LR GENSET SCAM - What you were not told.

So a warrant for the arrest of Treasury Secretary Daire Vele has been issued and is to be enforced. Not before time. As Treasury Secretary he has been running a number of illegal operations for the Prime Minister, the two biggest ones being the illegal UBS loan and the illegal purchase of two mobile power generators.
Police want to arrest him on charges of official corruption, misappropriation and fraud. The basis of the charges is documents provided to the police, the Attorney-General, the Ombudsman Commission and Task force Sweep by a whistleblower at PNG Power Ltd, and these documents show that a very serious and widespread fraud conspiracy took place at the highest levels of Government, business and State-Owned Enterprises.
Most of these facts were detailed In Parliament in early 2014 by the then Opposition Leader, Belden Namah. Responses were supplied by the Prime Minister himself, and his office, in a number of statements. All of the PM’s official statements further implicated him in fraud, misappropriation and Official Corruption.
Other officials, state institutions, companies and individuals were implicated along with the Prime Minister and Daire Vele, including
  • The Minister for Public Enterprises, Ben Micah
  • The PM’s personal adviser Jakob Weiss, who is also Israel’s Honorary Consul in PNG
  • Weiss’s son Ilan, who is head of the Israeli company LR Group in PNG
  • LR Group itself
  • The Governor of the Bank of Papua New Guinea, Mr Loi Bakani
  • The Commissioner-General of the Internal Revenue Commission, Ms Betty Palaso
  • The boards and managements of the Independent Public Business Corporation and PNG Power.
Why haven’t they been charged as well?
The basis of the purchase was corrupt and outside due process including NEC procedures, the requirement for a public tender for such an arrangement, the Public Finance (Management) Act, the Central Banking Act, the IPBC Act, the PNG Power Act, the Companies Act and the IRC Act. The State Solicitor, the Attorney-General and the Central Supply and Tenders Board appear to have been sidelined.
Every other action and decision to progress the deal was therefore also corrupt and outside due process. The only legitimate decision to be made by all of the officials and individuals involved would have been to request that due diligence be undertaken. On that basis the purchase would not have proceeded.
The fact that the deal proceeded leaves each and every person involved open to prosecution under the PNG Crimes Act and other Acts of Parliament.
Prime Minister Peter O’Neill masterminded the entire corrupt deal with his advisor Jakob Weiss and Ilan Weiss during an official visit to Israel in October 2013.
Then, on 4 December 2013, the Prime Minister wrote to Vele instructing him to release K50 million for the purchase and installation of two mobile generators, one for Port Moresby and one for Lae. The letter (attached) was copied to the CEO of PNG Power Ltd and to the Governor of the Bank of PNG.
There was no contract, no due diligence, no cost-benefit analysis, no technical compatibility analysis and no statutory approvals required for such a purchase. Key parts of the process were deliberately fraudulent and most Government procurement processes were bypassed by the Prime Minister and his accomplices.
In fact the entire corrupt deal was rushed through within three days of the Prime Minister’s instruction letter being received by Dairi Vele. From that it is fair to deduce that there was no scrutiny of the deal whatsoever by any person entrusted with safeguarding the national interest and the nation’s funds.
It was a corrupt deal done between family, friends and colleagues - the Prime Minister, his personal advisor Jakob Weiss (also the representative of the State of Israel in PNG), Ilan Weiss, and LR Group.
And the deal was worth much more than the K50 million mentioned in the charges against Vele. The total transaction amounted to well over K104 million. The K50 million was just a down-payment, and further payment were made of at least K44 million.
Furthermore, the arrangements for owning, operating and maintaining the generators have been kept secret by the Prime Minister. But it is known that LR Group offered to operate the two generators at a three-monthly cost of about K1 million.
The Prime Minister and the Minister for Public Enterprises, Ben Micah, presented a submission to NEC on February 25 2014, well after the transaction was completed, to try to cover up the corruption, fraud and misappropriation in the original deal. In the process they mislead NEC as to it true nature of the transaction and its status. Indeed, the details of the entire original transaction were concealed from NEC members by the Prime Minister and Minister Micah.
In subsequent public statements the Prime Minister deliberately lied to the people of Papua New Guinea. He stated in April and May that the K50 million “was still in a trust account at the Central Bank of PNG”. He also stated publicly and to NEC through his submission with Minister Micah that the purchase was from Israel General Electric Corporation. If he made these statements in Parliament then he is guilty of misleading the House.
This Prime Ministerial lie is easy to prove: a record of the SWIFT payment of $US20.4 million to the credit of LR Group dated 20 December 2013 is attached.
The corrupt actions by the Prime Minister, Minister Micah, Daire Vele, Jakob and Ilan Weiss and LR Group, Loi Bakani of BoPNG, Betty Palaso of IRC and IPBC and PNG Power have cost the people of PNG dearly.
The deal, along with the USB loan, is one of the reasons contributing to the Government’s present financial crisis. It ripped more than K104 million cash out of the Government’s funds when it could least afford it. It was also a major contributor to the cash crisis in PPL, which led to the Power State of Emergency.
LR Group appears to have been the only ones to profit. Because of the way the deal was structured, normal fees, levies, charges and taxes payable on a commercial bank transaction were avoided by LR Group. Also, LR Group benefited by at least $US1.5 million (about K3 million) from the way the deal was structured.
The K3 million benefit to LR Group is the difference between what any other private company - even a PNG private company - would get by going through a normal commercial arrangement with its own bank and the special rate approved under the Prime Minister’s arrangements.
The K50 million was exchanged for $US20.4 million at a rate of 0.4080 (see attached invoice from LR Group to the Treasury, dated December 18 2013 and BoPNG Requisition for Telegraphic Transfer).
On that day, a commercial transaction done through BSP would have been at a rate of about 0.3715 and would have bought $US18.5 million (see attached BSP commercial rates published for that day).
The rate paid by LR Group under the PM’s special deal was set by BoPNG, also on the 18th (see attached Telegraphic Transfer Requisition and Daily BPNG Exchange Rates for Finance).
No private PNG company could ever hope to get such favoured treatment by the Department of Treasury, the IRC or the Bank of Papua New Guinea. The question this deal raises is what treatment does the Prime Minister’s multitude of companies get. Is the Remington Group and its subsidiaries, all owned by the Prime Minister, getting favoured treatment too?
And why is the Weiss family and LR Group getting such special treatment? What favours does the Prime Minister expect when he orders the State to sell PPL to LR Group?
Mr Ilan Weiss, on behalf of LR Group, signed the BoPNG import notification form (attached), required under the Central Bank (Foreign Exchange and Gold) Regulation on the 18th of December 201. He signed the form knowing that the deal lacked the required approvals and that it was therefore corrupt. It is an offence under the Regulation to make a false statement in this form. Further, Form M must be submitted to the central bank by an Authorised Agent - a commercial bank or a Government department. It is unheard of for a private citizen - and a foreigner at that - to submit a Form M.
Bakani could not have instituted any form of due diligence by the bank between the time he received a copy of the Prime Minister’s letter initiating the transaction and the final processing of the deal. In fact Bakani appears to have organised special clearance for the transaction. The sources say the transaction was rammed thru BoPNG by Jakob Weiss, who is also an adviser to the central bank as well as to the Prime Minister.
Bakani authorised the telegraphic transfer of the funds to LR Group when he must have known that the Tax Clearance Certificate for the transfer was in the name of Israel General Electric (see attached Tax Clearance Certificate). Bakani must also have known of the wrongful submission by Ilan Weiss of the Form M.
Another problem with the Tax Clearance Certificate is that it is made out to the Treasury as the remitter of the funds. But the Form M notification of payment has been filled in by Ilan Weiss, acting for LR Group.
Even more disturbing is the fact that the Bank of Papua New Guinea’s Requisition for Telegraphic Transfer  (attached) lists the applicant as Department of Treasury (Ilan Weiss). Mr Weiss appears to have tricked the Bank of Papua New Guinea into believing he was a Treasury official. This is a very serious crime.
Bakani as the director of the transaction through BoPNG from the start, must be held responsible for these two frauds as well.
The failure of Bakani to act on these obvious discrepancies is more than just a failure of due diligence. It indicates complicity in the commission of official corruption, fraud and misappropriation.
Betty Palaso, head of the Internal Revenue Commission, is in the same boat as Bakani.
Ms Palaso granted tax clearance for the transaction on the 19th of December, only one day after it was first proposed to BoPNG and one day before the transfer of funds to LR Group actually took place. The tax clearance was granted for the K50 million to be paid to Israel Electric Corporation, when in fact it was to be paid to LR Group. It is apparent that no due diligence was conducted by IRC.
The same lack of due diligence also characterised the actions of Minister Micah, the directors and management of PNG Power Ltd and possibly its 100% owner the Independent Public Business Corporation and its Managing Director at the time, Wasantha Kumarasiri.
Allegations made to Task Force Sweep, the Police and the Ombudsman Commission by the PPL whistleblower, supported by full documentation, show an identical failure of proper process. Minister Micah played a pivotal role in the transaction and wrongfully instructed the two SOEs to take part in it.
It is broadly a requirement for a transaction of that magnitude that both the IPBC and PPL boards, the Minister and the IPBC Managing Director must approve it. Transactions over K10 million must also be in accord with the Annual Plan of the Corporation approved by NEC. This transaction is not, and sources indicate that in any event the annual plan may not have been approved by NEC.
If an SOE contravenes the IPBC Act, its directors and management will be deemed to have been involved in that contravention and thereby to have breached their duties as directors pursuant to Section 112 of the Companies Act 1977 and be punishable accordingly under Section 413 of that Act.
It is clear that the procedures required under the IPBC Act were not followed. Although the transaction was completed on 20 December 2013, it had no legal clearance. This is made clear in a letter from IPBC to the State Solicitor on 12 May this year (attached) seeking that clearance. The letter shows that no proper process had been followed by the Prime Minister, the Minister, the Treasury and its acting secretary, PPL and possibly even IPBC itself, if it gave approval for the transaction.
The letter clearly shows that the initial payment of K50 million, plus a later payment of K44 million by the State for the balance of the original deal, had no IPBC clearance or approval at the time. And given the illegal nature of the other elements of the deal, if the IPBC board and management did subsequently approve the payments retrospectively they would likely be subject to prosecution under the Crimes Act, the IPBC Act and the Companies Act.