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Criminologist uncovers elite network behind Paga Hill Estate

May 9, 2016 9 comments

paga hill

Peter O’Neill, Michael Nali, Gudmundur Fridriksson, Rex Paki, Jimmy Maladina, Dame Carol Kidu, Labi Amaiu, Tom Amaiu, these are just some of the names uncovered through an extensive probe that looks into the power players behind Port Moresby’s controversial Paga Hill Estate development, and their business partners.

The investigation was conducted by a senior criminologist Dr Kristian Lasslett, who began forensic research into the real-estate venture during 2012.

In the post, which first appeared on statecrime.org, Dr Lasslett raises new questions over the shareholders and executives standing behind the luxury real-estate development on Port Moresby’s harbour foreshores, and their connection not only to some of the biggest names in Southern Highlands politics, but numerous major corruption scandals.

Dr Lasslett connects Paga Hill executives and shareholders to major players into the Commission of Inquiry into the National Provident Fund, the Commission of Inquiry into the Department of Finance and the joint special inquiry into the Public Curator’s Office conducted by the Auditor General and Public Accounts Committee.

He also provides evidence documenting potentially illegal land transactions lying at the foundations of the luxury real-estate project.

And this couldn’t come at a more important time. It was recently revealed that the Paga Hill Development Company – under the leadership of Icelandic businessman Gudmundur Fridriksson – is bankrolling Dame Carol Kidu’s legal case to shutdown a film that documents the real-estate venture and the valiant efforts by our own justice fighters to save a historic national park from the developer’s knife.

Back in 2006 the Public Accounts Committee alleged the Paga Hill Estate was spearheaded by ‘foreign speculators’, who secured the title through ‘corrupt dealings’. A decade later it seems the controversy is still well and truly alive.

The Paga Hill Estate – A vision for a ‘progressive’ future 

Once designated a national park, the majestic surrounds of Paga Hill have been eyed by numerous real-estate developers over the years. However, it is the Paga Hill Development Company (PHDC) which succeeded in clearing the land of its residents and national park status.

This paved the way for a development that will evidently include luxury hotels, 800+ residential apartments, sporting facilities, marina precinct, and multi-use commercial precinct.

PHDC boasts, ‘with tourists and visitors staying at the Hilton Hotel, residents of the site, together with city visitors enjoying the waterfront retail, restaurants and marina complex, the area will be a buzzing melting pot, creating a new image for a progressive Papua New Guinea’ (Hilton Hotels strongly denies  any involvement in the project).

Even among the rubble produced by a brutal demolition exercise in 2012, the site’s development value is readily apparent.

Of course it is always important to ask, who in particular will benefit from the proposed real-estate venture? Rarely are such projects universally beneficial.

We at least know one core clientele. It was recently announced that the estate ‘will be the venue for the Leaders’ meetings at the Asia-Pacific Economic Co-operation summit in Port Moresby’ slated to take place in 2018.

This is one of the most important multilateral forums in the Asia-Pacific region. If this announcement is true – unlike the partnership with Hilton Hotels – this gives the venture a special strategic importance for the summit’s principal sponsors the PNG and Australian governments.

Although the construction timeframe looks tight, PHDC has announced that the Shenzhen based, Zhongtai company, will collaborate in the development, with Chinese government backing.

The project also evidently has the support of the National Capital District Commission and PNG’s national government. According to PHDC’s website the ‘PNG Government will provide the support through relaxation of import duties and taxes’.

However, over its twenty year lifespan what is perhaps most striking about the Paga Hill Estate is the project’s ability to weather controversy. In 2007 the Public Accounts Committee accused PHDC of acquiring the land through ‘corrupt dealings’.

Five years later the project hit the headlines again after residents faced a brutal demolition exercise, executed by the Royal PNG Constabulary, allegedly at the behest of the company. This event became iconic when the opposition leader, Dame Carol Kidu, was frogmarched from the scene by police officers who had used live ammunition on residents. She argued PHDC was not an appropriate company to be entrusted with Paga Hill (Kidu later retracted her statement, and entered into a consultancy contract with PHDC).

In October 2012 matters got worse when it was reveal that PHDC’s CEO, Gudmundur Fridriksson, has managed or owned businesses censured in investigations conducted by the Public Accounts Committee, the Auditor General’s Office and the Commission of Inquiry into the Department of Finance – seven in total.

The details were covered extensively by the Australian media, although sadly little of the controversy made its way into PNG’s muzzled press. That said, PNG citizens have created a vibrant social media alternative, which became a vital hub for circulating information on Paga Hill.

A month after this expose Fridriksson took leave from an Australian government funded think-tank where he was CEO, evidently to pursue business interests in PNG. His presence has now been wiped entirely from their website.

The wife of prominent Australian indigenous lawyer Noel Pearson – the latter is a key figure behind the think-tank – then disinvested of her shares in PHDC during January 2013.

Despite the turbulence, Papua New Guinea’s O’Neill Government has time and time again rallied behind the venture. Ministers have issued supportive press statements, the government real-estate firm NHEL  agreed to partner in the project on a 50/50 basis, and the development is now receiving generous tax breaks.

This is nothing new, from the project’s very inception in 1996 the executives pushing this luxury estate have proven adept at garnering support from some of PNG’s most powerful political forces.

A rejected planning application and Michael Nali MP

The first major challenge to getting the project off the ground was rezoning the land at Paga Hill and obtaining an Urban Development Lease. Back then it was the Paga Hill Land Holding Company (PHLHC) – a precursor to the Paga Hill Development Company – which led the way.

According to Investment Promotion Authority records – Papua New Guinea’s corporate registry – its shareholders included Rex Paki, Felix Leyagon, and the Western Australian company, Fidelity Management Pty Ltd. Its Directors were Rex Paki and Gudmundur Fridriksson.

Fridriksson used the same Perth address as Fidelity Management Pty Ltd in records he submitted to the Investment Promotion Authority for Asigau (PNG) Holdings Limited, a company he owned with his wife, Tau Fridriksson. Initially the landholding company’s Secretary was Tau Fridriksson, according to Investment Promotion Authority records she was replaced on 1 July 1998 by Rex Paki.

paga hill fidelity

Clearly a  key player during the project’s start-up period was the Shareholder-Director-Secretary, Rex Paki, who was also the principal of Port Moresby firm Ram Business Consultants. Ram would go on to collect its own share of official condemnation from the Commission of Inquiry into the National Provident Fund, in addition to Public Accounts Committee and Auditor Generals Office investigations.

Despite having up and coming executives at the helm, PHLHC’s initial proposal for a luxury estate at Paga Hill was rejected by the Physical Planning Board in late 1996. The board noted, ‘proper procedures in relation to the processing of Planning applications were not followed’. This seemingly put an onion in the ointment, unless the application was approved, and the land rezoned, the Land Board could not lawfully issue an Urban Development Lease.

However, the company received a major boost in 1997, when its proposal obtained the backing of Michael Nali, the Minister for Civil Aviation, Culture and Tourism.  On 27 February 1997 he wrote to PHLHC stating: ‘It give [sic] me pleasure to confirm my full support to your proposed comprehensive mixed use development of Paga Hill … I am prepared to sponsor a submission to the National Executive Council [Cabinet] next month to have the project endorsed as a property of National Significance. It deserves the full support of Papua New Guinea’.

Paga Hill Nali letter

Subsequently, Michael Nali acquired a 9% stake in PHLHC’s successor vehicle the Paga Hill Development Company (PHDC) through Kwadi Inn Limited, which Nali is the sole owner of. However, it should be underlined this occurred in December 2011. By then Nali had lost office.

Yet the importance of Nali’s involvement in 2011 can’t be underestimated. A towering figure from Papua New Guinea’s Southern Highlands, Nali is in business with some of the nation’s most powerful individuals.

Take the example of NIU Finance Limited. According to Investment Promotion Authority records [PDF], Nali’s company Kwadi Inn obtained a significant stake in this company during 2009, joining a select cast of executives and investors.

According to its last Annual Return, the company’s Managing Director is Peter O’Neill, Papua New Guinea’s Prime Minister.  Peter O’Neill again appears as the largest shareholder in NIU, through his companies LBJ Investments Limited, and Paddy’s Hotel & Apartments Limited. Another notable shareholder in this enterprise is Piskulic Limited, a company wholly owned by Ken Fairweather, Member of Parliament for Sumkar.

There is no evidence on the public record to suggest either O’Neill or Fairweather have been involved in the Paga Hill Estate. Nevertheless, it is clear Nali circulates in powerful business circles.

And it goes further than this. It appears that Nali had direct business links with PHLHC’s Rex Paki and Felix Leyagon dating back to 1996-1997, the period when he agreed to sponsor the Paga Hill development as a project of national significance in Cabinet.

According to company records kept by the Investment Promotion Authority, on 11 November 1996, a company Waim No.54 Limited, was incorporated. Its two Directors were Rex Paki and Felix Leyagon. The company also had two equal shareholders, the Tourism Minister, Michael Nali and Mary Nali.

In addition to this, Waim No.54 Limited’s registered address was Ram Business Consultants, ADF Haus, Ground Floor, Musgrave Street, Port Moresby, National Capital District, Papua New Guinea. This is the same registered address employed by PHLHC.

If accurate, IPA records suggest Rex Paki and Felix Leyagon were Directors at a company owned by Michael and Mary Nali. Furthermore, Michael Nali’s company, Waim No.54, also shared PHLHC’s registered address.

During this same period, Michael Nali, in his Ministerial capacity agreed to sponsor PHLHC’s proposed Paga Hill property development in Cabinet as a project of national significance, a venture  in which Rex Paki and Felix Leyagon were shareholders, with executive involvement from Gudmundur Fridriksson and Paki.

Paga Hill network

Public Accounts Committee alleges ‘corrupt dealings’

Of course, it cannot be deduced from these facts that the above parties were involved in any wrongdoing. However, in light of a subsequent Public Accounts Committee inquiry, which alleged that the land at Paga Hill was secured by PHLHC through ‘corrupt dealings’, this new link raises questions.

Underpinning the Public Accounts Committee’s concern was the circumstances under which the lease was obtained. For instance the Urban Development Lease was awarded to PHLHC when the land was still zoned open space. Before she recanted, Dame Carol Kidu observed this was in violation of the Land Act 1996, section 67, which declares, ‘a State lease shall not be granted for a purpose that would be in contravention of zoning requirements under the Physical Planning Act 1989, any other law relating to physical planning, or any law relating to the use, construction or occupation of buildings or land’.

Subsequently, PHDC was awarded a full 99 year Business Lease, despite the fact the improvement covenant set out in the Urban Development Lease was not completed as required.

The Public Accounts Committee claimed  it was not surprised this covenant remained unactioned. It observed, ‘the Lessee cannot pay the Land Rental and has sought relief from that obligation, much less fund a development of the magnitude required’.

paga hill lease

However, apparently this is not the only occasion that a company connected with Ram Business Consultants is alleged to have been involved in illegal land dealings. Those familiar with the Commission of Inquiry into the National Provident Fund Chaired by Judge Tos Barnett,  may have had a touch of déjà vu when the name Waim was mentioned.

Ram Business Consultants, Waim No.92 and the NPF Commission of Inquiry

It was another holding company, Waim No.92 Pty Ltd, that was allegedly used to defraud the National Provident Fund – a transaction that saw one conspirator sentenced to six years imprisonment with hard labour. According to the Commission of Inquiry, controversial PNG businessman Jimmy Maladina was the ‘secret owner of Waim No.92 Pty Ltd the shares of which he initially owned through his wife Janet Karl, and an accountant Phillip Eludeme. Ms Karl’s share was later transferred to Phillip Mamando who resided at the Mr Maladina’s residence’.

The Commission of Inquiry alleges that ‘Mr Maladina was responsible for bribing Land Board chairman Ralph Guise and Lands Minister Viviso Seravo, to ensure Waim No.92 was granted the lease of the Waigani Land on very favourable terms’. It continues: ‘The records of the Land Board indicate it notified Waim No. 92 that it had been recommended as the successful applicant and on September 28, 1998, Waim No. 92 received notice that a corruptly reduced purchase price of K1,724,726.10 was payable before title would issue, with annual rent to be K17,000 (instead of the legally correct amounts of K2,866,000 and K143,000 respectively)’.

The Commission of Inquiry claims that Waim No.92 frontman Philip Eludeme acted as a key fixer, ‘prior to the Land Board hearing, Mr Eludeme had approached Minister Seravo seeking favourable consideration for Waim No. 92’s application and, at Mr Seravo’s request, had performed, free of charge, accountancy services for Minister Seravo valued at K100,000′.

According to the company’s annual returns for 1998, Waim No.92’s  registered office during this period was Ram Business Consultants, ADF House. While its two shareholders cited above, Philip Eludeme and Phillip Mamando, similarly list their registered office as Ram Business Consultants, ADF House.

During 1998 Maladina’s alleged fixer, Philip Eludeme, was a director of the company Sulawei Limited, along with PHLHC shareholder, Felix Leyagon. Sulawei Limited’s  registered address was again Ram Business Consultants, ADF House.

paga hill ram network

It would thus appear there were multiple links between two networks alleged to have been involved in similar style illicit land deals by the Public Accounts Committee and the Commission of Inquiry into the National Provident Fund, respectively.

The Paki Fridriksson split and the Inquiry into the Office of the Public Curator  

The original development vehicle was of course the PHLHC. However, the Auditor General notes in early 2000 its two Directors apparently part ways [PDF], with Gudmundur Fridriksson evidently leaving Ram Business Consultants where he was alleged to have been employed (Fridriksson is PHDC’s current CEO).

Fridriksson was then involved in setting up a number of companies including Anvil Legal Services Limited, Anvil Project Services (PNG) Limited, Anvil Commodities and Trading Limited, Anvil Marine Limited, Anvil Marketing Consultants Limited, and CCS Anvil Limited.

Anvil Project Services (PNG) Limited and CCS Anvil Limited  have been censured in the course of  inquiries conducted by the Auditor General, Public Accounts Committee and the Commission of Inquiry into the Department of Finance. Perhaps the most controversial of these companies is Anvil Project Services (PNG) Limited,  which was awarded lucrative consultancy contracts with the Public Curator’s Office (shortly after Ram Business Consultants lost its contract with the same office).

This award wade made despite the fact the arrangement had been rejected by the Central Supply and Tender Board owing to no public tender – a procedure which is in violation of Papua New Guinea’s Public Finances (Management) Act1995.

The contract went ahead anyway, although it is alleged [PDF] by the Public Accounts Committee and Auditor General, that payments were made out of private estates held on trust by the Public Curator.

According to company records kept at the Investment Promotion Authority, Gomoga Jack Nouairi, the Acting Public Curator at the time which the Public Curator and Anvil began working together, had a 30% stake in Anvil Project Services (PNG) Limited – the remaining 70% was owned by Gudmundur Fridriksson and his wife through the company Asigau (PNG) Holdings Limited.

Nouairi was also Director of Anvil Commodities and Trading Limited, in which Anvil Project Services (PNG) Limited had a 50% stake, and was a 50% owner of Anvil Legal Services Limited, along with Gudmundur and Tau Fridriksson.

paga hill anvil network

Another company implicated in the inquiry into the Public Curator’s Office was Jac’o Business Consultants Limited, a concern owned by its principal Jack Naiyep. Despite being paid K1.5 million by the Public Curator’s Office, the Public Accounts Committee claims ‘there was no evidence that any formal procurement had ever taken place, nor was there any evidence of any formal contract’.

Naiyep and the Fridrikssons were business partners in a separate company they co-owned together, Anvil Business Services Limited.  Naiyep also had a stake in Mamaku Mai No.3 Limited. Before the latter company was deregistered it was connected to the family of former Prime Minister Bill Skate.  Also of significance is one of the company’s Directors, Paul Wagun.

It was a Paul Wagun who replaced Gomoga Jack Nouairi as Public Curator, and submitted evidence to the Public Accounts Committee and Taskforce Sweep contesting any wrongdoing by his office or Anvil (PNG) Project Services Limited. It cannot be confirmed this is the same Paul Wagun, however, given Jac’o Consultant’s role in the Public Curator’s Office, the overlap is concerning.

Sadly in a subsequent inquiry into this affair by Papua New Guinea’s anti-corruption agency, Investigation Taskforce Sweep, none of these crucial links between Fridriksson, Nouairi, Naiyep and Wagun were acknowledged in its case report, despite being freely obtainable from the Investment Promotion Authority company registry. When these flaws were noted by this author in a report published last year, Investigation Taskforce Sweep threatened to sue for defamation.

Another interesting company set up during this period under the Anvil stable, was Anvil Marine Limited. During its period of operation 2002-2005, the company was owned by Gudmundur and Tau Fridriksson, along with the father and son team, Tom Amaiu and Labi Alex Amaiu. Tom Amaiu is a former Member of Parliament, who was sentenced to five years prison for theft.

His son Labi Amaiu is the current Member of Parliament for Moresby North East, and has patronised PHDC, featuring prominently in the company’s promotional material. He can be seen in this video published by PHDC lauding Gudmundur Fridriksson. Amaiu states he would like to ‘congratulate and thank the CEO of Paga Hill development for a successful venture, this is what we call legacy, and I am proud to be part of that legacy’.

Fridriksson’s companies featured in a number of other inquiries during this contentious period, including the Commission of Inquiry into the Department of Finance. Nevertheless, public condemnation from Papua New Guinea’s anti-corruption agencies has not significantly impacted on PHDC’s grip over the land at Paga Hill.

Paga Hill Development Company’s Southern Highlands Connection

Part of PHDC’s success appears to be linked to its influential stakeholders. It will be recalled that the Urban Development Lease was originally awarded to PHLHC, a company jointly owned by Rex Paki, Felix Leyagon and Fidelity Management Pty Ltd. When the lease was converted into a 99 year Business Lease in 2000, the owner was a new corporate vehicle, PHDC.

The Public Accounts Committee in its inquiry drew attention to this – the recipient of any converted lease, it argued, should have been the initial owner PHLHC. At the time, PHDC was owned by Fidelity Management Ltd Pty, a holding company which shared a registered address in Perth, Australia with Gudmundur Fridriksson. But unlike PHLHC, Rex Paki and Felix Leyagon were not on the share register.

In 2005 ownership of the company changed hands, as Fidelity Management Ltd Pty’s shares were transferred to another vehicle,  Anvil Holding Limited. At this time Anvil Holdings Limited was owned by George Hallit, along with Gudmundur and Tau Fridriksson. However, between 2008 and 2011 there were a series of further changes to PHDC’s ownership structure. By the end of it, the Fridrikssons’ apparently divested all their shares in the company. It was PHDC’s lawyer, Stanley Liria, who became the majority shareholder.

Originally from the Southern Highlands, Liria has published a number of legal texts.  The first was launched in 2005 by Southern Highlands political heavyweight Peter O’Neill who informed the Post-Courier he would recommend to his ‘parliament colleagues that they buy the newly published book’.

Liria is also commercially linked to a number of high profile Southern Highland politicians. For instance, Liria is Director of Southern Highlands Holding Limited, along with former Minister, Michael Nali, who is also a PHDC shareholder via Kwadi Inn Limited. The sole shareholder of the holding company is the Southern Highlands Provincial Government.

In addition, there is Sharp Hills Investment Limited, a company fully owned by Southern Highlands Governor William Tipi, who entered parliament as an MP for Peter O’Neill’s People’s National Congress party. According to Sharp Hill’s company records, its registered office is Liria Lawyers, a firm which Stanley Liria is the principal of. William Tipi was also formerly a shareholder in Southern Highlands Holding Limited, presumably as a trustee for the provincial government.

Alongside Liria at PHDC is Michael Nali, who through Kwadi Inn, has acquired a 9% stake in the company – although this was reduced to 2% during April 2016. As we have already observed, Nali is in business with Papua New Guinea’s most powerful political players including Prime Minister O’Neill.

Curiously absent though is Gudmundur Fridriksson. Despite being the principal visionary and driver behind the project he has seemingly divested from the company, while retaining an executive role as CEO.

Nevertheless, given the current political gravity in Papua New Guinea, having backers with strong Southern Highlands credentials cannot have harmed the company over the past five years, as it has navigated significant public resistance to its real-estate venture.

Cold comfort 

All this analysis is rather academic for former Paga Hill residents. Many had their homes, belongings, church and school destroyed through a number of demolition exercises between 2012-2014 (PHDC has only been directly linked to the first exercise in May 2012). The soul and life of the community is captured in a moving song they composed to commemorate the destruction:

As a result of the demolition exercise, the site is now being prepared for the luxury estate which Michael Nali lauded as Minister back in 1997. Twenty years on, as the development is promoted as a host site for APEC 2018, questions still linger over the land transactions that underpinned its inception and a number of  executives involved in stewarding this project.

Given the systematic efforts being devoted to censoring a documentary film covering this controversial ventureone senses these questions may encroach on very powerful interests indeed.

Yet whatever happens with Paga Hill, audiences may sense the bell tolls for thee. As a real-estate venture Paga Hill is not unique or exceptional, even if its displaced residents are a very special group indeed.

injunction paga hill

Around the world cities are transforming through a process of creative destruction, or what geographer David Harvey calls accumulation by dispossession. They are becoming spaces moulded in the image of power, money, corruption and violence.

Indeed, the technical and often highly opaque character of urban governance is a breeding ground for abuse and inequality. It is a matter for wonks, bureaucrats and developers. It needs to be a space of popular, public participation.

The Opposition calls this to our attention. Of course, what we do to confront these dilemmas is the next urgent conversation to be had.

Supreme Court quashes Maladina conviction! But your Honor, Jimmy confessed. 

April 22, 2016 Leave a comment
Either Prime Minister Peter O'Neill is deliberately lying or he has been misled by his advisors...

Was Jimmy’s appeal more about the Prime Minister than Maladina himself?

In most countries when a powerful national figure confesses to their crimes, expresses remorse, and offers to pay back the stolen money, it is often considered a fairly clear sign they are guilty.

Not in our country. 

PNG Exposed reported yesterday that Jimmy Maladina’s conviction for misappropriation was recently quashed by the Supreme Court.

Yet it has gone unnoted in the media coverage, that Maladina actually confessed to the crime during the earlier National Court trial. 

This was confirmed when the National Court passed sentence: 

“The accused admitted freely that he had committed the offence. He stated that he is sorry for what he did. He further apologises and is remorseful especially to the contributors of NPF for what he had done that deprived them of their benefits which was to be enjoyed with their families and to his family for the sufferings, shame that he has brought on them for the last 17 years. He is making arrangements and is willing to repay the money owed back to the state”.

It was also noted in yesterday’s blog that Maladina had never been successfully prosecuted for his role in separate fraud involving Iori Veraga. In that instance Veraga was sentenced to six years hard labour, while the alleged mastermind behind the operation Jimmy Maladina escaped the charges. 

Clearly Jimmy is a lucky fellow.

But the question remains why would Maladina confess to a crime, and then petition a higher court to quash the conviction? 

A possible answer is provided by the Australian commentator Susan Merrell, who is a close ally of the PM’s clique. She remarked in the aftermath of the Supreme Court decision: So, if Jimmy Maladina is innocent of misappropriation and the accusation against the Prime Minister is that he received monies from Maladina that Maladina had misappropriated in this matter, (NPF) then it stands to reason that this exonerates the Prime Minister of any accusations of impropriety’.

So, perhaps this appeal was less about Jimmy Maladina and more about Prime Minister O’Neill. 

Those familiar with elite business circles know Jimmy Maladina and Peter O’Neill were for a significant period married at the hip in their affairs. As a result, when those involved in Maladina’s schemes were successfully convicted in two separate criminal prosecutions, a certain bad smell clung to the PM, especially given that O’Neill featured heavily in the NPF inquiry findings (but don’t expect to find a copy of the NPF inquiry report anywhere, conveniently it was never made public!). 

Indeed, when Jimmy Maladina fled to Australia in 1999/2000, he informed the Australian courts that he ‘was fearful of violence at the hands of persons who suspected that he might be in a position to make serious allegations against them’. It was never specified who these ‘persons’ were.  

Read 85 extracts from the NPF inquiry report

This Supreme Court decision it would seem is just as beneficial for the PM as it is for Maladina, at least if we follow the perverted logic of the PM’s cheer squad.

Sadly, all of this comes as public confidence in the integrity of the judiciary is dropping. 

It is increasingly apparent that the judiciary is not immune to the disease of corruption – in fact there is a growing body of evidence and inside information that some judges are accepting bribes, to return favorable judgements. Of course, no one has suggested, despite the strange occurrences noted above, that either Mr Maladina or Mr O’Neill bribed/pressured the judiciary. 

Yet the growing inconsistent and at times illogical decisions being delivered by the courts, will fuel speculation and concern. 

Jimmy Maladina acquitted??? Spare a thought for his partner in crime 

April 21, 2016 1 comment

jimmy maladina

The Supreme Court it appears has quashed Jimmy Maladina’s conviction for misappropriation, which emerged out of  the National Provident Fund inquiry. We are told Maladina is away on business, but will hold a press conference shortly. 

No doubt Mr Maladina will claim full vindication, and protest his innocence. But don’t get the tissues out just yet for Jimmy. In fact spare a thought for one of his conspirators, who does not appear to have the same luck as Jimmy Maladina when it comes to the courts. 

Iori Veraga was found guilty of misappropriation and conspiracy in 2005, for his part in the fraud Maladina is alleged to have masterminded. According to the National Court Mr Veraga was a registered valuer, who was recruited by Jimmy Maladina to provide services to the National Provident Fund at a grossly inflated price. The proceeds of the scam were then shared between the two.

The court accepted:

‘the State evidence, once again confirmed by the accused’s own evidence that 50% of the proceeds of each of these cheques went to Maladina as his share of the fees as agreed between them’.

The National Court also claimed it was:

‘satisfied beyond reasonable doubt that before Maladina’s meeting with the accused, there had been an agreement with … [NPF executives] Herman Leahy and Henry Fabila about this criminal enterprise. These two officers were to be the conduits for the successful prosecution of the conspiratorial agreement. The events which took place throughout the entire affair did not, in my opinion, take place by accident. There was here the hallmark of preconcert. These events occurred pursuant to a pre-existing, antecedent, agreement’.

‘The conspiracy also depended on the accused performing his part by over-pricing or exaggerating the values of the two properties and charging excessive fees to be shared with Jimmy Maladina. The fees had to be large enough to be worth sharing. Messrs Leahy and Fabila were important elements, conduits, in the conspiracy. They were in the position to ensure secrecy, non-compliance with tendering requirements, keep the [NPF] Board in the dark, and ensure further that the fees quoted were accepted, thus committing the Fund to paying them, and paying them quickly.’

The National Court, therefore, concluded:

‘the funds [misappropriated by Veraga and Maladina] were the funds of the NPF. They remained the property of the Fund because neither the accused nor Jimmy Maladina had any legitimate claim over them. Thus, the sharing of the fees between the accused and Jimmy Maladina constituted the dishonest application to his own use and to the use of another person, property belonging to another as defined [by the Criminal Code].’

Veraga was sentenced to six years hard labour. Curiously Maladina – the alleged mastermind – was never successfully prosecuted for this crime. 

Instead his recently quashed conviction related to yet another act of misappropriation against the National Provident Fund.

So when you hear Jimmy Maladina waltz around the media claiming he is the true victim in all this, spare a thought for his partner in crime, Mr Veraga, who spent six years inside for a crime Mr Maladina was allegedly the primary author of.

National Provident Fund Final Report [Part 85]

November 30, 2015 1 comment

Below is the eighty-fifth and final part of the serialized edited version of the National Provident Fund Commission of Inquiry Final Report that first appeared in the Post Courier newspaper in 2002/3.

NPF Final Report

This is the 85th and final extract from the National Provident Fund (now known as NASFUND) Commission of Inquiry report. The inquiry was conducted by retired justice Tos Barnett and investigated widespread misuse of member funds. The report recommended action be taken against several high- profile leaders, including former NPF chairman Jimmy Maladina. The report was tabled in Parliament on November 20 by Prime Minister Sir Michael Somare.

Executive Summary Schedule 9 Tender Procedures and Nepotism Continued

Findings

In paragraph 13.6.1.2, the commission has found that:

(a) The evidence before the commission clearly indicates that Mr Wanji’s conduct in his dealings with Laiks Printing, a company in which he was a shareholder, director and a cheque signatory, was improper. Mr Wanji stood to benefit from NPF, when he obtained quotes from Laiks Printing and recommended Laiks Printing to supply stationery and office supplies. This was not disclosed to the NPF by Mr Wanji;

(b) It is likely that moneys were paid to Laiks Printing well in excess of the fair value of goods and services provided by them

Warenam Office Supplies

There were 12 purchases from this company to a value of K80,982.26.

Mr Alopea, the proprietor and manager of Warenam Office Supplies, voluntarily provided details of 16 secret payments to Mr Wanji totalling K12,530 during the period May 3, 1999 to June 14, 2000.

However, in actual fact, Mr Wanji received only K11,280.

Due to a loss of records at Warenam Office Supplies, other payments to Mr Wanji prior to May 3, 1999 could not be ascertained. Mr Wanji has admitted, in his evidence to this commission that these payments were made to him, personally, by Warenam Office Supplies, before May 3, 1999.

Findings

At paragraph 13.6.1.5, the commission has found that:

(a) There was an agreement between Mr Wanji and Joe Alopea of Warenam Office Supplies that contracts would be awarded to Warenam in exchange for secret commissions paid by Warenam to Mr Wanji;

(b) On some occasions the secret commission was factored into the price paid by NPF;

(c) The relationship between Mr Alopea and Mr Wanji was criminal in nature. Mr Wanji received more than K11,280 from which he personally benefited. Mr Alopea and Mr Wanji should be referred to the Commissioner for Police for investigation.

Country-wide Business Supplies

The commission has found that Mr Wanji received commission from Christopher Enara of Country-wide Business Supplies.

Other companies

The commission inquired into Cando Investment and Stephens Enterprises. The investigations showed Mr Wanji received corrupt commissions from these companies.

Findings

At paragraph 13.6.2.1, the commission found that:

(a) Given the weak internal control procedures, Mr Wanji used to decide, almost at will, how much to buy and from whom during the period covered. These weak controls resulted in Mr Wanji obtaining benefits from suppliers including the purchase of stationery and office supplies from his company, Laiks Printing;

(b) The benefits Mr Wanji received from the suppliers were in fact “bribes” or “commissions” and not loans;

(c) The commission considers that there is sufficient evidence of criminal offences of the nature of conspiracy to defraud. The commission recommends that Mr Wanji be referred to the Commissioner for Police for further investigation.

Funds obtained from NPF housing advances scheme Cando Investments

Mr Wanji applied for and received K2200 from the NPF Housing Advance Scheme for repair and maintenance work to his house, to be carried out by Cando Investment, which had quoted for the work. However, this money was not used for the said work on the house.

Mr Wanji claimed he engaged another contractor to do the quote, which was completely different from the quote used to obtain the money.

He then requested and benefited from the refund from Cando Investments.

Findings

At paragraph 13.8.2.1, this commission has found that:

Simon Wanji dishonestly obtained the payment of K2200 from Cando Investments for his own benefit. The money had been provided by NPF to Cando Investment for a different purpose.

A similar situation occurred with two other NPF officers, Max Noah and Kanora Aua, who requested money from the Housing Advances Scheme and used the money for other purposes than they stated in the request form.

Findings

At paragraph 13.8.5, this commission has found that:

(a) NPF advanced the funds for specific work to be carried out by Cando Investments. However, Mr Wanji, Mr Noah and Mr Ava obtained the funds from Cando Investments and either used the funds for a different purpose or arranged for the work to be carried out by a different contractor or both, which was contrary to the purpose for which NPF advanced these funds;

(b) Cando Investments appears to have been a facilitator of these arrangements, taking a 10 per cent commission. The funds should have been reimbursed to NPF but Cando Investments failed to do this and in repaying funds to the NPF member, enabled that person access to his funds not available to other members;

(c) The payments from NPF to Cando Investments may have been made on false representation. Cando Investments may have facilitated obtaining from NPF under this false representation and later paid those funds (less commission) to the NPF member;

(d) The commission considers that there is sufficient evidence of criminal conduct and recommends referral of the following persons to the Commissioner for Police for further investigation as to whether the offence of obtaining money by false pretence or by fraud or conspiracy to defraud has been committed. Simon Wanji, Max Noah, Kanaro Ava and Pere Enara of Cando Investments;

(e) The following matters should also be referred to the Police for investigation:

  • Suspicious payments made by suppliers to Mr Wanji;
  • Mr Wanji’s dealings with Laiks Printing and Bubia; and
  • Mr Koae’s dealings with Bubia.

Concluding Comments

At paragraph 14, the commission concludes::

The commission’s investigations have shown that at the beginning of the period under review, there was some attention given to calling for tenders and seeking competitive quotations for procurement of some of the goods and services examined in this report.

As time went on, these frail attempts to comply with proper procedures lapsed and management increasingly ignored the concept of obtaining competitive quotations.

Management also ignored the need to keep the NPF board informed or seek its approval.

This gross laxity allowed the development of nepotism and criminal acts to defraud the NPF.

It is a very sad story for which NPF senior management is primarily to blame. The NPF trustees, however, had a fiduciary duty to ensure the fund was well managed and its finances were protected.

They failed this duty totally. The abuses were so noticeable that the trustees’ failure to notice and address it, constitutes a breach of their fiduciary duty to the members of the fund and may constitute a breach of the Leadership Code by all trustees who held office during the period under review. This matter should be referred for consideration by the Ombudsman.

Schedule 10 Exemptions:

On June 29, 1981, a general exemption was granted to all organisations which were engaged in:

(i) Agriculture industry organisations involved in production of crops or livestock;

(ii) Agriculture processing organisations (including veneer and plywood industries) who are involved in the first stage of processing of agriculture and livestock products, but excludes industries involved in the production and/or processing of fish and other forest products.

This exemption was continued by a series of extensions. On September 30, 1993, Sir Julius Chan exempted all coffee growing and processing establishments “until further notice”.

These general exemptions and extensions for these classes of establishments ignored the very different types of employees in the industries, which ranged from low paid casual rural workers to skilled managers and accountants. Under the exemptions all employees were precluded from joining and contributing to NPF.

Coffee Industry Corporation (CIC) proposes a superannuation scheme

This differentiation in types of employees was highlighted when CIC endeavoured to set up its own superannuation scheme for its skilled employees in January 1996.

The NPF board directed management to recommend that the Minister should lift the exemption in relation to the coffee industry so that appropriate employees could join NPF and so employer contributions could be enforced, but enforced fairly “noting the seasonal nature of the industry”.

Exemption lifted throughout coffee industry

Minister Haiveta lifted the exemption as it applied to all establishments in the coffee industry, without regard to the different classes of employees, leaving NPF to sort out with individual employers which employees would be covered.

This ad hoc decision-making was unsatisfactory and did not address the same problem, which applied to other exempted agricultural industries.

Findings

At paragraph 9.1.2, the commission found that:

(a) Because of the predominance of low paid seasonal rural workers and the low product prices, it was decided to grant relief to this sector by way of a general exemption to those organisations in the agriculture industry and processing. However, there were other employees who were employed by these agriculture establishments who were located and employed in urban areas and were receiving higher urban wages. When granting the exemption to the agriculture sector in 1993, this difference should have been taken into consideration so that those higher paid employees in urban areas are given the opportunity to contribute to the fund;

(b) When the exemption applying to the coffee industry was lifted in May 1996, the difference between permanent, urban, casual and rural employees was again not sufficiently addressed and the lifting of the exemption simply applied across the board to all establishments in the coffee sector. This led to ad hoc decision making and confusion in the application of the Act.

Specific Exemptions Already Granted

According to documents obtained from the Office of Legislative Counsel, the following establishments have been exempted by the managing director under Section 42 of the Act, as they had superannuation schemes at least as favourable as the NPF scheme and the Minister was satisfied the employees wished the exemption to be granted: Bougainville Copper Ltd exempted in 1984 and again in 1986.

Ok Tedi Mining Ltd was exempted in May 1991. From February 1994 until late 1997, the NPF board and management made half-hearted attempts to encourage the unions to lead the OTML employees into the NPF, as OTML management had expressed its willingness. It seems Mr Leahy, Mr Paska and Mr Leonard failed to follow through on this matter. Despite being exempted under Section 42 of the Act, OTML remained liable to report on its superannuation scheme as directed pursuant to Section 43. This was not followed up by NPF.

Findings

At paragraph 10.2.1, the commission found:

(a) The statutory instrument does not expressly exempt OTML from Section 43 of the Act; Management failed to advise OTML of this factor during their discussions;

(b) Trustee Leonard failed in his fiduciary duty to the board and NPF by not completing the task given to him by the board through a proper board resolution and his failure to advise the board on the progress or otherwise, about OTML staff move to join NPF.

(c) All trustees and NPF management failed in their duty to proactively pursue the possibility of engaging OTML employees in the NPF scheme.

(d) The exempted establishments remained bound by Section 43 to report to NPF as directed. NPF failed to follow through on this aspect.

____

Lack of action: We are all losers

THIS is the last update we will publish on the National Provident Fund Commission of Inquiry findings. Over the last 85 editions, the Post-Courier published 97 pages of extracts from the NPF Report as well as a Scoreboard on the referrals made to the various national institutions for further action.

The pages this newspaper had committed to the NPF Report amounted to a revenue of more than K224,000 which we did not collect.

That was the cost of bringing this report to the people of Papua New Guinea — more specifically thousands of contributors to the National Provident Fund who lost millions of kina in life savings they will never ever reclaim.

For them the only satisfaction will be to see justice done — that those responsible for this greatest scandal ever in the history of PNG face the law and answer for their actions.

We have no regrets at what may seem to be lost revenue. We did so in good faith and in the public interest because of our firm commitment to fight corruption at all levels in our society.

This may mark the end of the published extracts from the NPF Report but our commitment and resolve to rid corruption from this great nation remains as strong as ever.

We are committed to working in partnership with all our partners in the Community Coalition Against Corruption and the great Institutions of State to ensure justice prevails in PNG — for without it there is no future for our children and future generations.

We are committed to supporting all efforts being made to ensure our people live and enjoy the fruits of a just, open society with systems that ensure transparency and accountability in leadership at all levels.

A society where every man, woman and child is given an equal opportunity to realise their full potential as free citizens of this nation.

Corruption is a deadly form of cancer that is eating away at the social fabric of PNG. A major surgery is required to remove it before it engulfs the whole body and soul of our land.

There is a ray of hope out there in the community that gives us confidence that even if action on the referrals contained in the NPF Report is delayed, we know that there is a coalition of many individuals and groups in this country who have a voice loud enough to remind the institutions of State of their duties and responsibility to implement the recommendations of the report.

Today’s public forum asks the most pertinent question about the referrals: What action?

As this forum gets underway in Port Moresby, the final report of another commission of inquiry — the Commission of Inquiry into the Defence Force Retirement Benefits Fund will be presented to the Prime Minister.

We have yet to see one successful prosecution out of the NPF Commission of Inquiry Report and we have another report soon to be tabled in Parliament.

The contents of that report will remain secret until it is actually tabled in the House. Only then will we know what the inquiry has found.

Will there be another public forum to ask the same question: What Action?

Both reports are a sad indictment of the direction our country has taken in the last few years.

We say that the elite of this nation ought to feel guilty about not doing the right thing by their people. So much hope and confidence was placed on so many of our elite citizens but they have failed their people.

All of us are the ultimate losers.

National Provident Fund Final Report [Part 84]

November 27, 2015 Leave a comment

Below is the eighty-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 84th 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

Tender Procedures and Nepotism

Management contract price in excess of NPF Board approval

The total cost of the new AS400 machine was within the amount approved under Section 61 of the PF(M) Act. However, the amount paid was greater than the earlier quotes provided by Datec to NPF and on which the board provided its original approval.

Evidence given by Mr Ta’eed and Mr Vere of Datec

Mr Ta’eed gave evidence (Transcript pp. 8128-42) that:

  • The AS400 which NPF had was over utilised;
  • Datec had advised NPF that a performance analysis of the computer system was required;
  • The return advice revealed that the system was too small for NPF’s needs, which was already known.

Reasons for choosing the AS400

Mr Ta’eed advised that:

  • The software NPF required ran only on AS400 machines;
  • A different machine with a different software had to have everything converted to the AS400, which is exactly what happened in 1993 when NPF moved from the McIntosh system to AS400.
  • NPF was the only authorised reseller of IBM equipment in PNG and the only service centre in PNG.

Findings

At paragraph 12.5.7.5, the commission found that:

(a) Once NPF had committed itself to Datec and purchased both software and sophisticated unique hardware it, was hooked into Datec/IBM with Datec being the only supplier in PNG. There was then no scope for seeking competitive tenders; and

(b) NPF management and trustees failed their duty to NPF members in not seeking independent expert opinion and advice before making this commitment to Datec.

1999

There were imperfections in NPF accounting records for the financial years 1998 and 1999 as mentioned in paragraph 12.6.

Computer purchase in 1999

See previous table

Disposal of computer equipment in 1999

The fixed asset register did not record any disposal of computer equipment in 1999. However, old Y2K non-compliant computers were disposed of by tender, restricted only to NPF staff. This method of disposal of assets can be criticised as a form of nepotism. Clearly, NPF did not determine the market values of these computers and therefore would have lost substantial income for its members.

Findings

At paragraph 12.7, the commission has found that:

(a) NPF management were in breach of Section 61 of the PF(M) Act by not seeking board and Ministerial approval for the additional expenditure incurred in the purchase of the new computer hardware;

(b) Management failed in their fiduciary duties for not seeking the maximum price for the used PC’s and other computer equipment sold during this period;

(c) THE Board and Management failed in their fiduciary duties to seek a second opinion about the new computer hardware they were purchasing;

(d) The sale by tender of PC’s and other computer related hardware to staff, without obtaining a proper market value for them, is deemed an act of favouritism and nepotism and loss of additional income to members of the fund; and

(e) Mr Wright exceeded his financial delegation in approving a Bloomberg Screen for his own office use, costing K41,515.03. He is personally liable for the loss suffered by NPF because of this purchase.

Procurement Of Stationery And Office Supplies

NPF’s financial statements for 1995 to 2000, recorded various costs for stationery and office supplies.

Costs were constant from 1995 to 1998 but took a quantum leap in 1999.

While the commission understands that some increases can be attributed to the general increase in cost in the country due to economic factors in 1999, the increased cost in stationery and office supplies cannot be fully explained by such economic factors.

This view is clearly supported by the fact that stationery and office supplies cost for 2000, returned to its normal level.

The main report (Schedule 9), seeks, in particular, to identify whether:

  • There was failure to comply with tender procedures;
  • Such failures benefited any person;
  • There was any conflict of interest in the procurement of these services.
  • There was any conflict of interest in the procurement of these services.

Summary of suppliers used between January 1, 1995 and December 31, 1999

Out of the total 10 suppliers listed, only four are commonly recognised suppliers. There was also an increase in the amount of purchases from unrecognised suppliers.

The Finance Department inspectors report also uncovered numerous procedural irregularities and weaknesses in this area. The same was found by the Auditor-General in his audit of financial statements for the years ended December 31, 1998 and 1999.

The state of control over procurement, recording and payments — 1995 to 1999

Procurement:

Simon Wanji was responsible for ordering stationery and office supplies. There was no management control over what Mr Wanji was doing.

The only control at the time was that each order had to be accompanied by three written quotes.

Recording Creditors

Normally in many companies, the monies for goods received would be recorded in the creditors ledger and paid after 30 days.

The NPF accounting package used in the period 1995 to 1999 did not have an auditor’s subsidiary ledger. Creditors were only recommended at year-end for reporting purposes, based on unmatched work orders, purchase orders and claim forms.

Payment of creditors

Payment of creditors was ad hoc. NPF did not operate a scheduled payment policy.

Review of payments made

Documentation of the procedures in place between 1995 and 1999 in respect of procurement, recording and payment, reveals crucial weaknesses and in particular, the lack of segregation between ordering and receiving goods, and recording liability and payment to suppliers. Given this situation, there was a high risk of nepotism, fraud, theft and errors occurring and remaining undetected.

Weaknesses identified

  • There was a complete lack of segregation of duties, and functions between ordering, receiving, recording and payment for goods which were, in almost all instances, performed by one officer, Mr W anji;
  • The minimum number of three written quotes were not always obtained;
  • Payment requisitions did not always indicate that the cheque raised was for goods and services; and
  • A creditors subsidiary ledger was not maintained.

Benefit derived

Evidence before this commission indicated that Mr Wanji derived substantial benefits while in his position as officer in charge of accounts payable.

It is also evident that Siri Koae, through his wife, might have also derived benefits but it was to a much lesser degree.

Findings

At paragraph 13.5.5, the commission has found that:

(a) There were inadequate procedures in place regarding the procurement, recording and payment of stationery and office supplies. These weaknesses are a significant break down in the control and safeguard of NPF finances;

(b) The controls, which were in place for the procurement, recording and payment of stationery and office supplies, were weak and therefore provided the conditions for nepotism and employee fraud to occur and remain undetected;

(c) Management failed to address procedures for a long time. Through the review of the payment vouchers the commission has come across written notes by Ms Dopeke and once by Henry Fabila, notifying Mr Wanji to obtain three quotes and queries as to why so much stationery was being purchased. These comments were ignored;

(d) These weaknesses resulted in nepotism, “bribes” and other benefits to staff at the expense of NPF;

(e) Mr Wright and Ms Dopeke failed in their duties to the board to identify weaknesses and install appropriate controls and procedures in the financial management of the fund.

Siri Koae

Mr Koae was the manager of the NPF Lae branch between October 1993 and January 1999.

Mr Koae gave stationery and office supplies orders to Bubia, a firm of which his wife, Ms Lari, was co- owner. Ms Lari was also a director of Laiks Printing, a company that provided stationery and office supplies to NPF.

Mr Koae maintained that he received no benefits from Bubia or Laiks Printing.

Findings

At paragraph 13.7.4, the commission has found that:

While the evidence does not disclose any criminal act by Mr Koae, his actions were in the commission’s view, improper and dishonest in that he disclosed quotes of other competitors to Bubia and failed to disclose his clear conflict of interest to NPF management.

There is a clear case of nepotism.

Examination of benefits received by Mr Wanji

Laiks Printing

Mr Wanji was a director of Laiks Printing as well as a cheque signatory on its cheque account.

Ten of 15 quotes from Laiks Printing were obtained verbally by Mr Wanji and he recommended that NPF purchase from Laiks Printing.

TO BE CONTINUED

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 82]

November 25, 2015 1 comment

Below is the eighty-second 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 82nd 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

Fees Paid to accountants in 1996 1997 and 1998

npf 82 a

npf 82 b

npf 82 c

npf 82 d

The situation in 1998 remained basically the same as the previous three years. However, as far as outsourcing of accounting work was concerned, a significant part of the costs at the end of 1998 was charged to 1999 accounting cost.

When Noel Wright (a qualified chartered accountant) left in January 1999, the responsibility for the accounting positionmoved to Salome Dopeke.

The commission finds that Ms Dopeke was not suitably qualified and experienced and lacked appropriate skills to take on this role. A draft section 8 letter prepared by the authorised auditors for the year ended December 31, 1998, included items that deal with weaknesses in the accounting area and requested NPF to address these weaknesses.

NPF therefore sought out accounting firms to assist them in having their accounts brought up to date.

Appointment Of Ram Business Consultants (Ram) 

Jimmy Maladina engaged this firm as auditors and investigators for Crocodile Catering. The engagement was made without reference to the Crocodile board or the shareholders, (the NPF board). This appointment was made contrary to proper tender procedures. This firm was also most expensive. This commission considers the fees charged by Ram were excessive for the actual time they worked for NPF.

Appointment Of Pricewaterhouse Coopers (PwC)

Fees paid to PwC were related to several distinct engagements. This commission found that work performed by PwC was agreed to in advance between NPF and the firm, and was confirmed by a letter of engagement. It is noted that NPF sought quotes before engaging PwC.

Fees paid to Accountants in 2000 relating to 1998 and 1999 financial statements

npf 82 e

In 1998 and 1999, KPMG billed additional audit fees direct to NPF for additional work in assisting NPF in the preparation of their annual financial statements in a format compatible with International Accounting Standards.

Tender Procedures Adopted In November 1999. 

From 1995 to 1999, NPF management used its discretion to appoint key advisors and professional service providers. Then in early 1999, chairman Mr Maladina made the appointments without reference to the NPF board. This is contrary to normal procedures used by NPF in the procurement of professional services, including accountants.

Findings

At paragraph 8.9.6, the commission has found that:

(a) During the period January 1, 1995 to December 31, 1999, NPF engaged the services of the following accounting firms for various accounting and tax related services:

  • Ernst & Young in the period 1995 to 1998 as tax agents and tax advisers;
  • Deloitte Touche Tohmatsu in 1999 as tax agents and tax advisers and to do sundry accounting services with regard to the Ambusa Copra Oil Mill Project;
  • PwC in 1999 as business advisers including inter alia a review of the fund’s investment portfolio and a review of the financial position at December 1999;
  • Ram in 1999 for accounting assistance (and in particular the completion of bank reconciliations for 1998);
  • Auditor-General — for the 1995 to 1997 financial years authorised auditor was Deloitte Touche and for 1998 to 1999, the authorised auditor was KPMG;

(b) Almost without exception, NPF did not seek to tender the fund’s tax and accounting related work and as such NPF management failed to ensure the fund received the most cost effective service during the period 1995 to 1999;

(c) Following the departure of Mr Wright in January 1999, the weaknesses in the fund’s accounting systems and resources resulted in the need for the fund to out source accounting and business advice from the abovementioned professional accounting firms;

(d) These weaknesses in the accounting function also resulted in the significantly high level of additional audit costs levied by the authorised auditors, KPMG. In relation to the 1998 and 1999 financial statements, KPMG billed NPF direct contrary to normal procedures where audit fees are usually billed by the Auditor-General;

(e) With the exception of Ram, there is no evidence that favouritism or nepotism existed in the appointment of any of the professional firms. However, the lack of transparency and tender procedures in the appointment of these professional firms leaves a general suspicion that favouritism may have existed in relation to non-audit services, particularly with regard to Ram;

(f) There is considerable evidence connecting Rex Paki of Ram and Mr Maladina during the time that Mr Maladina and Mr Leahy were actively conspiring to defraud the NPF. Mr Paki also received benefits in the form of cash and airfares from the proceeds of those frauds;

(g) Examining the process of appointing Ram to provide services for NPF, the commission finds that it was similar to Mr Maladina’s improper appointment of Ram as financial consultant for Crocodile (see Schedule 3A);

(h) On all the evidence, the commission finds that the appointment of Ram by the NPF board, which was not properly briefed, was strongly influenced by Mr Maladina. Mr Maladina’s co-conspirator in the criminal conspiracy to defraud NPF, Herman Leahy, then proceeded to approve the payment of Ram’s excessive fees without seeking the required NPF board approvals.

(i) The commission finds that the appointment of Ram and the payment of their excessive fees on the approval of Mr Leahy constituted nepotism within the meaning of the commission’s terms of reference;

(j) There also exists a significant level of concern as to the probity or otherwise of fees charged by Ram. The limited documentary evidence in the form of the working papers, fees and correspondence files, produced under summons to this commission by Ram, to support the fees paid by NPF, indicates that the fees charged by Ram were excessive.

(k) Management acted in excess of their delegated financial authority by approving Ram’s fees without referring them to the board.

Other Professional Services 

During the period covered by this review (1995 to 1999), NPF hired other firms to carry out specific work requirements. These firms are:

  1. Hay Group of Companies;
  2. Ken Yapane and Associates
  3. Freehill Hollingworth and Page;
  4. E&S Groups;
  5. Minao Surveys; and
  6. Sogu Works.

The finance inspectors closely scrutinised the arrangements between NPF and the above firms and concluded they were in order, with the exception of Ken Yapane and Associates. The commission accepts and agrees with those findings.