How Don Polye helped swing the 2012 election for O’Neill

It was the year 2011. Papua New Guinea faced one of its worst constitutional crises.

Two Prime Ministers faced off.

On one side stood the Grand Chief Sir Michael Somare and on the other Peter O’Neill, each claiming the Prime Ministership as rightfully theirs. Both men have a history of corruption and illegal dealings documented in judicially led inquiries and court proceedings.

For a period Papua New Guinea faced the unprecedented situation of, in effect, having two Prime Ministers, two Police Chiefs, even two Defence Force Commanders while Supreme Court judges were falling over themselves to get arrested.

In the end it took a National Election to sort it all out – though the poll very nearly never happened. The Common Role was a mess and the voting was chaotic at the very best.

Michael Somare’s National Alliance party got a hammering in the elections. The Peoples National Congress topped the poll and a political newbie, the Triumph Heritage Empowerment Party, helped secure Peter O’Neill in the top job.

Behind the headlines though taxpayers money had been unlawfully flooding out of Waigani and across the country for the previous nine months, lining the pockets of MPs and candidates loyal to O’Neill, helping to secure their election success.

Between August 2011 and February 2012 over K1 billion was distributed by the Department of Finance from two illegal accounts, including more than K500 million funnelled to carefully selected Provincial and District treasuries for unplanned projects.

Evidence indicates the payments were authorised by the Secretary for Finance acting on orders from the newly appointed Minister for Finance Don Polye. Treasurers were explicitly instructed on how to deal with the money outside normal accounting procedures.

While we don’t know where all the money ended up as no audit trail exists, one high profile case involving former Forest Minister Douglas Tomuriesa provides a tantalising glimpse. K6 million was allegedly paid into bank account of a company he controlled and over K2.5 million ended up in the pockets of the then prospective Parliamentary candidate and his wife.

A senior whistleblower within the audit investigation branch of the Department of Finance has described the whole affair as “a grand conspiracy”, involving as it did not only the Minister and Secretary but also senior staff within Finance and the Provincial and District treasuries.

The whistleblower provided a detailed brief on the “heinous scheme” in which over K1 billion in public funds was “embezzled” in a “blatant abuse of set laws, rules and regulations” to the Chief Ombudsman, the Police Commissioner, Ministers and Department Heads in 2015, yet almost no action has been taken.

The Ombudsman Commission has passed the buck, saying the whole scheme was criminal in nature so it is a case for the police, but the Fraud Squad investigations, even with the recent arrest of ex-Minister Douglas Tomuriesa and his wife, seem to be proceeding at a glacial pace.

Below we expose how the scheme was facilitated and explain its wider political context.

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Rotten to its core

The whole scheme as, explained to PNGi, was rotten to its core. Not only was the O’Neill government distributing cash handouts for unidentified projects to its political allies, it was doing so completely outside the lawful budget appropriation process.

The National Budget is passed by Parliament annually, and it appropriates monies according to the published budget plan. No additional ‘votes’ are allowed to be created during the operation of the budget unless Parliament specifically gives its approval by passing a revised budget.

The government’s cash handout of over K1 billion in 2011 and 2012 was never authorised through the budget process. 

In order to distribute the money, the Department of Finance had to create two new accounts, a Cash Adjustment Vote (in August 2011) and a General Reserve Vote (from January 2012).

It used these Votes to unlawfully access funds from the Waigani Public Account at the Central Bank. These funds were then distributed by issuing government cheques.

This was unlawful on several levels. Firstly, the creation of the Votes was not approved in the budgets.

Secondly, Cash Adjustment and General Reserve Votes are not supposed to be used as expenditure accounts that allow funds to be drawn. Yet the Department of Finance used them to draw down, first K768 million and then K265 million. Thirdly, the Department distributed the money by simply issuing government cheques. This totally bypassed normal procedures under the Public Finance (Management) Act, which include the use of Warrant Authorities.

This money was distributed to the Provincial and District treasuries in electoral seats that were loyal to the government. It was then used to fund a score of financial promises made by the Prime Minister and his fellow Ministers as they toured the country to drum up support.

A list of the ad hoc funding commitment made by the PM and government Ministers that were funded through the unlawful Votes.

Download the list of ad hoc funding commitments as a pdf file.

The Supplementary Budget

The payments out of government coffers, into the regional treasuries began on 24 August 2011. A month later a K781 million Supplementary Budget sought to regularise the distribution of funds. It was “hastily and with minimal debate” approved by Parliament.

The expenditure in the Supplementary Budget was supposedly funded from an estimated K608m budget surplus. The major beneficiaries were supposed to be the education sector, with K305m allocated, rural infrastructure was to receive K231m, and health, K109m.

In the health sector, K72m was earmarked for District Rural Health Centres. The major infrastructure spending was to be on rural District and Provincial roads (K122m).

Treasury Minister Don Polye split the National Alliance party by backing Peter O’Neill as Prime Minister

Treasurer Don Poyle assured MPs that all the additional expenditure would be correctly distributed through Trust Accounts:

“Mr. Speaker, in this regard, the 2011 Supplementary Budget will use trust accounts to pre-fund critical development expenditure programs outlined in the MTDP such as Education, Health, Infrastructure and Law and Order and……….”

This commitment was not honoured: no payments were made through trust accounts. Instead they were made first from the Cash Adjustment Vote and then through the General Reserve Vote.

Exacerbating the fraud, the payments were not allocated to specific road and health projects, which had been properly planned and costed. They were simply made as general deposits into the District and Provincial Treasuries operational funds.

The whole expenditure was completely unplanned, with no project names or locations mentioned and no tender and procurement process or any due diligence.

The act of disbursing funds generally in the names of, for instance Rural Roads, Provincial Roads, Rural Health Housing projects without specifically identifying the project name and location fails the due diligence tests and the tender and procurement process under the PF(M)A posing the risk of the funds being abused.

There were absolutely no steps taken to alleviate the risk of the funds being abused and all the proper rules and procedures under the Public Finance (Management) Act were ignored.

The monies were simply distributed as unallocated cash “bribes” into the pockets of rural officials says the whistleblower.

To understand the motivation behind this unlawful cash distribution we need to look at the timing and understand the political context.

Where the money went

The payments made by the Department of Finance under the cover of Polye’s Supplementary Budget were supposedly for development projects across the nation but none of those projects had even a name and none had been planned or costed.

Instead, the K781 million distributed supposedly for ‘rural roads’, ‘provincial roads’ or ‘rural health housing’ was simply dumped into rural treasuries with no demand for accountability. This opened the door for the funds to be abused by sitting MPs for their own political campaigns, or to be distributed to intending candidates in the lead up to the 2012 National Election.

In all thirteen Provincial and sixty-nine District treasuries were beneficiaries of the cash handout.

These eighty two regional treasuries were the selected recipients of over K500 million in cash.

Download the List of Payments in pdf format

The political context

Michael Somare is the nation’s longest serving Prime Minister (PM). He occupied the role three times for a total of 17 years. Somare was also the country’s first PM, serving in the role from Independence in 1975 until 1980. But his longest reign came more than twenty years later, from 2002 until 2011.

By 2011 he was 75 years of age, and a lengthy period of hospitalisation in Singapore for heart surgery gave  political rivals within his own government an opportunity to seize power.

In August 2011, Parliament declared the post of Prime Minister vacant and elected Peter O’Neill as Somare’s replacement. This was despite O’Neill’s People’s National Congress (PNC) Party having only six-seats in the 109-member Parliament.

O’Neill promptly appointed opposition leader Belden Namah as his deputy Prime Minister and Don Polye, who had led the revolt against Somare from within his own National Alliance (NA) Party, as Minster for Finance and Treasury.

Somare’s removal was contested through the courts. In December the Supreme Court ruled O’Neill had not been legally appointed. The judges found there had been no legal vacancy in the office of PM when O’Neill was appointed and that Somare should be reinstated.

This sparked a Constitutional crisis. O’Neill refused to step aside, while Somare claimed to be the PM and announced his own new Cabinet and appointed a new Police Commissioner and Army Commander.

In January 2012, a troop mutiny almost ended in bloodshed:

Somare, however, did not have the numbers in Parliament. The crisis was eventually resolved through the ballot box.

In the June 2012 National Election Peter O’Neill’s party obtained the most seats (27) and was able to form a government with a clear coalition of support in Parliament.

Although Somare’s National Alliance survived the split in its ranks that led to Somare’s ousting as PM, it was decimated in the polls, winning only 7 seats, 13 less than it had previously held, and ending up in joint fourth place.

Don Polye and his allies, who had led the split within the NA, were ousted from the party before the 2012 election. They formed their own party, the Triumph Heritage Empowerment Party  – known by the acronym T.H.E.

Despite having being formed just five-months before the election, the T.H.E. party enjoyed remarkable success at the polls, coming in second behind O’Neill’s PNC, winning 12 seats.

With the backing of T.H.E, O’Neill’s future as Prime Minister was secure.

The Political Objective

The political objective behind the unplanned and unlawful distribution of funds by the Department of Finance was simple. Reward those who were supporting the new government led by Peter O’Neill and punish those who remained loyal to Michael Somare.

A simple analysis of where some of the money went, and more particularly who missed out, exposes the political objective very clearly.

There were 21 treasuries that received no money at all.

Prominent among them were the treasuries for the Parliamentary seats held Michael Somare (East Sepik Provincial) and his son Arthur (Angoram) and the National Alliance MPs who remained loyal to them – like Sam Abal in Wabag (who had stood in for Somare as “Acting PM” while he was in Singapore), Peter Wararu Waranaka in Yangoru Saussia, Patrick Pruaitch in Aitupe, Patrick Tammur in Kokopo, and Andrew Mald in Moresby North East.

There were other Michael Somare supporters from outside the NA who also missed out. Tony Aimo in Ambunti was appointed by Somare to his ‘alternative cabinet’ in 2011 and contested and lost in the 2012 as a NA candidate. Gabriel Kapris in Maprik was a Minister in the Somare government.  Andrew Kumbakor in Nuku was Housing Minister in the Somare government. Carol Kidu in Moresby South was a long standing Somare government Minister and was briefly Opposition Leader after O’Neill seized power

Many of those who missed out on government funds also lost their seats in the 2012 election. The list includes Arthur Somare (lost to Ludwig Schulze of the Pangu Party), Sam Abal (lost to Robert Ganim), Peter Wararu Waranaka  (lost to Richard Maru, an Independent candidate who later joined O’Neill’s PNC), Patrick Tammur (lost to Ereman Tobaining Jnr), Gabriel Kapris (ironically lost to NA candidate John Simon – one of the few seats NA managed to win), Andrew Kumbakor (lost to Joe Sungi), and Andrew Mald, who lost to Labi Amulu even though he ditched the National Alliance, backed O’Neill as PM and joined the T.H.E. Party.

Other MPs whose districts also missed out on funds subsequently lost in the election. Tony Aimo lost to Ezekiel Anisi, Benn Temon in Mul Baiyer (lost to Koi Trape), Joe Mek Teine in Kundiawa Gembogle (lost to Tobias Kulang), Timothy Bonga in Nawaeb (lost to Gisuwat Siniwim),  Ben Semri in Middle Ramu (lost to Tommy Tomscoll), and John Kekeno in Koroba Kopiago who lost to T.H.E. Party candidate Philip Undialu.

In total, of all those who missed out, only seven managed to win re-election in 2012 – Michael Somare, Bob Dadae in Kabwum, John Hickey in Bogia, John Pundari in Kompiam, James Legea in Kagua Erave, Framcis Potape in Komo Magarima, and Roy Biyama in Middle Ramu (athough Biyama had missed out on funding through the Supplementary Budget as he was a Somare supporter and previous Minister, he contested in 2012 under the PNC banner).

Avoiding scrutiny

Provincial and District treasurers weren’t accustomed to receiving cash handouts for unidentified projects. There was concern about how they were going to manage their unexpected windfalls without falling foul of the law or proper accounting principals.

Provincial Treasurers were summoned to Port Moresby for a series of briefings by Finance Secretary Steve Gibson and his senior staff. Meetings were held at Vulapindi House and the nearby Lamana hotel.

The treasurers were instructed to ensure their District Treasuries account for the funds through manual ledgers and not through their usual ‘Chart of Accounts’. They were informed that the funds would be deposited to their operational accounts despite, at least notionally, being for specific projects.

Having briefed the Provincial Treasurers the acting Secretary, Steven Gibson, then issued a Circular Instruction, No.1/2011, dated 6th December.

Steven Gibson’s Circular Instruction, No.1/2011, dated 6th December.

In the Circular Gibson points the finger at the Provincial and District Treasurers for ‘facing difficulties in facilitating payments for projects nominated by members of Parliament’, and breaching financial and procurement procedures when facilitating the payments.

Download the Circular Instruction as a pdf file.

To avoid having to return any unspent monies at the end of the financial year the  circular instructs the treasurers to deposit the funds into their Provincial or District Service Improvement Program trust accounts.

This instruction was “a highly irregular administrative direction” says the whistleblower. The new funds were not part of the DSIP and to deposit the monies into the trust accounts was “cementing a grand coverup”.

The Public Finance (Management) Act stipulated that all appropriations out of the government’s Consolidated Revenue lapse at the end of the fiscal year. This means that any unspent monies must be transferred back to Waigani. The only exception is for monies held in legally proscribed Trust Accounts, such as government contributions to donor funded projects.

Douglas Tomuriesa and Quick Span

Douglas Tomuriesa was elected to Parliament for the first time in the June 2012 election that put an end to the Constitutional Crisis. He was a candidate for Treasurer Don Polye’s T.H.E. party.

An engineering graduate, Tomuriesa’s last job prior to his election was CEO of the Border Development Authority (BDA).

Strangely that fact is not revealed on Tomuriesa’a Parliamentary website profile. There he claims that prior to entering Parliament he was employed by Bowmans Limited.

In his biography on the official Parliament website, Tomuriesa claims his last job before being elected was with Bowmans Limited.

Yet in his 2015 report, the Auditor General is critical of Tomuriesa for failing to resign from the BDA a full six months before the issuance of writs for the 2012 election. Indeed, according to the Auditor General, Tomuriesa only resigned on 29 May, a full month AFTER the writs were issued and just a month before voting began.

The Auditor General also found that during his extended stay at the BDA, Tomuriesa had ‘improperly approved payments totalling K1,034,729.34’ which the auditor could not confirm were made ‘for the benefit of the Authority’.

While Tomuriesa has not been sanctioned for any of those misdemeanours, in July 2019 he was arrested and charged with misappropriating K2.2 million from the K6 million allocated to the South Fly District for health worker’s housing under the 2011 Supplementary Budget. 

According to the police statement, after the K6 million was transferred to the South Fly District Treasury account the former South Fly MP Sali Subam convened a Joint District Planning and Budget Priorities Committee meeting which made the decision to change the scope of the project from building houses for health workers to supply of building materials.

It is alleged a contract was then awarded to Tomuriesa’s company, Quick Span Building Systems Limited, to supply roofing materials.  It is alleged that the recommendation to award the contract to Quick Span was made by an unauthorised and ‘purported’ Technical Evaluation Committee.

The K6 million to Quick Span was paid in single cheque issued by the South Fly District Treasury. The cheque was signed by the District Treasurer and District Administrator despite the sum involved being way in excess of their K50,000 financial limits. Both have told investigators they were under pressure from the local MP and his Executive Officer

It then took nearly 12 months before any roofing iron was delivered and then only to two central locations, not the 62 rural locations specified in the contract. It is alleged that six years later, the irons have still to be delivered to their final locations.

It is also alleged that of the K6 million paid to Quick Span, only K3.5 was spent on roofing iron while almost K2.5 million was misappropriated by Tomuriesa and his wife.

Tomuriesa’s wife, Rachel, has been charged with making cash withdrawals of K182,000 from the money.

Sali Subam was elected to Parliament as a National Alliance candidate in 2007 and was appointed a Parliamentary Secretary. In August 2011 though he backed Peter O’Neill in his attempt to unseat Somare and was rewarded with an appointment as Minister for Sport.

In January 2012 Subam joined Don Polye’s new T.H.E. Party. He lost his seat in the 2012 election.

It was Don Polye who explicitly ensured that the K6 million for Rural Health Workers Houses was issued to the South Fly District Treasury.

In a letter dated 14 October 2011, Polye instructed his Finance Secretary Steven Gibson to make three payments direct to the relevant Provincial or District Treasuries, namely K5m for WNBP Town Roads, K5m for Madang Open Roads and K6m for South Fly Rural Health Workers Houses.

Why were these three payments of such a priority and of such interest to the Minister?

The WNBP Governor at that time was National Alliance MP, Peter Humphreys who had won the seat in a hotly contested election in 2007.

In January 2012 Humphreys was one of the founding members of Don Polye’s T.H.E. Party. Despite his defection from the NA and the additional K5 million paid to his Provincial Treasury for ‘rural roads’, Humphreys was defeated by Sasindran Muthuvel in the 2012 election.

Another T.H.E. founding member was the Madang Open MP, Buka Malai.

So all three payments directed by the Minister in his letter to the Finance Secretary were targeted at soon to be members of the Minister’s own political party.

Sick and fed up

Ordinary people are rightly sick and fed up with the seeming never ending stream of stories of political corruption and financial mismanagement and rightly so.

What is even more galling is that the same politicians and bureaucrats who are named time and again, still sit in high office, seemingly immune from any culpability for their crimes.

While we see occasional glimmers of hope, an arrest here, a revitalised Parliamentary Accounts Committee and a contract not renewed there, the fact is that despite the high-minded rhetoric of our Prime Minister and his cohorts nothing ever changes.

We have been promised an Independent Commission Against Corruption for more than a decade but the legislation continues to proceed at a snail’s pace.

Our challenge to the government is simple. Recall Parliament. Pass the legislation and immediately appoint the first ICAC Commissioner.

There are no reasons why this cannot be accomplished in days.

The fact that it does not happen speaks volumes about who is really running our country.