NATIONAL CAPITAL DISTRICT COMMISSION

`NCDC INVESTIGATION REPORT 2000'

A REPORT OF THE INVESTIGATION INTO THE AFFAIRS OF THE NATIONAL CAPITAL DISTRICT COMMISSION

SEPTEMBER 1999 - MAY 2000

PRESENTED TO THE

ACTING CITY MANAGER OF THE

NATIONAL CAPITAL DISTRICT COMMISSION

The Investigating Team: Caryle de Silva Ex Director CIC/Prosecution R.P.N.G.C. Consultant Investigator NCDC

George Pera Consultant Accountant Delphi Corporate Investigations

Sisira Nanayakkara Serving a/Superintendent CID Sri Lanka

"NEVER AGAIN YESTERDAY'

Contents: Page Number

i. Acknowledgments 2 ii. List of Annexes 3

iii. Interpretations and Definitions 4

1. Introduction 5

2 Executive Summary 6

3 Background 11

4 The Mandate and Terms of Reference 11

5 Methodology 13

6 Prior Reports and Documents General 15

7 Findings and Conclusions 16

8 Recommendations 34

9 Annexures

To all other institutions and individuals who are too many to mention by name, who subscribed in one way or other towards making our task easy and successful.

2 i Acknowledgments

We are deeply grateful to the following people without whose help our work would not have been completed and achieved in a short space of time:

Mr. Jamie Maxtone-Graham, the former NCDC Acting City Manager, for his assistance and encouragement;

The incumbent acting City Manager, Mr. Bernard Kipit, for the encouragement and leadership demonstrated in this brief period;

Mrs. Iva Kola, Executive Officer, for advice and general counsel provided;

The Commissioner Police and the Task Force (Fraud Squad) for their valuable assistance and understanding of the problems faced by the Investigators.

The Financial Controller, Mr. Virgilio Gerolaga, for the release of staff and necessary documents;

Mr. George Pera, Consultant Accountant, who made a significant contribution in research drafting of Internal Controls which, was of immense assistance to the investigations.

Mr. Sisira Nanayakkara, who by shear dint of hard work and articulate questioning of witnesses helped to advance and prepare many a protracted cases for referral to Police.

Mr. Richard Pangwinyen, whose research and audit was invaluable to the investigations.

The PNG Banking Corporation for the expeditious release of bank documents;

Witnesses who volunteered information which advanced the investigations;

The respective divisions of NCDC for providing assistance and cooperation.

Ms. Elly Elias Nonggorr, for the long and arduous hours typing scripts, statements, reports and drafts without complaint. Her strength lies in the fact that she can work without supervision and she is reliable to a fault;

Mrs. Anna Kairi, the tea lady, for supplying tea and refreshment during our many sessions;

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iii List of Annexes

Annexure Particulars

A Internal Control Review Report 2000

B Assessment Report — 1998 by Department of Provincial and Local Government Affairs

C TSK International Report — (Attached and presented separately)

D Summary of Fraud and Misappropriation Cases

Summary of Stolen and Fraudulently En-cashed NCDC Cheques.

F Disciplinary Code

G Security Profile

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iii. Interpretation and Definitions

`The Minister' — The Minister for Provincial and Local Level Government Affairs;

`The Government — Includes the Executive Arm, The Cabinet or NEC;

`Committee of Inquiry' — Ministerial Committee appointed under section 31 of the NCDC Act;

"IVCDC Investigations' — includes the Investigations of 1999 — 2000 appointed by the City Manager.

‘Police’ — Includes the Fraud Squad, the N CDC Task force and the Police Prosecutions;

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1. INTRODUCTION

Pursuant to a National Executive Council decision taken on 6th September 1999. the National Capital District Commission was suspended as at 12 midnight of the same day.

Consequently, by a Gazette Notification, Mr. Jamie Maxtone-Graham was appointed as the Acting City Manager of the NCDC.

The suspension of NCDC was an outcome of a submission made to NEC by the Minister for Provincial and Local Level Government based on a Ministerial Committee of Inquiry report dealing with corruption and mismanagement in the administration of the suspended Commission.

The Committee of Inquiry was established under the provisions of Section 31 of the National Capital District Commission Act.

On 9th September 1999, the Acting City Manager appointed an independent team of Consultants (SK International) to continue in-depth investigations based on the recommendation of the Committee of Inquiry Report. This phase of the Investigations was concluded on 9th December 1999.

Notwithstanding the findings of the Preliminary Reports, it became apparent to the Acting City Manager that investigations conducted thereto were only a tip of the iceberg. It was abundantly clear that a massive workload into corruption and fraudulent transactions were outstanding which justified further extension of the investigations.

Therefore, a team comprising three Investigators was engaged for an initial period of three (3) months. The mandate of the investigators included the continuation of investigations and examination, assessment and evaluation of the contents of 29 boxes of documents which had been removed from the Country during the stewardship of the then Governor_ Bill Skate MP. This included the conduct of investigations into other cases of fraud and corruption as directed by Acting City Manager.

This report comprises actual findings of the state of affairs prevailing before the suspension of NCDC as well as recommendations for remedial measures and other safeguards with emphasis on proper financial control and accountability.

Carlye De Silva

6 1. EXECUTIVE SUMMARY

The NCDC Investigation 2000 is a culmination of years of concern by consecutive governments and the respective Ministers who were concerned and involved in the conduct and accountability of the affairs of NCDC. This resulted in several Ministerial directives and reviews to enhance efficiency and ensure viability of the Commission (NCDC). This exercise was based on the availability to the Minister of the many reports and findings of various Committees including the Auditor-General, the Department of Provincial and Local Level Government and other related agencies which provided to the Minister responsible advice and suggestions, urging the establishment of a Commission of Inquiry or an independent Investigation into the affairs of the NCDC.

The 'Assessment Report of 1998 by the Department of Provincial and Local Level Government Affairs and the various recent Auditor General reports form the very basis for the establishment of an independent investigation into the governance of the NCDC. Preliminary investigations disclose that the affairs of the NCDC lacked accountability_ transparency, checks and balances. it culminated with the suspension of the NCDC by the National Government. before the collapse of the NCDC Administration. This was clearly seen from various accounts with emphasis on the Assessment Report of 1998.

In consequence, the Hon. Minister for Provincial Affairs and Local Level Government was satisfied that a prima facie case was established to justify the suspension of the NCDC and appoint in its stead an Acting City Administrator and simultaneously an independent committee of inquiry.

Preliminary investigations surfaced many (serious) problem areas in the NCDC administration where corruption and abuse of power were rampant. The Administration lacked direction and vision. The system was riddled with nepotism and cronyism, which subscribed to the lack of accountability and transparency. That there was collusion between certain elements from within the system and outside including unscrupulous contractors and other businessmen who were siphoning millions of Kina from the Commission coffers was manifest.

In summary the investigations have established on the balance of probabilities that mal-administration and breach of financial procedures subscribed to the pathetic situation that existed in the NCDC administration before the suspension, which eventually compelled the National Government intervention. Indeed, the then Administrators were insensitive to the Mission Statement of the NCDC, that is to provide services to the ratepayer without let or hindrance. The cases investigated so far reinforce the theory that a network of corruption was systematically cultivated within the system, which deeply entrenched the City Hall causing mass erosion of public funds.

Enormous sums of unaccountable money were claimed and paid to 'ghost groups' and spurious contractors. A case in point was the surreptitious method used to intercept and steal cheques with specific crossings to wit: 'not negotiable' and 'account payee only' made out to leading Business Organizations and having them en-cashed at trade stores in the city for a deduction of up to 20% commission on the face value of the cheques.

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Another area, which formed the basis of investigations, was the falsification of source documents and theft of cheques made out to legitimate suppliers from the system under the very nose of the financial authorities. The value of the stolen cheques had to be replaced whilst the original stolen cheques were cashed at the supermarkets and in some cases even at the banks.

The foregoing revelations are reinforced with hard facts. The following facts demonstrate the extent of corruption that was rampant during the period under review.

On day I of the suspension, the suspended Governor and other officials who were also served with suspension notices, fast tracked a manual cheque for K150.000.00, disregarding financial procedures to be paid to Maladina Lawyers for the defence of Governor Tabu and former Prime Minister Bill Skate, who are parties to the pending National Court case in regard to the suspension of the NCDC. In the process, junior officers in the Accounts Section were bullied into submission to process documents. Manual cheques are a procedure resorted to in the extreme and more an exception than the rule.

The exercise per se' smacks of dishonesty, especially when the Certificate of Expediency was used as a vehicle of convenience to manipulate the system and expedite payment.

This matter has now been referred to the Police Fraud Squad for -further investigation as a case of criminal misappropriation of State funds. It may also be referred to the Leadership Tribunal. Action is contemplated to seek a refund of this money from the Lawyers failing which the Investigators are exploring the possibility of including Maladina Lawyers as a party to the offence, quite apart from having Greg Shepherd referred to the Lawyers Statutory Authority.

Yet another case was an award of a Contract to the magnitude of more than half a million Kina to a leading Security Company disregarding the usual tender procedures or a Certificate of Expediency. The fact that in an award of a Security Tender of such magnitude, tender processes are regarded mandatory.

The Contract was drawn by Supplier. Two important clauses pertaining to the termination of contract by the Client for poor or sub-standard service and the stipulation of the period of contract was willfully omitted by the Supplier who was required to drat the Contract. The absence of these two clauses was a significant advantage to the Supplier and it did have serious and adverse consequences when upon termination of the Contract after the suspension of the NCDC, the NCDC was sued, consequent to which the National Court awarded K8.million as compensation. So much for efficiency and competence of the suspended administration of the Governor and his cohorts who appears to have had a field day with State funds.

In this case, an alleged payment of K5,000.00 to a Senior Executive of the NCDC who was a signatory to the supplementary Contract in exchange for expediting the Contract is being pursued by the Police.

Action is contemplated to have these monies retrieved the banks whilst the erring food stores and other outlets are to be prosecuted for accepting stolen property.

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Whilst on the same Security Company, the Investigators have unearthed another scam where a payout of K237,000.00 had been made on a fraudulent invoice detailing the services of on-call duty of 80 men for 15 days on a 24 hour basis at the rate of K7.50 per hour plus 10% VAT.

There is evidence to establish that at that point in time the necessity for such a call out was neither justifiable nor the need exist. We do not have an iota of evidence to indicate that the call the necessity for stand-by duty originated from the NCDC.

We are following an information to the effect that the Company did not have 80 men for stand-by duty.

Importantly, the standard rate payable to a guard as per Contract Agreement was only K2.80 but without any reference to the Board or necessary amendment to the Contract Agreement the rate was raised arbitrarily to K7.50. per hour. Action is also pursued with the Internal Revenue Commission (1RC), as to the veracity of the payment of VAT. Our information is otherwise.

It may be recorded that the extreme, if indeed 80 men were actually required for 14 days on a 24 hour basis then the going rate according to the contract being K2.80 the sum payable would read as K80,640.00 whereas NCDC has been invoiced for K216,000.00 at the rate of K7.50, which is an overpayment of K135,360.00.

This is a clear illustration of the apathy that existed in the financial accountability and collusion between the system and unscrupulous contractors.

It was indeed catastrophe that due to systematic bureaucratic blunders made at the behest of their Political Masters, the NCDC now stands liable for a payout of K8.m only because two vital and basic clauses concerning termination and penalty for breach were not included in the Contract Agreement of Varna Security Services.

In yet another investigation millions of Kina had been siphoned from the NCDC coffers at the instance of certain. Senior Politicians to 'ghost youth groups'. Several cheques were raised at random and on an ad-hoc basis upon quotations obtained from renowned business houses for tools and equipment. The cheques raised upon such invoices were properly crossed and made 'account payee' but they were intercepted, stolen and encashed at trade stores and fast food outlets disregarding the crossing of not negotiable/account payee.

The justification or otherwise for the PNGBC to have honoured these cheques despite the provisions of the Bills of Exchange Act is a matter for conjecture. It has now been revealed that certain bank officials had acted in collusion with errant parties from within the system (NCDC). Rumors have it that such monies were used for election related purposes in 1997.

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The following two cases form the icing on the cake and reinforces the justification of the now infamous suspension of the NCDC for corruption and mal-administration:

Case No. 1 - GACTU Development Corporation Pty Ltd.

This company was floated in 1996. It was the brain child of the former Prime Minister and his aide a Sri Lankan who was also working on the Ministerial Staff of the then Finance Minister. He was a Consultant to the Internal Revenue Commission. He has since left the Country and is said to be a resident of Australia (Brisbane).

Interestingly, they floated a Company for road building and other heavy equipment work with a layman who was blissfully ignorant of what business was all about. The formation of the company was only a °marriage' of convenience in order to transact business with the NCDC whilst the layman, one Elijah Kiki, was only a front man. Upon the formation of the company, IC245,000.00 in 2 lots of K200,000.00 and K45„000.00 were injected to it by the Department of Finance.

Tender and Finance Procedures were waived at the instance of the Finance Minister, and the insistence of the then Governor of NCD. Although the understanding between the then Director of this company and the Department of Finance which acted in collaboration with the Governor of NCDC at that time, that the money was specifically for road development at Rainbow Estate, this did not eventuate.

On the contrary, the money in its entirety was withdrawn within a matter of five (5) days and placed in an IBD Account of a leading bank in the City. Interestingly, a Senior Expatriate engineer working for NCDC certified to the fact that the road was sealed to the extent of 1.2 km and built to the entire satisfaction of the grant. This was not so because no. such road was either planned, designed, undertaken or executed as borne out by the certification given by the Engineering Division of the NCDC. Thus the certificate given by the Expatriate Engineer was nothing but a falsehood done for the purpose of fulfilling acquittal requirements of National Government fund advances.

According to the Company Director, who was used as the front man, the Company had neither the expertise nor the infrastructure in terms of logistic support to undertake road building

Case No. 2 - Consolidated Property Holdings.

In the second case it has been revealed that on 25th April 1997, a payment of K100,500.00 had been made to this company by NCDC for the purchase of a Komatsu D6 Dozer. Investigations have revealed that the Tender and Financial Procedures had, once again, being disregarded. Although the funds were released for the purchase of the (said) heavy equipment, records do not support the purchase or delivery to NCDC an equipment of such description.

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Investigations establish that the sum paid has neither been an advance, up front loan nor a donation. Neither had funds been allocated for such a commitment. No action had been taken by the former regime either to retrieve this money or make good the delivery of the equipment. Ironically, when the present Administration drew attention to this fact the company by a letter has agreed to refund the money. By implication if nothing else this is an admission of guilt.

Yet another significant feature of this contract with the NCDC is that the son of the former Prime Minister who sign for and on behalf of this particular Company is neither a Director nor an Office holder of the Company according to IPA records.

It has also been established that the fleet of vehicles and equipment belonging to this Company is located at Par} Village in a garage built at the residence of the former Prime Minister.

investigations revealed that the family members of the former Prime Minister were actively involved in the operations of the company. Indeed they were the beneficiaries of the profits of the Company.

Investigations also revealed various expenditure unaccounted for and without supporting documents diverted to meet expenditure for political propaganda such as the Peace and Reconciliation Ceremony conducted in June 1998 and hosted by the then Prime Minister Bill Skate and Governor Philip Taku M. Such expenditure included cost of food, transport, sing sing groups etc. The source documents for such expenditures had been falsified and in other instances the documents have either gone missing or destroyed.

The foregoing examples were the prevailing scenario of disarray and chaos during the Skate/Taku regime.

When the actual picture supported with documentary evidence and the state of prosecution of certain cases referred to Police unfolds itself, the decision of suspension of the NCDC can be best judged by the people and the Honourable Members of the House of Parliament to which this report will be presented.

3. BACKGROUND

The investigation was commissioned by the Acting City Manager, Jamie Maxtone-Graham. It comprised two phases each with a time frame of approximately three months. The Investigators were charged with specific terms of reference to investigate the related issues of misconduct, mal-administration, corruption, and the causes for a breakdown in the Administrative and Financial controls.

The Committee of Inquiry was established under Section 31 of the NCDC Act. The objectives of the investigations were to firstly make in-depth inquiries into all allegations. The Investigators were required to follow proper procedures designed to gain appropriate and sufficient evidence to either sustain or disregard them. The conclusion of such investigation would form the basis for specific recommendations to the Minister. Second, the investigations would include compiling of documentary and oral evidence for referral to the Police. If a prima facie case of fraud or a related offenses such as a violation of Financial Procedures were established, the Investigators would submit the relevant files to the respective Authorities.

These interim recommendations identified areas of weaknesses and infirmities in the administrative system(s) and suggest appropriate remedial action. The investigations were also designed to discover other fraudulent activities committed either by the present or previous staff, or other external parties either through collusion with NCDC staff or otherwise. A common allegation was that external parties acted in collusion with highly placed official to swindle the NCDC.

The report will be presented to the Minister for Provincial and Local Government Affairs who may wish to table it in Parliament and cause it to be subjected to further investigations and other proceedings as appropriate.

4. THE MANDATE' AND TERMS OF REFERENCE

The Investigators were required to make in-depth inquiries into allegations and related issues of corruption, misappropriation, financial mismanagement and other matters identified by the Ministerial Committee of Inquiry.

The overall investigation into the affairs of the National Capital District Commission was a three-pronged effort. The first stage included a series of reviews, assessment-exercises and other types of investigations conducted by the Department of Provincial and Local Government Affairs and the Auditor General's Office, which culminated in the presentation of several reports to the Minister for Provincial and Local Government Affairs. These reports assisted the Minister to form the view that there was sufficient basis to establish on good ground a prima facie case to merit further in-dept investigations targeting specific instances of corruption and mismanagement.

12 It was the Minister's opinion that there:

was widespread corruption in the administration of the affairs of the NCDC;

had been gross management of the financial affairs of the NCDC;

.1"" had been a persistent and a consorted effort to frustrate the system by its failure to

comply with policy initiatives of the National Government.

This formed the basis for the second round of investigations for which purpose a Committee of inquiry under Section 31 of the NCDC Act was appointed.

This Committee highlighted a series of incidents related to mal-administration and in particular violation of the Financial Procedures and the Financial (Management) Act 1995.

On 7th February 2000, the third team of investigators headed by the former Director CID and Prosecution of the RP-INTGC, Mr Carlyle De Silva, assisted by Deputy Superintendent of Police (CID), Police Headquarters, Colombo, Sri Lanka, S. Nanayakara and Consultant Accountant George Pera was appointed by the Acting City Manager. The support staff comprised Ms. Elly Nonggorr (Secretary) and. Richard Pangwinyen (Research). This assignment is due to expire on 7th July 2000.

Broadly the terms of reference were:

i Liaise with Police Fraud Squad for follow-up action in cases investigated and submitted to Police;

Continuation of fraud cases commenced by the previous investigators;

iii Investigate all matters falling within the authority of the NCDC and cases referred to the team by the City Manager;

iv Perform such other duties as directed by the City Manager;

Review the Internal Control System and provide advice in implementation of corrective and preventive control measures to be conformed as safeguard in the future;

iv. Formulation of a contingency plan to retrieve large sums of money lost to the NCDC due to incorrect encashment of cheques and money fraudulently required from NCDC funds;

v. The analysis of 29 boxes of documents, files and vouchers which were taken unlawfully out of the Country by one Joseph Noonan;

vi. Formalize and rationalize the Security System of the NCDC;

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The Security Profile so prepared was submitted to the former Acting City Manager. See attachment Annexure G.

5. METHODOLOGY

Most matters dealt with relate to criminal offences and seeking civil remedy to recover money lost to the Commission due to fraud, theft and misappropriation. Therefore, it was essential to document collect, collate and disseminate volumes of documentary evidence gathered from witnesses and other materials in order to satisfy measures of validity, clarity and integrity.

To follow the conventions of formal investigations of the type pursued at City Hall a fluid framework was necessary to allow for an overall review, analysis, documentation and validation of all issues. cases and matters brought to the attention of the investigators during the course of the investigations.

Many of the procedures were time consuming and seeming of little value but without the menial tasks the bigger picture would have not fully developed. Many a man-hour was consumed on fruitless tasks pursuing trails that were blind ends in order to exhaustively follow all leads. Being meticulous and methodical required a formal documentary audit trail of each case. The filing system and the mass of documentation to be examined was exhaustive as was the material processed in order to extract information of evidentially review which would hold the investigations in useful stead.

The following guidelines which are the accepted procedure followed:

in investigations, were

i. A general understanding of the system. This was achieved through our presence and.-the participant observation of the process of decision making. We observed as closely as possible the interaction between the Senior Management, the Staff and the Investigators;

ii. Examination of background and prior reports, manuals, legislation, management briefs, internal audit files, external audit files and many other documents;

iii. An open door policy was observed to encourage any complainants or informants who would have wished to divulge valuable information that would assist and advance the progress the investigations;

iv. All information gained or derived and the sources of such were thoroughly screened for authenticity and integrity. Confidentiality was regarded a high priority;

As a measure to control and document time usage, each investigator maintained weekly summaries of the work handled.

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v. For each case of a suspected fraud or financial misdemeanor, the usual Police method of obtaining personal statements and documentary evidence was pursued. Statements were recorded within the strict confines of legal requirements, fundamental rights of a person, rules of evidence and most important, under fair and impartial circumstances. All statements were voluntary without threat, promise or duress. The statements and documents obtained were properly filed on record;

vi. Back up and source documents were extracted from the files of the Finance Sections in order to trace and verify background details of each case. In many instances these records were either incomplete or gone missing. Reliance was placed on other procedures and external confirmation:

vii. Where necessary trips to various sites including banks and other sites were made to collect evidence, statements or make site inspections;

viii. A thorough system of registers and files were created to maintain a detailed record of all documents created, copied, retrieved, adopted or otherwise dealt with by the team. Movements of files and its storage were closely monitored. A clear audit trail exists of all cases and matters handled;

ix. The progress of the investigations were regularly discussed at weekly conferences with the City Manager, the Police and the Investigators;

x. Upon completion of each case, the original file was submitted to the City Manager for onward transmission to the Police for appropriate action. The investigators did not make direct contact with the Police for reasons of protocol. Copies of all files are retained at the Investigation Offices;

xi. The Police Fraud Squad was located in the City Hall. This facilitated the operational convenience. Heavy reliance was placed on the Police and their response was most encouraging;

xii. The examination of 29 boxes which contained a mass of documents and files removed from the county illegal by one Joseph Noonan and later returned to NCDC from Brisbane is nearing completion. These files have been categorized into three areas. Firstly, files that had no relevance to the investigation and which could be returned to the office of the Financial Controller. Second, those that contained support documents, summaries, paid documents, photocopies of cheques etc, which may assist the main investigation. Third, the files that provided material and evidence of new matters or cases that merit in-depth investigations. All irrelevant material which are not required by the investigation has been returned to the office of the Financial Controller.

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In the best traditions of investigations, we have neither been selective nor targeted any victim for persecution or harassment. Rather, in so far, the investigations we have vigorously pursued the truth without, fear, favour or bias. In every case, that a prima facie case was established. It was referred to the Police for appropriate action. Any other approach could be construed as a perversion of justice.

The investigations have produced the desired results sans flamboyance or rhetoric. Progress was slow but sound and steady with quality being the focus. At the time of the final report, the investigations were closing in on a Crime Syndicate which had taken root liken to a cancerous growth within the system and had taken a stranglehold of the Controls in the past few years. But for the timely intervention of the National Government to salvage the NCDC from disaster, the secondary to the cancer would have destroyed the patient.

Monthly progress reports were presented to the City Manager by the Investigators for purposes of information, direction control and feed back. At the completion of the Investigations a Final Report of the investigations will be submitted to the City Manager for presentation to the Minister of Provincial and Local Government Affairs.

The investigations will be concluded by a formal 'hand over' of the Final Report with all the files, documents, registers and other material accumulated by the investigation. It must be stressed that there are still many undiscovered cases of fraud, defalcation and misappropriation. The fact that many of the source documentation had gone missing was a significant setback to the exercise_

6. PRIOR REPORTS, MANUAL AND DOCUMENTS

The investigation team was able to read many prior reports as a part of the background work to establish where the allegations fell and to establish search parameters in matters of fraud or other form of control abuse. All important procedural manuals and legislation were also perused.

The following constitutes a list of the more important material perused and analysed by the investigators:

i. National Capital District Commission Act (1990) as amended

ii. Organic Law on Provincial Governments and Local Governments

iii. NCDC Financial Procedures Manual, 1984

iv. Manual of Accounting Policies & Procedures, 1998 {Hades & Associates)

v. Public Finances Management Act. (1995) as amended.

vi. Audit Act (1989) as amended.

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vii. Audit reports for 1993, 1995, 1996, prepared 1999

viii. Deloitte Touche Tohmatsu report, April 1999.

ix. Financial Reports of NCDC for years 1993, 1996 and 1997

x. NCDC Assessment Report, 14th — 21st April, 1998 (Dept of Prov & L Govt)

xi. Reports of misconduct in office by Motu Koitabu Councillors & Commissioners. (Dept of Prov & L Govt)

xii. Internal Audit Report, 24th February, 1999

xiii. Governor's report on dismissal of City Administrator.

xiv. Report on Review of NCDC Goods & Services orders & cheque requisitions, regarding some security service payments to Yama Securities.

xv. Joe Noonan Report and Files (29 boxes)

Internal Audit Report Files (various 1996 - 1999)

xvii. Board Resolutions and Minute Books

xviii. TSK Report — Phase I of investigations

For the purposes of the investigations the above files have been 'adopted' as part of the accumulated documentation_ Many other files containing documents from prior investigations and reports were also perused as part of the ongoing investigations. These documents are part of the mass of accumulated data comprising the Investigations working papers and documentation.

7. FINDINGS AND CONCLUSIONS

The investigations have been divided into three different categories to suit the procedural as well as the nature and type of the review work.

a. Internal Control System Review b. Fraud Matters and Cases c. Security Rationalisation Issues

a. Internal Control System

Most of the specific findings in the '1998 Assessment Report' with respect to the different foams of internal control system breakdown were been largely identified as still being practiced at the time of arrival of the new management under Mr. Jamie Maxtone-Graham.

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Although some form of restructure in the organization and control systems may have been attempted by the previous administration it is strongly believed and supported by the preliminary findings and but for the suspension, the NCDC system would have collapsed leaving the system chaos and disarray. Thus goods and services would not have reached the consumer.

It was quite apparent that there was a deeply rooted system that had taken advantage of the weaknesses in the internal control system to bypass protocol and certification procedures to make payments for poor quality work and bogus claims. In some proven cases staff of the NCDC has colluded with corrupt external elements to gain direct personal financial benefits.

Loss of historical records, cheques and accountable forms through theft were still going on even after the suspension of the NCDC months after the arrival of the new management. There seemed to be little that can be done to stop the unscrupulous crooks who had infiltrated the system except by the terminating of the miscreants.

NCDC could not been salvaged nor have turned itself around of its own accord without external intervention.

The whole control environment needed a thorough revamp if meaningful change was to take effect. This included the political decision making process the policy formulation and implementation area down to the very basic issues of checks and balances of a normal control system.

Politicians as well as Senior Executives have been responsible for the execution of contracts that were detrimental to city. Instances of bad decisions by Senior Management has led to the city not getting value for money or losing money in apparently engineered schemes where third parties have benefited at the expense of the city.

This report agrees with the findings of the 1998 Assessment Report in that "the inability of the [then] cm-rent NCDC organizational-k-a.r.-..re to provide a satisfactory regime of internal controls has resulted in a myriad of reported adverse occurrences.... throughout the NCDC in the last few years 1". Further it is the opinion by the same team that "parts of the NCDC are being systematically stripped of funds by way of corrupt practices emanating from high office in the NCDC with support from the private sector has been proven in a number of cases. The Yama Security fiasco, the JBJ Consultants debt collection fees, Justine Tkatencho & Raymond Agonia false claims, are clear cases of collusion between highly placed officials of NCDC and unscrupulous private sector corporations and individuals leading to massive loss of funds through fraudulent contracts and transactions. The grand finale was the siphoning of Kina K150,000 on day one of the suspension by the former governor to pay his own legal fees and the scam of K245,000 perpetrated by the form Prime Minister, Bill Skate on the Rainbow Estate for a sham road project.

Assessment Report 14th — 21' April, 1998 — Department of Provincial and Local Level Government Affairs, p3.

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Some key personnel of NCDC may have been involved in various fraudulent activities have either been terminated, suspended or are being investigated. It is clear that many persons within the City Hall have been involved in the Mafia of corruption that took as strangle hold of the NCDC controls and management.

It must be noted that recommendations made in the Internal Control Assessment Report by Delphi 2000 been considered for implementation.

A full text of the Internal Control Review Report by the Investigation Team is attached as Annexure A.

b. Fraud Matters and Police Referrals

A full list of the fraud cases pursued by the investigations falling into the category of fraud or misappropriation is reflected in Annexure D.

Most of these cases including complete documentation of each concluded case have beer! referred to the Police where formal criminal investigations are progressing in their hands. The extent of the investigation work could not go beyond the discovery process, documentation and compiling of oral and documentary evidence and expression of opinion on criminal and fraud matters. The criminal investigations due process is the responsibility of the Police and in particular the National Fraud Squad of the Police Department.

The police investigations are expected to take much longer and follow all usual procedures of independent verification and validation of evidence and material provided by the investigation team.

Summaries of a few of the more significant cases are presented in this section:

CASE I Misappropriation by Hon Bill Skate - Former Prime Minister

Several cases were investigated and reported on, with respect to the Former Prime Minister and are reported in two parts.

a Private Security Costs

It is confirmed by the documentary evidence that Fabin Guards and Country security were paid for services and it is clear from the details of the various invoices that the services had been provided to the private residence of the former governor of NCDC and then Prime Minister, Honorable Bill Skate.

19 Details of payments include:

Firm ORF No. Period Amount Country Security 11361 1/8/899 — 15/8/99 5,580.00 Fabin Guards 55600 7 months (unspecified) 56,246.40 Fabin Guards 47813 July 1998 1,728.00 Fabin Guards 02872 Oct/Nov 97 8,142.77

Security for the Head of State is a national function and as such the cost of such services should be paid for by the Office of the Prime Minister which is adequately endowed for such purposes. The fact that such costs were passed to the NCDC gives rise to serious questions of legality and confuses the legitimate chain of authority and accountability. The police and the rest of the disciplined forces are adequately trained and equipped to provide security for the Head of State. This is a universally accepted practice and indeed a sacred protocol and that is to protect the Head of State.

Being a representative of seat of the NCD in Parliament cannot be adduced as valid argument to obtain privileges at State expense. in doing so one can compromise the NCDC.

It was obvious to the investigators that the Hon. Skate had enjoyed special privilege through his ability to remote control and arm twisting' funding decisions at NCDC without having authority within the legitimate chain of authority whilst the NCDC was helpless to counter or contest his directives for obvious reasons.

An instance discovered in the process of investigating this case concerns an invoice and claim that was recently received from Fabin Guards, the same security firm identified as providing private services at the much publicised Peace and Reconciliation Ceremony hosted and conducted by the former Prime Minister Bill Skate.

It is apparent from the claim by Fabin Guards that they had been deployed during the Peace & Reconciliation Ceremony conducted from June 24 to June 29 1999, at the behest and approval of Mr. Bill Skate. From the description of services provided on the invoice, it is clear that there were 25 men deployed over five days for a fee of K15,000. The invoice states 'At a special rate for 5 days approval was granted by the former NCD Governor and current Prime Minister'. This information is clearly written across the face of their invoice.

There was no doubt in the minds of the claimants that the approval for their service was properly granted and authorised by Mr. Bill Skate. This begs the question of the legitimacy of Mr. Skate's authority.

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Although this claim for security services provided during the Reconciliation Ceremony has not yet been paid, the fact remains that NCDC funds were committed for an event that was quite remote from the NCDC's normal operations by some one who had no authority to make such commitments.

Another factor, which gives rise to suspicion, is the payment for the cost of the Peace and Reconciliation Meeting. The cost of the exercise included the payments incurred for the sing sing Groups, venue structures, decorations, presentations, food & refreshments, transportation and related costs. The expenditure is said to have been astronomical.

The Investigation team is severely handicapped due to lack of documentation related to the payments for services rendered at the ceremony.

Assuming that the former Governor Philip Taku had made the necessary commitment of NCDC funds, the fact remains that the entire ceremony was not a legitimate NCDC operation. Any collusion on Mr. Taku's part in this event would tantamount to misappropriation.

1 5 Misuse of Public Funds

This section of the report concerns the alleged misappropriation of public funds by the Honorable Bill Skate during 1996 and 1997. The evidence to these allegations including supporting documentation have been supplied to the investigation committee by a very reliable source, who was used as a front man and director of certain companies controlled by Mr. Skate and his cronies during the time in question. A detailed statement has been recorded from the said source and there is strong documentary evidence supporting the allegations. The funds were provided from various sources as follows:

Source Cheque No. Purpose Amount Recipient Co.

E Finance 518754 RDP - Road Dept Sealing at

Sealing At Rainbow Estate

§ Finance 545270 Grant K45,000 Dept.

Gactu Development Corporation. P/L.

Gactu Development Corporation PIS,

§ NCDC 067450 Purchase of K105,000 Consolidated

Komatsu Prop-Holdings PIE Bulldozer

In each of the instances a cheque was raised by the source organisation and paid to the named companies for specific purposes. These cheques were banked and allegedly cashed and used to promote purposes other than those intended.

21

That Mr. Skate was not directly involved in the activities of the company is not in dispute. However, circumstantial evidence shows that the funds could only have been paid through the intervention and authority of Mr. Skate. This inference is irrefutable and irresistible.

Gactu Development Corporation Pty- Ltd

This Company was formed in the middle of 1996 for the purpose of obtaining work contracts from the NCDC and elsewhere. The founding directors were a Mr. Eli7ah Kiki and a Ben Memafu. According to the source, the promote: and organiser of the company was a Mr. Yo6 Srikhanta who was at the time employed as a Consultant with the Internal Revenue Commission and other government organisations. Mr. Yogi Srikhanta was later appointed as the Operations Management Consultant of the Company.

In September 1996, the then Governor for NCDC, Mr. Bill Skate applied for and was granted a total of K200.000 under the Rural Development Program for the purpose of sealing the roads at the Rainbow estates near Gerehu. The application was approved and Fiebou Constructions was nominated to carry out the work. The former Governor then applied for dispensation of tender procedures and a re-awarding of the project to Gactu Development Corporation Pty Ltd on the 19th of September 1996. The applications were approved by the Honourable Chris Haiveta (Minister for Finance) and Moi Avei (Minister for Planning) respectively. The cheque number 518754 for K200,000 was released the very next day. the 20th of September 1997 by the Finance Department.

According to the statement made by the former director of the Company, the cheque for K200,000 was delivered to him by the said Yogi Srikhanta for banking, into the company account at May Bank, account number, CO01-3001905.

All documentation with respect to the application for the funds were correctly - completed and further approvals with respect of dispensation of tender procedures were

also properly obtained. There is no apparent fault associated with the release of the funds by the Department of Finance

A 'certificate of practical completion' completed by former NCDC Engineer, Mr. Graham. McKenzie, was attached to an acquittal to the Ministry of Planning and submitted by the recipient. the former Governor of NCDC in May 1997. The certificate indicates that work was carried out to the effect of the sealing of 1200 meters or a 12 kilometre stretch of roads at the Rainbow Estates between 1996 and 1997.

The investigation has been concerned with establishing whether or not the funds were used for the purposes specified and that the basis of the certificate is not only correct but properly obtained. It has become apparent that the company that received the payments for the construction project had no infrastructure capacity or experience to carry out any form of construction.

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Information obtained from the current NCDC Engineers who were during the timeframe in question still employed by NCDC concur on the following points:

§ The NCDC Engineering and Works Divisions have no knowledge of work carried out in accordance with the 'certificate of completion, given under the signature of Graham Mackenzie a former NCDC engineer.

• They have never been associated with a similar road project at the Rainbow Estates or were in attendance for purposes of inspection.

No project road plans, drainage plans or bill of quantities was provided to NCDC or filed with NCDC.

• No contract documents exist of the same.

• A recent assessment made in 1998 of the Rainbow estates for the purposes of work request by the current Prime Minister, Honorable Mekere Morauta showed that there were in existence some sections of sealed road of approximately 400 meters constructed prior to 1994. The rest of the road net work had no hard top and in was in total disrepair.

• Some drainage and upgrade work was then carried out by a contractor called Warvickson to the value of about K64,000 during 1998/99 partly funded by Sir Mekere Morauta. and partly by NCDC. This being the only road works carried out at the Rainbow Estate that the Engineers are aware of

Further investigations have revealed that the K200,000.00 from the Department of Finance was initially banked into the company account at the May Bank and on clearance was transferred to two D3D accounts in lots of K50,000 and K100,000.00. The IBD's served as a security for a working overdraft to facilitate Company Operations. Upon maturity, the funds in the IBD were transferred to the operating account of the Company. On 15th May 1998, K50,000.00 was refunded to the Company cheque account and utilized for operational cost. One year later (15 May 1999) K150,000.00 lying in the IBD was drawn to service and pay off the outstanding overdraft.

The second lot of K45,000 (grant) was raised on the 26th September 1996 and was paid into the Company account at Maybank and later fully drawn and distributed for undisclosed purposes. The underlying purpose of the grant is yet to be established, although both cheques were paid into the account of Gactu Development Corporation PTL at the behest of the Governor of NCDC at the time.

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Documentary evidence has established that the Company utilized some of the funds to purchase a second hand ambulance from Australia, which was refurbished and painted at the Pit Stop garage. The ambulance was later donated to Hohola Clinic. Company documents reflects the purchase of a rubbish compactor truck and the purchase of other items. The rubbish truck was later hired back to the NCDC for waste removal and rubbish collection.

It is obvious that the NCDC was but a rubber stamp to facilitate certification for work that was not carried out. It was a cover up for the misappropriation of the total of 1(200,000 from RDP funds. As the funds were not used for the purpose for which it was granted, it follows that the supporting documents and certification provided to justify expenditure was a falsehood and a fraud perpetrated by the Engineer concerned. It is obvious he acted in collusion with the former Governor to defraud the State and the people of Port Moresby.

The documentation including, Company records, bank records and statements from key witnesses have since been delivered to the fraud squad for further investigation and copies forwarded to other government agencies for appropriate action.

Consolidated Property Holdings Pty Ltd

This was the Second Company formed in 1997. Its primary objective was to secure work contracts from the NCDC. The directors in this company were identical. The Sri Lankan National referred to elsewhere in the report played a key role in Management and Consultation. He was instrumental in the formation of this Company and amongst other matter, responsible for strategic planning and board decisions of both companies namely Gaeta Development Pty Ltd and Consolidated Property Holdings Pty Ltd. He was one of the signatories to the cheque account at May Bank. The other directors were merely pawns and used as a front to satisfy certain provisions of Company Law.

The following example is an illustration of blatant defrauds and racketeering and stands out like a sore thumb.

In April 1997, a cheque for K100,500 was paid by NCDC to Consolidated Properties Holding Pty Ltd for the purposes of supplying a D6 Komhatsu Bulldozer. No tender procedures were followed. Significantly, the company had just come into existence and there was no evidence to establish that the Company had the capacity to deal with heavier equipment or transact large tenders. In fact, they were not into dealing with heavy equipment. In this case, the source documents of this particular transaction have gone missing. This proved a setback to the investigations.

To date this bulldozer has not been delivered. No follow up action is available on record to show any attempts by the NCDC to recover the money or ensure the delivery of the bulldozer. This item has not been inventorized or documented.

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For all intents and purposes the transaction appears to be a ploy to swindle the NCDC.

We find that the K100,500 was paid in the Company bank account at ANZ — Waigani. A few days later, (1st May 1997) this money was transferred to an IBD account in favour of the Company. The J.13D was used as security to obtain a working overdraft for the Company. Upon maturity the funds were utilized to service the overdraft and for the other operational expenses.

However, in a strange quirk of fate, the Company has now volunteered to repay the entire sum of K100,500.00 back to the NCDC when their attention was drawn by the Investigators to the implication and consequences of this transaction. This gives the lie to the bona fides of those who were involved in the payout and the receipt of this money.

It has beer further revealed that this Company had entered into a yen, lucrative three year contract of K22,000 per month 117,264.000 per annum] with the NCDC for the purposes of collecting rubbish and removal of dead dogs. This was notwithstanding the fact that the Company had failed to deliver the equipment purchased for K100,500.00. The Operations Manager of this company was a Willie Hitolo ho is believed to be Mr. Bill Skate's adopted son. He represents the family Company in all matters with the NCDC.

Whilst records at the NCDC disclose the fact that Willie Hitolo is a signatory for and on behalf of the Company the IPA records indicates otherwise. In other words Hitolo enjoys no status in the Company either as Director or Secretary.

The base of operations of the Company until its disposal in December 1999, was located at Hon. Bill Skates private residence at Pari Village. It was common knowledge in the area that the business was controlled by the members of Hon. Bill Skate's immediate and extended family.

In December 1999, the business was transferred to new shareholders. The former shareholders were not compensated or any shares transferred to them.

The assets of the company at the time of transfer included three rubbish compactor trucks and one car together with the operating contract with NCDC for waste removal. Also transferred to the new owners were outstanding claims to the value of K30,000.00 before December 1999 due from the NCDC.

Documentation effecting the transfer were later filed by one of the directors who is a practicing lawyer showing transfer of the shares and the directorships.

The circumstances of transfer do not follow normal business practice or common sense and therefore raises suspicion as to why anyone would willingly give away a profitable business as a gift with no strings tied. Also suspicious is the sudden departure of the Sri Lankan, Yogi Srikhanta who departed for Australia the very next day after the transfers were effected with no intention to return in the future_

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Incidentally this was around the time when the NCDC was carrying out investigations to uncover major malpractices and breakdown of control at the City Hall. The plight of the Sri Lankan at the height of the investigation lends further suspicion to the case and the events surrounding the operations of the company and the involvement of the skate family.

A statement made by the current Directors mention that the transfer of the company to them came about by the insistence of Yogi Srikhanta. They farther state that Mr. Bill Skate had sent word to them to urgently get in touch with the said Yogi Srikhanta to take control of the company as the Sri Lankan was planning to leave. At a meeting where the transfer was discussed, the new directors were told to go to Mr. Skate's place and pick up the machinery and vehicles. The new directors claim that they asked Mr. Srikhanta why he was giving them control of the company and he responded that he wanted nothing further to do with the business and wished to be rid of it.

The overview of evidence collected so far indicates the obvious that Hon. Skate and his family were directly involved with the business and with the help of the Sri Lankan who has since fled the Country, conspired to defraud the NCDC of K1100.500.00. Coincidentally, Hon. Skate was the Governor of the NCDC at the time and he enjoyed overall control of the Commission.

Documentation including, company records, bank records and statements from key witnesses were delivered to the fraud squad for further investigation and action.

CASE II. Criminal Misappropriation of K150,000.00 of NCDC Funds

The facts briefly are that at the heels of the suspension of the NCDC at midnight 6th September 1999. Philip Taku. & others rushed through the documentation to raise a cheque for K150,000.00 on 7 September 1999 as payment of legal fees against an action Hon. Philip Taku MP and Hon. Bill Skate MP brought against the present Administration of NCDC. The documents included the preparation of a certificate of expediency and the raising of a manual cheque. The entire process was hurried and the normal procedures of certification, budgetary and commitment checks, audit clearance protocol and other important control measures were not followed. Instead evidence show that the officers who raised the documents were pressured by the above mentioned Hon. Philip Taku lvT and others.

There was also no Board approval for the payment of this money to Maladina Lawyers. In the context of the suspension it would follow that all Executive and Management powers which were vested in the Governor and others ceased as of midnight of the 6th September 1999 thus any official act performed by them could be deemed illegal and unauthorised.

26

Maladina Lawyers have retained K50,000.00 of this money as their fee whilst the balance was paid into the National Court trust account by Mr. Greg Shepherd which action he resorted to, after he was requested to return this money which lawfully belonged to the NCDC. Mr Shepherd attempted to obtain orders from the court granting him a right to lawfully keep the K50,000 retained as proper fees and the remainder held by the courts until the resolution of a purported dispute of the funds by Mr. Taku and the NCDC.

On the facts available so far, it is our view that a prima-facie case of criminal misappropriation against Hon_ Philip Taku MP and others as well as a case of receiving and retaining stolen property against Greg Shepherd had been established.

The relevant documents and statements of witnesses recorded further to this case were referred to the police fraud squad.

CASE III . Fraudulent Encashment of cheques - Pacom & Jinchil la K39,00.00 & K12,000.00 respectively

In this matter the above cheques were stolen by employees of NCDC and passed to a well know criminal who had contacts in the PNGBC Port Moresby branch to cash the cheques. When contacted, PNGBC agreed that the offices involved had breached all normal procedures in allowing the encashment of the two cheques. which were written to companies one of which is a reputable supplier of radio equipment.

Three bank employees (tellers) were identified as those who had been responsible for the encashment. The internal interview of the officers was conducted in the presence of two members of the investigation team to record statements of its employees_

The investigations revealed that a notorious criminal named ARUA M.ARAGA of Baruni Village had in collusion with a Senior Officer of the Finance Section NCDC intercepted the two cheques in question and given them to one Turin

Benedict of the PNGBC. He is a bank teller. Tuain cashed the two cheques with the assistance and connivance with two more bank employees namely, Goroa Ova and Keani Baru. The Bank Tellers were handsomely rewarded for their part by the principal suspect and it is further believed that the NCDC employee who had physical control of the cheuqes were equally well rewarded.

On the arrest of Maraga, the crime syndicate, which had caused havoc in the financial systems within the NCDC, can be busted.

The bank subsequently suspended the three bank officials. The bank also mentioned that they were prepared to repay the full amounts of the two cheques to NCDC.

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Goroa Ova also stated that a Joe Auri and a Geno of the Finance Division of NCDC gave the cheques to Arua. These officers are still in the employ of NCDC.

Police assistance was sought to arrest Arua Maraga after which the two NCDC employees would be questioned

The cheques in question made out to the two companies were appropriately restricted with the usual crossing Not Negotiable - Account Payee only'. The cheques were stolen prior to release to the legitimate payees and can only be the work of person(s) with access to the NCDC system.

Inspite of the crossing, the cheques were encashed over the counter at PNGBC Port Moresby. The investigators believe that this practice had been going on for a long while and that certain persons within NCDC are involved in a scam that has seen many cheques stolen and encashed at supermarkets and sometimes at the banks.

At the insistence of the Investigators, the bank has agreed to make good the loss in relation to the value of the two cheques.

The file is with the police for completion.

CASE IV. Hon. Philip Taku MBE MP — Yama Security Contract

The case relates to the former Governor and Member for Moresby North-East, Philip Taku, MBE MP.

It brings into question the Governor's conduct and his propriety of the governance of the Commission and if in the process he breached of the Leadership Code and compromised himself in his role in the now infamous Five-Year Security Contract awarded to Yama Security Services.

The facts briefly are that in February 1998, the NCDC awarded a Security Contract to Yama Security Services for a five-year period. The accepted procedures and related constraints including the provisions of the Financial (Management) Act 1995 were disregarded. Indeed, the Contract was rushed within a matter of few hours at the instance of the Chairman, Yama Security Services, one time a Minister of the State, by his Manager and the OIC Administration.

The draft Contract was tailored to meet the requirement of the Supplier. It was prepared by the Manager, Yama Security Services. NCDC Legal Section which monitors contracts was kept in the dark whilst it is obvious that the Contract Agreement had the tacit approval of Governor Taku. The Contract was rushed on the night of 18th February 1998 to the Poolside of the Islander Travelodge where Governor Taku and the Managing Director, Yama Security were awaiting its delivery.

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Significantly, the Contract Agreement is silent on the Termination Clause and the Period of Contract. This is considered a major departure of accepted practice and procedure governing the principles of contracts because the client (NCDC) should reserve the right to terminate a contract if the services fall short of the task specifications. As for the period of contract, it is ridiculous to award a Security Contract for more than 12 months, which is open to renewal. In this case, the Contract has been awarded for 48 months.

Another factor which has aroused suspicion is that the Governor's presence at the poolside of a hotel at an ungodly hour especially when he is known to be a teetotaler arouses grave suspicion and the inference is obvious.

Evidence recorded so far indicates that on the following day (19th February 1998), a Filipino employee was entrusted with K5,000.00 by the Managing Director, Yama Security, to be delivered to the then Deputy City Administrator (Finance &, Admin) as a reward for expediting and assistance in finalizing the Contract. This matter is being, dealt with by the Police and regarded as bribery.

Mr. Michael Kondai acted for and on behalf of the NCDC. He failed through reasons within his control to take cognizance of the infirmities built into the Contract by the Supplier which resulted in a National Court Award of K8 million to Yama Security Services for wrongful termination of the Contract. It is clear that legal opinion had not been sought from within the NCDC Legal Section or other independent appraisal of the Contract. A legal officer of NCDC who gave an adverse opinion on the matter was suspended and terminated.

This matter has been referred to the Ombudsman Commission for action under the leadership code.

An extension to the Yama Security Case is a fraudulent claim for K216.000.00 plus K21,600.00 for 10% VAT by Yama Security Services for the purported deployment of on-call duty or stand-by duty of (80) men on a 24 hours basis for period of 15 days. The rate charge was K7.50 per hour, which far exceeds and contrary to the Contract, which stipulates K2.80 per hour. In truth and in fact, no such deployment was required nor supplied. This matter is now before the Police.

This brings us to the question as to the necessity of the requirement and the contingency facing the NCDC for such a huge deployment of stand-by men. An oral examination of former Yama managers and duty roster records, it is quite clear that there were no provision or resources in terms of equipment or manpower on payroll for this specific stand-by arrangement.

The facts lead us to believe that the purported emergency was a total fabrication or farce by Yama Security acting in connivance with certain dishonest elements within the City Hall. That the spoils were shared is obvious.

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Yama Security Services earned the notorious reputation for crooked and dubious deals, not only with the NCDC, but all their business contacts. A case in point was in June 1999, the Company requested an upfront payment of K554,000.00 (approx.) to fund the purchase of security equipment and accoutrements. This is unheard of in general business principles where the client is compelled to finance the Supplier upfront whereas the Supplier is expected to be equipped with such facilities before a tender is awarded.

This payment had neither the Board approval nor did it conform with the Financial (Management) Act 1995.

The Yama Security Saga is now a matter of court proceedings and we reserve our comments, as it is a matter of subjudicie.

CASE V. Suspicious Transactions and Payments to Phantom Youth Groups

This case relates to a series of dubious payments made by the system to certain suspicious youth groups, which in fact did not exist. They are commonly referred to as ghost payments.

Briefly the background of this saga goes back to 1996 during the regime of Hon. Bill Skate the then Governor of the National Capital under whose direction a committee to assist under privileged youths; women and churches were established.

This Committee was appointed by the Governor and comprised seven members chaired by one Jerry Martin, a close associate of Mr. Skate. The finding for the work of this Committee was provided for in a special vote called Social Development Committee with an initial allocation of K750,000.00. It was equally allocated to the three groups at K250,000 apiece. The funds were controlled by the Financial Controller of NCDC.

Though the underlying motives were laudable its operational and administrative factors were riddled with bad procedure and infringement of the Financial Management Act. The procedure for allocation of funds and payments were adhoc and most important the cheques and payments were not correctly monitored so that cheques were raised at random and paid to persons without proper records and identification. Most importantly, the cheques which were made out to a particular person or a group with a crossing such as not negotiable or account payee were picked up at the office and cashed by the third party often at a trade store with the assistance of an employee of the committee disregarding basic banking principles.

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A case in point refers to several transactions involving the Executive Officer of the Committee one Dixon Dama who admitted that he assisted several groups and individuals to encash cheques at commercial outlets by witnessing to the identity of the payee. Under closer examination of the witness, he admitted being under severe pressure inferring that the source of such pressure was Governor himself, When pressed for a positive explanation he remained silent. The reason for his silence was obvious and can only be inferred_ In his statement, however, he did not wish to incriminate himself or the Governor except to say that the youth groups threatened him with his job by reporting his failure to cooperate to the Governor.

There was no concrete evidence available to show that the Groups executed formal contracts and there is no record to indicate that the committee had a system in place to verify valid claims or whether a specific contract was awarded and the party to which it was awarded executed the task to the satisfaction of the committee.

Tt is a coincidence that during mid-1996, the City experienced a severe drought with the famous El Nino taking its toll on most parts of Papua New Guinea. in this context, one may question the rationale of spending large sums of money on youth groups for cutting grass whereas rainfall is required for the growth of grass.

It is both impractical and time consuming, to embark on a voyage of discovery to ascertain the identity of the youth groups as it is obvious they have never existed. On the other hand there are no records to indicate that the youth groups were registered, monitored and their work was correctly supervised before payments were made.

In the circumstances it is safe to rationally infer that the transactions in its isolation or in its totality were irregular and fraudulent thus by passing, accepted financial practices and procedures. The irresistible and obvious inference is that this Committee [indistinct] the youth groups were established to achieve a diabolical objective. The General Elections of 1997 was a coincidence and it is best that we leave the report at this point so that in your wisdom you may read between the lines.

From a legal standpoint there is evidence to proceed against Dixon Dania for aiding and abetting illegal transactions. Doing so would only mean that we spare the shark in preference to a minnow who was acting in fear of losing his job and at the behest of his political master.

We would recommend that legal advise is sought to have the money recovered from the bank as it is manifestly clear that by clearing the cheques which had positive instructions from the drawer it violated the basic rules and regulations governing the control of a cheque account.

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Second, and equally important it is vital that all escape routes surrounding the issuance of cheques be insulated and escape routes sealed to ensure that a recurrence would not occur.

It is extremely disappointing to note that Financial Procedures have been flouted with impunity by all concerned in the financial exercise thus enabling the crooks to have a field day.

A method of establishing whether the payee youth groups were bona fide, media release have been proposed to assist in identifying the so called 'ghost groups'.

CASE VI. JBJ Consultants — Debt Collection Fees

This case is an illustration of flagrant disregard of Financial Procedure and total lack of State expenditure carelessly committed in collusion with external parties to the detriment of the NCDC.

The issues and findings are as follows:

The appointment of JBJ Consultants was made without due regard to long term consequences. It appears that acting on advice, the NCDC Board approved the appointment of JBJ Consultants on the 1St May 1999. The Contract included Debt Collection Services. Curiously, some of the sources of such debts included Government and statutory bodies, such as the internal Revenue Commission, Eda Ranu and the National Gaming Control Board. The IRC is not a client of NCDC, and the other Institutions referred to above have no history of incurring bad debts as the payment of VAT is only considered an administrative exercise. Such dues a statutorily guaranteed enhance one may question the rationale of hiring a firm of debt collection at high cost.

A Company Search reveals that JBJ Consultants are neither registered as a company nor as a business name with LPA.

JBJ Consultants was engaged arbitrarily by a two man decision namely, that of Lega Vaal, City Administrator and Rarua Garnu, Deputy Governor at the time. One need not labour on the absurdity of this arrangement except to say that it was a total waste of NCDC funds.

Such absurdity and foolhardiness can best be described when JBJ Consultants were paid 10% of a total of K1.3 million which was a cheque paid by the Gaming Board. The rest is history and can only be inferred.

There is no evidence that that tender procedures were followed or proper legal advice sought as to the implications of such an appointment. Especially when it was quite clear that value of the claims base on an invoice already presented by JBJ to the value of K133,900 was already in the possession of NCDC.

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The claim in issue was made in the absence of formal letter of appointment. Strangely, the payment had been made before approval was granted. We have been finable to locate the source documents supporting this payment as they have been removed from the files. The actual cheque was paid on the 15th of June 1998, by cheque number 96986 for the amount of K133,900. It was the first of three payments received by JBJ Consultants.

Another important fact clearly articulated by the line staff is that the gaming board payments had never been a subject of concern either as a delinquent account or one being doubtful as payments had been regularly received from the gaming board on a quarterly basis.

The second and third payments made to SRI include K124,354.22 paid on the 15th June 1998 cheque number 96987 a sequential cheque to the first cheque and paid on the same day as the first invoice was paid. This claim has no signature of clerks or audit clearance and identification of person receiving cheque.

The other cheque being for an amount of K122,683.58 was paid on 21 December 1998, cheque number 107567. This claim seems to have bypassed all normal procedures and fast tracked. We could not find the cheque clearance by the subject clerk or the identification of the recipient.

it is obvious that the Audit Section and the related sections in the Accounts were under severe by the then City Administrator, Brig. Dademo. Such arrogance was in the backdrop of a letter of caution addressed to the City Manager by the Acting Financial Controller/Deloitte Accounting Firms.

Interview of staff of the Revenue section raised a serious allegation that the payments from gaming board had been purposely withheld by the gaming board officials and handed over to JBJ Consultants. Anecdotal evidence shows that on one occasion the NCDC staff had fronted up at the gaming board office to collect the cheque and were told that it was but while still waiting for more information the .1BJ Consultant personnel walked out with the cheque.

There is a distinct connection between JBJ Consultants and Gaming Board. Mr. John Orea, a one time Governor of Central Province, enjoyed a close rapport with NCDC. JBJ Consultants were also in the employment of the Gaming Board, between February 1998 and July 1999 and Management Consultant. The basis of their engagement by Gaming Board is not clear but what is clear is that, at all material times, during which they set up the debt collection scheme with NCDC, and collected the exorbitant fees, they were already in the employment of the Gaming Board and therefore privy to knowledge of the statutory payments due to NCDC.

It is believed that JBJ Consultants used privileged information for personal gain, which leads us to believe that fraudulent JBJ Consultants acted mala-fide with intent to defraud the NCDC.

I

Chq Date I Collected from number paid

Amount

Gaining Board 1.300.000.00 Others 900.00 Gaining Board 1,200,000.00 others 4,354.22 Gaming board 1,209,793.10 others 17,042.10 K3,809,377.4

0 Commission K380,937.74 10%

98987

107567

96986 15/6/98

Total

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Apart from the gaming board amounts, no other material amount was ever collected as part of their supposedly debt collection activities by JBJ. A breakup of the collections made by JBJ are listed in the following table: Thee forgoing statistics manifest the colossal wastage and financial

mismanagement where during a brief period, the Commission. due to shear negligence or collusion had forked out a total of K380'937.70 as commissions for debt collection whereas in the normal course of time these dues were statutorily guaranteed and it would have been received in due course.

As to whether those responsible for this fiasco should be seriously considered for prosecution in a stealing related or abatement to steal public money is a matter best left to the wisdom of the authorities. We consider this a cleverly manipulated swindle.

It is a matter of deep regret that financial delegates had failed in their responsibility to correctly monitor and supervise transactions of such magnitude. It appears that the unscrupulous elements within and outside the system have had a field day at the expense of the State.

CASE VII. Principal Legal Officer - Attempt to Circumvent Procedures

Attention is also drawn to another case of poor advice provided to the Honourable Minister for Provincial Local Level Government Affairs by the former Legal Officer by a letter dated 2 March 1999 by which the NCDC was committed to another huge payout of K4.m approximately to a firm of Lawyers. Such advice bypassed the City Manager for reasons still to be discovered.

The available information showed that same quantum of work performed by Paterson Lawyers had been entrusted to another legal firm namely Paul Paraka Lawyers as far back as 22nd March 1999.

34

The list of companies and businesses registered with the NCDC in both sets of correspondence that is Patterson Lawyers and Paraka Lawyers are similar.

That the Principal Legal Officer lacked good judgement, vision and professionalism was illustrated in several matters, which compromised and embarrassed the NCDC. He doled out contracts for debt collection indiscriminately and without proper basis. This meant large and improper expenditure suffered by the NCDC.

Due to the indiscretion and lethargy of the Principal Legal Officer, many a civil suit against the NCDC which could have been otherwise successfully defended were settled outside Court thus leading- to settlement outside court which meant hefty pay outs to litigants.

The Principal Legal Officer has since resigned from service of the NCDC butt has had the distinct fortune of being appointed as a Secretary for the Western Province.

b. Security

Upon execution of the Contract for the Special Investigation, the undersigned was required by the Acting City Manager to provide security advice for the improvement of security to VIP, staff and property of the Commission.

His experience and expertise in security related matters was the basis of this direction. Accordingly, a complete security profile was prepared and submitted to the City Manager with a curriculum to be used for training of all grades of security officers. It is annexed marked F.

8. RECOMMENDATIONS

Preamble

§ From the Facts and Evidence surfaced in this investigation, it becomes abundantly

clear to us that the system during the pre-suspension regime was riddled with political

interference, corruption and nepotism..

§ It seemed that Politics permeated at every level of Management right from the bottom to the top culminating with over-riding powers of the Governor.

§ In that regime, all activities of the administrative body, were focused towards furthering and safeguarding Political objectives as opposed to achieving the end objectives and goals contained in the NCDC Mission Statement and that is to provide services to the rate payers and residents of the National Capital District.

35

• It appears in that period the political cronies, henchmen and Politicians themselves benefited personally from jobs, contracts etc.

• A comprehensive package in the 1995 Decentralization comprises reforms to Provincial Government. However , the NCDC does not fa l l wi th in the Decentralization Reforms.

Primarily the recommendations are as follows:

a) To focus on the primary function for which the NCDC was established by an Act of Parliament.

b) To provide an efficient service to the ratepayers in the National Capital District

To discourage dominance of Politics, involvement of Politicians in the governance and day to day administration of the NCDC, thus affording the professionals who are best qualifier' to do the job with a politics free work environment.

d) Identify and weed out dead wood in the system including corrupt mangers, prune the work force so as to maximize efficiency and minimize incompetence and corruption.

e) Encourage public participation in the management mechanism in particular the award of projects tenders without political links. This means participation of representatives from the community in key issues involving improvement to the City.

f) Stringent control of Financial Procedures and strict compliance of the Finance (Management) Act 1995 with emphasis on Section 61.

g) To undertake an audit of all moveable and immovable property and ensure safeguards by means of inventor- and regular audit inspections and physical checks.

h) Youth Groups concept to be reviewed. Whilst not discontinuing Youth Groups System to consider, regulate and monitor awards of contracts, payments and certificate of jobs performed. Mandatory registration of all Youth Groups.

i) Control and monitor payment of cheques. Cheque crossings to be strictly honored.

j) Goods and Services Orders to be approved before the payment and not the reverse.

k) Stringent control and proper guidelines to be adhered in award of contracts. Award of contract to be political free.

1) Professionally qualified and knowledgeable officers with proven track records of integrity- to be co-opted to serve on boards of review, tender evaluation etc.

m) Activate and comply with Section 61 of the Public Finance (Management) Act 1995. This section is observed more in the breach. Certificate of Expediency to be resorted to as an exception than the rule.

36

n) Pre-audit system to be re-introduced. The Audit to be an autonomous body accountable to the City Manager_ Note further recommendations in ANNEXIJTRE A .

o) Advance Payment to suppliers to be discontinued.

p) Implementation of Financial Control and ongoing improvement of the Accounting System currently progressing. (See ANNEXURE A).

q) To establish a Disciplinary Code and Code of Ethics applicable to all employees, irrespective of rank in the NCDC.

r) Introduce Monthly, Quarterly, half yearly annual inspection and reports of all Divisions.

s) introduction of a System of Assets, Properties and Inventory Registers to -track and inflow, outflow of physical resources through normal wear and tear and to report loss. theft or other unnatural demise of physical propel-des. Monthly Inspection of vehicles by OIC Transport and proper inventory of =active stores and issue of consumable items for office/divisions

t) Establish a quota system for issue of fuel and introduce a vehicle log-book and running chart system to ensure safeguards from wastage and control of resources.

This report is delivered to the City Manager for on forwarding to the Minister for Provincial and Local Government Affairs on the 12th June, 2000.

Carlyle DeSilva Chief Investigator

12 June 2000

SPECIAL INVESTIGATION INTO FRAUD, CORRUPTION AND FINANCIAL

MISMANAGEMENT AT THE NATIONAL CAPITAL DISTRICT COMMISSION

FINAL REPORT

9th DECEMBER, 1999

INDEX

1. INTRODUCTION 1

2. JOHN REID - CASE NO. 1 3

3. JOHN REID - CASE NO. 2 3

4. YAMA SECURITY 5

5. POL CONSULTANCY 8

6. AUGADO ENTERPRISES 15

7. PHANTOM SECURITY 21

8. GOVERNOR'S HOUSE 22

9. NCDC BUILDING BOARD 23

10. MISAPPROPRIATION OF K8000 26

11. MISAPPROPRIATION OF K4000 30

12. FREEWAY MOTORS 34

13. CD BUILDING AUTHORITY 39

14. MISAPPROPRIATION OF K14,000 43

15 INVESTIGATIONS PENDING 47

16. INVESTIGATIONS NOT COMMENCED 48

TSK INTERNATIONAL LTD

9th December, 1999

The City Administrator National Capital District Commission City Hall P 0 Box 7270 BOROKO N.C.D.

We have the honor of submitting for your perusal and necessary action the final report of our assignment (special investioations) regarding the cases of alleged white collar crime and malpractices alleged to have been committed during the period of the regime of the suspended National Capital District Commission.

The Contract Agreement provides for the final report to be tabled before you on this 9Th day of December 1999.

For ease of reference we have attached hereto a tabulated list under the following heads:-

> Total cases completed and submitted for necessary action;

> List of cases pending completion of investigation:

> List of matters which has not been probed due to lack of time.

We take pride in the fact that in this brief period notwithstanding the usual time x for settling in and other problems, we have completed an appreciable quantum of work

We do not wish to burden the record and your busy schedule with the repetition of the facts which are contained in a comprehensive interim report which was

submitted to you on 12th November 1999 which covers the period from 919/1999 to 12/11/1999.

Directors : T. Sentheyval, S. S. Kumaran Telephone : (675) 32.5 1007 Facsimile : (675) 325 1230

Address TSK International P. 0. Box 6322, Port Moresby, Papua New Guinea.

L art

Therefore, the final report deals with the work from 12th November 1999 to-date. A total of four cases were completed since 12th November, 1999 and has been forwarded for onward transmission to the Police. Submitted hereto are three more investigation files for similar action.

From the documents examined hitherto and the random examination of files and related material it would be seen that this is but only the 'tip of the iceberg'. There appears to be a mass erosion of NCDC funds which had been surreptitiously siphoned by certain elements who-wage holding responsible positions within the system prior to the period that the present Administration took over.

In the course of our investigations we discovered several lapses pertaining to financial procedures of the Financial {Management} Act and the NCDC financial procedures. Such requirements were seen to be flouted with impunity by officers enjoying delegated powers. Accountability was not evident in many cases, which was the prime cause for several important files and documents going missing. It is submitted with respect that all financial procedures and the audit system be reviewed by the new administration. .

In conclusion we thank you for the confidence you have reposed in us and we assure you of our highest consideration at all times.

Yours sincerely,

PROFESSOR T. SENTHEYVAL

INVESTIGATIONS COMPLETED

CASE NO. 2

ALLEGATION 2

STATUS

ALLEGATION 3

ar CONFIDENTIAL 3

CONFIDENTIAL 3

1. JOHN REID

CASE NO. 1

Duplicate income of Consultancy Fees and Monthly remuneration.

He has accrued monetary benefit in that whilst being in receipt of a consultancy fee he has also drawn his remuneration been on the staff of NCDC. The period of his consultancy fee includes 111198 up until he was suspended in September 1999.

STATUS This investigation has since been completed and the file submitted for prosecution to Police.

Defrauding NCDC of K15, 000 being the proceeds of an Auction conducted by the. suspect wherein three (3) vehicles were sold to the Workers Union but the proceeds were credited to his persona! business account instead of the NCDC.

In this case the suspect has been arrested and charged by Police and is presently on Court Bail pending trial.

Relates to defrauding/misappropriation of K181,000 that should have been deposited to the NCDC account as proceeds of vehicle auction but instead diverted to his personal funds. In this regard, a major setback is experienced due to the non-availability of related files suspected to have been spirited away by the suspect A Police search of his residence proved futile. The files/documents related to the respective Auctions forms the very backbone of this inquiry.

1 ALLEGATION 4 Relates to the purchase of a boat value K95, 000

on Goods and Services Order No. 62552 dated 28 May 1999.

STATUS Investigations done so far do not reveal any wrong doing by Mr. Reid. On the one hand the transaction has taken place in June 1996 between one Bob Bowling the then Business Manager of the Business Arm of NCDC and Mr. John Reid. On the other hand Mr. John Reid was the owner of Fairfax Auto and Marine Center and he had no control over the NCDC at that point in time.

CONFIDENTIAL 4

CONFIDENTIAL 4 However the inference of a dishonest deal is obvious. We also do not find any supporting documents such as a valuation report, tender procedures and quotations. The purchase has had the approval of the then Governor, the City Administrator, the Deputy and the Financial Delegates including the Auditor. The purchase value of the boat is K95, 000 which figure smacks of suspicion. The justification for such a purchase is not available to us. That Bowling and other persons in authority acted in collusion with Reid the owner of the boat is obvious. However, investigations are underway although we cannot find any justification to proceed against John Reid at this stage.

A significant setback to the investigation is that at the time of the suspension of the suspect the authorities failed to secure all vital documents and files which are said to have been removed by the suspect on receipt of suspension notice.

This case is pending. The present time frame does not allow us to complete this case.

STATUS

CONFIDENTIAL 5

PETER YAMA That:

CONFIDENTIAL 5

YAMA SECURITY

MR. FRANK MAKANUEY The former Deputy City Administrator.

CASE NO. 1 Mr. Makanuey who was the then Deputy City Administrator had approved a sum of K554, 365.60 as an advanced payment of Security Fees for the purchase of radios, alarm systems and vehicles which request/payment was outside the provisions of the security contract of Yama Security and the NCDC.

This payment has not had the approval of the full board or the Minister of Finance, as provided for in the Financial (Management) Act 1995 and/or the NCDC Financial Regulations that govern NCDC Financial Procedures.-

However, the investigators have requested the following documents viz:-

Board approval (if any) Copy of amended agreement (if any) Approval of Minister for Finance as the sum is over K500,000.00 . Current NCDC Act

Whilst on the subject of Peter Yama the investigators have in the course of perusing the general files have stumbled on the following matters and we expect with the assistance of Police to explore all avenues which may result with his ultimate prosecution.

1_ Peter Yama is the signatory to the contract. He is the beneficiary of the revenue derived from the provision of Security to NCDC.

He requested a sum of K554, 365.60 for the purchase of security alarms, radios, vehicles and uniforms. He has not specified the nature and details of the related equipment or submitted any quotation from his supplier.

3. The requisition was made on 4 June 1999 and the Goods and Services Order No. 61385, processed and cleared by the audit for payment in a haste in a matter of ten (10) days including weekends which was 14/6/99.

In matters of such magnitude (K554, 385.60) Board Approval is a pre-requisite.

5. Financial procedures have been bypassed/overlooked.

U

As a time consuming measure, the investigators have not dealt with many other anomalies in the claims submitted by Yams Security such as the quantity of guards deployed on various shifts etc.

In one particular claim, although the supplier was entitled to claim for 24 elite squad guards, we find he has fraudulently and without an explanatory note or covering approval claimed for three (3) dog handlers thus defrauding the hirer of K5,022.00.

CONFIDENTIAL 6 6. Although it does not relate to Peter

Yams directly the fact that a manual cheque has been raised is cause for suspicion. Also the usual procedure of paying such monies through the NCDC main operating account has been bypassed,

7. More important the contract of agreement (both the principle and supplementary) does not contain any clause(s) pertaining to payment of monies for whatever reason up -front.

8_ We also find that Yama Security has claimed the sum of K30,300.80 for vehicle hire for 31 days

at the rate of K245.00 per vehicle per day. Although hire of vehicles has been provided for in clause 9 (3) of the Agreement the quantity of vehicles agreed upon was three whereas the claim for the month of June, July and August 1999 the supplier has claimed for four (4) vehicles. Thus defrauding NCDC for a sum of

K22,785.00.

We have also uncovered a serious discrepancy in an invoice submitted by Yams Security dated 28/5/99 and conseqw l --d for by NCDC on or about 2 June 1 b99 a matter of two working days for three lots of " on call duty" for armed -guards at the rate of K7.50 per guard per hour for 24 hours of service. The breakdown as follows'

September 1998 20 X 24 X K7.50 x 7 = K25,200 November 1998 30 X 24 X K7.50 x 7 = K37,800 December 1998 15 X 24 X K7.50 x 9 = K24,300 K87.300

The actual payment to be paid at K4.50 for the period should read as: K52,380

This is a overpayment of K34,920

It would be noted that the principle and supplementary contract of agreement clause 9 and clause 4 (1) respectively provides for the payment of only K2.80 per static guard and K4.50 per dog handler. However, nothing in either of the contracts refers to or provides for the payment of K7.50 for whatever category of services rendered by Yams Security, be they static guards, dog guards, elite squad or on call duty.

CONFIDENTIAL 6

CONFIDENTIAL 7 The inference therefore is that on the one hand the claim is fraudulent and on the other hand the financial delegates of NCDC who authorized payments have connived with the supplier to defraud the NCDC unless of course they could provide a satisfactory explanation to the contrary.

One may also ask then as to why the supplier delayed the claim of September, November and December 1998 until May 1999. A perusal of his earlier claims have shown degree of promptness.

We require as a matter urgency the originals of the payment vouchers for the entire period of the Yama Security contract (5/2/98 — 719/99).

This case will form a separate submission to the Police for investigation and prosecution as appropriate,

CONFIDENTIAL 7

CONFIDENTIAL 8

FACTS IN BRIEF

CONFIDENTIAL 8 POL CONSULTING

SUBJECT IRREGULAR PAYMETS RE-PROFESSIONAL SERVICE FEES FOR POL CONSULTING, PORT MORESBY.

SUSPECTS:

BRIG_ GEN. ROBERT M DADEMO CBE (rt.) (FORMER CITY ADMINISTRATOR): AND HON. PHILIP TAKU MBE MP (GOVERNOR NCDC PRESENTLY UNDER SUSPENSION)

ALLEGED OFFENCES

Abuse/ Misconduct in office and fraud related offences. (Criminal Code /Organic Law on the Leadership Code.

This the deals with a series of financial anomalies related to breach of violation of financial procedures allegedly committed by Hon_ Philip Taku and Brig. Gen. Dademo.

The NCDC awarded a contract to private consultant hereinafter referred to as _POL Consulting for the provision of professional services to be rendered to the Commission in relation to policy formulation and general Administration of the NCDC. The agreement was executed on 15/4/99 and the signatories to the Agreement were: Brig. Gen. Robert M Dademo (the then City Administrator for and on behalf of the Commission) and Michael R Kondai for the Pol Consulting. The agreement was witnessed by the Director NCDC Legal Services David B. Ipassi. The copy of the contract is annexed marked Exhibit 1. The agreement was valid for 24 months effective from 15/4/99.

However, investigations reveal that Poi Consulting was not a registered company With the Registrar of Companies on 15/4/99 the day on which the agreement was executed.

A company under the name and style of Pol Consultancy was registered as a business on 13/8/99 with the Registrar of Companies. Copy of BRC attached marked Exhibit 2. It would then appear that Pol Consulting was not legally entitled to enter into any agreement or provide goods and services to NCDC under the name of Pol Consulting. Equally it would be seen that the said agreement executed on the 15/4199 between NCDC and POL Consulting 'did not have the force and effect of law.

CONFIDENTIAL 9

CONFIDENTIAL 9 Attention is also drawn to the fact that the Common Seal, which appears on the contract (El), is not that of. POL Consulting or Pol Consultancy but rather a company called "DOVE International Ministry Limited". We find the common seal of "Dove international Ministry Limited" placed on the photocopy of the agreement annexed to invoice number 05/99. Strangely, and for reasons that could be best explained by the signatories to the original contract the common seal of Pol Consulting has not been affixed to the original contract. This gives the lie to the fact that Pol Consulting was not registered to do business on 15/4/99.

Although the sum payable to the supplier (Pol Consulting) was K8000 per month the city administrator and the Governor by a minute dated 1/7/99 had increased the rate of payment from K8000 to K10,000 to be effective with retrospective effect from the original date of the agreement which is 15/4/99 by a sum of K2000 and consequently a sum of K64,000 was paid. This amount is subject to "confirmation. This is inclusive of a sum of K8000 referred to by the supplier as mobilization fee which amount does not reflect in the agreement.

The underlying reason for the increase of fee according to the then Governor and the City Administrator was on the basis of equal pay equal work. The said letter dated 151 July 1999 authorizing the payment of K8000 as mobilization fee is annexed and marked EXHIBIT.M.

In passing it is pertinent to comment on the mobilization fee that has been paid in June which is an after thought. The word mobilization in this context would mean to commence operations and mobilize labour and set up logistic support. However, the actual work commenced 15/4/99 which begs the question why the necessity to pay a fee for the work which had began t… months earlier.

It is standard practice for the supplier to submit a summary of work or progress report each month to the employer but in the instant case the supplier has failed to submit such reports (except for the month of August/September). Despite this laps NCDC has paid the supplier his dues from April to September 1999.

The investigators have examined all related document in order to determine falsification of accounts, frauds or other related misdemeanors committed and identified the alleged offenders.

10

WITNESSES AND EVIDENCE: WITNESS

David B Ipassi Director Legal Services NCDC

Internal Auditor NCDC at the period in question. Financial Controller NCDC

Accounts Staff of NCDC

Accounts Section staff NCDC (the stafwho prepared the cheques and took delivery of the same) Jacob Rongap Executive Officer to the suspended Governor Hon. Philip Taku

Secretary to the suspended Governor Hon. Philip Taku

CONFIDENTIAL EVIDENCE

Complainant City Manager National Capital District. He is the virtual complainant who will speak to the facts enumerated above. He will delegate officers in charge of the respective subjects to identify and produce relevant documentation which includes vouchers, receipts, invoices and paid documents.

EVIDENCE

Will speak to the preparation of the agreement (Contract) documents including the terms and conditions and the execution of the agreement between the city administrator and the supplier. He is the attesting witness to the agreement as the Director Legal Services NCDC. He will also identify the signatures of the signatories to the Contract. ( E x h i b i t A ) He has approved the payments of money on the invoices submitted by the supplier for work said to have been performed between the period in question. He will also identify and explain payment vouchers raised during the period. To explain the circumstances surrounding the payments to the supplier viz: mobilization fee and the adhoc raise of K2000 to the initial agreement fee. He will identify the staff of the Accounts Section who were responsible for the preparation, checking, authorizing payments, invoices and service orders etc. He will produce the respective counter-foils of cheques raised in favour of Poi Consulting and identify the respective signatories and signatures. (Exhibit B.C.D,E.F,G,H) Will identify the respective vouchers and other documents which have been prepared, and checked by officers responsible for the subject. (ExhibL B C , D , E . F . G H ) Re cheques raised to Pol Consulting, the details of such cheques including identification of signatures. They will also produce for purpose of Police investigation the bank reconciliation statements. Will identify his endorsement and signature on the cheque requisition form dated 8/6/99 to explain the nature of instructions he received from the Governor regarding the payment of Mobilization Fee of K8000 for Pol Consulting. (Exhibit G) _________________ Re the drafting and typing of the letter dated 1' July 1 999 addressed to Mr. Michael Kondai from Hon. Philip Taku and Gen. Robert M Dademo informing the fee raise. She will identify the two signatures of H on. Taku the former Governor and Brig, Dademo the former City Administrator

CONFIDENTIAL 10

Correspondence Clerk City Administrator's Office

Re-registering of the above letter in the outward registry and the delivery of same.

CONFIDENTIAL 11

Accounts Clerk Executive Management Dept. NCDC (suspended)

To speak to the necessity of departing from accepted procedure viz: the raising of the consultancy agency fee by K2,000 whereas goods and services order should have been raised for such payment. Purchase order are no used in such matters but instead Goods and Services Order are raised for payments.

Will speak to all cheques received from NCDC in favour of Pol Consulting between the period of April-October 1999 with cheque number, date, amount, clearance and other related details.

PNG Banking Corporation

Registrar of Companies Will identify and speak to the date Pol Consultancy was registered as a business institute and the nature of the common seal to be used by Pal

1 Consultancy.

Administration Manager Human Resources Manaaer

' To describe the services rendered by Pol Consulting and if they conformed or otherwise to the terms and conditions of the agreement entered with NCDC on 15/4/99.

Michael Kondai Pol Consulting

,.

To speak to the following matters: 1. Under which name of company did he enter

into an agreement to provide goods and services to NCDC.

2 If that company was registered with the Registrar of Companies effective 15/4/99 and beyond..

3. The receipt of K50,000 for the period April-September 1999 for goods and services supplied to NCDC. (subject to confirmation of the amount).

1. Whether he sought mobilization fee of K8000 and if so, the basis for such payment in mid-c o n t r a c t .

2. As to why he failed to provide a progress report of the work summary every month to the NCDC

3. As to why his fee was raised to K10,000 from K8000 contrary to the agreement.

ACCUSED (SUSPECT'S) VERSION

The principal suspects at this stage are Messrs. Philip Taku and Brig. Gen. Robert M. Dademo. The investigators (NCDC) have neither the status nor the power to question the suspects and conduct a Record of Interview. This will be the role of the Police. Basically they will be called upon to clarify the following matters:-

HON. Philip Taku 1 As the Governor did he have powers to vary the terms and conditions of a Tender Board.

The underlying reasons for initiating

CONFIDENTIAL

CONFIDENTIAL 17

CONFIDENTIAL 12 the increase of K2000 to a monthly fee of K10000 to Pol Consulting without reference to the Tender Board.

3. Was he aware that Poi Consulting was not a. registered company although a tender was awarded to them on April 15th, 1999. And if so, why he failed to take appropriate action to discontinue the contract.

Brig. Gen. Robert M. Dademo 1. If he conformed with the accepted

provisions of the Financial (Management) Act 1995 or the financial regulations governing the NCDC insofar as the award of

contract and tenders.

2 If he was aware at the time of the execution of the agreement on behalf of the NCDC with Pol Consulting that Pol Consulting was not a registered company with the Registrar of Companies as provided for in Section 8(4)(5) of the Papua New Guinea Business Names Act.

3. That the said Pol Consulting had registered a company under the name Po! Consulting 13/8/99 a period of four months (approx.) after the said agreement was executed. Whether he noticed the common seal of one Dove international Ministry Limited had been affixed to the agreement whereas such common seal. If so, why he failed to take appropriate action to demand the company seal of Pol Consulting which is a requirement in Law. Why he failed to take cognizance of ti-. fact being the signatory for and on behalf on NCDC at the time of the signing of the contract Pol Consulting.

A mobilization fee of K8000 was approved by him payable to Pol Consulting which was contrary to the provisions of the agreement: He should explain the term mobilization and what point in time should a mobilization fee (if at all) be paid to the supplier.

Did the Governor or he have the authority to override authority of the City Administrator in the affairs of financial procedures. The reason for the raise in the consultancy fee and if such an amendment to the agreement had authority of the tenders board.

CONFIDENTIAL 13

CONFIDENTIAL 13 To clarify any other matters from the records of . interview.

EXHIBITS

(A) Orig ina l Agreement be tween NCDC and Pol Consul tancy

(B) Service Orders (NCDC) 59873 dated 11/06/99 59893 dated 29/06/99 58239 dated 12/07/99 59868 dated 01/06/99

(C) Purchase Order number 00065388 dated 27/7/99 for K2000 authorized by Brig. Gen. R. E Dademo.

(0) Cheque requisition dated 8/6/99 for cheque number 001166344 K8000 (mobilization fee).

(E) Order Requis i t ion numbe r da te d 22/0 7 / 9 9 fo r K2000

(F) P ay m en t V o u ch e r s (N C . ,D C ) 00117667 of 23/06/99 00118378 of 01/07/99 001 19891 of 29/07/99 00119354 dated 14/07/99 for K2000

(G) Payment cheques (cheques to be obtained from PNG Banking Corporation)

00117667 dated 23/06/99 for K 8,000-00 00118378 dated 01/07/99 for K 8,000-00 00119891 dated 29/07/99 for K 6,000.00 00116634 dated 08/06/99 for K 8,000-00

(H) Invoice numbers 01/99, 02/99, 03/99, 05/99, and 06/99 of Pol Consultancy

(1) Work Activity Report of poi consultancy for the period of 15th August 1999 14th September 1999

(J) Certificate of Registration of Pol Consultancy dated 13th August 1999

(K) C o p y o f t h e l e t t e r d a t e d I 1999 addressed to IVIr. Michael Kondai from Hon. Philip Taku and Gen. Robert M Dademo informing of the fee raises.

(L) Copy of the letter dated 20'h July 1999 addressed to Mr. Jacob Rongap by Michael Kondai of Pol Consultancy requesting a further payment of K 2,000.00 (copies of invoice. 4 are still to be located by NCDC Accounts Payable staff)

MOTIVE Abuse of authority and misconduct of public office.

CONFIDENTIAL

CONFIDENTIAL 14 OBSERVATIONS

From the investigations conducted hither to and the perusal of documentary evidence, it may be safe to rationally infer that both the Governor and the City Administrator have acted in collusion to defraud the NCDC. Accepted financial procedures have been flouted with impunity and total disregard to financial discipline which must be safe guarded by Managers, the reason why transparency and accountability have been regarded as a priority in the new political agenda in the present Government.

RECOMMENDATION:

On the available evidence and further investigations by Police will establish several variations of the Criminal Code. Financial (Management) Act and the Leadership Code. A total assessment and evaluation of the evidence will clearly establish prima facie cases ranging from Criminal Misappropriation, Abuse and Misuse of Office. Violation of Financial Regulations and False Certification of payments.

CONFIDENTIAL

CONFIDENTIAL 15

AUGADO ENTERPRISES PTY LTD

SUBJECT Duplicity of payment to the supplier for the one and same work performed.

SUSPECT Mr. Frank Makanuey (Former Deputy City Administrator NCDC — presently under suspension) and Mr. Tony Kulno Augado Enterprise Pty Ltd (Supplier)

ALLEGED OFFENCES: Fraud, Misappropriation, Abuse/Misconduct in office etc FACTS IN BRIEF Augado Enterprise of P 0 Box 8097, Boroko was

awarded a contract by the NCDC for the construction of a concrete footpath at Garia Street Boroko for a sum of 1-cl 0,000. The location however was later amended to Kanage Street.

On completion of the construction Augado Enterprise had been paid K10,000 less withholding tax of K1 0001- on order number 49795 dated 2919/98. Payment was made by cheque number 00103314 dated 14/10198.

Then again, a similar payment of K9,000 raised on order number 57511 for minor works had been paid to the identical supplier on cheque number 001 11375 dated 13/03/99. This payment was for the same construction for which the supplier was paid a sum of K10,000 less K1000 withholding tax on 14/10/98.

The second payment of K9000/- had been approved by Mr. Frank Makauney the then Deputy City Administrator. Mr. lakeri lvai the Internal Auditor has made a statement to the effect that he cleared this claim for payment as only because he was instructed to do so by Mr. Frank Makanuey despite his advise that this claim tantamount to a double payment.

On the facts available it would appear that Mr. Frank Makanuey had acted in breach of financial procedures, misuse of office and acted in collusion with Augado Enterprise in order to defraud the NCDC of K9,000.

Both Makanuey and Tony Kulno of Augado Enterprise are regarded as suspects.

COMPLAINT The City Manager National Capital District will speak to the facts enumerated above and delegate officers in charge of the respective subject to identify and produce relevant documentation. —

16 Mr. Dion Tub (Works Supervisor NCDC)

Mr. Bernard Kipit Acting Director — Engineering NCDC

Mr. Willie Henry Director -,..Internal Auditor NCDC

Accounts staff of Accounts Payable Division NCDC

Mr. Wilson Thompson Internal Auditor NCDC

Acting Financial Controller — NCDC

CONFIDENTIAL WITNESSES AND EVIDENCE AVAILABLE

WETNESS Mr. Evera Oiveka (Works Engineer NCDC)

EVIDENCE Will speak to the awarding of the contract to Augado Enterprise to construct a footpath and of the accomplishment report, He will also certify to the fact that a second contract for the same task was not awarded to Augado Enterprise. (Exhibits A,B.C.D.) Will speak to the work carried out by Augado Enterprise and the completion of the same and the preparation of the request for Goods and Service Requisition. (Exhibit D) He will also certify that the second contract was neither awarded nor executed by the second suspect_

He has authorized the payment of K10,000 to Augado Enterprise on order no. 45795 dated 1/10/98. He will also speak to the facts relating to the second order 57511 of 8/3/99. (Exhibit E,F,I,J refers) Will speak to post audit conducted by him in relation to the overpayment to Augado Enterprise_ (Exhibit M) He will also speak to the audit clearance on Payment Voucher for cheque no. 00103314 of 14/10/98. Exhibit F) Will identify the respective vouchers and other payments, related documents and cheques which have been prepared and checked by officers responsible for the

subject. They will disclose the name of the beneficiary of the cheques and also identify the respective signatures of the vouchers, goods and services order etc. E x h i b i t s He has raised Order No. 57511 for K10,000/- and speak to the procedures, re-preparation of the documents and the underlying the reasons for raising the documents. He would explain any irregularities of the order and corrective action taken by him. He will clarify his action to request a replacement claim to Augado Enterprise (Exhibits H,I,J) He had countersigned order no. 57511. Whether the correct procedure has been adopted before authorizing the payment? Were the supporting documents to raise the order available? If so, what are the documents and where are they now? If not, why he countersigned an incorrect order. (Exhibits I.J)

CONFIDENTIAL 16

Mr. lakeri lvai Internal Auditor — NCDC

CONFIDENTIAL I7 He will speak to the clearing of the payment voucher for cheque number 00111375 for K10,0001-. Was he aware that this payment to Augado Enterprise was duplicity of payment? If so, what are the remedial measures taken by him. (Exhibit J) Was he instructed by Mr. Frank Makanuey to clear the payment on order no. 57511 (Exhibit L). He will also speak to the contents of the statement made by him (Exhibit I,J,L)

Financial Controller NCDC (During the period under the review)

Computer Operator Payment Division — NCDC

Bank Clerk PNG Banking Corporation He will speak to the contents of order numbers 49795 and 57511 and Payment Vouchers for cheque numbers 0010334 and 00111375 and whether all documentation were in order to make the payments? If not why he failed to advise

on the shortcomings. (Exhibits E-,F,I,J) He will speak to the payments of cheque numbers 103314 and 111375 on the computer print out of vendor transactions dated 15 March 1999_ (Exhibit K) The bank will speak to the clearance of the respective cheques viz: 103314 and 111375 of K9,000 each dated 14/10/98 and 12/3/99 respectively. They will also speak to the source document and into which account these two cheques were eventually credited. The police may take charge of the paid cheques as exhibits_

CONFIDENTIAL 17

TONY KULNO Augado Enterprise P 0 Box 8097 BOROKO

CONFIDENTIAL 18 I Suspect's Version

Mr. Frank Makanuey A/Deputy Commissioner NCDC (on suspension)

(Record of interview with the Police)

(a) As the Deputy City Administrator during the period under review he has approved the payment of K10,000/- through cheque number 00111375 dated 12/03/99 to Augado Enterprise. What made him to authorize this payment although Augado Enterprise has been paid earlier for the same work. He will explain this.

(b) Mr. iaker lvai, the internal auditor approached him on 12/3/99 at about 0930 a.m. at his office and informed him that clearing the above cheque will tantamount to duplicity or a double payment. His response was a direct instruction to proceed with the payment. The suspect's comments to Mr. Ivai's assertion may be put to the suspect by Police.

(c) According to Mr. Ivai, cheque number 00111375 had been raised on the suspects instructions. He will

explain the unlawful order and the attendant irregularity. (Exhibit L refers)

He will speak to the fact that:-

1. he was awarded a contract to construct a footpath at Garia Street later amended to Kanage Street Boroko

2. On completion of the said contract he was paid a sum of K10,000 less vithholding tax of K1,000 on 29/9/98 Order Number 49795.

3. Whether he was awarded a second contract to perform a similar task at the identical site and for the payment of a similar amount of money.

4. Whether or not he received a cheque dated 12/3/99 by cheque number 111375 for K9,0000.

5. If the second cheque was an oversight payment then what remedial measures he took to bring this to the notice of NCDC.

CONFIDENTIAL 18

CONFIDENTIAL 19

CONFIDENTIAL 19 EXHIBITS

(A) Quotation of Augado Enterprise dated 6 April 1998 for the construction of a footpath.

(B) Quotation schedule with the comments of the Opening Committee NCDC awarding the contract to Augado Enterprise.

(C) NCDC Technical Department form of Request for purchase of Goods or Services requisition dated 24109198.

(ID) NCDC works Division Accomplishment Report for services dated 05/10/98.

(E) Goods and Services Order No. 49795 for K10,000/- less withholding tax.

(F) Payment voucher for cheque no. 00103314 dated 14110/99.

(G) invoice checklist for order no. 57511 dated 11/03199.

(H) Letter dated 8 March 1999 addressed to DCA-Corporate Affairs by international Auditor Mr. Vviison Thompson.

(I) Goods and Services order no. 57511 dated -08/03/99 for K9,000/- K1 0,000 withholding tax.

Payment voucher for cheque no. 00111375 dated 12/03/99.

(K) Vendor transaction computer print out dated 15 March 1999.

(L) Statement made by Internal Auditor Mr. lakeri lvai on double payment —Augado Enterprise.

(M) Post audit report on finding by Director Internal Auditors — Mr. Willie Henry dated 19 March 1999.

MOTIVE

To defraud the NCDC of K10,000.

OBSERVATIONS

From the evidence available it is abundantly clear that an offence of fraud had been perpetrated on the NCDC by the suspects acting in collusion. Unless there is evidence forthcoming from the suspects to exculpate them with valid documentary or other evidence, it is our considered view that both are individually or jointly guilty of fraud related offence, the details of which charae/s will be determined by the Police.

RECOMMENDATIONS

It is recommended that both suspects be considered for prosecution by Police for a range of fraud related offences viz: obtaining money by false pretense, _conspiring to defraud, cheating.and fraudulent false accounting etc etc.

CONFIDENTIAL In determining the specific charges by Police we will be pleased to attend any conference should the Police so require_

CONFIDENTIAL 70

71

SUSPECT

ALLEGED OFFENCES

FACTS IN BRIEF

STATUS

CONFIDENTIAL 21

CONFIDENTIAL

PHANTOM SECURITY

SUBJECT Defrauding NCDC the sum of K99,000/-

Fred Martins owner of Phantom Security and contractor to NCDC.

Defraud of K99,000/- by falsely submitted Vouchers and requisition seeking payments.

Fred Martin was a contractor to the NCDC and he was awarded a Tender for the demolition of illegal tucker shops in the National Capital. He obtained a payment of K99,0001- but it was alleged that he has demolished only two buildings and failed to satisfactorily complete the contract.

The suspect was arrested by Police and stands charged in District Court Boroko. He is presently on court bail.

NOTE Significant features which the present administrations take note of include:-

Refrain from the payment of invoices Up front.

2. Comply with tender procedures

3. Physical check of work in demolition exercises and call for progress reports.

CONFIDENTIAL '77)

CONFIDENTIAL GOVERNOR'S HOUSE

SUBJECT Misapplied Home Ownership Scheme monies to purchase official residence

SUSPECT Hon. Philip Taku (Governor in suspension) FACTS IN BRIEF A submission was prepared to purchase a

three (3) bedroom high covenant residential property at S73L25 Homola Street, Gordons at a cost of K222.250.00 for the use of the Governor.

There was no submission but a sum of K30.000/- had been spent before the preparation of a submission. The real estate agent was Alfred Olologo of Real Estate New Niugini Pty Ltd, and the Administration Clerk Parila Mayako was directed to handle the transaction for and on behalf of the NCDC. Significantly, a valuation report for the purchase of such property for the state (NCDC) which is to pre-requisite was neither obtained nor quotation sought. These are basic financial procedures.

Originally the sale was settled for K180,000/- but subsequently the vendor sought and amended the price to K200,000/-.

The contract sale was executed on 23 July 1998 and the title.transferred to NCDC on 5/11/1998.

In addition to the above information the following files have been submitted to Police for prosecution. We have in our possession the said files which can be submitted for perusal if required.

(I) JBJ Consultants - Paying for work not performed. (ii) PNG Motors - Purchase of eight (8) vehicles without

the approval of the board.

CONFIDENTIAL

CONFIDENTIAL '23

MR LUCKY MANOKA/CHIEF BULDENG SURVEYOR

Project: Supermarket, Bulkstore and Residence for Portion 414 Boroko NCD

Applicant: Tan Investment Pty Ltd, PO Box 6668, Boroko

Suspect: Mr. Lucky Manoka

Facts in Brief:

Tan investment Pty Ltd submitted an application to the NCDC Buiiding Authority on 10/07/57 under Application No, 222197 together with the structural engineer plan and the architectural design and drawing of the building.

According to the Design Plan of the building, the architect was one LIV and the draftsman was one LL. It could be established from the evidence of the under mentioned persons that LM referred to is Lucky Manoka who was the Chief Building Surveyor of the NCDC Building Authority during the period under review and LL is Lapia Leva who drew the plan_ Therefore Mr. Lucky Manoka has used the Building Authority office to secure private architectural drawings. Mr. Lapia Leva admitted that the plan was drawn by him and the architect was Mr. Lucky Manoka also paid him for he drawing. (Copy of the statement attached).

Complainant:

The City Administrator will speak to the facts enumerated above and delegate officers in charge of the respective subject to identify and produce relevant documents.

CONFIDENTIAL 24

WITNESS E V I D E N C E Senior Building Clerk NCDC Building Authority

He will speak to the fact that Tan Investment submitted an application for the erection of the above building and the issuance of the Permits. He will also identify the Application and the drawings submitted by Tan investment and the period. (Exhibits A,C,E,G,H,I,J)

Mr. Hebou Asi A/Chief Building Surveyor NCDC Building Authority

He will speak of the certificates issued and under what circumstances. He will also name the architect who did the architectural designs and whether the building has been contracted. He will also identify the exhibits. (Exhibits A,C,D,E,H,I,J)

Mr. Apisai Malasi He will speak to the report with regard to this Building inspector — Boroko application and also disclose the name of the architect NCDC Building Authority who did the architectural designs.

(Exhibits J,H) Mr. Labia Leva Leva Drafting Services

He has already spoken to the fact that he did the drawings of the plan and architectural designs was done by Mr. Lucky Manoka and the period this plan was drawn. He had also spoken as to who offered him the contract and how much he was paid and by whom and the amount paid to Mr. Lucky Manoka for the architectural drawings. He will identify the plan. (Exhibits H.1-1)

Homeguard Pty Ltd (Builders) Site Engineer

He will speak to the period this building was constructed and as to who did the architectural site supervision. (Exhibits B,H,H)

Tan investment Pty Ltd Owner

:

He will speak to the submission of the application to NCDC, the occupancy of the same and as to the architect. He will also identify the said plans. (If he denies the architectural design was done by Mr. Lucky Manoka, confront him with the statement of Mr. Leva. (Exhibits A,B,C,D,E,F,G.H.H,I,J)

Human Resources Manageress NCDC

She will speak to the period of employment of Mr. Lucky Manoka at the NCDC Building Authority and produce relevant contract periods. (That Mr. Lucky Manoka was employed at the NCDC Building Authority since 1987 up to his resignation on 13tb October 1999.

She will also speak to the fact that NCDC is in public s e r v i c e . ( E x h i b i t K )

Suspects Version: Mr. Lucky Manoka As an employee of the NCDC Building Authority during the

period under review he has used building authority office for securing private architectural work_

He will explain the approval given for the erection of the buildings.

Exhibits: A)The application of Tan Investment Application No. 222/97 B) Structural Certificate of the engineers

CONFIDENTIAL '74

CONFIDENTIAL 25

CONFIDENTIAL 25 C) Approval Permit dated 9 th March 1998 (3052/97) D) Certificate of Completion dated 16th December 1998

(3052198) E) Cert i f icate of Permissive Occupancy F) Statement of Mr. Lapia Leva G) Structura l Engineer ing P lan H) Architectura l Des ign P lan

H) Site and locality plan cage which denotes the names of the architect and the draftsman J) 698/05/Q52 Building Board file cover K) Personal F i le of Mr. Lucky Manoka

Observat ions: From the evidence available it is abundantly clear that Chief Building, Surveyor Mr. Lucky Manoka has used Building Authority office to obtain private architectural contracts are derive financial and other advantages to himself.

Recommendations:

Mr. Lucky Manoka being an employer of the NCDC had without authority and for lawful excuse or justification conducted a private contracts to wit:- Public Office interests in contracts

42.

CONFIDENTIAL 34

FREEWAY MOTORS

ALLEDGED MISAPPROPRIATION OF (HILUX D/CAB VALUED K 23,000) AND DOUBLE PAYMENT

INTRODUCTION

This file deals with an alleged fraudulent transaction between certain officers of NCDC and Freeway Motors involving a purchase of motor vehicle to the value of K23,000 and double payment for the same transaction.

FACTS IN BRIEF

Goods and Services Order No.54068 dated 25/01/99 has been originated from DON F&A Division NCDC, for K 23,0001 being the payment for the purchase of Toyota Hilux Double Cab from Freeway Motors, P.O. Box 5245, Boroko, NCD. This had been authorized by the then City Administrator Brig. Gen. Dademo and countersigned by Mr.Frank Makanuey.

Payment voucher for cheque No.00109335 had been raised on 02/02/99 under Invoice Ncr54068 for K 23,000/for the purchase of Hilux Double Cab payable to Freeway Motors. This payment voucher has been recommended by Mr.Geno Nabua and approved by the then Financial Controller Mr.Jacob Mera. Internal Auditor Mr. Pangwinyen had cleared this for payment.

Surprisingly the payment cheque had been received and identified by Mr. Justin Tkatchenko instead of it being received by the Payee Freeway Motors and identified by an officer of the Accounts Department in NCD..

Freeway Motors Invoice No.0484 dated 20/01/99 does not give the Registration Number, Engine Number, Chasis Number and other relevant details of the vehicle.. This invoice had been addressed to one 'Justin' and 'Frank' of NCDC — either it should have been addressed to Director/Transport Division NCDC. Mr. Tasion, Managing Director/ Freeway Motors, had authorized this invoice.

On the invoice it has been minuted that the vehicle had been delivered to Western Highlands South Group. However the records at NCDC does not indicate the existence of this particular vehicle or its allocation.

The vendor transaction computer printout dated 15th October 1999 indicates a payment of K 23,000/ under Invoice No.54068 and cheque No.00109335. On the same printout Cheque No.00109436 for K 23,0001 has been paid again on 5th February 1999. The relevant payment documents relating to the second payment are either missing or destroyed.

To ascertain the facts surrounding this mysterious purchase and the possible second payment, the following matters have to be attended by the Police as our efforts to obtain the required particulars from Freeway Motors have proved futile.

WITNESS EVIDENCE Mr. Tasion 1. The Reastration Number, Engine Number, Chasis

CONFIDENTIAL 34

Wilsori Thompson Deputy City Administrator NCDC

COMPUTER PROGRAMMER NCDC

CONFIDENTIAL 35 Managing Director, Freeway Motors Number of the Toyota Hilux Double Cab sold to -

NCDC under invoice number 0484 for K23,0001-dated 20/01/99 (Copy of Invoice to be shown)

Who ordered delivery of the vehicle? Copy Of the delivery order to be obtained.

3. Why he addressed the invoice number 0484 to Justine and Frank of NCDC. Who are these two persons anyway. is this accepted procedure?

4. As for the particulars of payments received from NCDC, was he aid twice? If so can the second payment be justified.

5. Who signed the invoice number 0484 on behalf of Freeway Motors?

6. Who made the endorsement on the invoice "vehicle delivered to Western Highland South Group? What made them to make this endorsement?

1. The payment has been approved by him (Refer payment Voucher for Cheque No.00109335 dated 02102/99) . Were the documents in order to approve the payment? Did he notice that the particulars of the Vehicle such as Engine No, Chasis No, and Registration No. etc were not reflected in the Freeway Motors Invoice?

Who ordered the purchase of this vehicle? Did the order originated from the office of the Director/Transport NCDC.

3, To identify the signatories on the payment voucher.

4: What are the particulars of payments made under Cheque No_ 00109335 and 00109436 for K 23,000/ each dated 2nd February 1999 and 5th February 1999 respectively. Was this in respect of the one and same transaction?

5. Who made the endorsement " Delivered to Western Highlands South Group " on their invoice dated

20/01/99 and the reason for making this endorsement Did he see this endorsement prior

t o a p p r o v i n g t h e p a y m e n t v o u c h e r ? The vendor transaction printout dated 15m October 1999 indicates a double payment for K 23,000/ through Cheque No 00109335 and 00109436 dated 2nd February 1999 and 5th February 1999 respectively.

He will explain:-

a) The reason for these two payments to be made?

b) Whether the Goods and Services Orders for these two payments are available. If not why the payment has been made without relevant documents? Who is responsible for producing

CONFIDENTIAL 35

MR. PANGWINGEN INTERNAL AUDITOR NCDC

Mr. Gene Nabua F/C NCDC

STAFF PAYABLE DIVISIONS NCDC

36

CONFIDENTIAL 36 such documents before payment?

c) Who were the beneficiaries of these two cheques ?

He has cleared this cheque for processing payment.

a) Why did he clear this payment voucher for cheque No. 00109335 for K 23,000 dated 02/02/99 when the Freeway Motors invoice

does not indicate the particulars of the vehicle such as, Engine No, Chassis No, and Registration Number. Do we take it that this is a 'ghost' vehicle?

b) Explain the second payment of K 23,0001 through Cheque No. 00109436

dated 5th February 1999? Did he clear this payment too? If so, for what reason was this cheque raised and the particulars of the payment_

c) Refer bottom of the payment voucher for cheque number 00109335 for K23, 0001- dated 02/02/99. This cheque has been received by Mr. Justin Tkatchenko and identified by himself. Why did Mr. Tkatchenko receive the cheque whereas the Payee is Freeway Motors. _______________________

He has recommended the payment voucher for cheque number 00109335 for K23,000/- dated 02/02/99.

(a) Whether the above payment vouchers was in order.

(b) For what purpose was this vehicle was purchased and who took delivery of the same.

c) Why did he recommended the payment without the particulars of the vehicle such as Engine Number, Chasis Number and Registration Number.

(d) According to this payment voucher, can he explain as to who received this cheque? Is it proper for Mr_ Tkatchenko to receive this cheque where as the payee is Freeway Motors. What is accepted Practice and Procedures.

(e) What are the particulars of cheque number 00109436 for K23,000/- dated 5th February 1999? Did he recommend this payment too? If not who has recommended it? If yes, for what reason and to whom this payment has been made.

The staff at Payable Division at NCDC will identify the Signatories to payment voucher for cheque 00109330 for K23,0001-dated 02/02/99 and the mode of payment and who has received the cheque and the beneficiary. They will also

explain the whereabouts of the re levant payment

CONFIDENTIAL

r PAY CLERK NCDC

INSURANCE CLERK NCDC TRANSPORT DIVISION

BANK CLERK NCDC

CONFIDENTIAL 37 documents for cheque number 00109436 for K23,0001-d a t e d 5 t h F e b r u a r y , 1 9 9 9 . He will identify the person who received cheque number 00109335 for K23,000/- dated 02/02199 and cheque number 00109436 for K23,000/- dated 05/02/99. By looking at the Goods and Services Order Number 54068 dated 25/01/99 and the Invoice of Freeway Motors dated 20/01/99 he will explain the existence or non existence of this particular vehicle and the Engine Number, Chasis Number and the Registration Number of the same.

He will also explain whether the particulars of this vehicle has been entered in the allocation list and if not why?

DIRECTOR ' By looking at the records maintained by the Transport TRANSPORT DIVISION Division he will explain the following details_ NCDC

(a) The reason this Toyota Hilux double cab was purchased for K23,000/- from Freeway Motors?

(b) What is the Registration Numbers, Chasis Number and the Engine Number of this vehicle?

(c) Where is this vehicle at this point in time?

(d) Was this vehicle delivered to Western Highlands South Group.

(e) Were general and accepted procedures followed on the purchase of this vehicle.

(f) What is the procedure when a vehicle is purchased for NCDC. is it taken into stock and inventorized. Can he comment in regard to this particular vehicle.

(g) Live the description of the vehicle which have been delivered to Western Highlands South Group in the year 1999. Are these issues recorded in the books.

WESTERN HIGHLANDS SOUTH GROUP

The leader of the Western Highlands South Group should be questioned as to:-

(a) Whether a Toyota Hilux Double Cab was delivered to them by NCDC in the year 1999? If so where is this vehicle now are its details viz: Chasis, Engine Number and Registration Number.

He will identify the beneficiaries of cheque numbers 00109335 and 00109436 dated 2nd February and 5th February for K23,000/-. He will also produce the above two cheques and the relevant bank statement.

CONFIDENTIAL 37

CONFIDENTIAL 38

CONFIDENTIAL 38 EXHIBITS

A. Goods and Services Order Number 54068 dated 25/01/99 (NCDC)

B. Payment Voucher for cheque number 0019335 dated 02/02/99.

C. Invoice Number 0484 dated 20/01/99 of Freeway Motors.

D. Q u o ta t i o n o f B o r o k o M o to r s .

E. Quo ta t ion o f Ac t ive Eng ineer ing .

F. Vendor Transaction Computer Printout of NCDC dated 15th October, 1999.

OBSERVATION

From the investigation conducted so far it is abundantly clear to us that a vehicle had been transacted from Freeway Motors for which two cheques for the similar amount of K23,000 had been raised to Freeway Motors upon invoices numbers 0484, ______ submitted by one Mr. Tasion, General Manager, Freeway Motors.

In the said Freeway Motors invoice we find two Christian names (Justin and Frank) unless otherwise rebutted we regard these two names as Justin Tkachenko and Frank Makanuey. To support our claim we find that Mr. J. Tkachenko had received the cheque in question where as the actual recipient should be the Payee that is Freeway Motors. It is for J. Tkachenko to explain as to why he involved himself in this transaction. He had also signed the Goods and Services Order and the least we could expect from him is verification of the purpose of the purchase of the vehicle details.

Another significant discrepancy which may have to be explained by J. Tkachenko is that the invoice of the vehicle had been received long before the Goods and Services Order was raised.

A breach of practice and procedures relative to purchase of vehicles either breached or bypassed for which reason alone we find the entire transaction smacking of suspicion.

RECOMMENDATION

We have undertaken only a fact finding inquiry and the Police may be in a position to delve further and ascertain the location of the vehicle or if it was not purchased at all and the culprits who are responsible for what we believe is a ghost transaction.

NWe were seriously handicapped due to the fact that vital documents are said to have gone missing due to which our investigations were confined to a preliminary fact finding inquiry.

CONFIDENTIAL 39

CONFIDENTIAL 39

PROCURING EXECUTION OF DOCUMENTS BY FALSE PRETENCES. NCD BUILDING AUTHORITY

PROJECT: Supermarket Bulk Store and residence for portion 414 Boroko.

APPLICANT: Tan Investment Pty Ltd, P.O_Box 6668 Boroko.

SUSPECT: Karo Ralai (Senior Building Inspector NCD Building Authority)

FACTS IN BRIEF: Tan Investment Pty Ltd submitted an application to the NCDC Building Authority on 10/07/97 under application No.222197 together with the structural Engineer pian, Architectural design and the drawing of the building.

The Chairman of the Physical Planning Board rejected this Application on 09/09/97 as the building was considered Undesirable for the location and the proximity of the site to the highway_ However, the then Minister had approved this Application under Sec97(2) of the Physical Planning Act 1989_ Subsequently on 09/03/98 the application for the construction of the building was approved and permit No. B 052/98 was issued

However, the Chief Fire Officer had not approved the building and there is no Inspectors report prior to approval. Inspite of these shortcomings mandatory for the issuance of a Certificate of Completion and Permissive Occupancy, Mr. Karo Ralai who represented the Building Authority as the Executive Officer of the NCDBA Meeting No. 16/98 held on 16/12/98 had obtained the approval of the Building Bpard for the certificates of completion and permissive occupancy.

It is the responsibility of the Executive Officer who is representing the NCDBA to summon all parties concerned and to see that all the files, which are to be submitted to the Board, are in order. The building board chairman accepts the recommendation of the Chief Executive Officer for approving the applications for certificates. In this instance Mr. Karo Ralai by means of false representation had got the Building Board to approve the certificates of completion and permissive occupancy for the Chief Fire Officer and Building Inspectors report.

Complainant: The City Administrator will speak to the facts enumerated above and delegate officers in charge of the respective subject to identify and produce relevant documents.

CONFIDENTIAL 40

WITNESS EVIDENCE Senior Building Clerk NCD Building Authority

He will speak to the fact that Tan Investment submitted an application for construction of a building and the issuance of respective certificates. He will identify the signatory to certificates of completion and permissive occupancy. (Exhibits A.C,D,E,1-1)

Mr. Hebou Asi A/Chief Building Surveyor NCDC Building Authority

He will speak to the procedure of approving plans and issuing certificates. He will also speak to the responsibilities of the Executive Officer to the building board meeting and the responsibilities of Mr_ Karo Ralai who acted as the building Board meeting held on 16/12/98_ He will also identify the minutes of the Board meeting held on 16/12/98 and the signatory to the completion and permissive occupancy certificates issued to Tan Investment on 16/12/98. By looking at the Tan Investment file he will identify the shortcomings prior to issuing the respective certificates. Exhibits A.C,D,E,H

Mr. Apsai IVIalasi Building Inspector NCDC Building Authority

He will speak with regard to for the Tan Investment application as the Building inspector responsible for Boroko area. He will also speak to the procedure of approving plans and issuing permits and what are the mandatory requirements. He will also 'speak with regard to his report on this file and also the responsibilities of the Executive Officer who is representing the Building Board at the Board Meetings. He will also identify the shortcomings of the Tan Investment Application. (Exhibits A,C,D71-1)

The Fire Chief He may be requested to comment on Procedure and Legality of the entire transaction. .

Fr. F.C. Koieba The then Chairman NCD Building Board

He will speak to the procedure of approving applications on the recommendations of the Building Authority Executive Officer who is present at the Board Meetings. By-looking at the minutes of the NCD B/A meeting No.16/98 held on 16/12/98, he will speak to the fact that Mr. Karo Ralai of the NCD/ BA was the Executive Officer and the Board approved the applications recommended by Mr.Karo -

Ralai on 16/12198 and of the approval of

CONFIDENTIAL 40

Mr. Charles Hayes Member NCD Building Board Mr. Neville Sariman Senior Building Inspector NCD/BA

He will corroborate the version of Mr. Neville Sariman. (Exhibits D,E,I)

Mr. Mores Dibura Building Inspector NCEWBA

SUSPECTS VERSION Mr. Kara Ralai

CONFIDENTIAL 41 applications submitted by Tan investment on 16/12/98. He will also explain that it is the responsibility of the Executive Officer to see that the files are in order before they are submitted to the board. (Exhibits D,E.I) He will corroborate the above version of Fr. F.C. Koieba. (Exhibits D,E.1) As an officer who represented NCD/BA, at the board meeting held on 16/12/98 he will speak to the approval of applications submitted by Tan Investment for the completion and permissive occupancy certificates and who was the Executive Officer who represented NCD Building Authority on that day and the

responsibilities of the Executive Officer and how the Board Members approve the applications . (Exhibits D,E,I)

As an employee of the NCD Building Authority he will describe the requirements to obtain approval for applications and whether Tan Investment had obtained the required approval from the respective authorities such as Fire Chief and the report of the Building inspector responsible for Boroko area. He will also explain the responsibilities of the executive office who is representing the Building Authority at the Board Meetings, and as to why he signed and issue the certificates of completion and occupancy to Tan

vestment on 16/12/98 before the approval of the Fire Chief was obtained. He will also explain as to whether he informed the Board members that Tan investment had not obtained the approval of the Fire Chief to issue Completion and occupancy certificates. (Exhibits A,B,C,D,E,F,G,H,1)

Exhibits

A) The application of Tan Investment (Application No.222/97)

B) Structural Certif icate of the Engineer

C) Approval Permit No.B052/97 dated 9th March 1997

D) Certificate of completion dated 16th December 1998

E) Certificate of Permissive Occupancy dated 16th December 1998

F) Structura l Engineer ing Plan

CONFIDENTIAL

CONFIDENTIAL

CONFIDENTIAL 42 G) Arch i tec tura l Des ign P lan

H) Building Board fi le cover (No B 98/05/052)

I1) Minutes of the Building Board meeting No.16/98 held on 16/12/98 chaired by Fr. F.C. Koieba

OBSERVATIONS

From the evidence available it is abundantly clear that A/Deputy Chief Building Surveyor Mr. Karo Ralai has obtained the approval for the applications of Tan Investment for the certificates of occupancy and completion by making false representations to the Chairman of the Building Board to the effect that the application was in order inspite of the rejection of the fire chief.

RECOMMENDATIONS

Mr_ Karo Ralai being the Executive Officer at the Building Authority meeting held on 16/12/98 had procured the board members to approve the applications of Tan Investments by means of false representations. and thereby committed an offence punishable under section 466 of the Criminal Code Act.

CONFIDENTIAL 26

CONFIDENTIAL 26 MISAPPROPRIATION OF K8000.00

FACTS

Edward Ipai of NCDC had been paid K4000/- as funeral expenses on 30/6/99 through cheque number 00118331 which encashed at PNGBC on 1/7/99 by himself.

Subsequently, cheque number 118392 had been raised for K8000/- also in favour of Edward 1pai on 1/7/99 for reasons best known to Edward 1pai and the NCDC authorities who had approved the payment.

On 5th July 1999 a letter had been addressed to the Manager, PNGBC, P. 0. Box 169, Waigani certifying that the bearer Edward 1pai is the correct recipient of the enclosed cheque number 118392 dated 1/7/99 amounting to K8, 000/-. The (then) Acting City Administrator Justin W. Tkatchenko and Management Accountant Kinsley Manikam have issued this letter on a NCDC letterhead. However, the cheque requisition, Goods and Services or Purchase Order, Order Requisition, Expenditure Control Form and the payment voucher for cheque number 00118392 are missing_ This document's are vital to our investigations.

When interrogated by the CID, Mr_ Edward 1pai had admitted that Mr. Justin Tkatchenko gave him this cheque for K80001- to be encashed from the bank and the cash was given back to Mr. Tkatchenko. He has further stated that he did not apply for any assistance and he only signed some documents at the instance of Mr. Tkatchenko.

It couid be established from evidence that a cash cheque was raised for K8000!- and Mr. Justin Tkatchenko had obtained this money fraudulently.

COMPLAINANT The City Manager will speak to the facts enumerated above and delegate officers in charge of the respective subject to identify and produce relevant documents.

SUSPECT Mr. Justin Tkatchenko, Acting City Administrator

27 W I T N E S S Mr. Kinsley Monikam Management Accountant NCDC

Computer Programmer NCDC

Internal Audit NCDC

Accountant I Payments NCDC Deputy City Administrator — Finance & Admin. NCDC

Accounts Section Staff NCDC

CONFIDENTIAL 2 7

CONFIDENTIAL

EVIDENCE

He will speak to the fact that he together with Mr. Justin Tkachenko authorized Edward ipai to cash cheque number 00118392 for K8000/- by their letter dated 5/7199. (Show him Exhibit A) He will also explain for what reason this cash was paid to Edward !pal and whether the correct financial procedures have been adopted. He will also identify the available payment documents and signatories. He will also explain as to what made him to authorize the encashment of this cheque_ He will also explain the entitlement payments for Edward ipai such as salary, advance, loan etc. and also on the unsigned payment voucher. He will also identify the signatories on cheque number 118392 (Exhibit B) and will speak to the contents of the unsigned payment voucher for cheque number 48392 (Exhibit D) and why his voucher has been made as m e d i c a l e x p e n s e s . He will speak to the vendor transaction computer printout dated 8tn November 1999 and a sum of K8000/- had bee paid to Edward ipai on 2'd July 1999 through cheque number 0018392 under invoice number 59898. He will also explain figures and the references indicated in this printout and for what r e a s o n t h e y s t o r e t h i s d a t a . ( E x h i b i t C ) On looking at the computer printout and the cheque they will speak to the approval or non-approval for the same. He will also explain the entitlement for medical expenses for the staff. (Exhibit B,C,D) He will speak to the issuance of the cheque and for what reasons and also what documents have been produced to raise this cheque. He will also identify the signatories to this cheque and in whose favour this cheque has been raised and also about the non-availability of relevant payment documents and as to why the payment voucher was unsigned. (Exhibits B,C,D) He will speak to the authorization of this cheque, the reason for making this payment and who is responsible for raising the relevant payment vouchers. He will also speak about the unsigned payment voucher for the c h e q u e ( E x h i b i t B , C , D ) They will identify the signatories to the cheque and the person who took delivery of the cheque and also why the payment voucher for cheque number 00118392 was not signed by the appropriate authorities and the details of invoice number 59898. (Exhibits B,C.D)

Financial Controller NCDC

Mr. Victor Lakae Accounts Department N C D C

r Bank Clerk PNGBC

He will identify the available documents and signatories and explain the financial procedures and for what and whose instructions cheque number 00118392 has been raised and also that Mr. !pal is not entitled for any such payment. (Exhibits B,C,D) He will speak to the fact as to who took delivery of the cheque and who instructed him to deliver the cheque. (Exhibits B.D) He will identify the cheque and speak to the encashment of the cheque. (Exhibit B)

CONFIDENTIAL 28 Mr. Edward [pal NCDC

He will speak to the reason as to why cheque numb& 00118392 was raised and the purpose of the claim. He will also speak to the encashment of the cheque and how he disposed of the cash. He will identify the cheque and his signature on the payment documents. And also he claimed this money as medical expenses. (Exhibits A&B)

SUSPECTS VERSION

Mr. Justin Tkatchenko His statement has to be recorded by Police Clarification need to be sought on:-

As the Acting City Administrator for what reason he authorized and approved this K8000/-. Payment to •Edward Ipai (Show him exhibit). What is the medical expenses written on the payment voucher (Exhibits D&A)

Did Mr. Edward Ipai request for any additional financial assistance after he was paid K4000/- on 1/7/99.

Did he collect the K8000/- from Edward Ipai after Ipai encashed the cheque from the bank. If not confront him with the statement made by Edward Ipai. If yes. what did he do with the cash.

On whose instruction was he authorized and approved this payment_ If he denies confront him with Exhibit A&B.

so question him the designation and grade of Edward Ipai and whether he is entitle for any payment amounting to K8000/-.

EXHIBITS

CONFIDENTIAL

CONFIDENTIAL 29

CONFIDENTIAL 29 (A) Letter dated 05/07/99 addressed to the Manager PNGBC by Mr. Tkachenko

and Mr. K. Manikam.

(B) Cheque number 118392 for K80001- payable to Edward !pal

(C) Vendor transaction computer printout of NCDC dated 8th November 1999.

(0) Unsigned payment voucher dated 2/07/99 for K8000/- description given as Medical Expenses

OBSERVATIONS

From the evidence available and on the revelations made by Mr. Edward 1pai to the CID it is abundantly clear that Mr. Justin Tkatchenko had misappropriated a sum of K8000/- fraudulentiy raised in favour of Edward ipai_

RECOMMENDATIONS

The evidence available is sufficient to maintain a charge against Mr. Justin Tkatchenko even though the requisition forms and other relevant payment documents are either destroyed or stolen. Mr. Tkatchenko had dishonestly applied to his own use property either belonging to NCDC or Edward (pal and thereby committed an offence punishable under Section 383A of the Criminal Code Act.

CONFIDENTIAL 30

CONFIDENTIAL 30 MISAPPROPRIATION OF K4000

Mr. Jacob Roncap, the Executive Officer to the Governor Hon. Philip Taku (on suspension) advised the (then) Deputy City Administrator (MSS) Mr. Justin Tkatchenko by letter dated 30/6/99 to arrange K40001- as "financial assistance". On the same day Mr. Tkatchenko made the following endorsement to the (then) Deputy City Administrator — Finance & Admin to the effect. "Could you assist this request a.s.a.p. for financial assistance and confirmation. On the same letter DCAIF&A had made an endorsement Mr. Jacob Mera to expedite the request for same funeral assistance.

Accordingly, Jacob Mera had instructed to Accountant (Payments) to raise a manual cheque payable to Justin Tkatchenko urgently.

Subsequently, NCDC Order Requisition form number 10420 was raised on 30/6/99 for K4000/- payable to Edward Ipai a NCDC employee being payment for funeral expenses. This form was authorized by Mr. Justin Tkatchenko and purchase order number 0006430 was raised on the same day to Edward Ipai for K40001- as professional fees (funeral expenses) authorized by Mr. Justin Tkatchenko. Accordingly, Expenditure Control Form approved by Mr. Tkatchenko and cheque requisition authorized by Mr. Jacob Mera were raised on the same day.

A cash cheque number 11833.1 for K40001- was encashed by Edward !pal on 01107199 at PNG Banking Corporation. Strange y, the payment voucher for cheque number ft118331 had been raised and approved by Deputy City Administrator —Finance Admin. Mr. Jacob !Vera only on 12/07/99.

When interrogated by the CID: Mr. Edward 'pal had admitted that Mr. Justin Tkatchenko gave him a cheque for .K4000/- to be encashed from the bank and the cash was given back to Mr. Tkatchenko. He has further stated that he did not apply for any assistance as funeral expenses and that he only signed certain documents at the instance of Mr. Tkatchenko and the cash he received from the bank was civen to Mr. Tkatchenko.

It could be established from evidence that upon instructions from the Governor's Office a cash cheque was raised for K4000/- and Mr. Justin Tkatchenko had obtained this money fraudulently.

SUSPECT Mr. Justin Tkatchenko, the former Deputy City Administrator — Health & Social Services

COMPLAINANT The City Manager will speak to the facts enumerated above and delegate officers in charge of the

respective subject to identify and produce relevant documents.

Mr. Jacob Mera (Then Deputy City Administrator — Finance & Admin.

Accounts Payments NCDC

Internal Audit

CONFIDENTIAL 31

_______ W E T N E S S EVIDENCE Mr. Jacob Rongap He will explain as to what made him to write to Deputy (then Executive Officer to Mr. City Administrator — Health & Social Services on Philip Taku) 30/6/99 to arrange K40001- for presentation, the

discussion he had with the Governor and what is this presentation. What were the instructions of the Governor? Exhibit A

He will speak to the endorsement made by him to Accountant payments on the fetter (Exhibit A2) to organize manual cheque made payable to Justin Tkachenko urgently. What made him to write this endorsement? For what reason he ordered to raise a manual cheque? Was the payment of K40001- in order? For what reason this cheque was raised. He will also identify he signatories to payment documents (Exhibits B,CD,E,F) and also speak to the authorization and approval of the said documents. He will also speak as to why payment voucher has been raised on 1217199 whereas the payment has been m a d e o n 3 0 / 6 / 9 9 .

He will speak to the action taken by him on the 1 endorsement made by Mr. Jacob Mera_ (Show him the endorsement Exhibit A2). He will also speak to the raising of payment vouchers and the signatories for th same and also whether the payment was in order. He will speak to the clearance of the payment. (Show him the clearance endorsement on Exhibit A4). What made him to clear this payment? Was the claim in order? For what purpose this claim has been raised? Is the claim legal? if so on what grounds? If it is not what made him to clear the same? Payment has been raised on a purchase order form number 0006430. W h y p u r c h a s e o r d e r h a s b e e n f o r m e d .

Deputy City Administrator Finance & Admin_ NCDC

He will speak to the order ne received from Mr. Thatchenko on letter Exhibit A2 and on the endorsement he made to Jacob Mera advising to assist. (Show him the endorsement he has made to Jacob Mera). Exhibit A3 is this payment legal? If so, how did it become legal? If not what made him to order Mr. Jacob Mera to assist this claim.

Accounts Section Staff NCDC

They will speak to the preparation of all vouchers and orders related to this payment and will identify the sionatories. Exhibits 13,C,D,E,F

CONFIDENTIAL 31

Accounts Clerk NCDC

Mr. Victor Lakae Accounts Department NCDC

Mr. Edward !pal NCDC Employee

CONFIDENTIAL 32

He will speak to the cheque number and other details including writing of the cheque and signatories and their designations, also identify the cheque. (Exhibit F,G) He will speak to the fact as to who took delivery of the cheque number 00118331 and as to why the payment was raised on a cheque requisition of the Salary Section. (Exhibit B). He will also explain whether this payment could or could not raise on a salary section requisition form. He will speak to reason as to why a cheque for K40001-was raised and the purpose of the-claim. He will also speak to the encasement of the cheque and how he disposed of the cash. He will identify the cheque and his signature on payment documents.

Bank Clerk PNGBC

He will speak to encasement of the cheque and the person who encashed the cheque and the amount paid by him. (He will identify the cheque Exhibit G& H)

SUSPECTS VERSION

Mr. Justin Tkatchenko His statement has to be recorded by Police clarification need to be sought on:-

As the then DCAIMSS what is the discussion he had with the then Governor Hon. Philip Taku re presentation of K40000/-. (Show him exhibit).

For what reason was this payment made?

if he denies show him the endorsement made by him on the letter to DCA/FA (Exhibit Al).

Did Mr. Edward Ipai request for ILA al assistance? If not what made him to authorize and approve a payment of K4000/- to Edward Ipai as funeral expenses?

Did he collect the K4000/- from Mr. Edward !pal after he encashed the cheque? •

If not confront him with the statement of Edward Ipai.

If yes, on what he did with the cash.

Also question him as to whether they have made similar payments to employees as funeral expenses.

CONFIDENTIAL 32

CONFIDENTIAL 33

CONFIDENTIAL 33

is there a welfare scheme in force?

If the answer is yes what did he do with the cash?

EXHIBITS

(A) Letter dated 3016199 addressed to Deputy City Administrator — Health & Social Services by Mr. Jacob Rongap_

(Al) Endorsement made by Deputy City Administrator — Health & Social Services on Exhibit A

(A2) Endorsement made by Mr. Jacob Mera on Exhibit A

(A3) Endorsement made by the then Deputy City Administrator — Finance & Admin.

(A4) A u d i t c l e a r a n c e s e a l o n E x h i b i t A

(B) Order requisition form number 10420 dated 30/6/99.

(C) Purchase order number 006430 dated 30/06/99.

(D) Expenditure Control Form dated 30/06/99.

(E) Cheque requisition dated 30/06/99 for cheque number 00118331.

(F) Payment Voucher for cheque number 00118331 dated 12/07/99.

(G) Cheque number 0011833 (with the CID)

(H) Encashed cheque number 011833

OBSERVATIONS

From the evidence available and on the revelations made by Mr. Edward Ipai to the CID it is abundantly clear that Mr. Justin Tkatchenko has misappropriated this K4000/- raised in favour of Edward 1pai an employee of the NCDC.

RECOMMENDATIONS

The evidence_ available is sufficient to maintain a change against Mr. Justin Tkatchenko under Section 383 A of the Criminal Code Act.

CONFIDENTIAL 43

CONFIDENTIAL 43 ALLEGED MISAPPROPRIATION OF K14.000 — J.W. TKATCHENKO

INTRODUCTION

This file relates to a case of alleged misappropriation and cheating of cash K14,000 by Justin W. Tkatchenko the Acting City Administrator on about 1 July 1999.

FACTS

It would appear that an ex-minor employee of the NCDC had been paid a sum of K14,000 on cheque No. 118391. Investigations are presently hampered due to the fact that the related paid documents, goods and services order and the requisitions, which forms the basis for raising a cheque has either gone missing or otherwise disposed of.

What is available at present is an unsigned Payment Voucher for cheque No. 118391 drawn on PNGBC and a computer printout reflecting the payment of K14,000 to the said Mathew Bai. According to Internal Auditor, this payment is not regarded as an advance of salaries which leads us to believe that the payment has been for a mysterious reason still unknown to us. The document from the division available to us indicates the remarks "outstanding contribution" which can be regarded as the Termination Benefits, or either entitlements of Mathew Bai on separation from the NCDC.

A significant fact to this transaction is that Justin W. Tkatchenko, Acting City Administrator and the Management Accountant, Kingsley Manickam had certified the signature of Mathew Bai to be the payee of the cheque which we believe is a major departure from accepted financial practice and procedures.

The investigating team has caused a search of the records at NCDC and has also called for the 7-77:se of the relevant documents which would further assist the investigation.

Mathew Bai will also play a key role in the outcome of the investigation as the cheque had been released and cashed by him. It is not known if Mathew Bai is still in the city or returned to his village.

CONFIDENTIAL 44 WITNESS ' EVIDENCE City Administrator Will produce or cause to produce the related

documents in evidence and make available the related staff to make statements to the Police.

Willie H. Chief Internal Auditor

will speak to the circumstances relating to the alleged payment to Mathew Bai, to identify the signatories to the cheque No. 118391 and identifying the letter addressed to PNGBC certifying the signature of the recipient of - cheque, Mathew Bai. He will also confirm the endorsement he made on the computer printout related to the payment of the sum of money K14,000. Quote: 'This is not an advance, I checked with the advance clerk"

Accounts Payable Division Officer In Charge

will make available the staff members responsible for the preparation and raising of documents and the cheque in question. They will also identify the signed Payment Voucher for the said cheque No. 118391 and describe the nature of the payment with particular emphasis on the words "outstanding contribution".

Secretary to Justin W. Tkatchenko will speak to the signatories to the letter addressed to PNGBC in regard to the payment of K14,000 and will identify the signature of Justin W. Tkatchenko in the usual cause of business.

CONFIDENTIAL 44

CONFIDENTIAL 45 Financial Controller By looking at the cheque and the Payment

Voucher for cheque No. 118391, he wi l l explain on whose orders this cheque was raised and for what reason and whether the payment was in order. He will identify the persons responsible for raisin, this cheque.

Computer Programmer will identify the vendor transaction computer printouts dated 8th November 1999 and speak to the payment of cheque No. 118391 and the payee.

Mr Victor Lakae will speak to the delivery of the cheque and identify its signatories.

Kingsley Manickam

.s~

Will explain the facts and circumstances surrounding the issue of cheque number 118391 dated 01/07/99 and the fact it was encashed at the instance of Justin W. Tkachenko. He will explain as to why procedures were not followed and be called upon to produce the missing document. He will also explain as to who ordered the documents in issue, to be raised and the preparation of the cheque for payment to Mathew Bai. Being the Accountant, he is solely responsible for all accounting procedures and if there has been breach of procedure then why he went to the extent of certifying the signature of the payee. Unless, Kingsley Manickam is able to provide a satisfactory explanation to the above matter. He can be treated as an accom slice.

Mathew Bai An ex-employee of NCDC will speak to the facts under caption facts in brief insofar his role in this entire transaction will he accept or deny the receipt of K14,000 and how it was disbursed. If the money was indeed an entitlement, he may be called upon to substantiate it with facts and evidence.

SUSPECTS VERSION

Justin W. Tkatchenko

Upon the evidence gathered so far it is evident that Justin W. Tkatchenko has manipulated this payment in order to derive a monetary benefit to himself. If he denies, then the following questions may be directed to him:-

1. As Acting City Manager, he approved the payment of K14,000 — YES/NO.

2. He will explain the circumstances as to why K14,000 was raised and why he took a particular interest in addressing a letter to PNGBC identifying the signature of Mathew Bai for the payment of the cheque.

3 If Mathew Bai denies receipt of the money, then the suspect may be confronted with such a denial. He will explain as to why the cheque was raised and why the deviation from practice and procedure.

CONFIDENTIAL 45

CONFIDENTIAL 46

CONFIDENTIAL 46

MOTIVE

To disfraud the NCDC of K14,000

EXHIBITS

A) Letter of Authorisation dated 116/99 addressed to the Manager PNGBC by Messrs Justin Tkatchenko and Kingsley Manikarn.

B) Cheque no. 118391 dated 117/99 for K 14000/.

C) Paid cheque number 118391 dated 117199 for K14:000 (Original to be obtained from the bank)

0) Unsigned payment voucher for cheque number 00118391 dated 2/7/99.

E) Vendor transaction computer printout of NCDC dated 15th October 1999 depicting the payment of K14,000.

E) Endorsement made by the Chief Internal Auditor on Exhibit E.

RECOMMENDATION

On the facts available and subject to further evidence collected by Police, would recommend Justin W Tkachenko for prosecution under Section 417 of the Criminal. Code and/or any other charges deemed appropriate by police

CONFIDENTIAL 47

CONFIDENTIAL 47

CASES NOT BEING PROBED INTO SOFAR

(a) Hire of a vehicle by the P.O.M. District Administrator North West.

(b) Repair of Kai Bar at Botanical Gardens.

(c) Supply of wheel Bins to CIS.

(d) Supply of painted 200 litre drums for markets.

(e) irregularities at NOD Building Authority

(f) Hire of tipper truck for special clean up during Easter Holidays.

(g) Payment of Mr. Mckenzie's son's school fees by the NCDC.

(h) Governor's trip to Jayapura (Expenditure of K83,000/-)

f

ANNEXURE D

SUMMARY OF FRAUD AND

MISAPPROPRIATION CASES

Number of cases committed for National Court Trial 8.

Number of cases pending before Committal Court 3

Number of cases pending with the. Public Prosecutor 4

Number of case Pending before the Grade. Five Magistrates Court 1

Number of cases pending investigation with the CID 16

Number of cases referred to CID for prosecution 6

Number of cases pending investigation with the NCDC Special investigations 9

Number of cases referred to Internal Revenue Commission – 1

Number of cases for submission to the Leadership Tribunal - 2

Total Cases bandied by the Investigators 50

Cases where recovery action was initiated

ANNEXURE - E

LIST OF FRAUD CASES

c=f 2P. cses hstfile-c: tht sec the Of i!1VStiaZ1Q!I byfrle.= seial -ivesdzzl-,-.- — M a 2 0 0 e . _ z - k a r . -

the 3.-.L.F.LL2z.7! o t t e r _ r e e r r e d t c , a a . . S o r t a / .

werE pm; p e u a t i 1 L S o m e c a s e { t a L c are fol. recover :: FLt_iortir-7 tht NODC.

C A S E S C O M M I T T E D F O R N A T I O N A L C O U R T TRIAL

Tt'1.4,1Th OF 11: 95.--f,91G.Oe VS FRED IVLARTFINS OF PHANTOM CUP=

This case was coramitied. on 2S March 200C, for Notional court trial. Case penciiri.L

2. ATTEMFTED FRAUD OP K 5:765.21 V5 (JT1J

ivissrs. Bit Skate Jo-ml Reid. and 7-1-Fro lviakamay- had been cornmide6 on 2 April '200:i to stale i_r_b9' 1 before the National Cour.I. Case pending.

3. F R A U D O F K 1 5 , 0 W . 0 0 V S J O H N R E I D Case cornmited. OE 10th May

2000 for trial before the Notional Comt. Case penning

4. FRAUDULENT SALE OF TOYOTA LA,NDCRITISER WORTT-r IT' VS JOHN REID

Case committed. on 10 May 2000 for trial before the National Court, Case pending.

(L;. FRAUD OF K 45955.00 VS JUSTIN TK.= 'PPP-TN-Kt-1 AND RAYMOND ACONLi-'•

Both committed on. 20th April 2000 to stand trial before the National Court.

OK. FRAUD OF K 25,000.00 VS JOBI BOMA! (MARKET SUPERVISOR NCDC)

Case committed_ on 4th May 2000 for trial before the National Court.

•

2 0 FRAUD OF K 20,127.82 VS DAVID UK] (CLERK Nr(nr)

Case cormnitted on 29 May 2000 for trial before the National Court. Case Pendinz.

07. FALSE CLAIM OF K 9,000.W vs simoN NAINTOWA (BUDGET 014 VICER

Case committed oTE. 30th May 2000 for trial before the National Coult. Case pending.

, COMMITTAL COURT

C . 7 E f f i : C O T E

;,_

RI-TACISIDArrt TT. v - r 70( I iNfiL.

Case before the cc.5=aittal

,p.::;;F:±.,L.,

-12:13:LTFM17317T FORD NCDC CHEQUE OFIL 0-ei 17E- JOBIT'

CE.E3EA AND SL_INGT:T (STEtailS.7,72:-;--;

Case before the committal courL.

3r.pe PENDING Di7BL1 r 0 p c 4 7 7 7 7

0. Fkx-D-Ill,ENT EN:::::Enikti.E1.--17 OF NCDC CHEQUE OF K1 0,000St., 1,7E3 PALA VAGI (A WELL KNOW N CREVINAL)

Case pending with the Public Prosecutor for deliberation.

02. STEALLNIG OF NCDC Cr2QUE OF K 780.16 VS WESLEY laSAIT (NCDC PROJECT OFFICER)

Case pending with the Public Prosecutor for deliberation.

Brian Bell 57 100,197.95 rdordon Food Store Brian Bell Brian Bell Brian Bell Brian Bell

Steamships HWare Steamships Hware Steamships Hware Steamships Hware.

Carpenters Hardware

UMW Niugin UMW Niugin

Gerehu Plumbers

Woo Textiles

POM Athletics Assoc

TNT Air Cargo

A N N E X U R E - E

Summary of Stolen and Fraudulently Encashed Cheques

The following details of Stolen and Fraudulently negotiated cheques are divided into three distinct types:

Cheques made out to the name of reputable business houses but en-cashed third parties through trade stores etc.

E. Cheques stolen and cashed b unknown culprits so that the correct supplier was

Later paid with a replacement cheque Summary of cheques paid to youth groups during the election period

= • •

Cheques made out in the name of reputable business houses but en-cashed by third. parties through trade stores etc

Paves of Civ.-tcques Totaf Value

1 2.367.00 I-c.2,ntila 4-7 -4 1.171.50 Ceitx.

1 .z 2.227.00 DivIC VenturE

-,, 8.635.00 PNGBC

12 71,518.07 Gordori Food Store 2 4.631.00 PINI-GBC

_ P"' 5.200.91 Celte-L 21 , 2.216.16 DMC venturer

6 23,406.71 Gordon Food Store

7.287.71 Gordon Food Store 4643.28 DMC Ventures

3,330.71 Celtex 21

1 1,640.79 Gordon Food Store

1 1.000.00 Gordon Food Store

1 4,618.55 Gordon Food Store

Important Note: These are believed to be a minor part of the total cheques payable to reputable businesses cashed which have been verified. There is strong evidence supporting the belief that much more could have been similarly transacted but remain as yet undiscovered.

ii. Cheques stolen and cashed by unknown culprits so that the correct supplier was later paid with a replacement cheque.

During 1997 and 1998 a total of K120,937.75 consisting of 45 cheques made tc various suppliers and contractors were reported stolen. The details of the cheques including amounts. cheque numbers. date drawn and date encashed are available.

Without am formal investigations as to who cashed these cheques and how they were lifted from the- treasury section of the NCDC. the claimants have been

presented with replacement. cheque. This has led to the NCDC paying double for services provided.

- . -

iii Summary of Cheques paid to youth groups during the election related period (Dec 96 to Aug 1997

The following payments were all made during a few month period around the election period in 1997. What is very interesting about these payments is that most of the work claimed were for grass cutting, drainage street cleaning and similar services. The irony of it all is that during the entire period the

country was under one of its longest and worst. spells of dry weather brought about by the El Nino phenomena.

The logic behind this major policy of political handouts is best left to the imagination of the interested but if the NCDC went out of its way to promote, grass cutting, etc when there was absolutely no grass around. is only leads to more questions as to what kind of work was actually done for the money paid

SurPrilia. Of Pa y M

io a

Decemberr 1996 (P/17196

ts

Amount

83%010.67

Date

February 1997

07/0')/97

i t 6 r 111 7,1

03/12/96 113„438.57 04/0',/97 18_949.05, 04/12/96 77,741.00 06/02/97 3,490.00 05/P/96 18.890.00 07/02/97 42,538.34 06/12/96 87,889.90 10/02/97 16,460.00 09/12/96 46,055.50 11/02/97 35,-782.03 10/12/96 45.429.40 12/02/97 56.610.00 11/12/96 46,805.00 13/02/97 53.946.00 Sub Ttl (Dec-96) 519360.04 14/02/97 32.869.80

21/02/97 62.561.50 24/02/97 46318.50

January 1997 Sub Ttl (Feb-97) 414.739.47

Various cheques

Total K615.762.89

May 1997

Various cheques Total 234 .51

03/06/97 13/06/97 25/06/97 Sub TO (Juri-97'k

43.043.39 39.494.55 23.048.36 105386.30

c,1-11Tri- 1997

yi

, ,yand o ta K 4 1 0 I . L p:

01/07/97 2r::/07/97 0, /07/97 14/07/97 07/07/97 08/07/97 09/07/97 10/07/97 11/07/97 14/07/97 15/07/97 16/07/97 Sub Tti (Rik,

`24,S.:1.34 4 _ 3CJ.0C

71.0-29.

10.396.0€: Ic .8?8.3e

.747.04 44.725.4c

30(1.240.74

1.300.0(2 L4.572.91: "-A _058.0C-€: .269. 00 7.657.8C 32.668.68 1.603.82 6.410.86 1,400.00

20,958.00 4= .993.57

2 2.379.71 20.1'S4.56-

9.353.91 17 486 74 3 44 .47

These are only a fraction of the cheques paid to youth groups etc during the period which been verified by the investigations. There is strong evidence supporting the belief that much more could have been similarly. transacted but remain yet to be discovered.

April 1997

3

Various cheques Total 1(1.131“89.09

June 1997

Aucrus- :(qr

) 0i3 9 0/08'97 05/08./97 06/08/97 C7/08/97 08/08197 11/08/97 12/08/97 13/08/57 15/08/97 18/08/97 19/08/97 21/08/97 '72/08/97 25/08/97 26/08/97 27/08/97 28/08/97 19/08/97

Sub Ttl (Aug-97)

Important Note: