Archive

Posts Tagged ‘Waim No.92’

Elite network behind Paga Hill Estate

February 16, 2017 13 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.

National Provident Fund Final Report [Part 51]

October 15, 2015 1 comment

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

NPF Final Report

This is the 51st 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 4O Continued

NPF’s Investment In NGPHL/NGPL 

The two companies are essentially one enterprise. NGPHL was formed to purchase coconut plantations in the New Guinea Islands, some from the old Burns Philip Company and one plantation in the Central Province. The intention was for NGPHL to re-develop the old coconut plantations in the New Guinea Islands into cocoa plantations. A development plan was drawn up and costed by the proponents.

The Commonwealth Development Corporation (CDC) was interested in investing in the plantations in the New Guinea Islands but not the Robinson River Plantation in Central Province. In an attempt to accommodate this requirement, the company NGPL was formed and CDC then invested in 20 per cent of this company.

NGPHL and NGPL made submissions inviting the three major private superannuation funds, NPF, POSF, and DFRBF and the Investment Corporation of PNG (ICPNG) to invest in the two companies. In addition, there was a public issue of shares. The response to the share issue was poor. NPF invested in 250,000 shares in NGPHL and also took up 250,000 shares in NGPL.

With the initial capital in place, the project proceeded and went quite well in Bougainville with annual cocoa production reaching 13,000 tonnes per year. Outside of Bougainville, operations were not proceeding as well as expected. When the unrest situation in Bougainville reached crisis point in 1989, the companies became unviable and the creditors (Westpac Bank and CDC) took over.

Evidence suggests that even at this point, when the companies were unviable due to the crises in Bougainville, NPF bought all the NGPHL and NGPL shares, which were held by the other three institutions POSF, DFRBF and ICPNG. The commission has not been able to confirm the price NPF paid for the shares.

Investment In Walmetke Ltd

This company was formed to take over from the Agriculture Bank’s three plantations in the Baining area of the East New Britain Province. The three plantations are Stockholm, Kuriendahl and Manimbu. The company issued a formal prospectus and raised just under K2 million. Kina Securities handled the share issue. NPF subscribed to this share issue and bought 250,000 shares in Walmetke Ltd at the issue price of K1.

The Selldown Of NGPHL, NGPL And WALMETKE

In the period after 1995 covered by this commission’s terms of reference, NPF was seeking to extricate itself from its investments in the three companies. At the 99th board meeting on February 23, 1996, the NPF board resolved to sell its interest in these companies. Mr Kaul wrote to Mr Tony Gilbank on October 23, 1996, offering the shares on the three companies to Kina Gilbank, for one toea per share giving a total of K29,571.00. Kina Gilbanks accepted this offer.

At the 104th board meeting on December 9, 1996, the NPF board passed a resolution to have the loss from the sale of these shares written off in 1996 to claim the tax benefits and credit the payment received from the sale, if the payment was made in 1997, as profit for 1997.

Findings 

This resolution as to tax treatment was clearly wrong. The proper tax treatment is to include the loss in the year it occurred, which, in this case, was 1997. This matter is serious in the sense that Noel Wright, an accountant, was present at this meeting, yet the minutes do not record him advising against what the board approved.

This treatment would also impact on management bonuses by bringing an overstated loss to book in 1996 (where bonuses were at the upper threshold) and a false profit to book in 1997 (where bonuses were below that threshold).

Conclusions

The board of trustees, prior to the period covered by this commission of inquiry, inherited those investments and the associated problems, which rendered them essentially worthless. NPF invested more than K1 million in these three companies. It received no dividend, and then it sold all its shares for K31,237.67.

Findings 

In difficult financial circumstances, which were not of NPF’s making, the selldown was orderly and appropriate.

Investment In New Guinea Islands Produce Company (NGIP) 

Background 

NGIP was originally based in Rabaul and Kokopo in the East New Britain Province. After the 1994 volcano eruptions, its main base shifted from Rabaul to Kokopo. The company is an agriculture company involved in plantation management, cocoa buying and processing and commercial property development. It is also a 50 per cent shareholder in Papua New Guinea’s largest cocoa exporter, Agmark Pacific Ltd.

NPF invested 100,000 shares in NGIP in 1987, well before the period covered by this commission’s terms of reference.

Sell-down of shares in NGIP 

In August 1999, when NPF was urgently trying to solve its cash crisis, NPF management decided to sell all shares in NGIP.

Quite clearly, board approval was not requested for the sale of these 100,000 shares in NGIP. The sale of these shares was at a unit price of K3.03 per share.

Findings 

(a) NPF management and, in particular Rod Mitchell and Henry Fablia, acted in excess of their authority and their financial delegation in authorising and completing the sale of these shares without the NPF board’s prior approval;
(b) The board of trustees was also remiss in simply noting the sale as a fait accompli and not reprimanding management for acting without authority and selling assets without the requisite board approval; and
(c) A fair market value was obtained for the shares sold.

Conclusion On NGIP 

NPF purchased 100,000 shares at K3 per share in the capital of NGIP at a cost of K300,000 in 1987 and sold for a net K301,030.50 in 1999. NPF also receive dividends totalling K75,000 from this investment between 1996 and 1998.

Mr Bell, the current general manager of NGIP, has informed the commission that the current trading price for NGIP shares is K6. It is not appropriate to use hindsight to criticise NPF for the price at which it sold these shares in August 1999.

It is appropriate, however, to criticise management for not obtaining board approval for the sale.

Executive Summary Schedule 5 Waigani Land And Related Matters 

Introduction 

Sometime in late 1997, a plan was formulated to acquire the Waigani land cheaply and on favourable terms in order to entice the NPF and/or other PNG statutory bodies to use member’s (or public) funds to buy the land for an exorbitant price, with some of the proceeds being used for political purposes related to an anticipated vote of no confidence in the Skate government (paragraph 3).

Jimmy Maladina, a partner with the firm Carter Newell Lawyers, acquired Waim No. 92 Pty Ltd in February 1998 to be the corporate vehicle to acquire the lease over the Waigani land. The directors became Philip Eludeme (representing Mr Maladina) and Mr Maladina’s wife Janet Karl.

By August 1998, Prime Minister Skate decided to press for Mr Maladina to be appointed chairman of NPF and Mr Maladina then concealed his interest in Waim No. 92 by appointing an associate, Philip Mamando, to replace his wife as director. This was to conceal Mr Maladina’s conflict of interest in the event that NPF could be persuaded to acquire interests in the Waigani land (paragraph 3.6).

Findings

(a) Mr Maladina purchased Waim No. 92 Pty Ltd from Ram Business Consultants (Ram) as a shelf company. He exercised control through the appointment of his wife, Ms Karl, as a director;
(b) Mr Eludeme gave false evidence in order to hide Mr Maladina’s involvement with Waim No. 92 Pty Ltd; and
(c) The commission has referred Mr Eludeme to the Commissioner of Police to investigate whether he has committed the crime of perjury.

To ensure Waim No. 92 was allocated the lease of the Waigani land cheaply and on favourable conditions, Mr Maladina bribed the chairman of the Lands Board Ralph Guise and the Lands Minister Viviso Seravo.

Mr Maladina used Mr Eludeme as his agent in some of these activities (see paragraphs 4, 5 & 7). 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).

Further corrupt dealings occurred and a second substitute notice was signed in October but backdated to September 28, 1998, allowing payment by instalments of K50,000 every second month, with title to issue after the first instalment.

Findings 

(a) Mr Eludeme performed free professional work, valued at approximately K100,000, for Minister Viviso Seravo, before the Land Board sat on June 19, 1998;
(b) The Land Board advised Waim No. 92 on August 10, 1998, that it had recommended that the Minister should grant the lease over Waigani land;
(c) On September 28, 1998, Mr Eludeme was advised by notice that the purchase price of K1,719,600 was payable with annual rental of K17,000, both to be paid in full, before the title would be issued;
(d) A second notice was prepared afterwards and backdated to September 28, 1998. It showed the same purchase price but advised that the amount payable before title issued was K50,000 with the balance of the purchase price payable by instalments of K50,000 every second month; and
(e) There was no legal basis to vary the amounts below the tendered price nor to allow payment of the purchase price by instalment or to issue title before the payment of the full purchase price. Mr Maladina funded the sum of K50,000 on October 6, 1998 (he had already paid the original K500 application fee to the Lands Department) but trust statements were fabricated on Carter Newell file no 970625 (Phillip Eludeme – general matter, investment advice) to make it appear that the money came from Mr Eludeme’s funds (see paragraph 7.3).

It appears that a criminal offence under Section 122 of the Criminal Code Act – fabricating documents – has been committed and the commission has referred this file to the Commissioner for Police for investigation.

The corrupt activities in the Land Board and the Office of the Minister became clearer after Mr Guise gave evidence “in camera”.

Findings 

(a) Waim No. 92 Pty Ltd was at all relevant times beneficially owned by Mr Maladina and he paid all the necessary application fees, costs and the required K50,000 instalment on the purchase price to acquire the lease over the Waigani land;
(b) Mr Eludeme was, at all material times, acting as an agent and representative director/ secretary of Waim No. 92 on behalf of Mr Maladina;
(c) Mr Mamando acted as a director representing Mr Maladina;
(d) Waim No. 92’s application was lodged after the closing date of May 6, 1998, and, by law, should not have been considered;
(e) The decision to list Waim No. 92 as a late application was made on direct instructions from Minister for Lands, Viviso Seravo;
(f) Land Board chairman Ralph Guise, accepted direct instructions from Minister Seravo that the Land Board should consider that Waim No. 92’s application was sponsored by the NEC and should be supported. He ensured that it would be received and considered by the board as a late application. He then ensured that it was one of two alternative recommendations sent to the Minister for approval;
(g) Mr Guise participated in the activities to retrospectively vary the conditions of the Letter of Grant and signed a minute to the Minister which had been prepared in the Minister’s office. It falsely stated that the Land Board had recommended reduction in the purchase price and annual rental and that the purchase price be paid by instalments, with title to issue upon payment of the final instalment.
This enabled Minister Seravo to subsequently sign and backdate the document to June 1999. Mr Guise was present at a meeting when a fabricated substitute letter of grant was placed before Secretary Alaluku for signature and thereby added the support of his apparent authority to what was being done;
(h) 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 at the Minister’s request;
(i) At the Land Board hearing on June 19, 1998, chairman Guise and members Yanepa and Wak voted for Waim No. 92’s invalid application. The two official representatives voted for the preferable application by MDP Pty Ltd;
(j) There was no discussion at the meeting about reducing the purchase price or the annual rental or about allowing the title to issue after partial payment of the purchase price (contrary to the Statutory provisions);
(k) When Minister Seravo approved the non-legal application by Waim No. 92, he was influenced by bribes received and in anticipation of future bribes;
(l) After the grant of the lease to Waim No. 92 by Minister Seravo, the Minister was approached by Mr Maladina (and possibly by Mr Eludeme with Mr Maladina’s knowledge) who requested successive variations to the terms of the lease to lower the total purchase price, lower the annual rental and to provide a new term that title would issue after the first K50,000 instalment of the purchase price was paid. The balance to be paid at the rate of K50,000 every second month;
(m) Mr Seravo, Mr Guise and Mr Maladina conspired to illegally reduce the terms of the lease and to persuade Lands Secretary Alaluku, to sign a false lease offer letter, on October 2, 1998, which set out the illegally varied terms of the lease;
(n) After the Waigani land was eventually disposed of (by sale of shares in Waigani City Centre), Mr Maladina paid the sum of K49,598.49 to Mr Seravo after it was laundered through the accounts of Carter Newell Lawyers, in consideration of his assistance in the allocation of the lease to Waim No. 92, on favourable terms (paragraphs 32.8.6.3 & 32.8.6.13).

Once the lease was allocated for a reduced purchase price payable by instalments, Mr Maladina entered into a criminal conspiracy with Herman Leahy, the corporate secretary and legal counsel of NPF and valuers Iori Veraga and Mariano Lakae.

The agreement was for NPF to engage the valuers to value the Waigani land (and the NPF Tower) for an exorbitant fee. Mr Leahy acted from within NPF to ensure that Mr Fabila signed the contract on behalf of NPF. Mr Maladina, meanwhile, reached an agreement with the valuers for them to pay half their fees to him.

As a result of this scheme, valuation fees totalling K235,000 were paid to Mr Maladina/ Carter Newell of which K226,175.13 was received into the Carter Newell Trust account (Mr Maladina taking K8864.87 as “expenses”). The valuers put a grossly inflated value on the Waigani land of K14.7 million (Mr Veraga) and K17.6 million (Mr Lakae). They valued the NPF Tower at K87,854,500 (Mr Veraga) and K86 million (Mr Lakae). Each estimated valuation amounted to approximately twice the true value (see paragraphs 10 and 11).

Mr Maladina then briefed Pacific Capital to prepare proposals for POSF and other PNG institutions, to encourage them to acquire interests in the Waigani land.

Findings 

(a) As soon as the amended letter of offer was approved on October 2, 1998 (backdated to September 28, 1998), Mr Maladina briefed Mr McIntyre of Pacific Capital to prepare an investment memorandum to be submitted to POSF to purchase 40 per cent of the shares in Waim No. 92. If successful, this would raise sufficient money to pay the purchase price of K1.7 million, the cost of preparing development proposals and Carter Newell’s costs of K100,000 for “attending to” legal aspects of the Waigani land tender procedures;
(b) POSF wished to write off its losses on the Waigani land and the Pacific Capital investment proposal was delivered to NPF instead in about late October 1998.
(c) Mr Maladina and Mr Leahy conferred about obtaining valuations on the Waigani land (and the NPF Tower) prior to any discussions with the NPF board and for no proper reason;
(d) Mr Maladina entered into arrangements with valuers Mariano Lakae and Iori Veraga to pay him a 50 per cent commission on fees received;
(e) At the instigation of Mr Leahy, Mr Fabila, in excess of his delegated authority, signed the valuation contract with Mr Lakae and Mr Veraga without NPF board knowledge or approval and without any tender procedure being followed.

TO BE CONTINUED

National Provident Fund Final Report [Part 5]

August 11, 2015 2 comments

Today we continue the re-publication 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.

NPF Final Report

This is the fifth 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.

Term of Reference 1(g)

“All investment transactions including those relating to Highlands Pacific Limited, Itemus Inc. (formerly Vengold Inc.), Lihir Gold Limited, Cue Energy Resources N.L., Macmin N.L., Steamships Trading Company Limited and Collins & Leahy Limited and the failure to inform the full Board of Trustees of the transaction”

Each of these investment is reported upon in a separate schedule to this report, each of which has its own executive summary.

The major loss making investments of STC and CXL, HPL and Vengold are briefly covered also in this report at paragraph 11 above, as are the smaller investments in Macmin and Cue. As pointed out repeatedly in the schedules, the failure by management to inform the full Board of Trustees of the transactions was endemic. This is illustrated by the tables in the schedules.

Term of Reference 1(h)

“The decision to finance the Poreporena Freeway, and the role of any trustee or officer or employee of the fund or of any other person or entity in reaching this decision”

Creation of intermediary company Curtain Burns Peak

The full report on the loans provided by NPF to finance the construction of the Poreporena Freeway is set out in Schedule 7B. The executive summary is quite comprehensive and refers to relevant paragraphs in the schedule.

It describes how the State initially intended to borrow the necessary funds offshore but faced opposition from the World Bank.

To overcome this opposition, it decided to set up a company to be jointly owned by the State and the construction company (Curtain Bros Papua New Guinea) to be called Curtain Burns Peak Pty Ltd, which would then borrow the funds and finance the construction work, with the State providing a guarantee to the lender.

The State sought loans from DFRBF, POSF and NPF. It was a difficult situation for the State, which had recently failed in a lawsuit with Curtain Bros.

The other superannuation funds refused to be involved because their lawyers pointed to possible constitutional problems with the way the State proposed to fund the construction by off-budget, non-appropriated payments through Curtain Burns Peak Pty Ltd as an intermediary.

Blake Dawson Waldron had advised POSF and DFRBF that this method of funding, with a guarantee being given by the State, violated Section 209(1) of the Constitution.

State applies pressure despite conflict of Interest

The Minister for Finance Mr [Chris] Haiveta, the Secretary of DoF Gerea Aopi, and the First Secretary of DoF’s Commercial Investments Division Vele Iamo were all actively seeking funds to commence the troubled venture and NPF effectively became the banker of last resort.

Mr Aopi and Mr Iamo were also chairman and Public Service representative trustee of NPF respectively, so their conflict of interest was acute. 

The first loan agreement for K3 million was worked out in discussions between Mr Aopi and NPF managing director Robert Kaul.

From then on, it was clear that the State was pushing hard for NPF to provide further funding. The next K10 million loan was approved by Minister Haiveta even before the NPF board had resolved to seek it.

This was a large commitment for NPF, which rose eventually to a loan of K62 million. There were real doubts about the constitutional validity of the loan and whether the way the loan was structured could eventually be disadvantageous to NPF, as there was a mismatch between the terms of the loan agreement between the NPF and the lender bank (ANZ) and the terms on which NPF on-lent to Curtain Burns Peak.

The NPF board was divided whether to provide the loan or not.

Contrary Legal opinion withheld from NPF Board

The Blake Dawson Waldron opinion was provided to NPF management and it then sought and obtained a contrary legal opinion from John Batch on November 7. Although Mr Batch felt the loan was not unconstitutional, he pointed out that if the court decided otherwise, the loan would not be repayable to NPF nor would the State guarantee be enforceable in favour of NPF.

When the NPF board deliberated on the matter, management did not advise it of the very worrying Blake Dawson Waldron opinion. Nor was any expert investment advice given to, or sought by the NPF board.

Mr Aopi and Mr Iamo played an active part in the NPF board’s deliberations, without disclosing the conflicting double role they were playing. The employee representatives, Mr Paska, Mr Gwaibo and Mr Leonard, voted against providing the loan. Had Mr Aopi and Mr Iamo refrained from voting because of their conflict of interest, as they should have, the resolution may not have been carried.

The key players in initiating this loan were Mr Aopi and Mr Iamo, both of whom were in breach of their fiduciary duties to NPF members by taking part in the vote and by not disclosing their conflict of interest. Another key player was managing director Robert Kaul who must have witnessed that conflict of interest in action yet failed to seek independent investment advice for the Board of Trustees. Noel Wright also failed to advise the NPF that there was senior legal opinion that the loan would be unconstitutional and that NPF risked losing the amount of the loan and the interest owing.

Advantages and disadvantages of the investment

As reported in Schedule 7B, successive loans raised the amount to K62 million and it seriously distorted NPF’s investment portfolio by creating an over exposure to the State. When economic conditions turned against NPF, it proved difficult to “sell” the loan as the State guarantee was not transferable. As the “mismatch” problem did eventuate, making the loan no longer favourable to NPF, it was eventually transferred to the Bank of Hawaii, at a discounted profit. Later again, the Bank of Hawaii transaction had to be unravelled.

In fairness to those who supported these loans to the State, it needs to be said that they genuinely believed that NPF was getting a good deal. In fact, these Freeway loans turned out to be far more profitable than most of NPF’s investments.

All these matters are fully reported in Schedule 7B and its Executive Summary.

Term of Reference 1(i)

“Whether there was any manipulation or attempted manipulation of the fund’s financial results or its financial position and whether any such transaction benefited any trustee, officer or employee of the fund or any other person or entity”

The two main instances of manipulating the funds financial results have been discussed above under term of reference 1(c) namely the:-

  • Bank of Hawaii transaction when the K18.5 million profit was all brought to book in 1997, thereby contributing to the payment of a bonus to senior management (Schedule 1 Appendix 20 paragraph 20.7.2.1) and; The K10 million “reserve” provision where, by using incorrect accounting, K10 million of the 1996 large profit was taken out of the 1996 accounts (when maximum bonus was already payable) and brought to account in the less profitable 1997 accounting year which boosted the book value of the 1987 end of profit. This enabled the payment of a bonus of K52,941 for senior management which would not otherwise have been payable.

This contributed to an increase in senior staff bonus payments (Schedule 1 Appendix 20 for a detailed discussion of problems associated with the bonus scheme. The K10 million reserve is reported at paragraph 20.6.4(d)(vi) and findings at paragraph 20.7.2).

Term of Reference 1(j)

“The construction, contract negotiations and renegotiations of the Tower building and the role of any trustee or officer or employee of the fund or of any other person or entity”

deloitte-tower

The commission’s investigations into the NPF Tower were greatly facilitated by an excellent report provided by the DoF Finance inspectors who had previously investigated many matters connected with the construction of the Tower.

They pointed the way for this commission to follow, using its greater powers of investigation. Schedule 2B and 6 contain different topics of the report on the Tower.

Schedule 2B – NPF Tower Financing and Construction

Schedule 2B reports on the decision to construct the NPF Tower, the construction contracts and the PNGBC loan facility which financed its construction. The decision to borrow K50 million for this purpose was taken by the NPF board on a very poor briefing by management, which failed to explore the commercial viability of the large project.

NPF went into this project with no expert advice about the demand for office space in Port Moresby, no pre-agreed “signed-up” tenants and no expert advice about the dangers inherent in the terms of the loan agreement.

The PNGBC entered the agreement without carrying out adequate due diligence into those matters and above all, without assuring itself that NPF had the power to borrow funds for this purpose.

It was initially intended that PNGBC would lend funds to the Tower Ltd, a company incorporated by NPF to build and own the Tower building. At the last moment, however, the loan agreement was signed with the NPF itself and this invalidated the agreement because NPF had no power to borrow.

Schedule 2B reports upon management’s poor performance in reporting to the board on the administration of the loan and in particular its failure to obtain board approval for increases in the loan facility, which eventually expanded to more than K59 million. The schedule introduces six (6) suspicious matters, which the Finance inspectors thought required special investigations. The commission’s investigation into those matters is reported at Schedule 6.

The executive summary provides a detailed summary of the main themes and paragraph references to Schedule 2B.

Schedule 6 – NPF Tower Investigations

Schedule 6 reports upon the six matters, which the Finance inspectors had reported required specific investigation, as follows:-

In-ground works variation costs of K3,006,270.26

These costs were incurred on top of the agreed construction cost because of engineering problems in the foundations caused by the difficult soil substrata on the building site.

The commission concluded that the costs were genuine and recommended no further action.

Builders and other works variations

The commission accepted the professional opinion of Rider Hunt and Pacific Architects Consortium (PAC) and found that the variation costs were genuine and recommended no further action.

The first acceleration fee – K1.4 million

This fee of K1.4 million was paid in order to speed up the work in order to recover time lost because of the in-ground work delays.

Though there is reason to doubt whether NPF gained much benefit from this expenditure, the commission is satisfied that the decision to seek the acceleration was genuinely made and that the acceleration costs agreed upon were within reasonable bounds.

Professional fees

The commission investigated to see whether NPF had been overcharged pursuant to the consultancy agreement for professional fees. It found that there is ambiguity in the terminology used in the 23-page consultancy agreement and its appendices on the one hand and the wording in an appendix to a letter dated August 23, 1994, which is referred to in the consultancy agreement. The ambiguity has caused a difference of opinion about whether or not NPF has been overcharged for professional services.

The commission finds that it is a genuine dispute, common to such projects, which may need to be resolved through court processes.

A Kina fluctuation claim

A second acceleration claim

The contract was a fixed cost agreement with no provision to vary it because of fluctuations in the value of the kina.

The kina did, however, undergo significant devaluation, which seriously eroded the builders profit margin.

NPF’s consulting engineers, Rider Hunt, and PAC, advised NPF that it would be advisable to pay Kumagai an appropriate amount to compensate for the kina devaluation as otherwise it could mean cessation of work on the project.

Negotiations occurred which made it clear that an increase in the contract price to K51.5 million would satisfy Kumagai.

At that stage, however, Mr [Jimmy] Maladina and Mr [Herman] Leahy removed PAC from the negotiations, and discussions continued between them and Kumagai direct. At this stage also a spurious second acceleration claim was introduced.

After hearing evidence from the senior managers of Kumagai and PAC and after thoroughly studying the relevant correspondence and documentation, the commission found that Mr Leahy deliberately misled the (newly appointed) NPF board members to agree to a settlement price between K53 million and K55 million to settle both the kina devaluation and the second acceleration claim; when K51.5 million was on record as being Kumagai’s agreed settlement price.

The result was that an extra K2.5 million of NPF’s funds was paid to Kumagai. This had previously been agreed by Kumagai management at the insistence of Mr Maladina just prior to his appointment to the NPF Board of Trustees.

He had threatened to deny Kumagai the currency depreciation payment (after his expected appointment) unless they co-operated. The agreement between Mr Maladina and Mr Leahy with Kumagai managers was that Kumagai would return the extra K2.5 million of NPF funds to Mr Maladina plus an extra K150,000 of Kumagai’s own money as Mr Maladina’s personal “commission”.

An elaborate scheme was put in place, including the fabrication of false documents, so that Kumagai’s return payments to Mr Maladina could be laundered through the personal account of Ken Yapane and the account of his company Ken Yapane and Associates.

The pretext for these payments was to be a spurious sub-contract between Kumagai and Ken Yapane and Associates whereby Mr Yapane would pretend to provide extra labour and to do fictitious on-site work.

Kumagai duly received the “padded” K2.5 million as settlement of its kina devaluation/second acceleration claim and in return, made six progress payments for Mr Maladina’s benefit.

The first four payments were to Mr Yapane or his firm. The last two payments went directly to Mr Maladina’s law firm Carter Newell (After Mr Yapane refused to allow his bank account to be used to launder these payments).

The “cover-up”

After the Commission of Inquiry was established in April 2000, there was an attempt to “cover-up” what had occurred by fabricating false documents and correspondence between Kumagai and Ken Yapane and concealing Mr Maladina’s involvement.

Ms [Barbara] Perks and David Lightfoot of Carter Newell were involved in providing false documents to the commission and they have been referred to the Commissioner of Police to investigate whether their involvement was criminal.

Mr Lightfoot has also been referred to the PNG Law Society.

Mr Yapane initially gave false evidence to the commission in support of these false arrangements. When confronted with the consequences of his statements, and after receiving good legal advice, Mr Yapane changed his testimony and disclosed what had really happened.

The commission has recommended that he be referred to the Commissioner for Police to investigate his part in the fraud committed against the NPF.

The money trail

The commission embarked upon an intensely detailed exercise to trace the money paid by Kumagai’s six progress “payments”, totalling K2,649,999.70 to the ultimate recipients.

The tracing is described in paragraphs 7.1 to 7.6.2 in Schedule 6 and is also depicted diagrammatically by charts, which are attached to both Schedule 6 and its executive summary.

In essence, the commission has found that the money was “laundered” through the books of account of Carter Newell Lawyers and PMFNRE.

The investigations showed that PMFNRE is actually beneficially owned by Peter O’Neill and that he and Mr Maladina obtained substantial benefits from the proceeds of the NPF Tower frauds, either personally or through their companies and families.

Other beneficiaries of the NPF Tower fraud money can be ascertained by following the money trail on the NPF Tower charts, which are attached to Schedule 6 and its executive summary.

Term of Reference 1(k)

“The Waigani land proposal, and the role of any trustee or officer or employee of the fund or of any other person or entity taking account of the Department of Finance and Treasury inspectors’ recent investigation report”

By Term of Reference 1(k), the commission was specifically directed to investigate the attempted sale of land at Allotment 2 Section 429 Hohola, referred to here as the Waigani Land.

It was a long and difficult investigation, which was made more difficult by the “cover-up” activities of the parties involved and lawyers acting on their behalf.

Allocation of Waigani Land lease to Waim No.92 Pty Ltd

At Schedule 5, the commission reports how Mr Maladina before and during the time he was chairman of NPF, 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.

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.

Part of the bribe was the performance by Mr Eludeme of free professional services for Mr Seravo prior to the allocation of the lease in order to obtain the Minister’s support.

Inflated land valuations and valuation fees

Mr Maladina then organised two inflated valuations of the land from valuers Mariano Lakae and Iori Veraga.

He arranged for NPF to pay the valuers a “double fee” which he then shared with them.

Mr Maladina’s secret commission on the valuation fees, amounting to K60,000, was paid into the account of Carter Newell and subsequently paid for his own benefit and to pay off Mr Guise and Mr Seravo and for the benefit of Herman Leahy, his co-conspirator.

At approximately the same time, Mr Maladina was also using the same two valuers to obtain inflated valuations of the NPF Tower as part of a scheme to sell off 50 per cent of the Tower (Schedule 6). He organised for NPF to pay them double fees for the Tower valuations and took half of it for himself, amounting to K175,000.00.

Mr Maladina’s was laundered through the accounts of Carter Newell and PMFNRE.

The Tower valuation fees are reported in Schedule 5, along with the Waigani Land valuation fees.

Continued tomorrow