Posts Tagged ‘PNG Sustainable Development Program’

Elomar brothers in $9 million legal row over PNG deal

April 23, 2018 Leave a comment

The Elomar brothers in Papua New Guinea.

By Patrick Begley, Sydney Morning Herald

Sydney businessmen the Elomar brothers were busy in 2014.

Mamdouh Elomar was publicly decrying the actions of his son Mohamed, an Islamic State fighter in Syria who would go on to be photographed holding severed heads.

Mamdouh was also vying for Iraqi construction contracts with his brother Ibrahim, arranging a $US1 million bribe for which they would both be jailed last year.

But the pair struck another deal that year, paying $6 million for a logging company only to end up negotiating a $9 million payment from the previous owners after a dispute.

The case, now before the courts, involves the forests of Papua New Guinea and a development fund meant to help lift locals out of poverty.

And it hinges on claims that another businessman stole more than $10 million in assets belonging to the Papua New Guinean people.

Mamdouh, 64, and Ibrahim, 61, were raised in Lebanon in a family of 12 children and worked manual jobs in Australia before building a large construction company, Lifese.

The firm counted a former Supreme Court judge as its chairman and completed projects worth hundreds of millions of dollars.

In time, though, the Elomar brothers became better known for the extremist activities of their relatives.

Mamdouh’s brother Mohamed Ali Elomar is serving 21 years’ jail for his role in planning attempted terrorist attacks in Melbourne and Sydney in 2005.

Mamdouh’s son Ahmed was jailed for four years for assaulting a policeman at the 2012 riots in Sydney’s Hyde Park, after carrying a sign that said “our dead are in paradise, your dead are in hell”.

Then his son Mohamed, formerly a promising boxer, travelled to Syria to become one of Australia’s most infamous IS fighters, before he was killed in an airstrike in 2015.

Terrorism headlines were hurting the Lifese business in 2014, shrinking revenue.

But the Elomars found money in February that year to buy a timber operation called Cloudy Bay from the PNG Sustainable Development Program, a charitable trust part-run by Australians.

Managing $US1.3 billion in assets, PNG SDP funds local development projects with proceeds from the Ok Tedi mine that was once owned by BHP, which handed over its stake in return for immunity from environmental lawsuits.

“We commit ourselves to improving the quality of life of the people of Western Province,” the program says on its website.

The Elomars were joined by another Australian, 25 per cent shareholder Nick Roniotis, in buying the Cloudy Bay timber operation – including logging permits, production plants and a commercial building in Port Moresby – for 40 million kina, about $17 million at the time.

They paid $6.5 million up front, but then defaulted on the rest.

As they faced charges over the bribery in Iraq, the Elomars were negotiating hard over the PNG business to strike a new and unusual deal.

It would have allowed them to keep control of the company while receiving millions of dollars more than they ended up paying for it.

The deal, signed last February, was meant to put an end to a murky dispute.

PNG SDP could have taken back all of the timber operations’ assets, but it decided to forgive the $11 million debt in return for the Port Moresby property alone.

On top of this, PNG SDP said it would pay the Elomars’ company $9 million.

Once the property was transferred back to the development program and the money paid, both sides would relinquish any right to sue over the initial sale.

The deal was fair, according to PNG SDP’s Australian chief executive John Wylie, because it compensated the Elomars for a massive theft on the timber operation.

A former public servant and management consultant, Mr Wylie said the theft was committed by someone working within the development fund before the sale to the Elomars and was only discovered later.

“Physical assets” were allegedly stolen and funds siphoned off to pay for personal expenses, including school fees in Australia.

“The validated quantum of the theft was much more than $9 million,” he said.

The alleged thief, who cannot be named for legal reasons, has been reported to an anti-corruption body in Singapore, where the company was incorporated, Mr Wylie said.

“The PNG authorities are in the process of being informed,” he said. “This is being done carefully through lawyers and has yet to be fully executed.”

Deeds sighted by The Sun-Herald refer not to a theft but “disputes” between the buyer and seller.

Asked why the $9 million payment was to go to the Elomars personally, not the Cloudy Bay company, Mr Wylie said Cloudy Bay had given a written executed authority for it.

“How they divvied up the spoils, as it were – we didn’t want to get involved in that. None of our business.”

The deal has yet to go through.

The Elomars’ former business partner, Mr Roniotis, claimed he was cut out of the $9 million payment. He launched action in PNG’s National Court of Justice to have the sum paid to the timber company, not the Elomars’ venture.

Mr Roniotis also questioned the idea of compensation for a theft, saying he and the Elomars conducted due diligence on the company before buying it and found nothing untoward.

His lawyer, Stewart Levitt, has questioned the negotiations between PNG SDP and the Elomars, who at the time had been facing foreign bribery charges for more than a year.

“It would be extraordinary for the trustees of a public trust to want to continue to do business with people known to be facing serious criminal charges which had been widely reported,” Mr Levitt said.

The Elomars, who pleaded guilty to the Iraq bribery last July, will be first eligible for release in September next year. Their lawyer at the time of the PNG deal negotiations, Abdul Reslan, did not return calls.

The establishment of PNG SDP and environmental damage from the Ok Tedi mine is now under investigation after PNG Prime Minister Peter O’Neill announced a public inquiry in parliament this month.

Mr Stephens should beware of glass houses…

November 2, 2012 4 comments

In response to recent posts on Rex Paki, Lawrence Stephens has suggested:

“There are excellent reasons for us to scrutinize appointees to many positions. There are excellent reasons also to show respect for those with whose activities we may be concerned [with] but against whom no court of law has recorded criminal convictions”.

Well then, lets look at the comments Mr Stephens made when PNG’s Deputy Prime Minister, Belden Namah was accused, not by a Commission of Inquiry, not by a Public Accounts Committee, not by an Auditor General, and not by a Court, but a newspaper of depositing $800,000 in a casino account at the Australian Star City Casino.

Mr Stephens, as Chairman of TIPNG, told the Sydney Morning Herald:

“It looks bad. Splashing large sums of cash around at a casino is extremely frightening, especially when we are constantly told there is not enough money for schools, hospitals and roads”.

There you go, Namah was guilty, on the basis of a report in an Australian newspaper. Was this the sort of “respect for those with whose activities we may be concerned [with] but against whom no court of law has recorded criminal convictions”, Stephens means?

So in the case of Namah, Mr Stephens was more than prepared to publicly indict PNG’s Deputy Prime Minister, on the word of an Australian newspaper. But PNGexposed is wrong to post articles criticizing Paki on the basis of two Commission of Inquiries, two Public Accounts Committee inquiries, an Auditor General inquiry, and two court judgments.

Why the double standards Mr Stephens?

Could it be that this example is a little closer to home? Could it be that the case of Rex Paki shows a staggering failure of due diligence, or worse, on the part of the PNGSDP Board and Management. It is time for TIPNG to take a principled stance against corruption, not a politically expedient one.

TI dismisses Commission of Inquiry findings

October 31, 2012 9 comments

In an astonishing statement, Transparency International Chairman Lawrence Stephens has dismissed the findings of two Commissions of Inquiry as ‘unproven accusations’ and says they ‘are not sufficient for responsible people to treat as facts’.

Stephens remarkable comments, which he published on this blog and which are reprinted below, were made in response to questions raised over the role of Rex Paki on the Boards of the Civil Aviation Authority, Bank of PNG and PNG Sustainable Development Program.

Paki has been implicated in the findings of both the Finance Department and National provident Fund Commissions of Inquiry as well as two Public Account Committee investigations and has been labelled by the Supreme Court as “evasive and dishonest”.

But this it seems is all worthless gossip to the Transparency International chief despite the fact the Commissions of Inquiry are conducted by qualified judges, are established under Statute and make findings of fact based on a “strict adherence to principles of natural justice” and “giving all person with an interest in matters before the Commission an opportunity to be heard”.

Stephens is right to say that Rex Paki has never been found guilty on any criminal charges, but to say the findings of a Commission of Inquiry merely raise ‘questions that are of concern’ and that often the ‘accusations prove baseless‘ is very misleading and insulting to the Commissioners.

Stephens is an employee of the PNG Sustainable Development Program.

Statement by Lawrence Stephens

This discussion in relation to Rex Paki draws on some useful sources. It raises questions which are of concern to many people. Questions however are not sufficient for responsible people to treat as facts. People accused are surely entitled to be heard out before being convicted, particularly if the convicting is being done by people who do not even give their real names!
TI PNG views with concern the official and unofficial records of many people holding public office and the disappointing regularity of appointments of reputedly inappropriate individuals to important positions. We are also conscious of the times where accusations prove baseless. Our approach is generally to encourage transparent scrutiny of all public appointments.
We are a partner to government in seeking to improve the manner in which governance is practiced. We do not normally focus on unproven accusations against individuals. We do focus attention on idications that, as a result of corruption, systems are failing or not operating as they should. Often our work is conducted quietly, working with like-minded public office holders and other community organisations, to assist bring about change. Occasionally public comment appears necessary and we are not constrained by relationships with governments, companies and individuals in so responding.
Individual TI PNG directors over the years have had interests in organisations and activities which have been subject to public debate and challenges. This does present the organisation with challenges which need to be worked through. In my experience we have, as a group of concerned individuals encouraging better ethical standards in government and business, faced these challenges without being constrained by our wide network of personal associates across the community.
Lawrence Stephens

Why is TI silent on the prominent role of Rex Paki in our State owned entities?

October 29, 2012 9 comments

Businessman Rex Paki has been heavily criticized in a number of investigations into alleged corruption and fraud involving millions of kina.

His business activities have attracted the censure of two Commissions of Inquiry and the Auditor Generals in a special investigation; he has been investigated twice by the Public Accounts Committee and Mr Paki has been described as “evasive and dishonest” by the Supreme Court which also found his conduct to be “improper, unreasonable and blameworthy”.

The Finance Department Commission of Inquiry found Paki’s firm RAM Business Consultants helped Andrew Mald inflate damages in a legal action against the State. The Commission found “Ram Business Consultants deliberately inflated the [value] by K4,659,650 for reasons known only to themselves… we conclude that the Cash-flow projection was specifically engineered in a way to inflate the yearly income projection… so the damages claim would be high”.

The Public Accounts Committee in a completely separate investigation found that RAM was paid K1,561,062 over an 18 month period by the Public Curator’s Office, yet “there was no formal contract… there was no check of the claimed hours worked and no evidence that any benefit flowed to the Public Curator at all”. The Auditor General found that after eighteen months of work, the Public Curator could only report that a small amount of computer equipment was provided.

Yet, Rex Paki sits on the Board of the Bank of Papua New Guinea, is Chairman of the Civil Aviation Authority and has more recently been appointed to the Board of the PNG Sustainable Development Program.

Why is Transparency International so quiet on the apparent disconnect between Rex Paki’s dubious business history and his prominent public roles?

One observer has pointed out that Lawrence Stevens, Chairman of TI PNG is a program manager employed by PNG Sustainable Development Program – where Rex Paki is now a Director.

It is to be hoped that Lawrence Stevens does not feel constrained by this relationship and that the silence of TIPNG is not a result of any undue pressure.

It is time for TI to speak out on the inappropriate role Rex Paki has in the governance of some of our key institutions.

The Evidence on Rex Paki: A Reply to Kusai Mahn

October 24, 2012 3 comments

Dr Kristian Lasslett | International State Crime Initiative (ISCI)

In a recent ISCI report on the demolition of Paga Hill, the prominent businessman Rex Paki received mention. According to Investment Promotion Authority records, he had been intimately involved in the Paga Hill property development during 1997-2000. ISCI queried Paki’s involvement in light of serious allegations laid against him by two Commission of Inquiries, two Public Accounts Committee inquiries, an Auditor General special investigation, and PNG’s Supreme Court.

Following the publication of our report, social media commentators noted with concern that Rex Paki has also been appointed to the Papua New Guinea Sustainable Development Program Ltd (PNGSDP) Board of Directors, by PNG’s Treasurer. According to PNGSDP’s 2011 Annual Report, Rex Paki is “a member of the Board of Bank of PNG and is the Chairman of the Civil Aviation Authority”, as well.

After these concerns were aired in PNG’s blogosphere, a supporter of Rex Paki, who goes by the name of Kusai Mahn, composed an article slamming the ISCI’s findings, see here. Mahn writes, “a recent report on the ‘Demolition of Paga Hill’ by a UK-based non-government organization…is merely a character assassination of Mr Paki on issues that are considered water under the bridge” (ISCI is in fact a research centre not an NGO, and it is run by King’s College London, Harvard University, the University of Ulster and Hull University).

Mahn continues, “Rex Paki has appeared before only the NPF Commission of Inquiry (COI) and not the Finance Department COI as alleged”. Of course, the report never said Paki appeared before the Finance Department COI, it said Paki’s firm Ram Business Consultants was censured by the Finance Department COI after it allegedly helped Andrew Mald inflate damages in a legal action against the PNG state. You can read the COI findings here. Though here is one telling extract from the report:

Ram Business Consultants deliberately inflated the NPV [Net Present Value] by K4,659,650 for reasons known only to themselves… From the review of the cash flow projection prepared by Ram Business Consultants we conclude that the Cash-flow projection was specifically engineered in a way to inflate the yearly income projection including NPV so that damages claim would be high. The Ram Consultants Report was based on mere trading assumptions supplied by Andrew Maid, not on proper business records and tax returns.

Mahn also argues: “Rex Paki was never ‘intimately’ involved in the Paga Hill development as alleged. He is not a director or shareholder and his only involvement was providing professional accounting services to the project developer for which he was duly paid”. According to Investment Promotion Authority records, Mahn is simply wrong. These records state Paki was a Director, Secretary and shareholder in the Paga Hill Land Holding Company (PHLHC), which was awarded an Urban Development Lease over Paga Hill in 1997 (you can view the lease here). Additionally, Paki’s firm Ram Business Consultants was PHLHC’s registered business address. You can see PHLHC’s company extract here.

Finally, Mahn claims, in reference to a recent Supreme Court decision, “Rex Paki was not ‘evasive and dishonest’ about his role as liquidator of the Motor Vehicle Insurance Ltd (MVIL)”. Once again, neither ISCI’s report or the Supreme Court said this. The Supreme Court’s remarks were in reference to Paki’s evident concerted attempts to avoid the legal process of discovery. Here is the relevant passage for Mr Mahn’s information, though the full decision can be read here:

It is clear to us that the appellant [Paki] was attempting to avoid giving discovery; the refusal was repeated, chronic and designed to conceal the true state of affairs. He was evasive and dishonest. He gave different reasons for not producing the invoices. He said copies of the invoices were available for inspection at Namaliu & David Lawyers, that the originals were in archives at Korobosea, that the copies on his computer have been lost because the computer crashed, that copies have been misplaced and he needed time to locate them, that copies were available at MVIL or at the offices of Mr. Kerenga Kua, a lawyer. He did not give discovery despite agreeing to Consent Orders of the National Court requiring him to produce the invoices for the entire period of the liquidation. Two (2) years after he verified a list of documents, the appellant was still looking for copies of the invoices. In fact, he never gave discovery. He was required by law to retain the accounts and records of the liquidation for seven (7) years (section 306 (1)(b) of the Companies Act). We agree with Mr. Brookes that the actions of the appellant have caused the respondent an enormous amount of wasted time, effort and money. We are of the view that the conduct of the appellant was improper, unreasonable and blameworthy.

And of course, Mahn failed to comment on the successive inquiries into the Public Curator’s Office made by the Auditor General’s Office and Public Accounts Committee. Here, once again, Ram Business Consultants came under fire. Despite being paid K1,561,062 over an eighteen month period, the Public Accounts Committee (2006) allege,

“there was no formal contract … there was no check of the claimed hours worked and no evidence that any benefit flowed to the Public Curator at all. The Auditor General finds that after eighteen months of work, the Public Curator could only a report that a small amount of computer equipment was provided”.

To conclude, there is one allegation Mahn makes which is rather serious, if credible: “Rex Paki was appointed to the PNGSDP Board by the Minister for Treasury as the State’s representative. He was not appointed by Prof Ross Garnaut who nonetheless values Mr Paki’s contributions as a Board member and will defend his appointment. CEO David Sode also holds Mr Paki in high regard”.

I have no evidence to suggest that what Mr Mahn says is true – my focus has been on Paga Hill –  but if the Treasurer, Prof Ross Garnaut and CEO David Sode, are not concerned by the findings of two COIs, two Public Accounts Committee inquiries, one Auditor General’s Office special investigation and a Supreme Court decision, that would indeed be a worrying new revelation.

Garnaut chooses strange bedfellows on PNGSDP board

October 11, 2012 8 comments

Prominent Australian Prof Ross Garnaut, already under fire for his extensive links to the environmentally destructive mining industry in Papua New Guinea – link – has chosen to bring “evasive and dishonest” businessman, Rex Paki onto the board of the PNG Sustainable Development Program. Garnaut is the Chairman of PNGSDP.

Over the past 20 years Paki has appeared before two Commission of Inquiries (Finance Department and National Provident Fund), two Public Account Committee Inquiries, and a Supreme Court case where he was slammed by the full court.

Paki was intimately involved in the Paga Hill development in Port Moresby between 1997-2000, a development which has recently been making headlines for forced evictions and corrupt property deals – link.

In January 2004 the Public Acounts Committee reprimanded Paki’s company Ram Business Consultants (RAM) for issuing an “empty cheque” to the Accountants Registration Board, and then “practicing without … formal registration”.

Two years later in a separate investigation – which Paki attempted to block – the PAC found that over an 18 month period (1998-2000) the Public Curator’s Office had paid RAM K1,561,062 (approx US$640,000), without the existence of a contract, proper invoices, or evidence that any work had been done.

Two Commission of Inquiries (COI) also found reason to censure RAM. Following its first appearance, RAM was accused by the COI of receiving “improper benefits” and charging clients “excessive” fees; in the firm’s second appearance, the COI found that RAM had substantially inflated a cash-flow projection, so a prominent client could amplify his damages claim against the state.

In light of these PAC/COI findings, it is perhaps not surprising that most recently in an appearance before the Supreme Court, Salika DCJ, Gabi J and Hartshorn J, described Rax Paki as “evasive and dishonest”, following Paki’s extraordinary efforts to frustrate the process of discovery (Paki was being sued for allegedly overpaying himself as liquidator of Motor Vehicle Insurance Ltd).