Illicit K10.6m payment further evidence Forest Authority is a rogue body

Today’s PNGi Court Report exposes K10.6 million in illegal payments which the PNG Forest Authority attempted to make to Asaule Development Corporation Limited. The National Court has concluded that these were payments which the state was in no way obliged to make, and they were unlawful.

This is just the latest example in a pattern of behaviour from the Forest Authority, which indicates it is a rogue organisation operating largely outside the law with no accountability.

Established in 1991, as part of sweeping changes under a new Forestry Act, the PNG Forest Authority was supposed to usher in a new era of clean forest management. The widespread corruption, mismanagement and unsustainable logging that the Barnett Commission of Inquiry had revealed two-years earlier would be replaced by a unified National Forest Plan, more domestic processing and local ownership, and a new type of logging agreement, the Forest Management Area.

Fast forward thirty-years and we find the Forest Authority has completely failed to fulfil its objectives. The forest industry is still dominated by foreign companies, the amount of timber being harvested from our forests has more than doubled yet 95% is exported as raw logs, most of the harvesting is still through the old Timber Rights Purchase Agreements and Local Forest Areas, there is no comprehensive National Forest Plan, and corruption, unsustainable logging and human rights abuses are still rife.

This chart, from the log export monitoring firm SGS, shows in 2019, 65% of log exports came from old TRP and LFA areas, and just 12% from the FMAs that were supposed to replace those concession types after 1991.

As further evidence of its failure, there are numerous examples of legal cases in which logging companies have been ordered by the courts to pay damages to landowners for illegal logging, trespass and environmental damage, all of which was done under the nose of the Forest Authority. It also played a central role in the SABL land grab scandal, illegally dishing out Forest Clearance Authorities to logging companies to clear-fell large-areas of forest for bogus agriculture projects while.

It is against this backdrop that we now turn our attention to the Asaule Development Corporation Limited.

An Illegal K10 Million Payment

In 2001, a foreign logging company, Lien Sang Limited of Malaysia, shut down its operations in the Apalik Agriculture Reserve in West New Britain and fled the country.

Despite the company’s breach of its logging agreement, the Forest Authority kindly, and according to the National court, unlawfully, returned its performance bond of approx. K196,000. But that was just the beginning of the PNGFA’s largess.

In 2011, the Asaule Business Group Inc., made a claim against the PNGFA for K10 million in damages for the stoppage of the Apalik logging operation. This group was first registered in 2008 and claims to represent the Asaule clan.

Without assessing whether the State was legally liable to pay any damages and without giving heed to the fact that any claim against it was already time-barred, the PNGFA agreed to pay the damages.

Consequently, two payments were made from the Log Export Development Levy (LEDL) trust account, which the PNGFA administered. The first payment was of K502,000 and the second, made in 2012, was for K3 million.

The payments though were not made to the Asaule Business Group Inc. They were made to the Asaule Development Corporation Limited, a company set up and owned by a Henry Maisam.

The National court has now ruled both payments were completely unlawful. There are a number of reasons why.

Firstly, neither the claimant or the recipient of the funds had any legally enforceable right to claim damages from the PNGFA. Secondly, payments from the LEDL are only supposed to be made to local or provincial governments. They should be made to fund agriculture or infrastructure development projects in logging areas. Also, the levy was only introduced in 2007, long after logging had stopped in the Apalik Reserve. Thirdly the monies were paid out to a privately owned company and not the clan group that had claimed the damages.

In December 2015, Henry Maisam passed away and ownership of the Asuale Development Corporation Limited devolved to his son, Steven Maisam.

In 2016, the State Solicitor was alerted to the PNGFA damage payments, as a result of the dispute between the Business Group and the Development Corporation over who was entitled to the money. The State Solicitor advised the PNGFA that the two payments had been made unlawfully. Despite this advice, in September 2017, the PNGFA issued a third cheque. This time for K7.1 million, again payable to the Asaule Development Corporation.

The Asaule Business Group responded in January 2018, by initiating court proceedings seeking a declaration that they are the lawful recipients of the damages payments, that the K3.5 million had been wrongly paid to the Asaule Development Corporation Limited and that the K7.1 million cheque be cancelled and issued instead to them.

The two groups and the PNGFA then tried to settle the matter privately by entering a Consent Order under which the Forest Authority would cancel the cheque for K7.1 million and instead pay K3.5 million to each of the groups.

That order was agreed in June 2018, which was two months after all the monies in the LEDL trust account were transferred into the government’s consolidated revenue under the Public Money Management Regularization Act 2017.

The Act effectively prohibited the PNGFA from continuing to administer the LEDL funds and set strict new criteria for their use. The Department of Finance was, therefore, able to successfully apply to the court to have the Consent Order stayed.

The Asaule Business Group though continued its court action, seeking access to the K3.5 million already paid out by the PNGFA and the further payment of K7.1 million.

Justice Thompson adjudicated on that claim in April. She dismissed the entire proceedings, finding the payments that had already been made were unlawful, that neither the Asaule Business Group or Asuale Development Corporation had any enforceable rights to claim damages and any such claim would anyway have been time barred.

Each party to the proceedings, the plaintiff, the Asaule Business Group, and the defendants, the Asaule Development Corporation, the PNGFA, and the Departments of Finance and National Planning, were ordered to pay their own costs; reflecting the fact that nobody had emerged with clean hands.

What we learn from the case is that not only did the PNGFA unlawfully pay out K3.5 million to the Asaule Development Corporation and then subsequently try to unlawfully pay the company a further K7.1 million, it unlawfully deprived genuine landowners in logging areas of agricultural and other infrastructure projects to the same value and it encumbered taxpayers with a debt for defending the legal proceedings.

Further payments to Asuale Dev Corp

The unlawful and unnecessary payments of K10.6 million to the Asaule Development Corporation in relation to the cancelled Apalik logging project, are not end of the Forest Authorities largess towards the company.

Last year PNGi reported on the Auditor General’s concerns about two other irregular payments of K8 million and K50o,000 also made to the Asaule Development Corporation from the Log Export Development Levy Trust Fund between 2012 and 2015.

K8 million was awarded to Asaule Development Corporation Limited for a project named the “Rabaul Queen Inquiry”.

The MV Rabaul Queen’s sinking was, of course, one of the nation’s worst ever peacetime maritime disasters. At least 172 people tragically lost their lives when the ferry sank in February 2012. But why was the Asaule Development Corporation, awarded K8 million from the LEDL trust fund for a project titled “Rabaul Queen Inquiry”?

The auditor general was unable to answer this question. He discovered there was no documentation within the PNGFA relating to the trust fund committee deliberations and decisions, and the project was never vetted or approved for funding by PNGFA staff.

Indeed, the Auditor General was unable to determine even if the project was ever approved in a formal LEDL committee meeting, with all the members present as “there were no records kept of committee proceedings”.

The same failures were also found in relation to the K500,000 also paid to the Asaule Development Corporation for a “cocoa processing and export project”.

Adding these two payments of K8,500,000 to the three payments of K10,600,000 that were considered by the court in the Apalik logging case, we find the company appears to have been given, or promised, K20 million from the PNG Forest Authority with no record to indicate that any of it was lawfully owed.

While this is clearly further evidence that the PNGFA is indeed a rogue institution, the actions and decisions in this case were not ones made by a faceless government department. These were actions and decisions made by individual public servants within the PNGFA who facilitated the illegal payments.

While it cannot be inferred that any of this money was misappropriated, there are clearly sufficient red flags to demand a thorough investigation and anyone found to have acted wrongly should be held to account.