Uni Tavur: 18 April 1997
INQUIRY: THE SANDLINE AFFAIR SOAP OPERA
The mercenary affair inquiry has begun to unravel the Sandline-Executive Outcomes tentacles, but little has been done to probe the alleged DiamondWorks and Panguna mine link.
MEDIAWATCH: By David Robie
IN OUR last issue, just before Sir Julius Chan was "sidelined" and before the mid-semester break, I had a brief look at unravelling the Sandline-Executive Outcomes tentacles as seen on the Internet with the teaser:
"And now for a slice of Bougainville and Papua New Guinea's copper shares?"
At the time this notion of the mercenaries cashing in on PNG's mineral wealth was being vigorously denied by the Government. But only the naive could have gone along with this.
And as the news media has shown, it hasn't taken long for the Sandline affair inquiry to highlight one of the hidden agendas of the deal - to recapture Panguna mine and for the mercenaries to gain an interest.
But surprisingly, although there has been some attention focused on Heritage Oil in the inquiry and in the media, little has been directed towards DiamondWorks.
In October 1996, DiamondWorks ‹ then known as Carson Gold ‹ completed a takeover of the EO mining affiliate Branch Energy. This became the base for an internationally controversial share promotion and apparently a front for laundering mercenary mineral interests.
As I reported in this last column, the company's management astoundly made public claims that its assets in Angola and Sierra Leone had an "estimated" value of some US$3.2 billion.
The pattern of operation in mercenary-mining contracts is to pay commissions in the form of a bribe.
"Rather than cash, it is a stock option in the mining company," says an informant from an American military aviation supplier with an interest in PNG.
"This is covered up by using relatives on the stock, or setting up a front company which owns the stock.
"Look at the owners in DiamondWorks as example."
A second mechanism is paying commissions on the equipment purchases - and this is where skimming in the Sandline affair is readily apparent. This is done in cash.
"That means someone from PNG had to get the cash brought in the country but more likely it was banked offshore," says the consultant. "This means someone involved travelled offshore to open an account."
The Cook Islands and Vanuatu are known tax finance havens as examples - and shrouded in murky controversies.
As the National reported, Sandline had targeted the opening of Panguna as the only option to speedily end the Bougainville war.
Brigadier-General Jerry Singirok said the option was brought to him by Sandline chief executive Tim Spicer and two other executives when they met on March 7.
"The new concept was that instead of heavily engaging military operations in Central Bougainville, the focus now was to deploy a battalion size group on Panguna mine and then let the rebels come and fight us," Singirok said.
According to DiamondWorks' incentive stock options list publicly filed with the Vancouver Stock Exchange, at least several people linked to the Sandline PNG affair have substantial interests. The list, dated February 18, totals 23 million shares with capital share at issue totalling $57 million.
Among the 10 acceptance options is listed Tim Spicer (10,000 shares at an exercise price of $2.72).
Spicer also figures on the oustanding options list (with another 10,000 shares at $2.72 and a five-year option).
Also listed is entrepeneur Tony Buckingham (125,000 shares on a similar basis) and a number of other nominees are believed to be proxies.
Although the Sandline contract has been suspended pending the findings of the judicial inquiry, the money trail has begun to unravel.
Sandline received half its contract money from the state, but is astoundingly still trying to seek the US$18 million outstanding, plus the US$400,000 cash seized by soldiers off Spicer (and now frozen in a PNGBC account by court order), and US$250,000 in "consultancy" fees.
And, believe it or not, the company wants compensation for its 70-odd employees arrested and deported.
Generally, the news media in PNG have done a very creditable job, although the Post-Courier has the edgein neutrality over its rival.
Many readers were grumbing over what was perceived as "Chan's paper", the National, because of its treatment of stories last week.
This was perhaps unfair as the National had stronger editorials, particularly one rapping Chan for fuelling the ambiguity of "two PMs".
But the most perceptive reporting - especially on the complex financial maze and the Australian links - of the past few weeks came from the Australian Financial Review, Business Review Weekly and the Independent.
David Robie is lecturer in journalism and managing editor of Uni Tavur.
