Central Bank probe finds Nasfund K125m Kokopo bond deal illegal

Central Bank probe finds Nasfund K125m Kokopo bond deal illegal

The National
The National

June 23rd, 2011, 9:22 am #1

Probe finds K125m illegal
Source:
The National – Thursday, June 23, 2011 http://www.thenational.com.pg/?q=node/20520


THE controversial K125 million loan from Nasfund to the Kokopo district was illegal and placed contributors’ savings at considerable risk, a confidential brief to the government reveals.
The brief, from the Central Bank, was to have formed part of the report that was to have been tabled in parliament by Peter O’Neill on Tuesday, the day he was removed as minister for finance and treasury.
The brief revealed that the loan, obtained via a Treasury Department mechanism called the sovereign community infrastructure treasury bill (SCITB), did not have approvals from parliament, cabinet, treasury and the Central Bank and was outside the national budget.
It further revealed that middlemen companies and individuals received K20 million in fees and commission long before any project got off the ground in Kokopo. The bulk of the fees, K20 million, was said to have been paid to Malco, a company incorporated in 2008, owed by a single proprietor, one Alan Waters.
Communications Minister Patrick Tammur appointed Malco on Nov 27, 2009, as the exclusive coordinator for fund raising, fund management and legal requirements for the SCITB.
Six companies submitted invoices for a total sum of K69.8 million. This amount was paid to Malco according to the brief.
The other companies were Niugini Asset Management Ltd; Covec (PNG) Ltd; Kokopo Earthmoving Ltd; JGBBE Consulting Engineers Ltd; and Golding HKG Ltd.
Only K55 million remains of the total K125 million in an account held by Nasfund’s investment manager, National Capital Ltd.
In an attempt to ensure Nasfund contributors did not lose any funds, the cabinet, via decision No.51/2011, agreed to issue inscribed stock to settle the SCITB of K125 million but the Central Bank has now recommended that the government reviews that decision as payment of the money would mean there would be no one responsible or accountable for winding up the SCITB and for dealing with residual items such as equipment and contractors’ bills.
The Central Bank has further recommended:
*Termination of the investment manager and joint Nasfund CEOs Rod Mitchell and Ian Tarutia;
*Appointment of a receiver/manager to wind up the SCITB;
*Freezing of the National Capital Ltd account with the balance of K55 million; and
*An investigation be commenced into the tendering and procurement process.
The brief stated in part: “The ability to recover K125 million and the balance of the NCL account of K55,151,382 is not certain.
“There are outstanding creditors and creditors continue to accrue such items as administration fees, advisory fees and hire of equipment, etc.
“Any NEC decision be dependent upon Nasfund appointing a receiver/manager to deal with the proper wind-up of the SCITB including dealing with outstanding creditors.”
The report asked the government to seriously consider recovery action against companies for fees and commissions paid.
A separate investigation order by Prime Minister Sir Michael Somare is still pending.
In October 2009, upon receiving a request from Tammur for a K300 million loan from the Chinese government, Treasurer Patrick Pruaitch approved the SCITB.
In January last year, Waters, through his company Malco (PNG) Ltd, was engaged to be the exclusive coordinator for the issuance of K125 million of the SCITBs, to raise funds for water and infrastructure developments projects in the Kokopo district outside of the budget process.
The road projects included the following:
*Butuwin to Nangananga upgrade and sealing;
*Ulgunan road upgrade and sealing;
*Ulaveo to Lelenge maintenance;
*Malaguna to Tokua maintenance;
*Tobera to Talubar maintenance;
*Wainge to Malemale maintenance; and
*Bitapaka to mouth of Warangoi River upgrade and sealing.
The water supply projects included the following:
*Supply of 1,216 water tanks with purifiers and
cartage tanks; and
*Establishment of a main water supply in the Kokopo district.
Malco’s engagement as executive coordinator included a requirement to underwrite the issuance.
Malco then engaged an Australian funds management company, Backwell Lombard Capital, to be co-underwriter.
Subsequently, Pruaitch approved the engagement of National Capital Ltd to issue the treasury bills and manage the proceeds.
National Capital Ltd was previously owned by both Backwell Lombard Ltd and Nasfund.
However, Nasfund sold its share at the end of last year.
National Capital Ltd is also Nasfund’s fund manager.
National Capital Ltd issued all the SCITBs to Nasfund in March last year.
The SCITBs were issued for a period of one year, at an interest rate of 7.05%.
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Insider (reposted)
Insider (reposted)

June 23rd, 2011, 11:34 pm #2

The preliminary investigations revealed the following:

1. Under law, the deal is illegal because; no party other than the Central Bank can issue TBills on behalf of the State, even if the Bills are for special purposes;
2. Treasury Bills cannot be issued unless the expenditure was first approved by Parliament under the appropriate Budget Bill, in this case, the Kokopo projects were never approved by Parliament as part of the budget, NEC has no powers to approve expenditure outside of the Budget which must be approved by parliament; NEC in effect manages the country on behalf of Parliament.
3. All payments to State must go to Consolidated Revenue, in this case, NASFUND paid the money to National Capital Ltd which paid the money to Malco Ltd. Again, this is illegal.
4. At no time did the State of PNG ever receive the K125m. The money was transacted outside of all State systems, apparently on behalf of the State. This is the big problem now, if the deal was with the State, then why did the money not go to the State?
5. The deal appears to have been cooked up between Malco Limited (Allan Waters & Alois Kingsly), National Capital Ltd, Pruaitch, Tienstein and Tammur. No minister can spend any money unless it is consistent with the Budget Appropriation Bills. Whats worse is that the SCTIB Bills were signed by Tienstein, not Pruiatch as Finance minister.
6. NASFUND received bad advise from incompetent law firms that they could do this deal, including bad advise from National Capital which sold them the idea. NASFUND also owned 50% of National Capital at the time the deal was made.
7. NASFUND did no due diligence of its own on the deal.

Recommendations to Government are:

1. Investigate and prosecute everyone invloved,
2. Repay contributors funds despite the illegality involved,
3. Investigate projects in ENB and ensure they actually occured,
4. Recover any moneys if possible.
5. Discipline senior ministers????

There are 3 or 4 seperate investigations all recommending similar things. At the end of the day, the Government will have to make up its own mind about what to do.
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curious
curious

June 23rd, 2011, 11:42 pm #3

There are rumours that not all the Nasfund board supported this deal. There were a few apparently who voted against it or abstained. Do you know who those directors were that voted against the Kokopo deal?
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Erekanio
Erekanio

June 24th, 2011, 11:51 pm #4

The preliminary investigations revealed the following:

1. Under law, the deal is illegal because; no party other than the Central Bank can issue TBills on behalf of the State, even if the Bills are for special purposes;
2. Treasury Bills cannot be issued unless the expenditure was first approved by Parliament under the appropriate Budget Bill, in this case, the Kokopo projects were never approved by Parliament as part of the budget, NEC has no powers to approve expenditure outside of the Budget which must be approved by parliament; NEC in effect manages the country on behalf of Parliament.
3. All payments to State must go to Consolidated Revenue, in this case, NASFUND paid the money to National Capital Ltd which paid the money to Malco Ltd. Again, this is illegal.
4. At no time did the State of PNG ever receive the K125m. The money was transacted outside of all State systems, apparently on behalf of the State. This is the big problem now, if the deal was with the State, then why did the money not go to the State?
5. The deal appears to have been cooked up between Malco Limited (Allan Waters & Alois Kingsly), National Capital Ltd, Pruaitch, Tienstein and Tammur. No minister can spend any money unless it is consistent with the Budget Appropriation Bills. Whats worse is that the SCTIB Bills were signed by Tienstein, not Pruiatch as Finance minister.
6. NASFUND received bad advise from incompetent law firms that they could do this deal, including bad advise from National Capital which sold them the idea. NASFUND also owned 50% of National Capital at the time the deal was made.
7. NASFUND did no due diligence of its own on the deal.

Recommendations to Government are:

1. Investigate and prosecute everyone invloved,
2. Repay contributors funds despite the illegality involved,
3. Investigate projects in ENB and ensure they actually occured,
4. Recover any moneys if possible.
5. Discipline senior ministers????

There are 3 or 4 seperate investigations all recommending similar things. At the end of the day, the Government will have to make up its own mind about what to do.
Plis oh, I wake to another day of reading online news about the vicious cycle of corruption in PNG, how long are we going to allow this to continue?

I have always had my doubts about MPs like Tammur, Pruiatch and Teinstein! All their accounts and assets should be immediately frozen!!

I wonder why the NASFund board also put out a K50000.00 fee on information regarding someone who alleged Ian Tarutai and Rod Mitchell were corrupt!
Now clearly, Central Bank has recommended their sacking so are the Board gonna bend over for Rod and Ian???
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Hi
Hi

June 25th, 2011, 5:36 am #5

I totally agree they must be sacked. Mitchell is making a killing from Nasfund. How much did his cronies collect through National Capital. If they charged a fee of 10 percent from the money sent to Kokopo they would have collected K12.5 million. Peanuts heh Rod. No such thing as a honest days hard work for a greasy expat poof in PNG.
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Bakisipung
Bakisipung

June 26th, 2011, 2:01 am #6

Plis oh, I wake to another day of reading online news about the vicious cycle of corruption in PNG, how long are we going to allow this to continue?

I have always had my doubts about MPs like Tammur, Pruiatch and Teinstein! All their accounts and assets should be immediately frozen!!

I wonder why the NASFund board also put out a K50000.00 fee on information regarding someone who alleged Ian Tarutai and Rod Mitchell were corrupt!
Now clearly, Central Bank has recommended their sacking so are the Board gonna bend over for Rod and Ian???
Can someone tell us if Malco is the same Malco taking scrap metal out of Bougainville. They brought in two containers of dynamite which the PNG customs do not know anything about. The Australian has a asian wife and two Philippine bodyguards. They are in Arawa on tourist visas. There is a Malco office at Kokopo, above Agmark Office.

Please toksave na mipla ronim ol long Arawa.
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Mangi Wali
Mangi Wali

June 30th, 2011, 11:53 am #7

My brother,

That's the same person and the same company.
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askim
askim

June 30th, 2011, 11:27 pm #8

what is his name and background?
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vigilante
vigilante

July 1st, 2011, 6:24 am #9

Can someone tell us if Malco is the same Malco taking scrap metal out of Bougainville. They brought in two containers of dynamite which the PNG customs do not know anything about. The Australian has a asian wife and two Philippine bodyguards. They are in Arawa on tourist visas. There is a Malco office at Kokopo, above Agmark Office.

Please toksave na mipla ronim ol long Arawa.
Bro give this info to Garry Juffa at IRC to verify these serious allegations...
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customs man
customs man

July 7th, 2011, 11:14 am #10

Can someone tell us if Malco is the same Malco taking scrap metal out of Bougainville. They brought in two containers of dynamite which the PNG customs do not know anything about. The Australian has a asian wife and two Philippine bodyguards. They are in Arawa on tourist visas. There is a Malco office at Kokopo, above Agmark Office.

Please toksave na mipla ronim ol long Arawa.
Where is the dynamite now then
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