Asia Pacific Network: 25 November 1997
POLITICS: AUDITOR RELEASES DAMNING CAIRNS REPORT
Papua New Guinea's Auditor-General has released a damning report critical of leaders and officials involved in the controversial $A18 million deal to buy the Cairns Conservatory building in Australia.
By NEVILLE TOGAREWA in Port Moresby
AUDITOR-General Makena Geno yesterday released a damning report critical of leaders and officials involved in the controversial $A18 million deal to buy the Cairns Conservatory building in Australia.
Those named include former Prime Minister Sir Julius Chan, his deputy and then finance minister Chris Haiveta (now Planning and Implementation Minister), the then Secretary of Foreign Affairs and Trade Gabriel Dusava, and sacked Public Officers Superannuation Fund managing director Ereman Ragi.
The Cairns central city property was bought by the POSF at a price estimated to be between two and three times its real value.
Presenting the 80-page report in Parliament yesterday, Finance Minister Iairo Lasaro said the Auditor-General had concluded that "the investment is a colossal blunder and should not have been made in the first place''.
The Auditor-General found that:
MR DUSAVA had played a very important role in the purchase more than that of a facilitator as he had claimed and not consistent with his responsibilities and duties;
ALMOST all officers interviewed under oath claimed that political pressure had been exerted on them to expedite the purchase and that there was a ``discernible nexus'' between public servants and politicians;
SIR JULIUS had played a pivotal role through the powers vested in him by virtue of the influential position he held and indirectly through associates;
MR RAGI had displayed "lack of financial finesse'' in his dealings with the vendors and other partners; had failed in his duty to safeguard the POSF assets; and had been a "compliant public servant'' who yielded to external influences;
INDEPENDENT valuations obtained by the Auditor-General and the Ombudsman Commission revealed that the market value of the building was between A$5.75 million and A$8 million. The POSF paid $A18.72 million for it;
A FINANCIAL analysis done by officers from the Auditor-General's office indicated that insufficient revenues were being generated to make the investment viable;
MEMBERS of the POSF board were collectively responsible for the decision they took to buy the property at a special meeting on October 10 1994 when leasing arrangements were not in place, and they failed to exercise due care and diligence;
THE OFFICE Allocation Committee, responsible for all leasing arrangements, played a secondary role to the Department of Finance and Planning and usurped the powers of the committee;
MR HAIVETA had approved the refinancing package of K13.5 million which enabled the POSF board to channel funds to its subsidiary company Moki No 10 to buy the building. Also, his immediate approval of the refinancing package, and his involvement in obtaining a valuation report long after the investment, were flawed and raised questions about his covert involvement in the deal; and
The action of the deputy controller of foreign exchange with the Bank of PNG, Mr H Kaeka, who approved the remittance of foreign currency before all documentary evidence was produced, was a very serious lapse on the part of a senior executive.
The Auditor-General recommended that Mr Ragi should be charged with negligence and dismissed from office; that all contracts entered in relation to the management of the building be reviewed and terminated if possible; that cost-cutting should be done; and that leasing of office space at market rentals should be actively pursued to maximise returns to the POSF.
He also recommended that all the POSF Board members should be removed; that the deputy controller of foreign exchange should be demoted to a non-executive position; and that procedures should be put in place to ensure that the duties and responsibilities of the Office Allocation Committee are well defined and action should be taken against any officer who tried to circumvent procedures.
Debate on the report was adjourned to a later date, on a motion by Opposition Leader Bernard Narokobi.
Neville Togarewa is a senior Post-Courier political journalist.
