltd from Baradeen Holdings.

Mr O’Neill’s rental income 

In attempting to explain the expenditure of apparently excessive sums for his personal benefit Mr O’Neill claimed they were funded from rental income on his properties, which had been paid into PMFNRE on his behalf. At paragraph 12.4.25, the commission reported upon the procedures whereby PMFNRE accounted by monthly rental statements to Mr O’Neill for rental receipts.

Accordingly, payments were not made out of rentals unless they are detailed in the monthly rental statements.

Free rent for Minister Zemming 

While investigating the rental payments, the commission discovered that rent was not charged for unit 105 Pacific View Apartments, which was occupied by Hon Mao Zemming, a Minister in the National Government. Mr O’Neill said Unit 403 was occupied by Mr Zemming’s first secretary Sam Basil and that Mr Basil’s company paid the rent for both apartments by one cheque.

Findings 

At paragraph 12.4.25.1, the commission has found:

(a) Mr O’Neill’s statement that the payments out for his benefit are balanced by rental receipts from his rental properties managed by PMFNRE is not true; and

(b) Mr Zemming was occupying Unit 105 owned by Mr O’Neill rent free.

Money from Niugini Aviation Consultants and links to Chelsea Ltd 

At paragraph 12.4.27 (12.4.21(f)), the commission revisited the Waigani land matters concerning money allegedly paid into Carter Newell Trust Account Niugini Aviation Consultants in Hong Kong. After the deposit was made large cheques were paid to PMFNRE, Biga Holdings and also a cheque for K333,200.00 for Chelsea Ltd.

A search of Chelsea Ltd shows probable links to Mr O’Neill (represented again by Jack Awela and other significant links).

Findings 

At paragraph 12.4.26.1, the commission has found:

(a) There are clear links between the money from Hong Kong and each of PMFNRE and Mr O’Neill; the company Chelsea Security Limited and M Basil and Wandi Yamuna and the company Biga Holdings Limited owned by Ms Iaraga Asi (Mr Pok’s current partner);

(b) There are also rental arrangement links between Mr O’Neill, Chelsea Security and Mr Sam Basil and Hon. Mao Zemming and the commission so finds.

The relationship between Mr O’Neill and PMFNRE

At paragraph 12.5.2, the commission lists the many links between Mr O’Neill and PMFNRE, the many benefits he received from that company and the controls he exercised over the accounts and funds held by PMFNRE. The commission points out at paragraph 12.5.2.3 that:

(a) Mr O’Neill used PMFNRE as his banker with massive numbers of transactions treated as “Adjustments” and many entries on numbered sales ledgers attributable to Mr O’Neill and persons and companies associated with him and the commission so finds;

(b) Mr O’Neill also received funds for his personal benefit from sales “commissions” said to be earned by PMFNRE on property sales and which there were efforts to conceal;

(c) Mr O’Neill also borrowed large sums of money from PMFNRE, which were treated as “Adjustments” and many of which were not reimbursed even as late as 31st May 2001; and

(d) Mr O’Neill made, requested or gave directions to PMFNRE on multiple occasions concerned not only with his own funds but with funds derived from the NPF Tower fraud (credited to PMFNRE Ledgers 8, 9 and 18) and with transactions derived from those funds – one sees so often “REF P.ON” or “REF PO” or similar expressions that it is perfectly plain Mr O’Neill had dominion over these funds and gave directions in relation to them.

At paragraph 12.5.2.4 the commission describes how Mr O’Neill gave detailed directions to PMFNRE’s accountants on accounting matters. At paragraph 12.5.2.5, the commission reports on Companies Office records which show Mr Awela as owning 90 per cent of the shares in PMFNRE. Granted the commission’s previous findings that Mr Awela is a nominee for Mr O’Neill in Mecca No.36 Ltd, and Nama Coffee Exports Ltd, it is quite clear that Mr O’Neill himself owns the 90 per cent of shares in PMFNRE attributed to Mr Awela.

There are many reasons why Mr O’Neill would want to conceal his interests in PMFNRE including:

1. First, it would avoid the need for disclosure to the Ombudsman Commission during the time Mr O’Neill was executive chairman of Finance Pacific Group and subject to the Leadership Code;

2. Second, it would avoid the need for disclosure during the same period to PNGBC, which was a lender to each of these companies;

3. Third, it would conceal the fact that Mr O’Neill would receive benefits from the work that was directed to PMFNRE from the various Commercial Statutory Authorities; and

4. Fourth, it would mask Mr O’Neill’s connection with moneys that were being laundered through PMFNRE and used for purposes such as the acquisition of RIFL and the purchase by Bethgold Pty Limited of the Kanimbla property from Mr and Mrs Reynolds.

Findings

At paragraph 12.5.2.6, the commission has found that the:

(a) evidence is overwhelming that the true owner of PMFNRE is and was Mr O’Neill and that Maurice Sullivan and Mr Barker acted in accordance with his instructions.

(b) The commission recommends that the Prime Minister refer Mr O’Neill to the Ombudsman Commission to consider whether Mr O’Neill’s concealment of his interests in Nama Coffee Exports Pty Ltd and Port Moresby First National Real Estate Pty Ltd constitutes a breach of his duty under the Leadership Code and the need to submit full and honest Leadership Returns.

Concluding comments on the second acceleration claim 

The investigation into the spurious second acceleration payment has clearly demonstrated that it involved a carefully planned fraud on the NPF, instigated and carried out by Jimmy Maladina, with the active involvement and support of Herman Leahy. Mr Leahy’s wife Ms Angelina Sariman played a supporting role as a principal offender.

Ken Yapane was also involved, at least as an accessory and receiver of fraudulently obtained money. The two managers of Kumagai Gumi were reluctant participants and are also principal offenders. Mr Fabila had knowledge of what was occurring. He failed to stop it and signed documents which helped to perpetrate the fraud.

The tracing of the NPF money, paid as six progress payments by Kumagai Gumi, plus the K150,000 personal commission for Mr Maladina shows quite clearly who the beneficiaries of most of the Tower fraud moneys were.

These included Mr Maladina and his wife and companies, Mr Leahy and his wife and companies and Mr Yapane.

Substantial amounts were paid into PMFNRE accounts and substantial parts of these moneys were paid for the benefit of Mr O’Neill.

This finding was vigorously denied by Mr O’Neill, who argued that although it appears on paper that payments for his benefit came from ledgers containing NPF Tower fraud money, he in fact had other moneys of his own in other PMFNRE accounts, which were the true and “innocent” source of moneys paid out to himself, his companies and his family company.

To assess Mr O’Neill’s claim, the commission made a thorough study of PMFNRE’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.

The Proposed Sale Of 50 Per Cent Of NPF Tower To PNG Harbours Board 

1. In paragraph 13 of Schedule 6, the commission describes the failed attempt by NPF to sell a 50 per cent ownership in NPF Tower to the Papua New Guinea Harbours Board (PNGHB) for K40 million.

The idea of selling off an interest in the uncompleted NPF Tower was a good one because it would enable NPF to pay off some of its K59 million debt to the PNGBC, the interest on which was a crippling burden to NPF.

The commission reports how a small group of conspirators plotted and manipulated events hoping to ensure that:

  • Maurice Sullivan of PMFNRE would be appointed NPF’s agent to arrange the sale but this was without the knowledge and approval of the NPF board;
  • NPF management would agree to pay 2.5 per cent commission to Mr Sullivan, which was then raised to 5 per cent, (K2 million) without the knowledge or approval of the NPF board;
  • Mr Sullivan would take advantage of the inexperience of the PNGHB chairman John Orea to obtain his signature to a contract of sale;
  • The board of the PNGHB would then approve the purchase of 50 per cent of the NPF Tower for K40 million with the responsibility to pay the K2 million commission to PMFNRE being shared between NPF and the PNGHB;

2. Fortunately, the management of the PNGHB, under managing director Bobby Kaivepa, resisted the political pressure and prepared an excellent brief to the members of the PNGHB pointing out that:

(a) PNGHB had no legal power to enter the agreement;

(b) the proposal was not financially viable; and

(c) PNGHB lacked the required funds and had no power to borrow for this purpose.

3. The sale to PNGHB was then dropped by NPF. Throughout the negotiations Mr Leahy and Mr Fabila had deliberately refrained from mentioning the unauthorised agency agreement entered into with PMFNRE and the 5 per cent commission, which had already been agreed by Mr Fabila and Mr Sullivan.

On the evidence, it is clear that this idea was being promoted in NPF mostly by Mr Maladina and Mr Leahy, with Mr Fabila’s support.

Mr Sullivan was obviously a principal in the conspiracy.

In relation to the attempted sale to the PNGHB, at the paragraphs in Schedule 6 referred to below, the commission has found that:

At paragraph 13.1.3: 

(a) Mr Leahy was not in direct discussion with Mr Emilio;

(b) Mr Leahy, without any authority from the NPF board or Mr Fabila, engaged PMFNRE as NPF’s agent to sell equity in The Tower Pty Limited;

(c) Mr Leahy suppressed the fact that he had engaged PMFNRE from Mr Fabila and the NPF board.

(d) Mr Leahy provided false information to the NPF board that he was holding direct discussions with Mr Emilio and in failing to disclose his engagement of PMFNRE;

Paragraph 13.1.5: 

(a) Mr Leahy exceeded his authority in entering arrangements with PMFNRE in August 1998 without the approval of the NPF board or Mr Fabila;

(b) Mr Leahy was the recipient of Mr Sullivan’s letter of March 5, 1999, and the author of Mr Fabila’s letter of March 10, 1999. Mr Leahy exceeded his authority in entering into these altered arrangements with PMFNRE in March 1999 without NPF board and Ministerial approval. Mr Leahy was remiss in his duty to fully and properly inform Mr Fabila of the content and legal effect of the letter of March 10, 1999, which he arranged for Mr Fabila to sign;

(c) Mr Fabila was remiss in his duty as managing director of NPF in signing the letter of March 10, 1999, without properly reading and understanding it and without apprehending that the letter constituted a contract beyond his approved financial delegation, which required both NPF board and Ministerial approval;

(d) February/ March 1999 was a time of financial crisis at NPF and concurrently with this arrangement, Mr Leahy was heavily involved in the Waigani Land proposal and the NPF Tower claims with Kumagai. In those contexts, Mr Leahy also wrote and arranged for Mr Fabila to sign other letters in respect of which Mr Leahy also did not fully and frankly brief Mr Fabila; and

(e) MR Leahy, Mr Sullivan and Mr Fabila should be referred to the Commissioner of Police to consider whether charges of criminal conspiracy, attempted fraud or other offences should be brought against them.

Paragraph 13.4.1: 

Both Mr Fabila and Mr Leahy failed in their duties in not fully and frankly informing the board of this contractua* obligation they had entered into to pay 5 per cent commission to Mr Sullivan and by not openly seeking board ratification of their action despite the clear opportunity to do so.

Paragraph 13.5.5.1: 

The commission finds, on the balance of probabilities, that it is likely that this approval was prepared in Carter Newell’s office after March 25, but backdated to March 22.

There are at least two possible explanations for the sense of urgency about obtaining the Minister’s approval for the sale of 50 per cent of the Tower to the PNGHB. Firstly, NPF desperately needed the money. Secondly, the conspirators were greedily awaiting payment of the 5 per cent commission.

The three identical approvals by Ministers Lasaro, Pok and Auali, which were sent to the PNGHB were also dated 22nd March 1999, but were worded differently from the approval faxed from Carter Newell on 1st August 1999.

Paragraph 13.15: 

(a) THE approval for the sale of 50 per cent equity in the NPF Tower signed by Minister Lasaro dated March 22, 1999, which was faxed by Carter Newell Lawyers to NPF on April 1, 1999, was drawn up by Carter Newell and backdated to March 22, 1999;

(b) The approvals to sell to the PNGHB which were given by Ministers Lasaro, Pok and Auali, dated March 22 and 24, 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 per cent of the NPF Tower;

(c) Mr Leahy acted unprofessionally in drawing up a certificate recording a circular resolution of the NPF board dated March 26, 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) THE payment to Kumagai authorised by Mr Fabila on March 31, 1999, was part of a fraudulent scam involving Mr Leahy and Mr Maladina to fraudulently obtain K2,505,000 for the benefit of Mr Maladina. On the face of the documents Mr Fabila was also involved;

(e) The responsibility for the scam involving the 5 per cent (K2 million) commission to Mr Sullivan of PMFNRE lies with Mr Leahy, Mr Maladina and Mr Sullivan. On the face of the documents, Mr Fabila was also involved;

(f) MR Fabila as managing director and Mr Maladina as chairman, knowingly withheld from the NPF board the fact that Mr Fabila had signed an agreement to pay Mr Sullivan of PMFNRE a 5 per cent commission on the sale of the 50 per cent interest in The Tower. This was a breach of fiduciary duty by Mr Fabila and Mr Maladina.

(g) In relation to the attempted sale to PNGHB, it is recommended that the Prime Minister should refer the following people to the authorities named:

(i) TO the commissioner for Police – Herman Leahy, Jimmy Maladina, Henry Fabila, Maurice Sullivan, and Angelina Sariman to consider criminal charges;

(ii) TO the Papua New Guinea Law Society – Mr Leahy and Mr Maladina and Ms Sariman to consider disciplinary measures.

TO BE CONTINUED

National Provident Fund Final Report [Part 67]

November 6, 2015 Leave a comment

Below is the sixty-seventh 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 67th 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 6 Continued

67 a 1

67 a 2

Ledger 31 is considered at paragraph 12.4.21 – not all items are analysed. There were five main sources of credit to Ledger 31:

(i) Interest of K22,287, K22,580, K21,165 and K19,303 on K1.5 million in Treasury Bills;
(ii) Three sums of K897,741.94, K300,000 and K890,368.74 from Carter Newell Lawyers;
(iii) Interest of K41,148, K9299, K40,087 and K6950 on a sequence of four Treasury Bills financed from the Carter Newell money and other accumulations on the Ledger;
(iv) A transfer of K40,000 from Ledger 32;
(v) Funds said to be provided for or from Mr O’Neill of K109,631.26 and K150,000.

Findings 

At paragraph 12.4.21.10, the commission has found:

(a) During the period March to May 2000 the K1.5 million face value in Treasury Bills earlier held to the credit of PMFNRE Ledger 18 was “rolled over” on an approximate monthly basis and at each “roll over” the interest after tax, paid by the Bank of Papua New Guinea, was credited to Ledger 31, such interest aggregating K85,335.00 over the period;

(b) On March 16, 2000, a sum of K40,000 was transferred to this ledger and paid out on the same day by a cheque in favour of Mr O’Neill’s wife, Linda Babao. Both the transfer and payment were made at Mr O’Neill’s request or direction;

(c) On April 5 and 6, 2000, a total of K2,088,110.68 was paid by Carter Newell Lawyers to PMFNRE and credited to this Ledger 31. Out of these funds and Treasury Bill interest and further funds provided by or for Mr O’Neill a further K2,235,000 in face value in Treasury Bills was purchased;

(d) The other major transactions involved the payment to Mr O’Neill of K102,500 in cash on April 10, 2000, and receipts from or for Mr O’Neill of K109,631.26 on April 11, 2000, and of K150,000 on April 18, 2000, which consisted of K85,000 in cash and K65,000 derived from a “round robin” of PMFNRE cheques;

(e) On the expenditure side, there were major payments of K2,235,000 for Treasury Bills; substantial cash payments for Mr O’Neill (and the K40,000 for his wife); the reimbursement of K25,210.83 in “off book” adjustment items paid for Mr O’Neill and a miscellany of other payments which appear to have been for the benefit of Mr O’Neill and companies and persons associated with Mr O’Neill;

(f) Except for the payments for the Treasury Bills, no one but Mr O’Neill can be seen to have benefitted from payments debited to this ledger;

(g) Ledger 31 was Mr O’Neill’s ledger.

Ledger 32 

The four relevant entries on this ledger are:

67 b

After examining these four items at paragraph 12.4.23, the commission has found at paragraph 12.4.22.3 that:

(a) This Ledger 32 was used largely as a suspense account to receive the K690,000 paid by Carter Newell Lawyers and then to transfer K600,000 of that money to Ledger 9 to meet the balance payable for the Manamatana flats; to transfer the K40,000 to Ledger 31 for payment to Mr O’Neill’s wife Linda Babao and finally to re-bank to the PMFNRE bank account the sum of K50,000 which reimbursed an earlier payment of K50,000 to Carter Newell which had earlier been treated “off-book” as an “Adjustment” item;

(b) The K690,000 came into the books of PMFNRE “awaiting further action” as the receipt stated and the two transfers by journal entries were made at the request or direction of Mr O’Neill;

(c) The payment made earlier to Carter Newell which was reimbursed was also made at the request or direction of Mr O’Neill;

(d) Mr O’Neill exercised dominion over these funds in Ledger 32 and their disposal.

Ledger 34

Ledger 34 has been reconstructed for April 2000 as follows:

67 c

The only funds coming into this ledger was interest on Treasury Bills. The major expenditure was the K30,000 transferred to Ledger 31 for Mr O’Neill’s benefit.

Mr O’Neill seems to have been the only beneficiary of payments out of ledger 34;

Findings 

At paragraph 12.4.24.3, the commission has found that: Mr O’Neill was the major if not the sole beneficiary of the interest paid into Ledger 34 which derived from the K1.5 million Treasury Bill which had been purchased from the funds returned by RIFL to PMFNRE and credited to Ledger 18.

Return of funds from RIFL

At paragraph 12.4.24 the commission examines the transactions between PMFNRE and RIFL in late 1999 and January 2000 when substantial funds were being deposited and withdrawn from RIFL during and after the purchase of its shares by Bluehaven No.67.

After withdrawing K2,550,000 from its IBD with PNGBC RIFL paid three cheques to PMFNRE totalling K2,581,04.47 as follows:

Cheque 12117 – K1,781,824;
Cheque 12118 – K150,000;
Cheque 12119 – K49,218.47;
Total: K2,581,042.47

The commission established that cheque 12117 for K1,781,824 was the return of RIFL share purchase money and investigated which of the contributors to the purchase money received a return of their funds from this amount.

(a) Apart from the K250,000.00 which went to Bank of Hawaii and the K1.5 million in face value in Treasury Bills all the other expenditure from Ledger 18 in this period was for Mr O’Neill’s personal benefit or for the benefit of his children’s company LBJ Investments Limited.

TO BE CONTINUED

National Provident Fund Final Report [Part 66]

November 5, 2015 1 comment

Below is the sixty-sixth 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 66th 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 6 Continued

(j) Cheque #36707 – K25,000 – January 13, 2000;
(k) Credit – K25,000 – January 14, 2000;
(l) Credit – K2,794,342 – January 15, 2000;
(m) Cheque #36710 – K29,675.77 – January 18, 2000;
(n) Credit – K413.73 – January 18, 2000;
(o) Cheque #36727 – K2000 – January 27, 2000;
(p) Credit – K31,262.04 – February 2, 2000;
(q) Credit – K3,216.92 – January 21, 2000;
(r) Reversal – K3,216.91 – January 26, 2000;
(s) Cheque #55411 – K10,000 – February 1, 2000;
(t) Cheque #55515 – K10,597.47 – February 2, 2000;
(u) Credit – K10,597.47 – February 3, 2000;
(v) Cheque #55530 – K5000 – February 3, 2000;
(w) Credit – K5000 – February 4, 2000;
(x) Credit – K90,000 – February 11, 2000
(y) Cheque #55444 – K63,793.19 – February 16, 2000; and
(z) Credit – K63,793.19 – February 16, 2000

Findings 

At paragraph 12.4.19.4, the commission has made the following findings regarding these items:

When the 26 “off-book” or “Adjustment” transactions during the period January 1 to February 16, 2000 and related earlier transactions are examined it is clear that:

(i) two transactions (being (d) and (e) above) concern PMFNRE investing rent moneys on IBD with PNGBC and obtaining interest thereon from PNGBC;

(ii) three transactions (being (g) (h) and (i) above) concern PMFNRE investing moneys on deposit with RIFL and we have yet to see who obtained the interest on those moneys;

(iii) one transaction involving the purchase of RIFL (see (b) above) was entered to eliminate an “Adjustment” item which had been transferred to Ledger 24;

(iv) THE remaining 20 transactions concerned Peter O’Neill personally or companies associated with Mr O’Neill including two debits each of K10,000 which were unreimbursed at May 31, 2000, (see (f) and (s) above), a cash payment of K25,000 which was reimbursed by Ilimo Poultry Products Limited in strange circumstances and a credit of K90,000 from Hunter Real Estate Limited which was unallocated as at May 31, 2000.

“Off-Book” adjustments February-May 2000

At paragraph 12.4.19.5, the commission then considered 35 “off book adjustments” during the period between February 16 to May 31, 2000 numbered (a) to (ii) as follows:

(a) Cheque #55446 – K500,000 – February 16, 2000;
(b) Credit – K500,000 – April 12, 2000;
(c) Cheque 36613 – K5000 – February 18, 2000;
(d) Credit – K5000 – February 18, 2000;
(e) Cheque #55459 – K5000 – February 23, 2000;
(f) Cheque #55460 – K2000 – February 23, 2000;
(g) Cheque #55567 – K3000 – March 2, 2000;
(h) Credit – K10,000 – March 7, 2000;
(i) Credit – K18,200 – February 24, 2000
(j) Dish cheque – K18,200 – February 28, 2000;
(k) Cheque #55461 – K674.93 – February 24, 2000;
(l) Cheque #55465 – K50,000 – March 1, 2000;
(m) Credit – K50,000 – March 16, 2000;
(n) Cheque #55584 – K7100 – March 10, 2000;
(o) Credit – K7100 – March 14, 2000;
(p) Cheque #55598 – K9570.43 – March 16, 2000;
(q) Cheque #67015 – K5640.40 – March 30, 2000;
(r) Credit – K15,210.83 – April 6, 2000;
(s) Cheque #67010 – K10,000 – March 29, 2000;
(t) Credit – K5000 – March 31, 2000;
(u) Cheque #67103 K1,000,000 – April 3, 2000;
(v) Credit – K1,000,000 – May 1, 2000;
(w) Cheque #67124 – K29,102.40 – April 12, 2000;
(x) Cheque #67152 – K10,669.60 – April 20, 2000;
(y) Cheque #67164 – K100,025 – May 1, 2000;
(z) Cheque #89467 – K57,000 – May 2, 2000;
(aa) Credit – K25 – May 2, 2000;
(bb) Credit – K122,900 – May 2, 2000;
(cc) Credit – K4100 – May 15, 2000;
(dd) Credit – K12,646.45 – May 19, 2000;
(ee) Debit – K50,000 – May 17, 2000;
(ff) Credit – K50,000 – May 19, 2000;
(gg) Cheque # 9488 – K14,398.69 – May `9, 2000;
(hh) Unidentified credit – K1668.34 – May 24, 2000; and
(ii) Cheque #89500 – K70,497.16 – May 31, 2000.

Findings 

At paragraph 12.4.19.17, the commission has found that: Of the 35 “off-book” or “Adjustment” transactions during the period February 16, to May 31, 2000 (including four related earlier transactions) the commission finds that:

(a) FOUR transactions (being (a), (b), (u) and (v) above) concern PMFNRE investing rent moneys on deposit with PNGBC and Bank of Hawaii and obtaining interest thereon from PNGBC and Bank of Hawaii;

(b) two transactions (being (c) and (d) above) appear only to correct an error;

(c) two transactions (being (i) and (j) above) concern an unrelated third party’s dishonoured cheque;

(d) one transaction ((w) above) involves payment of legal fees for a property management contract dispute between PMFNRE and Finance Pacific Investments Limited;

(e) one transaction (being (hh) related to a deposit which could not be identified;

(f) the remaining 25 transactions concerned Mr O’Neill personally or companies or persons associated with Mr O’Neill including a number of transactions for South Super Stores and a number of transactions that were unreimbursed as at May 31, 2000, and the commission so finds.

Possible Perjury 

During the public hearing concerning the source of funds for the purchase of the Manamatana flats, the commission considers that Mr O’Neill gave deliberately false evidence. At paragraph 12.4.19.7, the commission found:

(a) Cheque #55465 for K50,000 was sourced from funds of K690,000 held in Ledger 32, over which Mr O’Neill had dominion and was for Mr O’Neill’s benefit;

(b) Mr O’Neill gave false testimony to the commission on June 28, 2001 (Transcript pp. 8632-8633);

(c) After hearing Mr O’Neill’s counsel on the subject on October 28, 2002, the commission directed counsel assisting to refer Mr O’Neill and copies of all relevant documents to the Commissioner for Police to consider whether Mr O’Neill should be charged with perjury; and

(d) THE commission also recommends that Mr O’Neill be referred to the Ombudsman Commission to investigate whether there has been a breach of the Leadership Code because of his concealed interest in Bluehaven No.67, the company which purchased the shares in RIFL while Mr O’Neill was executive director of the vendor of the shares, Finance Pacific.

Ledger 18 to February 2000 

The commission also considered further transactions in ledger 18 between January and February 2000 as follows:

Findings 

AT subparagraphs 12.4.20.1, the commission made the following findings:

Receipt #707129 related to the payment by RIFL cheque #12117 (BoH) for K1,781,824 being part refund of the K2,671,824 previously paid out for the purchase of RIFL shares by Bluehaven No.67 Ltd.

AT subparagraphs 12.4.20.2, the commission made the following findings:

The payments of cheque #36723 for K250,000 (and #67164 for K100,000 and #89500 for K70,496.16) were clearly made for the direct benefit of South Super Stores Limited and both Mr O’Neill and Nathaniel Poiya received a clear direct benefit from the making of these payments in that the payments reduced their personal liability under their respective personal guarantees given to Imak International Pty Limited.

AT subparagraphs 12.4.20.3, the xommission made the following findings:

The payments of PMFNRE cheques #55413 for K29,262.04 and #55414 for K2000 were made for Mr O’Neil’s benefit to reimburse payments earlier made on his behalf which had been treated “off-book” as “Aadjustments” and to bring those payments “on-book”.

AT subparagraphs 12.4.20.4, the commission made the following findings:

The receipt 707199 for a payment of K49,218.74 from RIFL recorded the money as interest on an IBD held for PMFNRE. It has not been possible to determine which IBD funds produced this interest.

AT subparagraphs 12.4.20.5, the commission made the following findings:

Cheque #55443 for K2000 was paid to LBJ Investments for the benefit of Mr O’Neill;

AT subparagraphs 12.4.20.6, the commission made the following findings:

The receipt 707369 for of K60,000 recorded the payment of K60,000 by Carter Newell cheque #800449 of K60,000 obtained from the Waigani land fraud. The money was subsequently expended from Ledger 18 for Mr O’Neill’s benefit (see paragraph 12.4.20.7 below);

AT subparagraphs 12.4.20.7, the commission made the following findings:

The K80,000 funds were used to pay Baradeen Holdings regarding the purchase of Remington Ltd by Mr O’Neill’s children’s company LBJ Investments (see paragraph 12.4.20);

AT subparagraphs 12.4.20.8, the commission made the following findings:

This payment of cheque #55454 for K200,003.70 was made for the benefit of LBJ Investments Limited as part of the process of buying Remington Ltd.

Conclusions regarding Ledger 18 – transactions January and February 2000 

The commission presents conclusions and review on Ledger 18 to February 2000 at paragraph 12.4.20.9.

At paragraph 12.4.20.10, it makes the following broad findings:

(a) Apart from the K250,000 which went to Bank of Hawaii and the K1.5 million in face value in Treasury Bills all the other expenditure from Ledger 18 in this period was for Mr O’Neill’s personal benefit or for the benefit of his children’s company LBJ Investments Limited;

(b) The K250,000 paid to Bank of Hawaii was for the benefit of South Super Stores Limited and both Mr O’Neil and Mr Poiya received a direct benefit as this payment reduced their direct personal liability under their respective guarantees given to Imak International Limited. It is recommended that Mr Poiya be referred to the Ombudsman Commission for breach of the Leadership Code in that as a trustee of the NPF he received a direct benefit from the trust funds which had been obtained from by fraud;

(c) THE K60,000 came from Carter Newell and was credited to this Ledger 18. The evidence of Mr Barker regarding that money was false and knowingly false. It is recommended that if Mr Barker ever returns to PNG he should be referred to the Commissioner for Police with a view to his being charged with perjury under the Commissions of Inquiry Act; and

(d) Mr O’Neill benefitted from the K1,781,824 paid by RIFL to PMFNRE as a return of money for Bluehaven No.67 to purchase RIFL.

Ledger 31 

Ledger 31 was the new “sales ledger” which replaced ledger 18 in February 2000 and was then used as Mr O’Neill’s ledger (see paragraphs 12.4.21.1 and 12.4.21.10).

There were 60 transactions between March 6 and May 31, 2000, as follows:

66 b

TO BE CONTINUED

National Provident Fund Final Report [Part 64]

November 3, 2015 1 comment

Below is the sixty-fourth 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 64th 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 6 Continued 

Chronological overview 

At paragraph 12.4.9 of Schedule 6, the commission has presented a chronological overview of payments in and out of the PMFNRE No.1 and No.2 Trust accounts.

It shows that there were some of Mr O’Neill’s funds in the trust accounts at various stages during 1999 but that at each stage the payments out of the accounts, which are proven to have been for his benefit and/or made at his directions, far exceeded the amount of Mr O’Neill’s funds available to fund these payments out for his benefit.

These other funds, which must have funded these payments out for Mr O’Neill’s benefit, included large amounts which had been derived from the NPF Tower fraud (and at least K600,000 which derived from the sale of the Waigani land, which had previously been invested on IBD with Nambawan Finance for Jimmy Maladina’s benefit).

The commission finds in paragraph 12.4.8, that Mr O’Neill’s explanation that he at all times had ample legitimate funds in PMFNRE accounts to fund the payments made for his benefit is demonstrated to be untrue. It is quite certain that very significant payments, which derived from the NPF Tower fraud, were paid for his benefit.

The chronological overview deals with Mr O’Neill’s benefits from outside funds from various sources, including commission on the sale of Ilimo Farm, but we are confined by the commission’s terms of reference to limit our report to outside funds derived from the NPF Tower and Waigani land frauds. In this regard the commission reports at paragraph 12.4.9.2.6(e) (p318).

(e) The real impact arises from the transactions on Ledger 11 to which Mr O’Neill’s July housing allowance of K10,833.33 and the K85,949.57 withdrawn from the Nambawan Finance Limited IBD were credited and the four payments by which those funds aggregating K96,782.90 were disbursed. It is clear that the following expenditure reimbursed from that money was expended for the benefit of Mr O’Neill:

(i) The K20,025.70 balance for the remittances to Amex and Cheryl Caley;

(ii) The K16,207.70 paid for stamp duty on the purchase of Mr O’Neill’s Daugo Drive property;

(iii) The K2,556.80 paid to Qantas for airfares for Mr O’Neill;

(iv) The K1000 paid to Young & Williams for legal fees for Bluehaven No.42 Limited;

(v) The K5000 provided via the cheque shown as drawn to Geuhena Limited but what was in fact shown by Mr Barker as paid to Mr O’Neill;

(vi) The repayment of K17,830.89 of K18,600 in VAT on the Ilimo Farm commission which was “borrowed” to make the payment of K195,600 to Pangia Enterprises Limited.

Thus a total of K62,621.09 of this expenditure, including fraud money derived from the Nambawan IBD, was quite clearly paid for Mr O’Neill’s benefit and bearing in mind that only Mr O’Neill’s housing allowance and IBD funds withdrawn from Nambawan Finance were credited to this Ledger 11, we believe the other payments of the balance of these funds would almost certainly have been for Mr O’Neill’s benefit.

Findings 

At paragraph 12.4.9.2.7, the commission has found that:

(a) Payments made by or on behalf of Mr O’Neill to PMFNRE up to the end of March 1999 aggregated K189,569.91.

It was not possible to ascertain what amounts of that aggregate were attributable to investment in PMFNRE’s IBD with Nambawan Finance Limited and/or funds transferred to Carter Newell and/or funds taken in cash.

(b) It is plain that all of the K56,040 of the first withdrawal of funds from that IBD and most, if not all, of the K85,949 of the third withdrawal of funds from that IBD aggregating K141,989 were applied for Mr O’Neill’s benefit.

Inferentially, this would indicate up to that amount of Mr O’Neill’s funds was in fact invested in the Nambawan Finance IBD;

(c) Other expenditure made by PMFNRE on behalf of Mr O’Neill between March 1 and July 31, 1999, and which was not reimbursed far more than accounts for the residue of Mr O’Neill’s funds even on the most favourable scenario for Mr O’Neill;

(d) In total accounting for Mr O’Neill’s funds on the most favourable scenario to him, the following payments were not attributed against Mr O’Neill’s funds:

(i) the loan of K25,000 paid by PMFNRE No.2 Trust Account cheque #263663 on April 19, 1999, to PMFNRE No.1 Trust Account;

(ii) the refund of K29,500.00 paid by PMFNRE No.2 Trust Account cheque #263670 to Peter Pena & Associates of deposit moneys paid to Hunter Real Estate Limited;

(iii) the payment of K30,400 paid by PMFNRE No.2 Trust Account cheque #263673 to the credit of the fully drawn loan account of Hon. William Skate;

(iv) the payment of K50,000 to Mr O’Neill’s former wife Cheryl Caley by PMFNRE No.1 Trust Account cheque #266923 on May 4, 1999;

(v) the payment of K100,000 to Mecca No.36 Limited by PMFNRE No.1 Trust Account cheque #266932 on May 17, 1999, this company being owned by Mr O’Neill and Nathaniel Poiya;

(vi) the second withdrawal of K160,000 from the Nambawan Finance IBD on June 25, 1999, which was credited to Ledger 9 and used by Mr O’Neill’s company Bluehaven No.42 Limited to purchase the Manamatana flats;

(e) Clearly, payments (iv) and (v) were paid from moneys derived from the NPF Tower fraud and have never been reimbursed.

Payments (vi) was combined with K150,000 derived from the NPF Tower fraud to pay the deposit stamp duty and building inspection costs on the Manamatana flats and leave a small residue to pay the fees payable to Bank of Hawaii in part.

Payments (i), (ii) and (iii) were still not reimbursed as at May 31, 2000. All were treated as “loan to trust a/c 1” and it remains to be explained whose funds the payments were charged against and who if anyone, has the obligation to repay the money.

(f) Mr O’Neill has failed to explain his involvement in the Coringa Limited purchase the subject of PMFNRE Ledger 8, in terms both of the K25,500 said to have been paid for his “outgoings” by PMFNRE cheque #26630 drawn on November 2, 1999, and the K27,500 which was transferred by PMFNRE journal entry 3437 at his apparent direction to the credit of Ledger 18 on November 17, 1999.

Carry over items 

Items not yet accounted for are listed at paragraph 12.4.9.2.8 as “carry over matters”.

The chronological accounting for transactions in PMFNRE No.2 Trust Account continues in paragraph 12.4.10 for the period August to December 1999. There the commission considers whether payments out for the benefit of Mr O’Neill could have been sourced from Mr O’Neill’s own legitimate funds held on his behalf by PMFNRE.

Incoming funds for Mr O’Neill of: Housing allowance K10,833.33 — Ledger 18;
Finance Pacific payout K390,000 — Ledger 18;
Interest on K1m. Treasury Bills K120,850 — Ledger 18;
Total incoming funds PON — K521,683.33

10.3.10 Adjustment items to December 1999

The commission was able to make the following findings regarding these few adjustment items.

Findings

At paragraph 12.4.10.1.1, the commission has found that:

Cheque #350109 for K1806.40 was paid for the benefit of Mr O’Neill;

At paragraph 12.4.10.1.2, the commission has found that:

The K10,000 was loaned from PMFNRE to Hunter Real Estate Limited, for the benefit of Mr O’Neill. In the course of detailed examination of PMFNRE’s books, it was frequently necessary to summons documents to be produced by PMFNRE employees Rupa Siba and Joseph Kup. The commission encountered a lot of obstruction in this process. At paragraph 12.4.10.3.2, the commission has found that: Mr Kup deliberately obstructed the commission’s inquiries by withholding documents and fabricating adjustment figures.

Some of the payments out are discussed in relation other ledgers but the commission made the following findings on the elimination of adjustment items.

At paragraph 12.4.10.3.3, the commission has found that:

The payment of K3770.20 by cheque #382446 was clearly made for the benefit of Mr O’Neill’s company Hunter Real Estate Limited;

At paragraph 12.4.10.3.4, the commission has found that:

The deposit of K17,631.35 used to purchase a bank cheque for $A10,000 was for the benefit of Mr O’Neill;

At paragraph 12.4.10.3.5, the commission has found that:

The payment of K111.32 by cheque #26783 was for Mr O’Neill’s benefit; and

At paragraph 12.4.10.3.6, the commission has found that:

This cheque #26785 for K5000 was for cash, the recipient of which was Mr O’Neill.

Payment to Mr Skate is not connected with fraud money 

During the course of its investigations, the commission was troubled by discovering an unexplained payment to Hon. Bill Skate, the former Prime Minister. Careful attention was given to this payment because of the prominence of Mr Skate’s position.

The commission is satisfied that the payment was from Mr Skate’s rent allowance, legitimately received from the National Parliament.

It had been incorrectly treated in PMFNRE books to create the suspicious appearance that South Super Stores had subsidised the payment of K30,000 into Mr Skate’s loan account.

Findings

Summing up the items listed as adjusting in the period August to December 1999, the commission has found at paragraph 12.4.10.4:

(a) There are a number of items included as “Adjustments” which were quite clearly not “off-book” items and which may have been included to conceal the source of funds from which cheque #350132 for K30,000 was reimbursed;

(b) The bulk of the “Adjustments” items have a clear association with Mr O’Neill and his company Hunter Real Estate.

Ledger 18 – Additional items August to December 1999. 

At paragraph 12.4.11, the commission examines additional items on Ledger 18.

With additional documentation and further evidence, the commission was able to construct Ledger 18 almost in its entirety as follows:

64 table 2 a

64 table 2 b

TO BE CONTINUED

National Provident Fund Final Report [Part 61]

October 29, 2015 Leave a comment

Again, Peter O’Neill features heavily…

Below is the sixty-first 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 61st 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 6 Continued 

At paragraph 12.3.8.4, after exhaustive investigations, the commission found that:

(a) The commission finds that Mr O’Neill’s money had gone out of the PMFNRE No.1 Trust Account prior to March 25, 1999, and the money in the account was less than sufficient to meet unpresented cheques.

(b) Mr O’Neill’s evidence cannot be accepted.

The commission set out to investigate what happened to the aggregate of K167,300.94 paid into PMFNRE No.1 Trust Account in four payments between January 20, 1999 and March 10, 1999, as detailed earlier in paragraph 12.3.8.3 sub paragraphs (a)-(d).

The commission searched the company records of PMFNRE. They are in clear breach of the Companies Act but also they showed Jack Awela owned 89 of 100 shares.

Other searches have shown this same name appear as the major share holder in other companies which are clearly (and admittedly) owned by Mr O’Neill. At paragraphs 12.5.2.5 and 12.5.2.6, the commission has found that Mr Awela (if he exists as a real person at all) is holding his shares in all these companies for Mr O’Neill. The result is that Mr O’Neill is the beneficial owner of PMFNRE and this accords with the overwhelming weight of other evidence – as set out in paragraphs 12.5.2.2, 12.5.2.3, 12.5.2.4 and 12.5.2.6.

At paragraph 12.3.8.5.3, the commission finds:

The directors of PMFNRE should be referred to the Registrar of Companies for further investigation and with a view to their each being prosecuted for failure to comply with their clear statutory obligations.

That failure renders it difficult to ascertain how the moneys of Mr O’Neill received by PMFNRE were either expended or invested on Mr O’Neill’s behalf.

On March 11, 1999, the No.2 Trust Account was said to have been opened and funds totalling K790,451.10 were recorded as transferred to it from the No.1 Trust Account. In fact, only K120,157.56 was so transferred (see paragraph 12.3.8.6.6(b)) the deficiency between funds actually deposited as against funds recorded as received is K600,293.54. (See commission’s conclusions at paragraph 12.3.8.6.6).

At paragraph 12.3.8.6.7, the commission has found:

(a) Despite Mr O’Neil’s explanation, the commission finds that none of the funds attributable to Mr O’Neill were transferred from PMFNRE No.1 Trust Account to PMFNRE No.2 Trust account between the time the latter was opened on March 11, 1999, and March 31, 1999;

(b) Further, the reconstructed cashbook for the No.2 Trust Account for the periods March 25, 1999 up to September 29, 1999 with this No.1 Trust Account show that none of the funds deposited into PMFNRE No.1 Trust Account and which were attributable to Mr O’Neill were recorded as having been received into the PMFNRE No.2 Trust Account during the same period;

(c) That the funds held by PMFNRE for Mr O’Neill in this No.1 Trust Account were paid out to third parties from the No.1 Trust Account prior to March 25, 1999, as the reconstructed cashbook shows. They were not paid out after that date.

In paragraphs 12.3.8.6.8 to 12.3.8.6.13, the commission makes a detailed study of the “off-book” entries in 1999. These are listed at paragraph 12.3.8.6.10 as follows:

61 table 1

Large sums of money were being transferred. The net effect of what occurred was that there were three contributions to the “off- book” receipts being:

(a) Nambawan Finance Limited, which contributed K321, 593.72;

(b) Mr O’Neill who contributed K189,570.01 as follows:

21/01/99 – K 91,467.63
09/02/99 – K 54,166.65
11/02/99 – K10,833.33
10/03/99 – K22,269.07
10/03/99 – K10,833.33
K189,570.01 

(c) Carter Newell Lawyers who contributed K70,000 as follows:

25/01/99 – K50,000.00
12/02/99 – K20,000.00
K70,000.00 

There were three payment destinations for the “off-book” payments:

(i) Carter Newell Lawyers K420,000

(ii) Nambawan Finance Limited K100,000

(iii) Recipients of cash:

25/01/99 – K20,000
28/01/99 – K30,000
29/01/99 – K1000
10/03/99 – K10,000
K61,000 

As at March 10, 1999 – some two weeks before the K300,000 of NPF Tower fraud money came via Ken Barker’s bank account into the PMFNRE Trust Account on March 25, 1999 – a residue of only K163.73 of this “off-book” money remained in the PMFNRE No.1 Trust Account.

Thus, at March 10, 1999, only K163.73 of the K189,569.91 previously for Mr O’Neill remained in the No.1 Trust Account. The rest of Mr O’Neill’s must have:

  • Been in part included in the K420,000 paid out to Carter Newell Lawyers, and/or;
  • Been in whole or in part included in the K61,000 taken in cash; and/or; and
  • Been in whole or in part included in the K100,000 invested in IBD with Nambawan Finance Limited.

On the state of the evidence obtained by the commission, we are unable to determine what was occurring, though it seems that Carter Newell’s cheque # 79628 for K50,000 was “laundered” through PMFNRE and then paid out on the same day by two cheques for K30,000 and K20,000.

It is possible that Mr Maladina was seeking K400,000 for the purchase through Perimist of a property at 5 Atherton St, Whitfield (Cairns), but there is insufficient evidence for a positive finding.

Findings 

(a) In the absence of evidence, the commission was unable to conclude what was intended and occurred with respect to these “off- book” transactions;

(b) Whoever was managing these “off-book” transactions – Mr Barker and/or Maurice Sullivan must have known exactly what was involved and where Mr O’Neill’s money went but both are now “safely” out of Papua New Guinea as is Mr Maladina;

(c) Clearly, PMFNRE must have kept records of these “off-book” transactions but we are told there are none beyond those produced. Equally clearly Carter Newell Lawyers must have had financial records of the transactions involving them but again we are told there are none available beyond those produced;

(d) Finally, it is also not credible that when Mr O’Neill provided his ANZ cheque for the precise and odd sum of K22,269.07 banked on March 10, 1999, he did not know exactly what that sum was required for and where his money had either been spent or invested.

In paragraph 12.3.8.7, the commission reported upon the surviving investment of Tower fraud moneys.

At paragraph 12.3.8.7.1, it examined the Nambawan Finance IBD’s.

The large funds involved did not concern the commission, being outside the terms of reference but indicate that huge funds were being laundered by Carter Newell through PMFNRE.

It seems the funds were coming from the funds of another statutory corporation.

The commission examined these movements of large amounts of money in 1998 and 1999 through the same CN and PMFNRE accounts through which the NPF Tower fraud moneys were also laundered.

We followed the payment in and out of the accounts of these large flows of funds in order to:

  • demonstrate that a similar laundering operation was occurring; and
  • confirm that it did not leave any additional “innocent” funds in Mr O’Neill’s account which might disprove the provisional finding that some expenditures for Mr O’Neill’s benefit must have come from the Tower fraud.

Subsequent cover up of the money trail 

Other difficulties have been caused by the activities of the conspirators, their associates and, in some instances, their lawyers after the commission was established.

Mr Maladina, Mr Sullivan and Mr Barker, having given false statements or evidence, have departed PNG and taken up residence in Australia, outside the commission’s jurisdiction. In some cases, they seem to have taken vital documents with them.

  • Ken Yapane, on Mr Maladina’s instructions, was party to the production and disclosure to the commission of back-dated false documents designed to hide Mr Maladina’s involvement in the fraud;
  • Barbara Perks and David Lightfoot were involved also in disclosing false documents to the commission, which were designed to distract it from discovering Mr Maladina’s involvement in the fraud.

Mr Maladina’s crimes are listed at paragraph 5.7.1. These matters are set out in detail in paragraph 5.5.1 – 5.5.4 and referrals to the Commissioner of Police are dealt with at paragraph 5.8.

Findings 

With regard to Mr Maladina, the commission has found at paragraph 5.7:

There is clear evidence that Mr Maladina committed a multiplicity of serious crimes which include:

(i) Demanding money (K150,000) from Kumagai with threats to stop work on the Tower and reject payment claims if the demand was not met (Criminal Code Act, Section 389);

(ii) Conspiring with Shuichi Taniguchi and Kazu Kobayashi and probably with Herman Leahy to defraud the National Provident Fund Board of Trustees of K2.505 million (Criminal Code Act, Section 407);

(iii) Forging or causing to be forged a writing (being the signature of Ken Yapane & Associates) on the subcontract (Criminal Code Act, Section 462(1));

(iv) Knowingly and fraudulently uttering a false writing (being the signature of Ken Yapane & Associates on the sub contract) to Kumagai (Criminal Code Act, Section 463(2));

(v) Fabricating evidence with intent to mislead a tribunal in judicial proceedings (the two false retyped letters produced to this commission by Mr Yapane) (Criminal Code Act, Section 122);

(vi) Attempting to induce a person called as a witness in judicial proceedings (Mr Yapane as called before this commission) to give false testimony or withhold true testimony (Criminal Code Act, Section 123); and

(vii) Possibly attempting in his telephone conversation with Mr Taniguchi (Transcript p.2977) to induce a person to be called as a witness in judicial proceedings (Mr Taniguchi before this commission) to withhold true testimony (Criminal Code Act, Section 123).

The commission has also found that there is sufficient evidence against several other participants to warrant referring them to the Commissioner for Police and to other authorities.

At paragraph 5.8, the commission recommends to the constituting authority as follows:

Referrals 

A – To the Commissioner for Police 

(a) Mr Maladina: For investigation into whether he should be charged with criminal offences including those specified above. (Paragraphs 5.3 and related sub paragraphs – 5.3.1.1-5.3.1.4 and 5.3.1.6-5.3.1.7);

(b) Mr Leahy: For being party to all or some of the above mentioned offences and/or of criminal conspiracy with Mr Maladina in relation to any or all of such offences. (Paragraphs 5.3.6.1 and 5.3.6.7);

(c) (Transcript pp. 3280-3332) Henry Fabila: For being party to all or some of the above mentioned offences and/ or of criminal conspiracy with Mr Maladina in relation to any or all of such offences. (Paragraphs 5.3.6.4 and 5.3.6.7);

(d) Mr Taniguchi: For being party to all or some of the above mentioned offences and/or of criminal conspiracy with Mr Maladina in relation to any or all of such offences. (Paragraph 5.6 and related sub- paragraphs);

(e) Mr Kobayashi: For being party to all or some of the above mentioned offences and/or of criminal conspiracy with Mr Maladina in relation to any or all of such offences. (Paragraph 5.6 and related sub- paragraphs);

(f) Mr Yapane: For being party to all or some of the above mentioned offences and/or of criminal conspiracy with Mr Maladina in relation to any or all of such offences. (Paragraphs 5.5.3.1 and 5.5.4);

(g) Mr Lightfoot: To consider whether there is criminal culpability in relation to the fraud against the NPF such as to warrant charging him with an offence against the Criminal Code. (Paragraph 5.5.3, 5.5.3.1 & 5.5.4); and

(h) MS Perks: To consider whether there is criminal culpability in relation to the fraud against the NPF such as to warrant charging her with an offence against the Criminal Code.

B – To the Ombudsman Commission 

(a) MR Maladina: To consider breaches of the Leadership Code in relation to his activities concerning the fraud against the NPF and related activities. (Paragraph 5.3 and related sub-paragraphs);

(b) Mr Fabila: To consider breaches of the Leadership Code in relation to his activities concerning the fraud against the NPF and related activities. (Paragraphs 5.3.6.4 and and 5.3.6.7).

Examination Of Funds Transferred Between No.1 And No.2 PMFNRE Trust Accounts – Assessing Mr O’Neill’s Explanation. 

Mr O’Neill’s explanation 

In his initial statement and evidence to the commission, Mr O’Neill stated that it was not appropriate to treat the PMFNRE No.1 Trust Account and the PMFNRE No.2 Trust Account in isolation from each of the other and in so doing to conclude that payments made on his account or behalf could only have been funded by funds banked to the credit of the PMFNRE No.1 Trust Account and some of which were sourced from the NPF Tower fraud.

Mr O’Neill was in effect saying that such payments were made by funds held to his credit in the PMFNRE No. 2 Trust Account.

Mr O’Neill’s funds In IBD’s at March 16, 1999 

It was in consequence necessary to examine in detail transfers of funds from PMFNRE No.1 Trust Account (into which Mr O’Neill’s money had been banked) to the PMFNRE No.2 Trust Account in order to test this explanation.

This is reported item by item in paragraphs 12.3.8.2 to 12.3.8.7.10.

The “investments” which subsisted after the transfer of funds between these two accounts were the IBD which PMFNRE had with PNGBC of K600,000.00 and the further IBD which PMFNRE had with Nambawan Finance Limited which was at March 16, 1999, in the sum of K914,616.

Findings 

At paragraph 12.3.8.7.11, the commission examined the IBD with the PNGBC of K600,000 established on March 12, 1999, and found at paragraph 12.3.8.7.11 that:

(a) Having completed this analysis and tracing it is totally clear that all the moneys contained in the initial IBD with PNGBC were funds that were deposited into the PMFNRE No.1 Trust Account and for which receipts were duplicated in the PMFNRE No.2 Trust Account computerised cashbook. It is also totally clear that the renewed IBD was an extension of the same process;

(b) None of Mr O’Neill’s funds which were banked into PMFNRE No.1 Trust Account were shown as included in the receipts duplicated in the PMFNRE No.2 Trust Account computerised cashbook up to March 31, 1999, and it can in consequence be said with total certainty that none of Mr O’Neill’s funds were included in these two IBD’s with PNGBC.

(c) The only ongoing repository of funds in which Mr. O’Neill’s funds could have been invested and which was in existence after March 25, 1999, was the funds invested by PMFNRE on IBD with Nambawan Finance Limited in the deposits of:

(i) K500,000 which subsisted after January 18, 1999 (if part of the Carter Newell “share” was transferred to Mr. O’Neill) as to which see paragraph 12.3.8.6.9; and

(ii) K100,000 which was established on February 25, 1999 – as to which see paragraph 12.3.8.6.10.

TO BE CONTINUED

National Provident Fund Final Report [Part 60]

October 28, 2015 1 comment

Below is the sixtieth 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 60th 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 6 Continued 

Of major concern to the commission were large payments to Mecca No.36 Pty Ltd (now South Supa Store) owned by Peter O’Neill and NPF trustee Nathaniel Poiya.

Findings

The commission finds the deposit of K10,833.33 was in respect of Mr O’Neill’s rental allowance for April 1999 and in consequence that K10,833.33 of Mr O’Neill’s funds were held in this account.

In paragraph 12.3.2.2, the commission made the following findings:

(a) PMFNRE cheque # 266923 for K45,000 was sourced from the NPF Tower fraud money;

(b) As a consequence, K5,000 of the Tower fraud funds remained in this account;

(c) As we have said earlier, we will come back to the payments to Williams Graham & Carman shortly. Mr O’Neill’s evidence was that none of these earlier payments had been made for his benefit so his K10,833.33 should still have been held plus the K5,000 of NPF Tower fraud moneys aggregating K15,833.33;

(d) The cashbook balance according to PMFNRE (Exhibit T1017) was only K10,854.68. Again it is clear either PMFNRE was “using” this money or Mr O’Neill’s or the NPF Tower fraud funds had been used to pay other cheques;

In paragraph 12.3.2.3, the commission made the following findings:

The two cheques each for K50,000 presented on May 4, 1999, were funded from the NPF Tower fraud money;

In paragraph 12.3.2.4, the commission made the following findings:

(a) After considering the whole of the available evidence, the commission finds that the sum of K102,300 paid by the Carter Newell cheque # 788441 which was derived from the NPF Tower fraud money was placed under the control of Maurice Sullivan and Ken Barker of PMFNRE upon its deposit on May 4. 1999, and that in exercise of the control so placed in him Mr Barker on the same day directed payment out of such funds of the two cheques # 266924 and 266925 each for K50,000 to PNGBC the first to make an International Money Transfer of the equivalent of K50,000 to Williams Graham & Carman, Solicitors of Cairns Australia and the second to make an International Money Transfer of the equivalent of K50,000 to Mr O’Neill’s former wife Cheryl Caley;

(b) The commission further finds that the bank fees of K36 were also paid from this deposit and that all of these payments were from funds derived from the NPF Tower fraud.

(c) It follows from these findings that of the funds remaining in this PMFNRE No.1 Trust Account after such payments and the debit of bank charges the residue of this K102,300 deposit amounting to K2264 plus the earlier residue of K5000, aggregating K7264 were held out of the NPF Tower fraud moneys and that K10,833.33 was held on behalf of Mr O’Neill;

In paragraph 12.3.2.5, the commission made the following findings:

The commission finds that this deposit of K10,833.33 was in respect of Mr O’Neill’s rental allowance for May 1999 and in consequence of its other findings that the funds of Mr O’Neill held in this account increased to K21,666.66;

In paragraph 12.3.2.6, the commission made the following findings:

There is insufficient evidence for the commission to make any definite finding in relation to these two payments of K6000 and K5000.

In paragraph 12.3.2.7, the commission made the following findings:

The only source from which this cheque for K100,000 could have been fully funded was the deposit of K300,000 on the same day (see (m) above), which was derived from the NPF Tower fraud;

In paragraph 12.3.2.8, the commission made the following findings:

(a) Cheques # 266930 and # 266931 aggregating K17,379.11 were paid from Mr O’Neill’s own funds;

(b) The dilemma, as we have said earlier, is that if the K10,833.33 of Mr O’Neill was applied in the earlier payment of K50,000 to his former wife, then there would not have been sufficient of his funds to cover this second payment to his former wife;

(c) Again the situation is confused by the use of the MJS/KB code on deposits of both NPF Tower fraud moneys and Mr O’Neill’s moneys and the payment out of moneys for the benefit of Mr O’Neill as well as others;

(d) Later investigations support the possibility that the various credits formed one common fund;

In paragraph 12.3.2.9, the commission made the following findings:

(a) It is totally clear that the deposit of K300,000 on Friday, May 14, 1999, derived from the NPF Tower fraud was banked with the “MJS/KB” code; that the K100,000 transfer to PMFNRE No.2 Trust Account on the same day was sourced from this deposit; that the K100,000 transfer to Mecca (No.36) Pty Limited the following Monday also with the “KB/MJS” code was also sourced from this deposit and finally that the cash withdrawal of K100,000 on the following Friday yet again with the “KB/ MJS” code was also sourced from that deposit;

(b) As will be seen later in this report, the K100,000 transferred to PMFNRE No.2 Trust Account was also converted to cash on May 14, 1999, and could not be traced further;

(c) On the evidence before the commission, it is clear that the second K100,000 was received by Mecca (No.36) Pty Ltd and that such money was not earned;

In paragraph 12.3.2.10, the commission made the following findings:

(a) The payment of K100,000 to PMFNRE No.2 Trust Account on May 14, 1999, derived from the NPF Tower fraud and could not be traced further;

(b) The cash withdrawal of K100,000 on May 21, 1999, was derived from the NPF Tower fraud and was received by Ken Barker and later paid to Jimmy Maladina;

(c) The payment of K100,000 to Mecca No.36 on May 17, 1999, was derived from the NPF Tower fraud and it was unearned by Mecca No. 36;

(d) Mr Poiya was a substantial shareholder in and director of Mecca No.36 Pty Ltd (now South Super Stores Ltd). At the time of the K100,000 payment to Mecca No.36 Mr Poiya was a trustee of the NPF;

(e) MR Poiya and Mr O’Neill benefited from the payment to Mecca;

(f) THE benefit received by trustee Poiya was improper and the commission recommends that he be referred to the Ombudsman to consider whether there had been a breach of the Leadership Code by Mr Poiya; and

(g) The benefit received by Mr O’Neill was improper and at the time he was subject to the Leadership Code, being executive director of Finance Pacific.

The commission recommends that Mr O’Neill be referred to the Ombudsman Commission to consider whether there has been a breach of the Leadership Code.

The payments made to Williams Graham & Carman were all from NPF Tower fraud money and all were paid to the lawyers in relation to the purchase by Bethgold of the Kanimlba property. The K50,000.00 to Cheryl Caley on May 4, 1999 was from the same source and for the same purpose.

Although Mr Barker and Mr Sullivan are shown as the directors and shareholders of Bethgold Mr Maladina and/or Mr O’Neill had beneficial interests in that company held for him/them by Mr Barker and Mr Sullivan.

The commission’s investigations clearly showed the criminal activities of Mr Barker and Mr Sullivan, former PMFNRE managers who had fled to Australia. At paragraph 12.3.4.1, the commission has found:

(a) Both Mr Sullivan and Mr Barker were involved in the laundering and disposal of the proceeds of the NPF Tower fraud through the PMFNRE No.1 Trust Account and the use of a code in that process strongly suggests “guilty” knowledge which may render both men accessories after the fact to that fraud;

(b) The commission recommended that Mr Sullivan and Mr Barker both be referred to the Commissioner for Police to consider charges for aiding the offence of fraud and any other offences;

(c) The commission also considered that Mr Barker:

(i) LIED on oath regarding the refund of K99,000 to Mr Maladina;

(ii) falsely denied knowledge of payments of K102,300 and K300,000 made by Mr Maladina to PMFNRE No.1 Trust Account; and

(iii) falsely stated that K60,000 and K690,000 were used to purchase Treasury Bills (see paragraph 12.3.4).

As Mr Barker is now permanently residing in Australia it would be a waste of resources to refer him to the Commissioner for Police to consider charging him with perjury under the Commissions of Inquiry Act. If he ever returns to PNG, he should be so referred.

As the commission’s inquiries continued it became clear that many payments were made to or at the direction of Mr O’Neill, that these payments far exceeded the total funds legitimately held by PMFNRE and that a significant portion of these additional payments were sourced from funds which demonstrably were the proceeds of the NPF Tower fraud.

In trying to explain these matters, some of Mr O’Neill’s explanations were unacceptable, internally inconsistent and contrary to clearly documented factual evidence. As inquiries progressed further and the successive ledgers were examined in more detail it became clear that Ledgers 18 and 31 were Mr O’Neill’s own ledgers.

At the end of the day the commission was forced to conclude that Mr O’Neill actually owned PMFNRE. To test Mr O’Neill’s unsatisfactory evidence, the commission constructed an extension of the cashbook as at paragraph 12.3.6 as follows:

The reconstructed extension of cashbook from May 30, 1999 to September 29, 1999.

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60 image b

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It was then able to make the following further findings.

Findings 

This deposit of K10,833.33 was in respect of Mr O’Neill’s rental allowance for June 1999;

At paragraph 12.3.7.2, the commission found that:

(a) The two cheques for K55,120 and K920 account exactly for the proceeds of the Nambawan Finance cheque for K56,040 banked the previous day and the commission so finds;

(b) The receipt of K55,120 into the No.2 Trust Account was kept “off book”;

At paragraph 12.3.7.4, the commission found that:

The cheque #028585 for K275,000.00 obtained by Hunter Real Estate Limited was proceeds of funds paid out of IBD held by the Registrar of the National Court, which was the subject of litigation between Mr O’Neill and Mr and Mrs Donald.

At paragraph 12.3.7.5, the commission found that:

The deposit was in respect of Mr O’Neill’s rental allowance for July 1999;

At paragraph 12.3.7.6, the commission found that:

The deposit of K275,000 into PMFNRE No.1 Trust Account on July 16, 1999, was paid into the No.2 Trust Account in three separate cheques and receipted as a deposit on PMFNRE sale of property by Hunter Real Estate.

The evidence of Mr O’Neill’s involvement with regard to the No.1 Trust Account is discussed at paragraph 12.3.8 and it is clear that the only funds paid into or held in the No.1 Trust Account for Mr O’Neill aggregated K32,449.99 or on the view most favourable to Mr O’Neill the total would be K57,499.99. Yet quite clearly the sum of at least K167,397.11 was paid out for his benefit or at his direction.

At paragraph 12.3.8.1, the commission has found that:

(a) Given the above explanation, the commission is compelled to conclude that the source of the differentials was Mr Maladina’s funds from the NPF Tower fraud and the explanation given by Mr O’Neill does not withstand testing and cannot be accepted. (Mr O’Neill’s explanation is further reported below at paragraph 12.3.8.2).

(b) The PMFNRE No.1 Trust Account appears to have been treated as a common account containing the funds of Mr Maladina and Mr O’Neill and some other transactions. Mr O’Neill’s explanations included claims that some of the payments were sourced from or paid as rental on his properties but his claim did not withstand scrutiny as other arrangements for rent were actually in place as recorded in detail in paragraph 12.3.8.3 of the Schedule.

TO BE CONTINUED

National Provident Fund Final Report [Part 59]

October 27, 2015 1 comment

Below is the fifty-ninth 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 59th 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 6 Continued 

At paragraph 11.5.18.1, the commission has found that:

(a) The K3752 part of the funds transferred from Carter Newell trust account to Carter Newell No.2 account was transferred in reimbursement of the payment made by Carter Newell No.2 account cheque # 788532 and that such payment as so paid was sourced from the NPF Tower fraud; and

(b) The residual K3248.64 so transferred and paid out appears to have been sourced from other funds.

At paragraph 11.5.20.1, the commission has found that:

The payments of K140,000 and K250,000 as so paid, were sourced from the NPF Tower fraud.

At paragraph 11.5.21.1, the commission has found that:

(a) THE K40,000 part of the funds so transferred from Carter Newell trust account to Carter Newell No.2 account was transferred in reimbursement of the payment made by Carter Newell No.2 account cheque # 788548 and that such payment as so paid was sourced from the NPF Tower fraud; and

(b) THE residual K638.05 so transferred and paid out appears to have been sourced from other funds.

Looking as a whole at the disposal of the fraud moneys which had been received into Carter Newell accounts, the commission found at paragraph 11.5.23:-

(a) There were four sums as specified in 11.5.1, 11.5.3, 11.5.9 and 11.5.10 above received in the Carter Newell trust account aggregating K1,187,387.21 credited to this file which were derived from the NPF Tower fraud.

(b) From these funds, four payments as specified in 11.5.4, 11.5. 16, 11.5.19 and 11.5.20 above aggregating K572,850.64 were made direct from the Carter Newell trust account to Port Moresby First National Real Estate (three payments) and Ram Business Consultants (one payment). These payments have been dealt with earlier.

(c) The residue of these funds aggregating K614,563.57 plus K8847.23 from other sources was transferred from Carter Newell trust account to Carter Newell No.2 account and expended from the latter account;

(d) It is not possible to identify which part of the aggregate payments of K623,383.80 sourced from these transferred funds was funded from the K8847.23 of funds from other sources but it can be said they were sourced to the extent of K614,536.57 from the NPF Tower fraud.

(e) Those payments aggregating K623,383.80 which required further investigation are: See table 1.

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Findings

The commission then set out to investigate the payments referred to in (e) above and made the following findings in sub-paragraphs 11.6.1.1 to 11.6.6.7.

At paragraph 11.6.1.1, the commission has found that:

A sum of K600 derived from the proceeds of the NPF Tower fraud was received by Jimmy Maladina in cash on July 27, 1999;

At paragraph 11.6.2.1, the commission has found that:

The payments aggregating K7656.30 for airfares were made from the proceeds of the NPF Tower fraud and that Mr Maladina, his family and Mr P Maladina received the resultant benefits.

At paragraph 11.6.3.2, the commission has found that:

The sum of K4,927.10 spent on air tickets for Mr Maladina and Dr Pok was sourced from NPF Tower fraud and the tickets were used by Mr Maladina and Dr Pok.

At paragraph 11.6.3.5, the commission has found that:

(a) The air tickets for Mr Maladina and Mr Paki on August 13, 1999, for K3773 were financed from the proceeds the NPF Tower fraud;

(b) Mr Paki was referred to the Commissioner for Police to investigate whether he committed perjury by denying his trip to Cairns and Brisbane was paid for by Mr Maladina;

At paragraph 11.6.4.1, the commission has found that:

(a) The withdrawal of K400,000.00 (or $A226,754.22) on July 30, 1999, was sourced from the NPF Tower fraud, that such payment was a benefit received by Mr Maladina and that such benefit was improper.

(b) The description of the purpose of this payment was clearly false and evidences a dishonest intention on the part of Mr Maladina in relation to these moneys; and

(c) Limitations on the territorial jurisdiction of the commission prevented it from further tracing these funds in Australia.

At paragraph 11.6.5.1, the commission has found that:

The payment of K100,000 by cash cheque # 788504 on July 12, 1999, was sourced from Tower fraud money and was drawn for the benefit of Mr Maladina, probably for political purposes.

At paragraph 11.6.6.1, the commission has found that:

The clear inference is that this K700 cash was drawn for use on Mr Maladina’s trip to Cairns on July 30, 1999, and the commission so finds.

At paragraph 11.6.6.2, the commission has found that:

Cheque # 788518 for K17,000 was cashed and the recipient cannot be traced;

At paragraph 11.6.6.3, the commission has found that:

It is likely that cheque # 788523 for K5000 was cashed for the benefit of Mr J Maladina and a Mr P Maladina;

At paragraph 11.6.6.4, the commission has found that:

It is likely that cheque # 788527 for K45,000 was cashed for the benefit of PMFNRE;

At paragraph 11.6.6.5, the commission has found that:

It is likely that cheque # 788529 for K2500 was cashed for the benefit of Mr J Maladina;

At paragraph 11.6.6.6, the commission has found that:

Cheque # 788549 which was cashed for K40,000 could not be traced further, although there is a link to Mr Maladina through the Morea Henry connection;

At paragraph 11.6.6.7, the commission has found that:

Cash cheques totalling K110,200 cashed between July 29 and September 7, 1999, were sourced from the Tower fraud money and the cash was used for Jimmy Maladina’s benefit or at his direction.

Further Tracing Of Money paid Into The Accounts Of PMFNRE 

The NPF Tower fraud money paid into PMFNRE came from three sources:

(a) Kumagai payment No.1 indirectly from Ken Yapane and Associates via payments variously through Kuntila Company No.35, Mr Barker and PMFNRE;

(b) Carter Newell’s investment of fraud money in Finance Corporation; and

(c) Carter Newell by cheque or cash.

The trust account books of PMFNRE are described in paragraph 12.1.2, consisting of the earlier manually recorded No.1 Trust Account and the later computer recorded No.2 Trust Account.

“Off-book” transactions are described in paragraph 12.1.3. These often involved fraud moneys which were received and banked but for which no receipt was issued or recorded. Often they were coded “MJS/KB” (referring to Mr Sullivan and Mr Barker who had personal knowledge of these transaction as described in paragraph 12.1.4. At a later date these non-property management transactions were recorded in numbered ledgers – but still some “off-book” transactions occurred for which minimal records were kept. By calling for production of documents from banks on summons and by other means described in the Schedule, the commission has been able to elicit details of most of the “off-book” transactions.

In paragraphs 12.2.1 to 12.2.5, the commission discusses the various amounts of fraud moneys, which were paid into PMFNRE No.1 and No.2 trust accounts and this is summarised at paragraph 12.2.6 where the commission has found that the following fraud moneys were received into the ledgers indicated.

(a) Account No.246204 – the Number 1 Trust Account 

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(b) Account No.613086 – the Number 2 Trust Account

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The amounts received into the PMFNRE No.1 Trust Account were examined in paragraph 12.3. A major problem for the investigation was that PMFNRE personnel claimed that most relevant records had been lost or removed by Mr Barker and Mr Sullivan and by their failure to co-operate with the commission. At one stage, commission staff were unexpectedly invited to visit PMFNRE premises and in one day gained considerable knowledge of how and where the records were kept. This proved most helpful.

The commission was able to reconstruct a cash book from available records which is set out at paragraph 12.3.1, as follows: See table 4.

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TO BE CONTINUED