Part 1 of this article was relation the Secretary of Treasury Dairi Vele being wanted by Members of Task Force Sweep and National Fraud & Anti-Corruption over allegations of Official Corruption, Misappropriation and Fraud. The article canvassed the allegations that facilitated a secret payment of K50 million to procure the purchase of two turbine generators in December 2013.

This article will cover an in depth analysis on the issues and facts as presented in Part 1; charges defined by law and the key elements of the offence to establish guilt beyond reasonable doubt.

Official Corruption is a criminal offence prescribed under the Section 87 of the Criminal Code. It relates to a person employed in the public service or holding any public office, who corruptly asks, receives, or procures (facilitates) any property or benefit for himself or any other person, is guilty of a crime. The penalty is imprisonment for a term not exceeding 7 years and a fine at the discretion of the Court. The provision also states that a person cannot be arrested for Official Corruption without first obtaining a Warrant of Arrest. (Court order directing Police to effect a person's arrest and that they be brought before the Court to answer to the charges).

Misappropriation is criminal offence defined by Section 383A of Criminal Code. It relates to a person who "dishonestly" applies property including money belonging to another, held under their trust or control, and applied to their own benefit or the benefit of another person. The penalty being upto 10 years imprisonment.

By law the Prime Minister has no power or authority to enter into contracts or direct any payments for goods or services of behalf of the State. Any disbursements or expense of public funds must be in accordance with strict guidelines and regulations provided under the Public Finance (Management ) Act.

Under Section 39(1) of the Act, Central Supply & Tenders Board (CSTB) is the only lawful authority to control and regulate the payments for purchase of property or services on behalf of the State. By law CSTB may enter into a contract on behalf of the State for any amount up to K10 million. Amounts upto K5 million maybe approved by Provincial Supply & Tenders Board Any amount in excess of K10 million must be approved by National Executive Council (NEC). However NEC approval is still subject to compliance with Public Finance (Management) Act. The Act requires CSTB calling for public tenders and after assessing all the applicants make a final recommendation to NEC to consider. Section 40(3)(b) states CSTB may waiver calling for public tenders if it certifies that the inviting of tenders is impracticable or inexpedient; (not advisable). The law Section 47(11) prescribes that any recommendation by the CSTB to NEC must be in the form of a submission containing the reasons for their decision.

CSTB is made up of six members, Secretary of Finance, Secretary of Works, Secretary of Trade & Commerce, Solicitor General (Govt lawyer); two other persons nominated by the Universities and PNG Chamber of Commerce & Industry who have impeccable reputations with relevant experience in procurement or contract practices.

Following final approval by NEC the CTSB will issue a certificate of Authority to Pre-Commit Expenditure (APE). Section 47B of Act states it may only do so provided the contract has complied with the tender processes and that funds will be available to meet the payments.

Government may not enter into a formal contract until the APE is issued confirming the details of the purchase of property, goods or services including the authorised contract amount. In accordance Section 47C of Public Finance (Management) Act, any contract entered into on behalf of the State without issuance of APE is null and void.

These strict administrative processes and procedures are to avoid fraud and misuse of public funds by public officials including Members of Parliament. In other words its to protect the peoples money from corrupt politicians and public service colluding with white collar criminals.

The Act also provides clear guidelines of authority and duties of the appointed Minister and officers of the Department. Essentially, failure to comply with the regulations is to act unlawfully. All Department Heads are made aware of the strict regulations and procedures and therefore claiming ignorance is not a excuse or defence against culpability (guilt)

This is confirmed by the recent criminal conviction of former Minister of National Planning Paul Tiensten. He was found guilty of misappropriation for directing his Acting Secretary of Department to facilitate payment of K10 million to the benefit of Travel Air. However the payment was in breach of the finance management regulations. The K10 million was specifically allocated for rural airfreight subsidise third level airlines but was instead directed by Tiensten to be misapplied to Travel Air to funds its operations.

The reason most corrupt public officers avoid complying with the Public Finance (Management) Act is because by calling for public tenders or having CSTB review the contract exposes their scheme to defraud the State. Where they deliberately and dishonestly inflate the contract price for the benefit of their close friends or associates or to receive kick backs following the transaction.

After considering all the facts its my opinion that following the Prime Ministers visit to Israel in October 2013 LR Group, Prime Minister hatched a scheme to purchase two second hand 15 mega watt turbine generators from Israeli State Owned Power Company, Israel Electric Corporation. The plan being that LR Group would act as the middle man to facilitate the fraudulent sale at an inflated price.

Soon after returning from Israel on 4th December 2013 the Prime Minister secretly without the knowledge of the Minister of Treasury or NEC directed the then Acting Secretary of Treasury Dairi Vele to identify K50 million from 2013 Budget and transfer the funds to the Bank of PNG to be remitted to LR Group's Israel account.

The transaction was rushed without any proper assessment, all lawful procedures were completely by-passed to avoid detection.

Sometime between 20th December 2013 and February 2014 the sale must have fallen through. In that Israel State Owned Electric Company may have refused to be part of the scam withdrawing from the sale.

To cover their tacks Prime Minister and Minister for IPBC Ben Micah quickly tabled a submission in February 2014 before NEC for purchase for two brand new generators from General Electric Corporation, Israel Branch for K94 million.

You will notice the Prime Ministers initial response to Namah's compliant on 15th April 2014 claims the K50 million was part payment and held in a trust account with the Central Bank of PNG. This was a false statement because the bank documents produced confirm the payment by Bank of PNG was made to LR Group on 19th December 2013. LR Group's invoice was only issued on the same day of the transfer. This statement by Prime Minister after the fact was calculated publicly stating the funds were held in trust in an effort to cover up he knew about the secret transaction K50 million to LR Group. Therefore whoever paid K50 million LR Group did so without his knowledge or authority. The normal procedure is obtain approval then arrange the funding, not the other way around.

Prime Minister's response made on 2nd May 2014 confirms a number of important facts:

1) Prime Minister acknowledges his letter to Secretary of Treasury directing him to secure K50 million and transfer it to Bank of PNG for procurement and installation of two turbine generators. This was a fatal mistake on his part and key piece of evidence confirming his knowledge and authority of the transaction from Treasury to Bank of PNG to purchase the generators.

2) In March 2014 NEC or 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. It was an upgrade from the two 15 megawatt turbines that were initially negotiated by LR Group. This is the second most important fact in that Prime Minister confirms NEC approval was granted in March 2014 after he already directed the payment of K50 million in December 2013. Therefore the transaction made in December 2013 under his direction was without the proper authority of NEC or CSTB and failed to comply with Public Finance (Management) Act. Thus confirming it to be unlawful.

The Prime Minister tried to justify payment of K50 million by claiming;

1) the decision to purchase the generators was following his trip to Israel in October 2013. The government decided to proceed with buying two turbines from an Israeli company, Israel General Electrics and the PNG Power Board accompanied him to Israel and were involved in negotiating with the company

2) The LR Group acted as their agent in the negotiations.

3) His letter to the Treasury Secretary was simply to source savings, if any, from the 2013 Budget for this purchase.

4) he was concerned about the power situation that affects us daily, and proving very costly to businesses.

5) What is wrong with me actively seeking a solution to this power nightmare? If Namah has a solution, what is the solution?"

There is nothing wrong with Prime Minister's claim he was actually seeking a solution to the Nations power issues. However he is required to follow the proper process. A former Minister of Finance & Treasury there can be no mistake he was aware of these guidelines. He instead by-passed all legal processes issuing a written direction to a Department Secretary to secure K50m and have the funds transferred to Bank of PNG without the knowledge of the Minister of Treasury, consent of NEC or compliance with Public Finance (Management) Act.

Prime Minister says LR Group was only engaged as a third party to facilitate discussions between the State Israeli State Owned Company and PNG Government. LR Group is involved in agriculture and had no track record or expertise in the electricity industry. An important fact is that Chairman of LR Group is a person by the name of Ilan Weiss, the son of Jacob Weiss who is a known close associate of the Prime Minister and long time senior advisor to the Bank of PNG. Both father and son were in Israel during the Prime Minister's visit. So why was K50 million paid to LR Group and how much did they pocket from acting as a middle man?

Why didn't Government just purchase the generators straight from General Electric US who actually manufacturer and sell the generators, and who in the end shipped the Generators to PNG?

The controversial Generators arrived in PNG in 29th June 2014 after being purchased from Israel General Electric and shipped from their headquarters in the US. However they have yet to be installed or commissioned.

When they arrived Prime Minister issued a press statement confirming the total cost ended up being K104 million. He said "that the Minister and I had to put pressure on the PNG Power Board and management."

In recent times a number of Members of Parliament have been charged and facing criminal prosecution for allegedly abusing their office, misapplying public funds by using third parties (middle men) to make purchases of plant and equipment at inflated prices and receive kick backs from the proceeds.

Hence why Public Management Finance Act makes it mandatory to call for public tenders to be vetted by Central Supply & Tenders Board to avoid collusion, fraud and misappropriation of public funds through secret transactions.

So is Vele and Prime Ministers guilty of Official Corruption? Key elements or facts that need to be proven beyond reasonable doubt that a person is guilty of Official Corruption are that:

a) a person employed in the public or holder of public office who
b) corruptly
c) gives, confers or procures,
d) any property including funds or benefit
e) to himself or any other person, is guilty of a crime.

Based on the evidence the elements confirmed beyond reasonable about are (a) Dairi Vele was Acting Secretary of Treasury, a person employed in public office, (c) Confirmed by the Prime Minister statements he did procure the payment of (d) K50 million property belonging to the State (e) to the benefit of another person namely LR Group. The only essential element to prove is (b) whether Vele "corruptly" procured the payment.

To establish whether or not the payment was corrupt is to determine whether it is unlawful and dishonest.

Vele procured the payment of K50 million of public funds to LR Group without even going through the processes and procedure under his Department's own guidelines. He failed to adhere to Public Finance (Management) Act. The whole process was short circuited and done by himself to facilitate the release of K50 million. There was no serious and genuine effort to properly appraise the transaction to check if the proper documentation were in place, whether the proper process and procedures had been followed; or proper authority and approval was obtained from NEC.

To establish misappropriation under s.383A (j)(a) of the Criminal Code the State has the duty to prove the following key elements of the charge beyond reasonable doubt that the Accused:

a) dishonestly
b) applied to his own use or to the use of another
c) property belonging to another

In this case it is beyond doubt Vele applied K50 million belonging to the State to the use of LR Group confirmed by documentation and Prime Minister's own public statement. So the only remaining element to prove is whether he "dishonestly" applied it.

In the Paul Tiensten case the National Court when considering the same question based on the evidence in that case. The Court held that "the word 'dishonestly' under the charge of misappropriation relates only to the state of the mind of the person who does the act which amounts to misappropriation. His Honour Deputy Chief Justice Salika Gibbs who presided over Paul Tiensten's case said;

"The state of mind when a person applies is a question of fact for the trial judge to determine on all the facts presented before him. And when the judge considers the facts on how the property was applied, he uses the 'ordinary standards of reasonable and honest people' test to determine whether or not the property so applied was dishonestly applied. 'Dishonest' is defined in the Oxford Advance learners dictionary of Current English as 'intended to cheat, deceive or mislead'".

His Honour made reference to the case of The State v Francis Natuwohala Laumadava [1994] where the Chief Justice Salamo Injia said: "The court must look into the mind of the Accused and determine whether, given his intelligence and experience, he would have appreciated, as right-minded people would have done, that what he was doing was dishonest."

Deputy Chief Justice said the "Accused knew or ought to have known that his direction or directive to the Acting Secretary to facilitate release of K10 million was wrong for the reasons that he had no authority to give such a direction to the Acting Secretary and also for the reason that approval for release of such funds must come from the National Executive Council. Moreover he knew that he was wielding his political muscle over an Acting Secretary and her officers."

"Given the Accused's level of education, his intelligence, skills and experience in the Public Service and in Politics, I have no doubt in my mind that he appreciated and knew that what he was doing was wrong and that it was dishonest; that is directing the Acting Secretary to facilitate the release of K10 million was improper and dishonest. He effectively caused the Department officers to break rules."

"Evidence shows that the Accused was involved in the application of the money to Travel Air. He facilitated the release of the K10 million by his direction. Without his directive, the K10 million would not have been released. He commenced the process of the release of the money through his direction or directive. He presented the cheque to Eremas Wartoto to complete the facilitation and application. Was that application dishonest? The direction from him and causing the department officers to bypass the proper appraisal process under the guidelines and by bypassing the Public Finance Management Act and the deliberate lies in the way appraisal process and the speed in which the facilitation of the release of the funds were orchestrated, I conclude that the accused and his officers in the department dishonestly applied K10 million to the use of Travel Air thereby contravening s.383A(1)(a) of the Criminal Code." Accordingly the Court found him guilty of Misappropriation and sentenced him to 9 years in prison.

After considering Prime Minister's comments in his press statement it suggests he will try avoid prosecution by claiming that he did not direct the payment of K50m in December 2013 but merely directed the Secretary to identify the funds to be parked in a trust account with Bank of PNG pending the formal submission to NEC in March 2014. However his letter provided no evidence of such a direction other than to transfer funds to Bank of PNG to facilitate the purchase of two turbine generators. In the Tiensten case the Acting Secretary facilitated the payment but escaped prosecution because the was pressed to by his Minister. So whether not Vele is guilty will come down to whether he will acknowledge he was pressured to.

Prime Minister's letter does not state whether LR Group were to be paid but his own press release acknowledges LR Group involvement and K50 million was part payment only establishes beyond reasonable doubt it was his directive. The fact that the K50 million payment was facilitated without any proper documentation and even before an invoice existed smacks of dishonesty.

A further twist in this case is that Parliament on 18 September 2013 passed stricter penalties for persons found guilty of misappropriation. The new penalties state that a person found guilty of misappropriation shall now be sentenced to 50 years imprisonment where the amount is more than K1 million and less than K10 million. Where the amount is more than K10 million then the penalty is "life imprisonment without parole." This case involves allegations of misappropriation of K50 million, unlike other offences where the Court has the discretion to order a lessor sentence in this case if the Court makes a finding of guilty the Court has no discretion but to sentence a person to life imprisonment.

Right now the Prime Minister is protected by Supreme Court interim stay order preventing Police from investigating or arresting him in relation to this matter or any other matter. The proceedings in the Supreme Court relate to James Marape's appeal against National Court's earlier ruling in July 2014 refusing the Prime Minister and his application to stay their arrest in relation to Paraka Lawyers matter. In that case Prime Minister is facing arrest for allegedly writing to the Minister Finance & Treasury directing him to facilitate fraudulent payments of K71.8 million to Paraka Lawyers. In that matter the Prime Minister claims he never signed the letter.

Director of National Fraud & Anti-corruption Directorate Mathew Damaru and his Deputy Timothy Gitua have joined as party to those Supreme Court proceedings and filed an application to remove the stay. The matter returns to Court on 3rd August 2015 to confirm the proceedings are ready for substantive hearing before a three man bench. The matter maybe listed before last week of August 2015. If the Supreme Court upholds Damaru and Gitua's application removing the stay then Prime Minister may face multiple arrests over numerous charges of corruption, fraud and misappropriation. Whether or not these matters will be progressed will come down to the authority of Commissioner of Police. The only matters beyond the the authority of the Commissioner are warrant of arrests in relation to Paraka Lawyers matter and the warrant against Dairi Vele.

Part 3 of this article will cover what possible course action the Prime Minister may take to avoid facing the same charges, criminal prosecution and conviction.

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