SECRETARY OF TREASURY WANTED FOR OFFICIAL CORRUPTION

Diari Vele Secretary of Treasury is wanted by Members of Task Force Sweep and National Fraud & Anti-Corruption Directorate to effect his arrest and lay formal charges of official corruption, misappropriation and fraud. Sources at the District Court confirmed warrant of arrest was issued on Wednesday 22nd July 2015. It's alleged Vele has gone into hiding after being tipped about his planned arrest.

The charges against him relate to allegations he facilitated a secret transaction of K50 million through Bank of PNG to an Israeli Company LR Group for the purchase of two power generators on 19th of December 2013.

It's alleged Vele acted on the written directions of Prime Minister Peter O'Neill to secure K50 million from the 2013 Budget and transfer the funds to Bank of PNG to facilitate the transaction. In doing so breached the proper processes under the Public Finance (Management) Act rendering the payment unlawful. Thus amounting to Official Corruption, Misappropriation and Fraud.

Prime Minister wrote to Secretary of Treasury on 4th December 2013. In his letter he said,

…”as per our discussion on the above subject, please identify savings of K50.0 million within the 2013 National Budget and have it transferred to the Bank of Papua New Guinea for the procurement and installation of two turbine generators for Port Moresby and Lae.”

Charges against Vele stem from a complaint by former Opposition Leader Belden Namah on 15th April 2014 against the Prime Minister Peter O'Neill for allegedly directing Vele to make the payment. Namah wrote to Director of National Fraud & Anti-corruption the contents of which were as follows:

15th April, 2014

Chief Superintendent Mathew Damaru
Director of Fraud and Anti-Corruption Directorate
Royal Papua New Guinea Constabulary
Police Head Quarters
KONEDOBU
National Capital District

My Dear Chief Superintendent Matthew Damaru,

SUBJECT: CRIMINAL COMPLAINT AGAINST PRIME MINISTER, PETER O’NEILL, MP

As the Leader of Opposition and Alternate Prime Minister, I am duty bound to keep the Prime Minister and his Government honest and accountable to the people of Papua New Guinea. High among my responsibilities is the duty to ensure prudent and transparent management of the affairs of the Independent State of Papua New Guinea, and more particularly the prudent management of the public finances of Papua New Guinea.

In this regard, I have the unpleasant duty of formally requesting, through this letter, the Royal Papua New Guinea Constabulary to investigate the Prime Minister of Papua New Guinea, Peter O’Neill, for fraud, misappropriation and official corruption. This complaint stems from the payment of K50 Million of public funds to an Israeli company called LR Group, purportedly for two (2) 15 megawatt diesel turbine power generators for Port Moresby and Lae between the periods 04th – 20th of December 2013.

The facts are as follows:

• On the 4th of December 2013, the Prime Minister, Peter O’Neill by-passed his Minister for Treasury and directly wrote to the Acting Secretary for Treasury, Mr. Dairi Vele to source K50 Million and have it transferred to the Bank of Papua New Guinea for the purchase of two power generators. The letter does not even state who the payee is. The Acting Secretary acknowledged receipt of the Prime Minister’s letter on the 17th of December 2013 and immediately organized a Cheque numbered 004621 for K50 Million, and remitted same to the Bank of Papua New Guinea on the 18th of December 2013. There is no supporting documentation as you would normally expect in a major transaction of this nature, such as a contract between the State and LR Group or between PNG Power Limited (The Beneficiary) and LR Group (The Supplier). To say the least, this transaction is not normal.

• On the same date, 18th December 2013 and from the blue, LR Group issued a Commercial Invoice Number: A130001 for (USD20, 400,000.00) which is equivalent to K50 Million, to the Independent State of Papua New Guinea and at the same time, emailed or faxed to the Bank of PNG the company’s account details. Furthermore, the LR Group lodged with the Bank of Papua New Guinea, an application for Telegraphic Transfer of the K50 Million and a Balance of Payment Reporting Form. It must be noted that the invoice was issued well after the Prime Minister’s directive of 4th December 2013 and well after the payment was processed by the Finance and Treasury Departments.

• On the 19th of December 2013, the Internal Revenue Commission issued a Tax Clearance Certificate. However, the certificate is issued to Israel Electric Corp (IEC) and not LR Group. It must be noted that this is not a mistake. It is by design that the certificate is issued to the name of Israel Electric Corp and not to the LR Group. The company name is not Israel Electric Corp as written on the certificate.

• On the 20th of December 2013, the K50 Million was transferred to the nominated bank of the LR Group in Israel, Bank Leumi in Tel Aviv, Israel. You would have to wonder how the Bank of PNG could go ahead and transfer the funds to LR Group, when the Tax Clearance Certificate was issued under Israel Electric Corp and not LR Group. You would also wonder why the Tax Clearance certificate is valid for three (3) months, that is, from 19 December 2013 to 30th March 2014.

As best as I can recall, there hasn't been any official or public disclosure of the purchase of these two generators by the Prime Minister, from December 2013 up to this complaint date. While keeping it under rap, the Prime Minister convened an NEC Meeting on the 25th of February 2014 to seek Cabinet approval for the funding of two power generators.

Interestingly, on the 25th of February 2014, a Policy Paper, numbered 61/2014 and titled “URGENT SOLUTION TO PORT MORESBY AND LAE POWER SUPPLY” was presented to the Cabinet under the joint signature of the Prime Minister and the Public Enterprises Minister. The submission sought Cabinet approval of K94 Million to purchase 2 x 26.2 megawatt gas turbines from Israel General Electric Corporation of Israel for use in Port Moresby and Lae. It is to be noted that the generators are being sought from Israel General Electric Corp and not from LR Group. As the name suggests, Israel General Electric Corp is an Israeli Government owned electric company, whereas LR Group, is a private company specializing in Agriculture and agricultural technology.

This development must be carefully noted as what happens here in and through this NEC Submission would explain the startling discrepancies discussed above.

Recommendation (a) of the Submission reads, and I quote, “It is recommended that the NEC decide and approve the Procurement of 2 x 15 MW (megawatt) new gas (dual fuel) turbines which is now revised to 2 x 26.2 MW (megawatt) turbines (GE Model TM2 500+) from Israel General Electric Corp at a cost of K94 Million as urgent solution to power generation capacity in Port Moresby and Lae”.

The NEC submission and the recommendations state that there is a change of plan where the initial 2 x 15 megawatt gas turbines are to be abandoned in favor of 2 x 26.2 megawatt gas turbines. However, there is no mention or explanation in the Submission as to why such an upward revision is necessary or warranted. The Submission also fails to state or disclose any previous NEC decision or any commitment to buy 2 x 15 MW gas turbines, from which the Submission seeks to revise upwards.

It is remarkable that the Submission does not mention anything at all about the generators paid for with K50 Million of public funds in December 2013. This is startling. It is incredible, that the Prime Minister conceals the December deal for reasons only known to himself and his Minister for State Enterprises. The Members of the NEC were obviously not aware that the Prime Minister had personally authorized and supervised the purported purchase of two (2) 15 megawatt generators in December 2013 from an agriculture company, while they were on Christmas vacation. The Prime Minister has kept it highly confidential or top secret which only he will explain why.

The whole episode raises many serious questions which I pause here for police to query;

1. Why is it that the Prime Minister and the State Enterprises Minister have not disclosed to Cabinet, the purchase of the 2 x 15 MW diesel generators for K50 Million in December 2013?

2. Why is it that K50 Million was wired to the LR Group which is a private company, when all understanding reached with the Israeli Government is for PNG Power to enter into direct business deals with Israel General Electric Corp?

3. Why is it that the Tax Clearance Certificate issued by the Internal Revenue Commission is to the benefit of Israel General Electric Corp and not LR Group which was the immediate beneficiary of the tax clearance, and why is it that the clearance is valid for 3 months (December 2013 to 31st of March 2014)? Was it schemed intentionally so that the same Tax Clearance Certificate could be reused to facilitate transfer of the K96 Million to Israeli General Electric Corp? Was the NEC Meeting perfectly timed to suit the PM’S scheme to cover his secret deal?

4. What was the reason for Internal Revenue Commission to issue tax clearance to Israel General Electric valid for three (3) months?

5. Why did the IRC willingly issue the certificate to Israel General Electric when Israel General Electric Corp had not applied for the certificate?

6. Why did the Bank of Papua New Guinea facilitate and effect the transfer of the K50 Million to LR Group when LR Group did not possess a valid Tax Clearance certificate?

7. Why did the PM state in the NEC Submission, that 2x15 megawatt power generators was revised upwards to 2x26.2 megawatt generators, and yet, he did not elaborate or explain why? In other words, why does the Submission not provide the nexus?

As can be seen here, the whole transaction raises more questions than answers. I have no doubt in my mind that the Prime Minister, the State Enterprises Minister and the Acting Secretary for Treasury have conspired to deprive the people of Papua New Guinea of K50 Million. The application of the K50 Million to the benefit of LR Group by the two individuals and the actions and inactions of the three gentlemen and the Internal Revenue Commission and others, suggest, that the whole transaction was dishonest, corrupt and fraudulent.

In addition to the above, the following information adds further credence to my claim of misappropriation, fraud and corruption against the Prime Minister:

1. There is no evidence that the National Executive Council approved the K50 Million which was paid to LR Group in December 2013, purportedly for the purchase of 2 x 15 MW diesel turbine generators.

2. There was no contractual relationship between the State and the LR Group for LR Group to supply power generators to the Independent State of Papua New Guinea.

3. There was no contract signed between PNG Power and LR Group for the supply of the two (2) 15 MW generators, and, apart from the two (2) 26.2 MW generators which Cabinet approved, PNG Power is not aware of the December 2013 transaction, which only Peter O’Neill and Dairi Vele are privy to.

4. There was no public tender called for the supply of the 2 x 15 MW generators. The K50 Million transaction was effected with lightning speed, yet three months on, no one knows what became of the whole deal.

5. Other relevant state agencies such as the Central Supply and Tenders Board, the office of the Attorney General and the IPBC as the sole shareholder of PNG Power were not consulted and are not aware of the K50 Million deal.

6. The Prime Minister has no power or discretion to commit more than K50 Million.

Mr. Director, the above facts and circumstances point very strongly to the suggestion that the Prime Minister of Papua New Guinea, Peter O’Neill has deliberately and intentionally engaged himself in a grand scheme to defraud the Independent State of Papua New Guinea of K50 Million. The outline and chronology of deliberate actions and inactions of the Prime Minister and public officials as outlined above clearly demonstrate that the Prime Minister was dishonestly directing traffic to achieve a particular outcome, and that outcome is to deprive the people of PNG of K50 Million and apply it to the use of LR Group. This, I believe amounts to the crime of fraud. .

Secondly, the Prime Minister’s blatant disregard for established systems and due processes, including wilful disregard for compliance with the Public Finance Management Act and other relevant laws, I believe, amounts to “Official Corruption”.

Thirdly, the dishonest application of K50 Million to the use of LR Group, I contend, amounts to an act of "misappropriation of public funds”.

On the basis of all of the above, I submit that an immediate and thorough investigation of this matter is warranted, and I ask therefore, that it be undertaken forthwith in the public and national interest.

Yours Faithfully,

Hon. Belden Norman Namah, MP
Leader of Opposition

(source of the letter former Opposition Press Release of 30th April 2014.

Namah produced copies of the Prime Minister's letter, Treasury and Central Bank of PNG Procurement Documents, LR Group’s Commercial Invoice No# AL3001 and Internal Revenue Commission (IRC) Tax Clearance Certificate issued under Israel Electric Corporation; NEC Submission No.61/2014, NEC Decision No.74/2014 and ‘MOU between PNG Power Ltd and Israel Electric Corporation Ltd.

On the same date Prime Minister, Peter O’Neill responded to Namah's allegations saying "the K50 million was part payment, and was still in a trust account at the Central Bank of PNG, and will be transferred once the Israelis get the generators installed and running, including the balance of K44 million." He said LR Group of companies was only facilitating the discussions between the state of PNG and Israeli State owned company, Israeli Electric, who further negotiated the deal with General Electric Corp. He said a good deal was negotiated to fix power problems in Port Moresby and Lae.

On 2nd May 2014 Office of Prime Minister issued the following formal press statement on behalf of the Prime Minister.

"Prime Minister Hon. Peter O’Neill yesterday welcomed a complaint lodged with the Police by Namah relating to the government’s decision to purchase two gas turbines from an Israeli company."Namah raised this issue on April 15 and I provided a response. He has proceeded with a police complaint today, which I welcome."But it’s another act of madness by Namah which Papua New Guineans are getting fed up with."The suggestion by Namah that the LR Group and myself are swindling K50 million in this transaction is absolutely false and a disgraceful allegation to make. I hope he can prove it," the Prime Minister said.

"The Prime Minister said following his trip to Israel last year, the government decided to proceed with buying two turbines from an Israeli company, Israel General Electrics. The PNG Power Board accompanied the PM to Israel and were involved in negotiating with the company."

"In March this year, Cabinet approved the procurement of two 26.2 Megawatts gas turbines (dual fuel) (GE Model TM2 500+) from Israel General Electric at a cost of K94 million. The LR Group acted as their agent in the negotiations. It was an upgrade from the two 15 megawatt turbines that were initially negotiated. Prime Minister Hon. Peter O’Neill said his letter to the Treasury Secretary was simply to source savings, if any, from the 2013 Budget for this purchase. "As Prime Minister, I am concerned about the power situation that affects us daily, and proving very costly to businesses."What is wrong with me actively seeking a solution to this power nightmare? If Namah has a solution, what is the solution?"If his action is aimed at creating political steam, he won’t succeed because leaders and the public at large are fed up with empty politics," the Prime Minister said. The purchase agreement with Israel General Electric includes installation and training of PNG personnel to operate the turbines."

Part 2 of the article will cover an in depth analysis on the issues and facts as presented; charges defined by law and the key elements of the offence to establish guilt beyond reasonable doubt.

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