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Elite network behind Paga Hill Estate

February 16, 2017 11 comments

Minister Justin Tkatchenko has this week called for a Commission of Inquiry into the murky deals behind acquisition of Paga Hill land and the abuse suffered by its former residents at the hands of Gummy Fredriksson and the Paga Hill Development Company.

Meanwhile, PHDC has issued a defence, claiming it has indefeasible title over Paga Hill, winning every legal challenge in District, National and Supreme Courts’.

We think we need to look again at the facts, and republish here an article from May 2016:

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.

Duma Scandal Thickens – The Fox is in the Henhouse

February 6, 2017 2 comments

william-duma 

When PNG Blogs exposed the Duma scandal, in which the Minister is alleged to have personally benefited from K50 million paid by the State to relocate the Lancron naval base, it was hard to know where to begin analysing the affair. There were so many angles!

Over the weekend we exposed the corrupt background of the man appointed by the Prime Minister to supposedly investigate the Duma affair – Chief Secretary Isaac Lupari.

Now it is time for another instalment.

It is alleged that one of Duma’s accomplices in the K50 million fraud was Phillip Eludeme and PNG Blogs has suggested that Eludeme received K16.5 million for his role in facilitating the scam.

Eludeme is the Chairman of the Central Supply and Tender Board, arguably one of the country’s most important national bodies. It can either be a guard against corruption if run properly, or a mechanism for corruption if abused.

So who would you appoint to Chair such an important Board, which safeguards hundreds of millions in public money? Probably not one of the leading stars in the National Provident Fund Commission of Inquiry, who is alleged to have supplied a K100,000 bribe to the Lands Minister. But this is exactly what happened.

The scandal centred on, Waim No.92, which on paper was owned by Phillip Mamando and Philip Eludeme. The commission argued both were proxy shareholders for none other than Jimmy Maladina, Chairman of the National Provident Fund. The conspiracy, the Commission of Inquiry argued was to acquire a plot of land in Waigani for a discounted price and then sell it on to the NPF at an inflated sum. 

The Commission claims Eludeme was a key fixer in this corrupt deal, ‘prior to the Land Board hearing, Mr Eludeme had approached [Lands] 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’. The Commission adds: ‘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)’.

Interestingly, Eludeme’s company at the centre of the NPF Commission of Inquiry, registered office at the time was Ram Business Consultants – Eludeme’s personal registered address was the same company.

Ram Business Consultants was another player at the centre of the NPF inquiry. In addition to this its principal, Rex Paki, was also one of the initial shareholders in the Paga Hill Estate.

National Court records indicate William Duma was involved in a land-grab that will greatly benefit from this proposed ‘tourism city’ at Paga Hill. He has also acted as Director in Malaga No.7 Limited, which is owned by Paga Hill Development Company.

In addition to the NPF scandal, Eludeme also featured in the SABL Commission of Inquiry, owing to his involvement in a company at the centre of the Bewani oil palm and logging scam – a major fraud involving 140,000 hectares of customary land, discussed in detail on PNG Echo blog.

According to the SABL CoI, one of the companies involved in the scam, Bewani Palms Management Limited was owned by Philip Eludeme and he was also a director, alongside Charles Litau, John Wuni and Bob Namah.

It appears birds of a feather flock together. 

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.

National Provident Fund Final Report [Part 69]

November 10, 2015 Leave a comment

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

NPF Final Report

This is the 69th 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. Michael Somare.

Executive Summary: Schedule 6 Continued 

(ii) To the Papua New Guinea Law Society — Mr Leahy and Mr Maladina and Ms Sariman to consider disciplinary measures;

(iii) To the Ombudsman Commission — Mr Maladina and Mr Fabila to consider whether they were in breach of the Leadership Code;

(h) The scam to defraud the NPF over the sale of the NPF Tower amounted to a criminal conspiracy involving Mr Leahy, Mr Maladina, Mr Fabila, Sullivan and Ms Sariman.

REFERRALS

IN relation to the commission’s inquiries into the six matters investigated in Schedule 6, the commission recommends that the Prime Minister makes the following referrals:

SECTION A:

Referrals recommended by the commission to the constituting authority:

Jimmy Maladina

To the Commissioner for Police:

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

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

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

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

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

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

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

Ombudsman Commission:

To consider breaches of the Leadership Code in relation to his activities concerning the fraud against the NPF and related activities.

PNG Law Society:

Professional misconduct.

Henry Fabila

Commissioner for Police

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

Ombudsman Commission

To consider breaches of the Leadership Code in relation to his activities concerning the fraud against the NPF and related activities.

Herman Leahy

Commissioner for Police

For being party to all or some of the above mentioned offences and/ or of criminal conspiracy with Mr Maladina in relation to any or all of such offences.

PNG Law Society Professional misconduct.

Mr Taniguchi

Commissioner for Police

For being party to all or some of the above mentioned offences and/ or of criminal conspiracy with Mr Maladina in relation to any or all of such offences.

Kazu Kobayashi

Commissioner for Police

For being party to all or some of the above mentioned offences and/ or of criminal conspiracy with Mr Maladina in relation to any or all of such offences.

Ken Yapane

Commissioner for Police

(a) FOR being party to all or some of the above mentioned offences and/ or of criminal conspiracy with Mr Maladina in relation to any or all of such offences; and

(b) Fabricating documents.

Rex PAKI

Commissioner for Police

Aiding the office of fraud or receiving.

PNG Institute of Accountants

Professional misconduct

Ango Wangatau

Commissioner for Police

Aiding the office of fraud

PNG Institute of Accountants

Professional misconduct

David Lightfoot

Commissioner for Police

To consider whether there is criminal culpability in relation to the fraud against the NPF such as to warrant charging him with an offence against the Criminal Code.

PNG Law Society

Professional misconduct

Barbara Perks

Commissioner for Police

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

Peter O’Neill

Ombudsman Commission

(a) The concealment of his interest in Bluehaven No.67 which purchased RIFL from ICPNG;

(b) The receipt of K100,000 fraud money by his company Mecca No.36; and

(c) The concealment of his interest in Nama Coffee Exports Pty Ltd.

Kenneth Barker

Commissioner For Police

(a) To be referred for perjury if he returns to PNG; and

(b) Aiding the offence of fraud.

Maurice Sullivan

Commissioner for Police

Aiding the office of fraud.

The commission has already directed that the following persons be referred to the Commissioner for Police.

SECTION B:

Direct referrals by the commission

Peter O’Neill

Commissioner for Police

Possible perjury regarding source of funds to purchase Manamatana apartments.

Concluding Comments

Result of the investigation

After thorough and painstaking investigations, the commission has concluded that no further action is required regarding:

  • The inground works variation costs of K3,006,270.26 as the costs were justifiable and there were no irregularities;
  • Builders other works variations because sound professional opinion establishes there were no irregularities;
  • The first acceleration fee of K1.4 million because the decision to pay the fee was justifiable and the cost was within reasonable bounds; and
  • The professional fees, because there is a genuine dispute caused by ambiguity in the contract documents and there are no irregularities.

However, the commission’s investigations uncovered criminal malpractice requiring the following matters and referrals to the Commissioner for Police and other authorities have been recommended:

The Kina devaluation claim of K3.3 million:

This payment was agreed upon by Mr Maladina so he could receive the fraudulent payment of K2,505,000 from Kumagai. That was part of the “deal” with Mr Taniguchi. NPF may be entitled to recover the refund of this K3.3 million;

THE second acceleration claim of K2,505,000:

This claim was spurious and was agreed upon between Mr Maladina and Kumagai Gumi managers (under pressure from Mr Maladina) to enable the money to be channelled through Kumagai Gumi and on paid for the benefit of Mr Maladina, with shares for Mr Leahy and Mr O’Neill (through the account of Carter Newell and PMFNRE).

NPF is entitled to recover this K2.505 million.

Tribute to Finance Inspectors

The commission once again commends the finance inspectors who were directed by DoF Secretary Brown Bai under Section 64 of the PF(M) Act to inquire into aspects of the NPF Tower financing and construction.

In every respect their inquiries and findings had validity and it amply demonstrates what a powerful tool Section 64 is if the inquiry into a public body is carried out by professional Finance Inspectors acting with perseverance and integrity.

SCHEDULE 7A

Niugini Insurance Corporation K2 Million Loan

The commission has carefully considered counsel’s opening submissions and all statements, evidence and submissions given in reply.

For ease of reference this report is presented generally in the same sequence as opened by counsel. The commission’s findings are set out at appropriate places within the text and also in the schedule of findings at the rear of the report as answers to the terms of reference given to the commission.

Addresses by counsel and evidence in relation to this topic can be found in the transcript of proceedings as follows:-

Background

The initial decision by the National Provident Fund of Papua New Guinea (NPF) to loan funds to Niugini Insurance Corporation (NIC) derived from the 93rd NPF board meeting on February 9, 1995.

At that meeting, finance and investment manager Noel Wright informed the board of NIC’s request for a loan to complete its Lakosi Place development.

A paper was also circulated to the board members in which the managing director Robert Kaul recommended board approval of a debt facility of K2 million at a fixed interest rate of 13 per cent for a term of 10 years.

The board, however, resolved not to approve the loan on the terms recommended by the managing director but instead resolved that the managing director offer the loan to NIC under the following terms:

Debt facility — K2 million;
Interest rate — PNGBC Indicator lending rate plus 4 per cent;
Term — 10 years; and
Security — first registerable mortgage over Lakosi place property. (Exhibit N1)

Although we were unable to locate a copy of the board paper that was circulated at the 93rd board meeting, it seemed that Mr Kaul brokered the deal with NIC as evidenced at the 94th board meeting on April 24, 1995.

The board meeting resolved to ratify the NPF management’s decision to loan up to K2 million to NIC on the following terms and conditions:

Borrower: Niugini Insurance Corporation Limited;
Amount : Up to K2 million;
Term: 10 years;
Interest Rate: PNGBC Indicator Lending Rate (ILR) plus 4 per cent payable monthly;
Grace Period: Eight months from date of signing agreement;
Drawdown Period: First drawdown after five days from date of signature of the loan agreement to and including up to 10 months from such date;
Commitment charges: No commitment charges within six months of the date of signature and 0.5 per cent of undrawn balance for the remaining drawdown period for each day undrawn;
Prepayment penalty: Provided no prepayment is made within three years, otherwise the charge equal to the default rate will apply on the prepaid amount before the expiration of the said period;
Default penalty: 2 per cent charge on unpaid amount remaining un-remedied within five working days;
Repayment: Repayments of the principal amount shall be made monthly equal installments, the first monthly repayment commencing on the eighth month after the signing of the loan agreement and the final repayment being on the 112 month after the signing of the loan agreement;
Management Fee: 1 per cent flat of the total facility in advance for the first K1 million drawn and for the balance of the drawdown in arrears; and
Security: First mortgage over the property. (Exhibits N2 and N3)

Although the minutes do not make reference to it, the managing director’s report for the 94th board meeting reads:

“v) NIC Loan

After NIC consented to the 4 per cent margin, Ministerial approval has been received and documentation is now proceeding smoothly. First drawdown is expected this month”. (Exhibit N4)

Mr Kaul failed to attach a copy of the Ministerial approval in his board report and it seemed his report might have been misleading.

Ministerial Approval

We have not sighted any Ministerial approval for this loan even though the finance report for the period ending March 1995 advised of the Ministerial approval as being received (Exhibit N5).

The NPF Files on “Letters to the Minister” (Commission Document 55) and “Letters from the Minister” (Commission Document 54) do not contain any letter granting Ministerial approval.

The documents produced by the Department of Finance and Treasury (DoF) in respect of Ministerial approval granted in 1995 (Commission Document 5A) contain no documents indicating Ministerial approval was either sought or given.

Consequently, there is no primary evidence of approval either being sought or given, only third party reports from Mr Kaul and Mr Wright.

Loan Documentation

The legal counsel/corporate secretary’s report for the months of April/ May 1995, reads: “Niugini Insurance Corporation Limited— Long Term Loan — K2 million Allotment 9 Section 62 Granville. I table the following loan and security agreements.

(i) Loan Agreement dated 28 April 1995

(ii) Memorandum of Mortgage dated 28 April 1995

The Memorandum of Mortgage was registered on the certificate of title to allotment 9 section 62 Granville on 17 May 1995. The certificate of title has now been lodged in the NPF safe”. (Exhibit N6)

The above report was for the 95th board meeting held on June 2, 1995. The minutes of that meeting record the corporate secretary tabling both documents (Exhibit N7).

The 95th board meeting was the last board meeting during which the NIC Loan was actually considered.

As was the case with the Ministerial approval letter, the commission was unable to locate copies of the signed loan documents.

Drawdown

In the managing director’s report for the 96th board meeting held on August 2, 1995, (Exhibit N8), Mr Kaul discussed NPF’s investment in the Bank South Pacific (BSP). Mr Kaul advised the board of NPF’s large deposit of K28 million with BSP and stated that although NPF is receiving healthy returns from this investment, the deposit will be reduced considerably in the next 12 months due to the withdrawal of funds to meet NPF’s loan commitments to, among others NIC.

With the K2 million already being committed the finance reports for the months of September and October 1995 attached the 1996 budget. The projection of interest from, the NIC loan was as follows: The interest projection was based on the assumption that the Indicator Lending Rate (ILR) averaged 13 per cent in 1996 (Exhibits N9-N12).

Repayment

By the end of 1995, NPF’s projection of interest income from the loan for the year 1996 was K281,419.

npf 69

The first mention of the NIC loan in 1996 was at the 101st board meeting on June 28, 1996.

The finance manager informed the board that NIC was willing to repay its K2 million loan.

The board resolved to accept early repayment subject to the terms and conditions governing the loan.

However, by the 103rd board meeting held on October 18, 1996, the board noted that NIC had decided against early retirement of the loan (Exhibits N13-N15).

In commission document 1144 is a schedule of loan repayments for the years 1996 to 1999 detailing monthly payments of K14,583.33 beginning January 1996 till December 1999. This standard payment of K14,583.33 was to retire the principal amount.

Therefore, a total of K699,999.84 had been received by NPF to retire the principal amount (i.e. K174,999.16 per year from 1996-1999) (Exhibit N16).

NPF could not locate documents evidencing payment of interest on the loan and it seemed that such payments were not forwarded to NPF.

Findings

(a) The NPF management failed to seek Ministerial approval for the loan to NIC;

(b) THE board reports by Mr Kaul and Mr Wright were misleading as no ministerial approval was sought or granted;

(c) NPF management and Board of Trustees failed to ensure that Ministerial approval had been received before allowing NIC to commence drawdown of the loan funds; and before allowing NIC to commence drawdown of the loan funds; and

(d) THE NPF management failed to ascertain and ensure that interest payments were made by NIC.

TO BE CONTINUED

National Provident Fund Final Report [Part 59]

October 27, 2015 1 comment

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

NPF Final Report

This is the 59th extract from the National Provident Fund (now known as NASFUND) Commission of Inquiry report. The inquiry was conducted by retired justice Tos Barnett and investigated widespread misuse of member funds. The report recommended action be taken against several high-profile leaders, including former NPF chairman Jimmy Maladina. The report was tabled in Parliament on November 20 by Prime Minister Sir Michael Somare.

Executive Summary Schedule 6 Continued 

At paragraph 11.5.18.1, the commission has found that:

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

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

At paragraph 11.5.20.1, the commission has found that:

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

At paragraph 11.5.21.1, the commission has found that:

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

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

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

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

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

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

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

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

59 image a

Findings

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

At paragraph 11.6.1.1, the commission has found that:

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

At paragraph 11.6.2.1, the commission has found that:

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

At paragraph 11.6.3.2, the commission has found that:

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

At paragraph 11.6.3.5, the commission has found that:

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

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

At paragraph 11.6.4.1, the commission has found that:

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

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

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

At paragraph 11.6.5.1, the commission has found that:

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

At paragraph 11.6.6.1, the commission has found that:

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

At paragraph 11.6.6.2, the commission has found that:

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

At paragraph 11.6.6.3, the commission has found that:

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

At paragraph 11.6.6.4, the commission has found that:

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

At paragraph 11.6.6.5, the commission has found that:

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

At paragraph 11.6.6.6, the commission has found that:

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

At paragraph 11.6.6.7, the commission has found that:

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

Further Tracing Of Money paid Into The Accounts Of PMFNRE 

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

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

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

(c) Carter Newell by cheque or cash.

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

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

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

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

59 image b

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

59 image c

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

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

59 image d

TO BE CONTINUED

National Provident Fund Final Report [Part 58]

October 26, 2015 1 comment

Below is the fifty-eighth 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 58th 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.

The methods of tracing

The commission has traced the expenditure of these moneys by cheques drawn on the Carter Newell No.2 general account and has noted how these payments were reimbursed from the trust account. By matching the items of expenditure with the trust account transfers, by physically examining cheques and receipts and any other documents and other evidence it has in most cases been possible to make accurate findings for whose benefit the fraudulent moneys were expended. (See Carter Newell general account No.2 John Lousia at paragraph 10.2).

Findings

In paragraph 10 of the Schedule, the commission has thereby been able to make the following findings regarding moneys, which had been received into the Carter Newell John Lousia Trust Account.

At paragraph 10.3.8.3, the commission has found that:

(a) Ram Business Consultants received improper benefits of K10,000 and K87,397.30 from the Tower fraud (and see paragraphs 11.3.1 & 11.3.1.3);

(b) These matters should be referred to the Commissioner of Police for further investigation as to whether any person should be prosecuted as a knowing recipient of part of the proceeds of the NPF Tower fraud; and

(c) Ram Business Consultants and its principals Rex Paki and Ango Wangatau should be referred to the Papua New Guinea Institute of Accountants for investigation as to whether the fees obtained were excessive for the work said to be done and whether the conduct of any institute member or accountant in these regards has been unprofessional.

At paragraph 10.3.9.1, the commission has found that:

The sum of K10,000 paid by cheque number 500275 into Jimmy Maladina’s ANZ Port Moresby branch account was derived from Kumagai progress payment number three and laundered through Ken Yapane’s account and Carter Newell accounts. It was therefore part of the money obtained from the Tower fraud and was paid eventually for the benefit of and was received by Mr Maladina.

At paragraph 10.3.10.1, the commission has found that:

Cheques referred to in (d), (e), (f), (h), (i), (j) and (k) were cashed and the cash was picked up by Carter Newell employees directly under the control of Mr Maladina. The amounts, which totalled K151,000, were derived from Kumagai payment No.3 and laundered through Mr Yapane’s personal account and Carter Newell account. The payments were therefore part of the Tower fraud and were received by or for the benefit of Mr Maladina.

At paragraph 10.3.12.1, the commission has found that:

The close matching of the transactions following Kumagai fraudulent payments one and three, which were processed through Carter Newell trust account John Lousia file were overwhelmingly for the benefit of Mr Maladina with some for his associates like Mr Leahy and some pay-offs to lesser participants like Nathaniel Poiya and Ram Business Consultants.

Tracing money in Kerowa Tiki file 990393

The commission similarly traced the fraud payments, which had been received into the Kerowa Tiki file 990343.

Reconstructing Carter Newell Accounts – birth of attempted “cover-up” 

At paragraph 11.1, the commission describes a scheme hatched by Mr Maladina for Mr Yapane to give false evidence to the commission to protect Mr Maladina. It records a statement prepared by Barbara Perks for Mr Yapane to present to the commission. At paragraph 11.2 is a reconstructed Trust Account Ledger prepared by the commission for Kerowa Tiki file 990393.

The Carter Newell No.2 General Account is reconstructed in paragraph 11.4.

Findings

By matching the reimbursements from the trust account with payments from the general account and by considering all the documentary and oral evidence as described in paragraph 11 of Schedule 6, the commission has been able to make the following findings and referrals as recorded in the various subparagraphs of paragraph 11.

At paragraph 11.3.1.2, the commission has found that:

No payment was made to or for the benefit of Delta Seafood Limited, which was derived from these funds;

At paragraph 11.3.1.3, the commission has found that:

Ram Business Consultants received a benefit of K87,397.30 from the Tower fraud. Its principals Mr Paki and Mr Wangatau be referred to the Commissioner of Police to consider whether criminal charges should be laid and to the institute of accountants to consider disciplinary action for professional misconduct;

At paragraph 11.3.6, the commission has found that:

Payments of at least K1,187,387.21 of the reimbursements paid into Carter Newell No. 2 account were sourced from moneys derived from the NPF Tower fraud;

At paragraph 11.5.2.1, the commission has found that:

The sum of K400,000 paid to Mr Maladina by Carter Newell cheque # 500491 was sourced from the NPF Tower fraud;

At paragraph 11.5.4.1, the commission has found that-

(a) The sum of K87,397.30 paid to Ram Business Consultants on August 4,1999, from Carter Newell Trust was sourced from NPF Tower fraud money;

(b) Mr Paki and Mr Wangatau should be referred to the Commissioner for Police (see paragraph 11.3.1.3);

At paragraph 11.5.5.1, the commission has found that:

The cheques listed in (a) total K6,232.70. They were drawn and paid for the benefit of Mr Maladina and the funds were sourced from the NPF Tower fraud;

At paragraph 11.5.6.1, the commission has found that:

The payment of K17,000 paid by Carter Newell cheque # 788518 was sourced from the NPF Tower fraud money and was for the benefit of Mr Maladina;

At paragraph 11.5.7.1, the commission has found that:

The payment of K45,000 by Carter Newell cheque # 788527 was sourced from the NPF Tower fraud and was paid for the benefit of Mr Maladina.

At paragraph 11.5.8.1, the commission has found that:

These payments aggregating K555,630 for a total of K554,151.57 was sourced from proceeds of the NPF Tower fraud and the residual K1,478.43 was from another source which is not identified;

AT paragraph 11.5.13.1, the commission has found that:

(a) K1,775.10 part of the funds so transferred from Carter Newell Trust Account to Carter Newell N.22 Account was transferred in reimbursement of the payments made by Carter Newell 2 Account cheques # 788507 and # 788511 and that such payments as so paid were sourced from the NPF Tower fraud;

(b) THE residual K2,011.88 so transferred and paid out appears to have been sourced from other funds;

At paragraph 11.5.15.1, the commission has found that:

The payments totalling K7,124 as so paid, were sourced from the NPF Tower fraud.

TO BE CONTINUED

Paki’s departure from PNGDP/OTML is a good thing Mekere!

October 4, 2013 2 comments

Is the government’s grab for PNGSDP/OTML a good thing? Its hard to say. What about the departure of Rex Paki from its Board of Directors? To this we can issue a much more definitive yes. While Sir Mekere Morauta may have slammed his replacement by Isaac Lupari, Papua New Guineans should breathe a sigh of relief.

In October 2012 PNGexposed raised serious concerns about Paki’s position on the board following the release of a report on the Paga Hill demolition by the International State Crime Initiative. For our efforts, we were slammed by Transparency International PNG Chairman, Lawrence Stephens, who is also a senior manager at PNGSDP.

He claimed:

“Come on oh nameless ones! Take some deep breaths and ask yourselves if you are really prepared to publicly defend the rights of Papua New Guineans and if it is really necessary for you to throw stones from the shelter of annoninimity. Much as you might like to claim the oppositie there is nothing astonishing in any loyal Papua New Guinean seeing the difference between accusations and convictions. Shame on you, whoever you are”.

The irony is we have men like Stephens and Morautu being held up in the international media as anti-corruption warriors, but what did they do about Rex Paki for all these years?

For those unfamiliar with Paki’s past, here is our original post from 2012:

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 Accounts 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 Rex 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).

Those interested can access the original story in full here:

A second article by Dr Kristian Lasslett:

The debate with Transparency International PNG can be viewed here: