Cover Report
Prominent Names, Firms Named In PNG Provident Fund Scam
But what actually happened?
On November 13 last year, a commission of inquiry released its findings into what happened to the Papua New Guinea National Provident Fund (NPF). It published the names of more than 30 people it said should be brought to account in one way or another.
The names included those of Jimmy Maladina, the fund’s chairperson and a Papua New Guinea national, who the inquiry said should be brought from Australia to where he fled to live comfortably, to face charges of corruption.
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Among those named are:
- Bill Skate, a former Papua New Guinea prime minister and now Parliamentary Speaker and a man with a criminal past;
- Chris Haiveta, a former finance minister and still a major political leader and MP;
- Herman Leahy, the fund’s corporate secretary/legal officer;
- David Copland, a member of the fund’s board and managing director of one of Papua New Guinea’s major business groups, Steamships Trading; and
- George Wright, another board member and businessman;
The commission said various people should be investigated with a view to prosecute for share ramping, failing to declare business interests, fraud and unprofessional conduct.
Some should be referred to the Australian financial authorities and some to Papua New Guinea’s law and accountants’ societies for investigation of unprofessional conduct.
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A prominent Papua New Guinea law firm, Carter Newell Lawyers (now trading under another name), should be referred to the law society and the police for investigation of fabricating evidence, the commission recommended.
What happened to the Papua New Guinea National Provident Fund, built up with compulsory contributions from workers and employers? Well, it is half the value of what it was, which means that pensions it pays are correspondingly affected.
Between 1996 and 1999 the value of the fund dropped by 153 million Kina due to what the commission said were bad investment and questionable management decisions, with only about 5 million Kina lost due to criminal activity. The fund made a “reckless” attempt to issue a A$54-million bond to a “dangerously unsuitable partner”.
The commission found evidence of criminal fraud involving an attempt by Maladina to sell properties in which he had an interest to the fund. “During the latter part of 1999, it became apparent that there were serious irregularities in the running of the fund, that many millions of Kina of realised and unrealised losses were occurring and that the fund was in a state of financial crisis.”
Against all advice, Copland and Wright pressed for the A$54-million bond deal, described by the commission as being “commercially impractical”. The deal was made with a “dubious Canadian”, Jai Ryan, who was associated with an “even more dubious Canadian, Rudi Cooper of Warrington International, a company registered in the tax haven of Antigua”. Warrington was to buy the bond.
The Bank of Papua New Guinea delayed the scheme when its foreign exchange controller, Benny Popoitaim, withheld essential approvals. The block was removed when Copland, a former director of the bank applied pressure on the governor, who signed approval papers himself.
It was, the commission said a “wild and giddy ride” and Messrs Wright and Copland almost succeeded in exposing NPF to a dubious international organisation which may well have been involved in illegal activities and money laundering.
“Had the bond been issued, there was no way NPF could have met the A$54-million bond plus 14.67% interest in nine years time. This would have endangered NPF assets.”
Wright and Copland didn’t disclose investments in companies they encouraged the fund to put money in.
The commission criticised a prominent public servant, Brown Bai, for failing to reject an “improper direction” from Skate to stand down as the fund’s chairperson in favour of Maladina, and after stepping down he failed to attend board meetings to give other members “the benefit of his experience and honest attitude.”
While Papua New Guineans won’t have all they lost in the fund restored to them, at least the scandal surfaced before they lost everything.
