PNGi INVESTIGATES
Konebada Petroleum Park CEO Misappropriated K10m Leak Claims
PNGi has received National Executive Council (NEC) briefing papers that allege ongoing misdealings within the defunct Konebada Petroleum Park Authority (KPPA), which has been the subject of several exposes published on this platform.
The leaked NEC documents claim that KPPA holds billions in assets belonging to the PNG public. This treasure chest has been managed by KPPA’s CEO Donald Valu who is accused in the NEC briefing of misappropriating K10.3 million, and misapplying a further K4.3 million. It appears Mr Valu is still notionally KPPA’s CEO.
Despite a 2017 NEC decision to abolish the KPPA, two years later this decision has yet to be properly enacted.
Furthermore, while KPPA’s outgoing CEO is allegedly being prosecuted under the Public Finances (Management) Act, the leaked documents suggest the matter has not yet been referred to the RPNGC for prosecution under the Criminal Code for misappropriation.
Image: March 2019 briefing paper recommends suspension and investigation
These NEC papers give an unprecedented look into the workings of KPPA. They strongly suggest that the government has failed to fully investigate and prosecute those accused of serious wrongdoing within KPPA.
This mirrors the lamentable situation with KPPA’s predecessor KPPA Limited. Former civil servant Kila Ai, and Australian national, Peter Nicholls OBE, have enjoyed impunity for their actions, despite serious evidence of impropriety being documented in a Public Accounts Committee report tabled with parliament.
The Backdrop
KPPA was set up by the government to maximize downstream enterprise opportunities emerging from the country’s gas and oil extraction industries.
Initially the authority conducted its business through a limited liability company, Konebada Petroleum Park Authority Limited (KPPA Limited), which came into being during 2005.
The sole shareholder of which is the former civil servant Kila Ai.
According to a Public Accounts Committee report 83% of the Authorities budget was spent on consultants without a public tender, as is required by law.
The report claims the principal beneficiary of these illegal awards was Kila Ai, KPPA’s sole shareholder, and Australian national, Peter Nicholls OBE.
Image: KPPA Limited (Source: Investment Promotion Authority and the Public Accounts Committee)
Nicholls and Ai were also at the centre of the controversial Central City project. They stand accused by the Auditor General of illegally awarding themselves high value consultancy contracts, after both men were appointed to the Central City Steering Committee.
Reports produced by the Public Accounts Committee and Auditor General contend that KPPA and Central City were marred by illegal expenditure, wastage of public moneys on luxury items, and a failure to properly document the dubious spending.
As these damning revelations came to light, KPPA Limited was put on a statutory footing through the Konebada Petroleum Park Authority Act 2008. The Limited Liability vehicle was replaced with a new statutory authority, KPPA, led by CEO Donald Valu, and Managing Director, Joel Oli.
Image: Konebada Petroleum Park Authority 2017 (Source: Investment Promotion Authority)
The bad news continued.
In a series of investigative reports, PNGi revealed that the authority still conducted business through private limited liability companies, and was entering into commercial relations with disgraced business people, such as Gudmundur Fridriksson, who has been censured in 4 x Public Accounts Committee reports, 2 x Auditor General reports, and 1 x Commission of Inquiry.
Additionally, PNGi revealed that in 2016 KPPA spent over K2.8 million on hire cars. That represents exactly half the Authorities’ total grant from government, which was K5.6 million.
Image: KPPA Car Hire Payments 2016
Then came allegations that KPPA’s CEO, Donald Valu, had potentially been defrauding the authority.
According to internal documents received by PNGi, after initially being appointed CEO on an acting basis, Valu was confirmed as CEO for a four year period, with a generous salary of K370,00 p.a.
He was being paid more than the Prime Minister.
Then Valu reportedly sued the authority for terminating his Acting status.
Valu claimed K479,258.05. Astonishingly, it appears Valu was duly paid this amount.
Valu was also paid K344,249.95 in entitlements for 2016, and K280,557.24 in travel allowances for 2016. While in 2015 Valu was reimbursed K110,491.64 for medical expenses he incurred in Manila.
Image: Payments to Donald Valu 2016
And we should not overlook the important work done by the National Research Institute on alleged land misdealings involving the KPPA.
As the controversies around KPPA accumulated, it was abolished by the NEC on 17 November 2017.
PNGi argued at the time that a burden fell on the government to ensure this decision was duly executed, and all allegations of fraud and misappropriation were thoroughly investigated.
Misappropriation and Tax Evasion Allegations
The KPPA was abolished by NEC Decision No. NG 57/2017 on 17 November.
A month later on 31 December 2017 the Department of Finance closed all trust accounts under KPPA’s control. By January 2018 KPPA had ceased all operations. It was in effect moribund.
Then on 1 February under NEC Decision No. 15, the KPPA was apparently resurrected, at least temporarily.
Image: NEC Decision 15/2018
In effect KPPA would be reinstated, with a key caveat. The Board was to be investigated.
Subsequently, a decision was made to transfer KPPA management functions to the Kumul Petroleum Holdings Ltd and its policy functions to the Department of Treasury.
According to documents dated February 2019, this directive has yet to be given a statutory footing.
A subsequent Ministerial brief dated 28 March 2019, provides a window into the ongoing KPPA scandal.
The brief’s aim is to advise Cabinet on the unlawful and unsanctioned conduct of KPPA’s CEO, Mr Donald Valu.
The NEC brief notes that the Department of Finance, through the Financial Controller, issued a set of final directives to the KPPA on 14 November 2017. They followed a number of previous requests that had evidently been ignored by KPPA.
The directive ordered that KPPA hand over its assets, and financial records, to the financial controller by 22 November 2017. The authority was instructed not to make any further financial commitments.
KPPA’s CEO, Donald Valu, challenged this directive in the national and supreme courts, losing both actions.
The brief then presents a bombshell, that echoes warnings raised by PNGi during 2017-18.
The Ministerial brief observes:
On the January 13th 2019, Finance Department filed a non-compliance civil proceedings against the CEO of KPPA, Donald Valu in the National Court for non-compliance to statutory financial instructions in accordance to PFMA and alleged misappropriation of the Petroleum Park Authority Funds totalling over K13m during the periods 2010 to 2015.
The allegations made against Valu, correspond to the key facts and analysis presented by PNGi. It includes: ‘Official misappropriation of K10,294,143.00 in his [Valu’s] capacity as the CEO of Konebada Petroleum Park Authority. Extravagant hire care payments in excess of K2,800,00.00. Payments claimed and made personally to himself totalling K1,499,000.00 without adherence to proper administrative processes’.
Official documents included in the brief’s appendices raise a number of additional issues. It is alleged that KPPA has ‘substantially undertaxed many of the senior staff and they owe the IRC very substantial sums’.
It is further claimed in these official documents that KPPA withheld K6 million in owed taxes from the IRC, and used this money to illegally cover its ballooning staff costs.
A confidential business paper prepared for the NEC in February 2019 notes that ‘the Financial Controller is now pursuing its mandated and statutory obligations to prosecute the Chief Executive Officer of Konebada Petroleum Park Authority under the PFMA Act 1995’ [Public Finances (Management) Act].
Billions in Assets
All of the above is cause for concern, in and of itself.
Public concern should heighten significantly following details included in the aforementioned business paper prepared for the NEC on 25 February 2019.
This business paper reveals that KPPA subsidiary Petroleum Park Holdings Ltd has ‘5 x Non-Conventional Hydro-Carbon Development Licenses containing approximately 282 trillion cubic feet of gas that is worth billions of US dollars in the global energy market’.
In addition the KPPA subsidiary holds ‘2 x Oil and Gas Exploration Licenses of greenfield areas whose commercial value is yet to be determined’.
Petroleum Parks Holdings Ltd has two shareholder-directors, Donald Valu and Samuel Pepena, presumably in a trusteeship arrangement.
Image: KPPA Limited Corporate Network 2017
The business paper also reveals that ‘KPPA has 1000 hectares of Greenfield land for the purpose of developing the Industrial Petro Chemical Downstream Industries. In 2017 a total of 200 hectares of land held by KPPA was declared as a special economic zone by the then Minister for Department of Lands and Physical Planning, Hon. Benny Allen under the Authority of KPPA’.
The NEC paper then goes on to note that KPPA has ‘sold or leased 10% of the 200 hectares of land declared under the special economic zone with little or no financial records of the proceeds of the land dealings (rentals, lease or sale proceeds) of all land transactions conducted so far’.
Over to You PM
So, we have a very serious ongoing situation here.
KPPA’s disgraced CEO Donald Valu is accused of misappropriating K10.3 million in a NEC brief. He is also accused of mismanaging KPPA, leading to the loss of significant public moneys, and the denial of taxation receipts to the IRC.
Were this not enough the KPPA has in its possession rights to billions in gas assets, while it is accused of selling off significant landholdings, without proper documentation. There is a significant risk that some or all of these sales may be affected by illegal dealings, given the lack of documentation which is a clear red flag.
The Prime Minister must now account to the public what he is doing in response to the advice given to him and the NEC.
Will Donald Valu be referred to the RPNGC for prosecution? Will attempts be made to recover any stolen assets, including any land illegally sold off? Have those at the centre of the previous KPPA Limited scandal been let off from further scrutiny, despite serious allegations submitted by the Public Accounts Committee?