Inside the Somare bribery scandal

Noble Project, Devious Ends

According to the Singaporean court, sometime in 2008 a community college project was initiated by the Somare government, ostensibly to address the worthy end of addressing educational underachievement in remote rural areas.

The project aimed to create the infrastructure for classes to be delivered from a central location, then employing wireless digital technology, they could be beamed across PNG to remote classrooms in all 89 districts.

To administer the project, a trust was established – it was known as the ‘Inclusive Education for National Development for Community Education Trust’ (ITE Trust).

Oversight was provided by three Trustees:

1. Indian national, Father Xavier Alphonse, whose India Centre for Research and Development for Community inspired the project.
2. Michael Maiwa Somare Jnr, son of the Grand Chief Sir Michael Somare, and
3. American national, Philip Doehrman, a close family friend of the Somares.

Doehrman was able to sign contracts on behalf of the trust.

Australian lawyer, Greg Sheppard, through the law firm Young & Williams was responsible for administering the Trust’s funds, and advising it on legal matters. Sheppard is a former Queensland prosecutor and PNG based lawyer, who made headlines in 2015 following an SBS investigation into his practice conducted with Global Witness.

In the project’s opening phase, the Singapore court observed, the ITE Trust awarded contracts to Quest Petroleum (Singapore) Pte Ltd and Quest Investments (PNG) Limited in order to establish the first four colleges using portable containers purchased from Renhe in China. According to Judge Hong, these companies were owned by ITE Trustee, Philip Doehrman, and his wife, Lim Ai Wah, who was involved in the companies’ day to day management.

Lim alleged her husband ‘had the authority to sign all contracts on behalf of the ITE Trust’. She admitted ‘that Doehrman as a trustee of the ITE Trust was buying from her as a supplier’. The court remarked, in this respect, ‘Doehrman, as a trustee, must have known that he should not be involved in a vendor supplier relationship with his wife’.

Judge Hong further added: ‘Lim and Doehrman shared profits from the container sales [used for classrooms and accommodation] between 2008 and 2010, even after Doehrman became a trustee of the ITE Trust in 2008. It is also to be noted that Doehrman held 98.245% of Quest Petroleum’s shares, while Lim held a measly 0.255%’.

_{Graph: Quest ownership structure and links with ITE Trust}

According to Lim’s testimony, the companies earned a profit margin of between 10 and 30% on the ITE contracts. The money was paid by Young & Williams Lawyers, which managed the ITE Trust’s funds. At the time, Young & Williams partner, Greg Sheppard, was also director at Quest Investments (PNG) Limited.

Official government documents sighted by this author suggest the following costings for the first community college at Marienberg:

_{*8 x Teachers houses @ K200,000 per house. Total K1,600,000
*2 x 40 men student dormitories @K680,000 per dormitory. Total K1,360,000
*2 x 30 men fully furnished classroom @ K250,000. Total K500,000
*1 x Kitchen and mess hall @ K900,000. Total K900,000
*1 x Boys ablution block @ K50,000. Total K50,0000
*1 x Girls Ablution block @ K50,000. Total K50,000
*Freight costs @ K300,000. Total K300,000
*Parameter fencing @ K500,000. Total K500,000
*Multi-purpose hall @ K500,000. Total K500,000
*Project administration cost @ K3,000,000. Total K3,000,000
Total: K8,760,000}

It is unclear from these records, if Quest Petroleum or Quest Investments, received all or part of the budgeted sum.

Nevertheless, by 2010 the company’s profit margins from the contract is said to have reached 49%. Then the project entered a new and much more ambitious phase.

'No one should take more than PM'

The community college project’s second phase saw it expand in size, as the ITE Trust sort to establish 13 more community colleges. Funding was secured through a Chinese EX-IM bank loan in the amount of US$ 35 million.

It was a loan condition that a Chinese company would be awarded the contract to oversee the second phase of the community college project. The controversial multinational, ZTE Corporation, was selected by ITE Trust to conduct the second phase of the project at a price tag of US$38,814,065.00. Last year ZTE Corporation was blacklisted by Norway’s Sovereign Wealth Fund over risks of ‘severe corruption’.

In order to secure this lucrative contract, Singaporean prosecutors alleged that ZTE Corporation paid bribes to PNG government officials, and certain fixers – including Doehrman and Lim – who helped set up the award. The bribe was evidently disguised through a British Virgin Islands (BVI) shell company and a sham work contract.

Lim claimed she set up the offshore company at the request of ZTE official, Stephen Li Weiming: ‘He told me that his bosses did not want to make any payments to Quest Petroleum [in Singapore] and wanted a BVI company’.

Judge Hong concluded this offshore vehicle was set up to manage a secret slush fund, that would be used to pay off decision makers.

_{Image: The British Virgin Islands are renowned for offering clients corporate secrecy.} 

Questzone director Lim Ai Wah claimed:

I understand that ZTE have to pay the PM, PNG in order to get the work in Papua New Guinea … if you don’t pay to the PM, PNG you will not be able to get business from Papua New Guinea.

Drawing on the evidence, Judge Hong claimed that the beneficiaries of this US$3.6 million fund, included:

• ITE Trustee Philip Doehrman
• Lim Ai Wah, the wife of Doehrman
• ZTE manager Stephen Li Weiming
• Prime Minister Michael Somare Snr
• Michael Somare Jnr

Some of the US$ 3.6 million was also evidently set aside as a contingency fund to bribe PNG officials, who might otherwise block the community college contract with ZTE.

Oral evidence provided by Philip Doehrman – if accurate – offers a revealing insight into the considerable cost inflation the PNG public endures, as a result of politicians and public officials seeking bribes in order to award and action contracts, which have often been struck on extremely unfavourable terms, much to the profit of corporate suppliers.

With respect to the ZTE deal, Doehrman claimed:

I am aware that the money to be paid to PM PNG was a form of gift to him by ZTE Corporation so that the operations of the contract would be smooth and that part of the monies [USD$3.6 million] would be used to pay PNG officials in the course of their dealings with ZTE Corporation in PNG as and when the officials demand for it.

According to Doehrman, this is symptomatic of a virulent rent-seeking culture in the PNG government. Public officials, and politicians, he argues often wont action agreements until a bribe has been paid. Doehrman recalled:

 … [T]here were PNG government officials who would demand monies from us before they would do their jobs and hence we need to set aside such contingency funds for such demands for monies from government officials and presently demanding for more and more as we are near sign off, in particular one request for up to USD 5 million by Ambassador Dominic Diya which was reduced to USD 1 million.

When dividing up the US$3.6 million, Doehrman claims Sir Michael was adamant – he and his son, were to receive the largest share:

The agreement was that no one should take more than PM and son combined, there was discussion on compensation to [Lim] Ai Wah due to the business opportunity loss as initially we were the ones arranging to source for the equipments for the project. The percentage for PM was 12.5% and his son was 12.5% [i.e. 25% of the USD$3.6 million]. It was agreed that compensation to Ai Wah should not be more than the share of the PM or his son.

In total, US$784,000, was paid from Questzone Offshore’s Standard Chartered Bank account, into the Standard Chartered Bank account of Sir Michael Somare, evidently for his own benefit, and his son’s benefit – who was also an ITE trustee.

_{Graph: Payments from Questzone’s Standard Chartered Bank account}

According to the Court, cheque stubs made out to Somare stated ‘Boss, services rendered’ and ‘Boss, oil search redemption’. The court concluded this was again an attempt to disguise the ‘true nature of the payment’.

Doehrman’s wife, Lim Ai Wah, indicated in her evidence to prosecutors that a similar system of corruption prevails in China. As a result, some of the ‘contingency’ fund was allegedly paid over to secure the EX-IM bank loan. She told Singaporean authorities: ‘I understand that [Stephen Li Weiming] needed to give his boss money so as to facilitate the loan from EXIM, China’. However, Lim later disowned this statement.

The court nonetheless concluded: ‘In my view, these [statements by Doehrman and Lim] were clear references to bribes. When asked about one Dominic Diya who demanded money, Greg Sheppard admitted it was bribery’.

Judge Hong added:

… there was clearly deviousness or surreptitious planning involved and the falsifications were undeniably committed for Lim and Doehrman’s personal gains. They admitted that they intended to use the Questzone funds for their new home in Singapore. Part of the ill-gotten monies were also used to bribe PNG politician and officials. Doehrman’s flagrant and repeated breaches of fiduciary duties as a trustee of the ITE Trust made him more culpable than Lim in this criminal enterprise.

Judge Hong continued:

 I agreed with the Prosecution that “Doehrman had the technical knowledge and the relationships with Li Weiming (“Li”) and Somare. Under the cloak of purported charitable good works, Doehrman got himself appointed as an ‘independent’ consultant to Somare and a Trustee of the Trust, and was instrumental in Quest Petroleum acquiring the self-advancing business of supplying containerized classrooms to the Trust, and reached an agreement with Li on securing the corrupt payment of US$3.6m from ZTE. Thirdly, his own handwritten evidence shows that Doehrman, Lim and Li determined the distribution of part of the US$3.6m to Doehrman and Lim, Li and Somare. Lim was either a pawn acting on instructions of her husband or, at its highest, an equal partner who participated in every aspect of the criminal scheme devised by Doehrman”.

U-Konekt Allegations

During the court proceeding, a number of serious allegations were also directed at U-Konekt Technologies, a company led by Julius Kera, which also profited from the community college project.

Kera, Judge Hong observed, had acted as a legal consultant to Quest Investments and Quest Petroleum. He even agreed to sign the Questzone-ZTE contract, a move Judge Hong concluded, was designed to conceal the conflict of interest this contract involved. In court, Judge Hong described Kera as ‘evasive’ and lacking in credibility.

With respect to U-Konekt, its shareholders include a range of companies, with owners that raise eyebrows:

• P’ Oceania Resources Management Limited (20%) – owned by Julius Kera.
• Quest Investments (PNG) Limited (20%) –owned by Philip Doehrman (50%) and Lim Ai Wah (50%).
• Questicsys Limited (10%) – owned by Julius Kera (100%).
• Koniye Enterprises Ltd (20%) – owned by Roger Maginde (17%) and Pauwe Maginde (83%).
• PNGUKT Holdings Limited (20%) – owned by Julius Kera (100%).
• Saet Ltd (5%) – owned by Michael Maiwa Somare (100%). Directors were Michael Thomas Somare (09/11/2007 – 28/3/2011), Betha Somare (09/11/2007 – 6/5/2016) and Michael Maiwa Somare (30/5/2007 – current)
• ITE Trust (5%). Trustees include Father Xavier Alphonse, Philip Doehrman and Michael Maiwa Somare. Legal advisor includes, Greg Sheppard.

Its directors include:

• Julius Kera (appointed 14/10/2011), and
• Bonnie Kainge (appointed 6/9/2010).

The company secretaries are:

• Julius Kera (13/1/2009 – 29/6/2011 & 14/10/2011 – current) and
• Gregory Sheppard (29/6/2011 – current).

The company’s registered business address is Young & Williams Lawyers, Ground & 1st Floor, Investwell Building.

_{Graph: U-Konekt Technologies ownership structure}

According to the former Chief Technical Officer (CTO) of the company, ZTE sub-contracted U-Konekt to ‘install containers and establish parts of Wimax, a wireless network’, for the community college project. A contract was evidently signed with ZTE in June 2010 to provide this service.

However, the CTO made three allegations. It was claimed:

• ITE Trust invested in the company, at a time when Doehrman held a beneficial interest, creating a conflict of interest.
• Julius Kera embezzled approximately K1 million from the company.
• The company doubled dipped, after it was paid by ZTE and ITE Trust for the same contract. He points to company minutes recorded on 14/11/2011

As this was not central to the prosecution’s case, these allegations were not deliberated upon in the court’s decision. It is impossible, therefore, to verify whether the company double dipped, or if money was embezzled.

However, it can be said more confidently, that ITE Trust paid ZTE Corporation US$38 million. ZTE then subcontracted U-Konekt for part of the project. U-Konekt’s beneficial owners included two ITE trustees, Philip Doehrman and Michael Somare Jnr. Additionally, U-Konekt appointed ITE legal adviser, Greg Sheppard, as its Company Secretary on 29/6/2011.

The Government's Response?

Judge Hong observed:

The ITE Trust was founded with the aim of including the excluded by providing accessible education to students in rural areas. What the accused persons have done was to take a significant cut of the public funds in the ITE Trust for pure personal gains.

In his decision Judge Hong points the finger at several PNG nationals who are alleged to have benefited from the proceeds of crime, including:

• Sir Michael Somare Snr, who was the PNG Prime Minister at the time.
• Michael Somare Jnr, who was an ITE trustee at the time.

This is not an accusation levelled by an anonymous individual on social media, unsupported by evidence, this is a finding of fact by a Judge, after reviewing a considerable body of evidence and testimony, in a context where the onus of proof was set at the highest level possible.

It has been over twelve months since Judge Hong delivered his decision.  Given the seriousness of the allegations, the credibility of the judicial authority, and the stature of those accused, clearly it is of vital interest to democracy that the Government of Papua New Guinea disclose publicly what actions have been taken to investigate the role Somare Snr and Jnr played in this bribery scandal.

The PNG public also deserves to know whether a prosecution will take place or not.

If a decision is made not to prosecute, the public then deserve a full account explaining why.

Sir Michael himself stated in September last year that ‘I will consult with my family and legal counsel and consider how to address this matter’. He denies ever taking a bribe or inducement.

If Sir Michael believes that two close family friends have been imprisoned in Singapore on the basis of fraudulent evidence, or a grave miscarriage of justice, surely he has a responsibility to come forward publicly with exonerating evidence to free Doehrman and his wife, and to clear the Prime Minister’s Office of the stigma attached to it by the Singapore decision.

In addition to the above, Judge Hong cited testimony implicating PNG lawyer Julius Kera in misconduct. These allegations must also be followed up on.

It must be established once and for all whether this was in fact a truly laudable project abused by a number senior business and political figures, or whether it was only ever a palatable fig leaf designed to conceal the plundering of public moneys.

Lamentably the body best positioned to establish these facts, an ICAC promised by Peter O’Neill back in 2011, is on permanent hold. While the slated interim office chief, Rtd Judge Graham Ellis, has it appears been defacto disinvited.

The matter is thus left to a resource strapped anti-fraud squad to investigate – given the silence to date, it would seem optimistic to anticipate any more than a damp squib from the national government.