Durand Farm: Dodgy Deals and Dashed Dreams

From Bad Beginnings

Durand Farm was initially identified by the NCDC as the preferred site for a squatter resettlement program. The resettlement program received a K1 million allocation from the National Government during May 1994.

At the time these funds were allocated, the NCDC was negotiating the farm’s purchase from a company, Vatar No 16 Pty Ltd. It was a family holding company used by Sir Hugo Berghuser MBE.

The German born Berghuser emigrated to Australia in 1958. He arrived in PNG two years later. According to seasoned PNG correspondent Rowan Callick, ‘he soon set up a base just outside Port Moresby, not far from the property where the late Errol Flynn once lived’.

Sir Hugo established a piggery, crocodile farm, and meat cannery, which faced ‘complaints about the flouting of environmental regulations’ and paying workers ‘rural minimum wages’.

The Age notes at the time of this scandal, Sir Hugo and his wife Lady Christa lived ‘in a marvellous house in the hills to the east of Port Moresby, with a tower, orchids, deer and peacocks and what are called collectibles’.

According to the Auditor General Sir Hugo offered to buy Durand Farm in early 1992 from the Agricultural Bank under a mortgagee sale. The purchase price was K150,000.

Sir Hugo’s company, Vatar No 16 Pty Ltd, paid a K15,000 deposit on an understanding that the balance of K135,000 would be paid within 7 days. According to a subsequent Ombudsman Commission inquiry, the balance was not paid. The commission claims two years later, when Sir Hugo entered into negotiations with the NCDC for the sale of Durand Farm, K135,000 was still owing.

During negotiations Sir Hugo provided a valuation. It priced Durand Farm at K950,000. In other words Durand Farm’s value had evidently increased six fold in two years.

Without obtaining an independent valuation, the Ombudsman Commission claims the NCDC agreed to pay K675,000 for Vatar No 16 Pty Ltd, in order to acquire the Durand Farm property. The Ombudsman Commission concluded the agreed price ‘was well in excess of the true market value of the company’.

The money was paid in two instalments of K317,500 and K357,500 during the first week of June 1994. According to the Ombudsman Commission this was done without Finance Minister approval, a requirement under the Public Finances (Management) Act.

The Ombudsman Commission argued the deal exhibited the key hallmarks ‘of a scam’.

So what happened to the money? The Ombudsman Commission tracked the payments.

On 2 June 1994, Kemaken Lawyers reportedly obtained a bank cheque for K317,500. Sam Kemaken was a lawyer handling the transaction both for Sir Hugo and the NCDC. That same day Mr Sam Kemaken, visited the General Manager at Indosuez Niugini Bank, Mr Serge Vatovey. Kemaken was accompanied by another individual, Mr Robert Suckling. Suckling proved to be an important player in the affair.

According to Rowan Callick the Victorian born Suckling ‘first came to PNG to sell advertisements for the Lae Courier’, before going into business himself. Callick observes ‘Mr Suckling began from a trade-store base and then, with the Papua Hotel as his flagship, built a chain of Port Moresby “discos” distinguished by their late-night licences and popularity with ladies of the night’.

At the time of the Durand Farm land deal, Robert Suckling was an NCDC Commissioner and MP. He was also a business partner of Sir Hugo.

According to the Ombudsman Commission at this 2 June 1994 visit to Indosuez Niugini Bank  ‘Messrs Kemaken and Suckling … requested Mr Vatovey’s assistance in expediting the issuing of various bank cheques so as to enable “urgent” settlement of the sale of Durand’s Farm that day’.

Three bank cheques were issued by the bank:

• K167,500 to H.E. Berghuser
• K10,000 to Kenmaken Lawyers
• K140,000 to F.C Cheah (Malaysian national, implicated in the Barnett Commission of Inquiry into the Forestry sector)

On 3 June 1994, Sir Hugo used K135,000 to pay the outstanding amount owed to the Agricultural Bank since April 1992. Some two years late.

Sam Kenmaken endorsed his K10,000 cheque and paid it into his personal account at ANZ Bank. Shortly after, he then billed the NCDC K4,500 for conveyancing work.

The second instalment of K357,000 was also paid by cheque. According to the Ombudsman Commission:

Our investigations have revealed that late in the afternoon of 7 June 1994, the second cheque was taken by Mr Suckling to the Boroko branch of the Bank of South Pacific. Sir Hugo was at the bank, waiting for the cheque. After discussions between Mr Suckling, Sir Hugo and the branch manager, the cheque was deposited into an account in the name of Sir Hugo and Lady Christina Berghuser.

In other words, Sir Hugo had purchased Durand Farm in April 1992 using Vatar No 16 Pty Ltd to hold the title. The Ombudsman Commission claims he only paid down the deposit of K15,000. The outstanding K135,000 was not paid within the stipulated seven days. Nevertheless, Sir Hugo was able to settle the amount owing over two years later, after he sold the shares in the land holding company to the NCDC. The sale price was four times higher than the agreed price of Durand Farm just two years prior.

Then when the cheques were issued, on both occasions an MP and NCDC Commissioner, Robert Suckling, was involved in distributing the funds. Suckling was also a business partner of Sir Hugo.

In effect Sir Hugo was able to turn K15,000 into K675,000 through nothing more than buying and selling a piece of paper, under conditions deemed ‘quite suspicious’ by the Ombudsman Commission.

The Ombudsman Commission concluded ‘it was administratively wrong for Mr Suckling, a commissioner of the NCDC and a member of Parliament to be closely involved in distribution of the proceeds of the sale of shares in a company. His conduct was reasonably capable of arousing suspicion as to why he was involved in the matter and what his motives were’.

Particular concern was raised over the K140,000 paid to Mr F C Cheah. At the time the Malaysian national was leading a foreign consortium bidding for a major contract to privatise Port Moresby’s water supply.  According to the Ombudsman Commission ‘Mr Suckling had, not long before, travelled to Malaysia in March-April 1994 … and been escorted to various projects by Mr F.C Cheah’s group’.

The  K140,000 paid to Mr Cheah, the Ombudsman Commission notes, was deposited into an account with the prior balance of K1,842.10. On the same day the K140,000 cheque was deposited F C Cheah withdrew K140,000 in cash. He received 4,500 K20 notes, and 5000 K10 notes.

The Ombudsman Commission observed ‘we are not aware of any legitimate reason why Mr Cheah would have withdrawn K140,000 from his account in cash … This was an extraordinary cash transaction, especially when it is viewed in the context of the irregularities surrounding the Durand’s Farm deal and the proximity of these events to the decision on who would be awarded the contract for the [Port Moresby] water project’.

The Ombudsman Commission concludes that the transactions surrounding Durand Farm were ‘irregular, questionable, and quite suspicious’, and led to ‘the waste of large amounts of public money’. This took place in an ‘environment that was ripe for corruption’.

After the sale of Vatar No. 16 Pty Ltd to the NCDC, the company’s name was changed to Port Moresby City Development Enterprises Limited. Port Moresby City Development Enterprises was subsequently deregistered on 13 May 2011. The Auditor General repeatedly reprimanded the NCDC subsidiary for failing to submit information needed for audits. It was noted by the Auditor General ‘no documents were produced to my Office in relation to deregistration’.

These lack of records, raise serious questions over how the Durand Farm land titles were subsequently managed following Port Moresby City Development Enterprises Limited’s closure.

Durand Farm Reboot with Failed Aussie Builder

In 2014 the O’Neill government announced it would revive Durand Farm as a major development site for affordable housing.

The project would be overseen by the NHC, and the NHC’s private investment arm, National Housing Estate Limited (NHEL). Both the NHC and NHEL have been deeply impacted by systemic and systematic corruption.

Initially it was announced that construction of the housing project would be entrusted to a joint-venture between China State Construction Engineering Corporation Ltd and Niule No.16 Limited. According to news reports the project would involve 40,000 houses. The joint-venture partners promised a US$500 million investment to undertake construction activity.

The joint-venture quickly prompted public criticism. China State Construction Engineering Corporation Ltd, for instance, had been blacklisted by the World Bank for collusion. The other joint-venture partner, Nieule No.16, had equally questionable credentials. It was part-owned by Henry Vue Henry (51%), a PNG lawyer, and Kamran Samimi (49%) a failed builder from Australia.

Samimi’s Queensland building licence was cancelled in 2014. The Queensland Civil and Administrative Tribunal found Mr Samimi had engaged in ‘financial brinkmanship’. Samimi attempted to acquire a builder’s licence in NSW. It was refused on grounds that Samimi was not ‘a fit and proper person to hold a contractor licence’.

Nieule No.16 alleges that the NHC and NHEL subsequently entered into agreements with other companies to conduct the work at Durand Farm. Litigation ensued. The claim was dismissed by the National Court. So closed another regrettable chapter in Durand Farm’s story.

Marape Government Alleges Serious Public Finance Violations

Despite this initial setback the NHC pushed on. In November 2014, it released a masterplan for the housing development at Durand Farm.

Housing Minister Paul Isikiel informed a press conference: ‘The Durand Farm will deliver 2500 houses annually per contractor, or if we engage 10 contractors simultaneously then it’s multiplied by 10 until we deliver 40,000 new homes to our population by 2020’.

K7 million was assigned by the government for procuring civil works equipment and subdividing the land.

However, it appears by 2016 not a single house had been built.

Prime Minister O’Neill promised action. And it appears from a recent Ministerial statement a swathe of new developers were contracted to realise this ambition.

However, by 2019 it appears nothing substantive had changed. In December 2019 Housing Minister, Justin Tkatchenko, announced ‘basically the project has achieved nothing, which I was given this Ministry, the Prime Minister James Marape told me to clean up the NHC once and for all’.

Tkatchenko claims that following a review by the State Solicitor it was discovered Durand Farm development contracts were not publicly tendered, as required under the Public Finances (Management) Act. It was concluded:

there is no evidence of the procurement following these strict statutory requirements, thus, no public tenders were called to initiate the process. Consequently all engagement of contractors are therefore, null and void.

Five companies were identified, for allegedly securing contracts outside the required tender process:

• Shandong Yinjang Industry PNG Ltd
• Haus Man Building Solutions Ltd
• PNG Metal Fabrication Ltd
• Kwik Built
• Zenith Construction

According to news reports, on the basis of the State Solicitor’s advice the Housing Minister elected to cancel these contracts. This engendered a quick and outraged response from Haus Man Building Solutions.

Nevertheless, this cannot overshadow the fact that the State Solicitor has made an extremely serious allegation. Major development contracts, it is claimed, were awarded by the NHC to a number of companies, outside the Public Finances Management Act 1995 and National Procurement Act 2017. These laws were set up to protect the public purse from a range of predatory practices. Any potential violation is a very serious matter.

This prompts the question of who stands behind the benefiting companies?

The Corporate Players Behind the Alleged Illegal Contracts

PNGi has examined the corporate filings of each company to map the ownership structure.

Kwik Built

Kwik Built is a registered name, for a business supplying building materials. The business name owner is PNG Resources Corporation Ltd.

Up until 18 June 2015, the owner of PNG Resources Corporation was Labi Alex Kamiak Amaiu.

He held all the shares in the company from 3 November 2003 until 18 June 2015. He was also Director during this period.

The shares were transferred to Junia Komboi on 18 June 2015. Junia then transferred the shares less than a year later to Veronica Kamiak. She is the current owner. Veronica Kamiak shares a registered address, and registered postal address with Labi Amaiu. They share a common name. Ms Kamiak also took over as Director on 20 August 2015.

Since 2017 Labi Amaiu has been Executive Director of PNG Resources Corporation.

Previously Amaiu served as MP for Moresby North East Open from 2012 until 2017, where Durand Farm is situated. He also served as Vice Minister for Sports and Pacific Games.

The media reported in 2019 that Amaiu had been committed to trial over allegations he illegally transferred 301 titles at Durand Farm, worth K24 million, to PNG Resources Corporation Limited. He has also been questioned by police over K4 million in misappropriated funds.

Previously Labi Amaiu was accused of intervening in a land dispute involving Macata Enterprises, a family company owned by his father Tom Amaiu, a former MP himself, who had previously been jailed for theft. Labi Amaiu denied any involvement in the land deal.

Shandong Yinjiang Industry PNG Ltd

Shandong Yinjiang Industry Limited is a foreign enterprise. Its Resident Agent is Si Yuan Zhan, its Director is Rongtian Xu. The company’s registered address is shared with dozens of other individuals and companies.

It is alleged by the Housing Minister that one of the five companies which had their contracts cancelled, was using the lethal material asbestos in constructed houses.

Minister Tkatchenko stated the company was Chinese owned. Only one of the five companies is Chinese owned, Shandong Yinjiang Industry. Therefore, it would appear this extremely serious allegation, which if true could have killed homeowners, pertains to this company.

PNG Metal Fabrication Ltd

There is no company record for PNG Metal Fabrication. There is a record for a company by the name of PNG Metal Fabricators. Its shares are owned by a number of companies:

• Sak Investments Limited (75%): Sak Investments Limited is jointly owned by Dian Roo (33%), Leanne Roo (33%) and Tindiwama Maua Kepore (33%).
• Kurada No. 69 Limited (10%): Kurada is jointed owned by former Judge Don Sawong (30%), Adu Sawong (30%), Jessica Sawong (10%), Ranga Sawong (10%), Joel Sawong (10%), and Kathleen Sawong (10%
• Moson Enterprises Ltd (10%): Moson Enterprises is jointly owned by Pelik Sapul (50%), and Mitroy Sapul (50%)
• Huon Brothers Limited (5%): Huon is 100% owned by David Roo.

PNG Metal Fabricators, according to media reports, won an additional contracts with NHEL. A 2015 report on EMTV claims PNG Metal Fabricators was contracted to renovate units at Manu Autoport in Port Moresby.

It is concerning, however, the company is alleged to have won a significant contract for Durand Farm, in violation of the Public Finance (Management) Act, given that one of its ultimate shareholders, and Directors, was at the time a Supreme Court judge, Don Sawong (Sawong retired on 31 March 2017). Sawong is well versed on essential tender requirements.

Haus man Building Solutions Ltd

Haus Man Building Solutions Limited was incorporated on 14 February 2014. Its shareholders include Australian nationals, Richard and Cecille McGuinness (50%), Colin Loi Vaname (30%), Fijian national Ravinesh Prasad (10%), and Mo – Ha Limited (10%).

Mo – Ha Limited is a company based in the Southern Highlands. It is owned by Sally Pate.

Haus Man Building Solutions has obtained foreign certification to operate in PNG’s construction industry.

Richard McGuinness accuses the Housing Minister of not following due process when cancelling his company’s contract. Haus Man Building Solutions claimed it has ‘followed the tender process set by NHC management and board team in 2015’.

NHC is not, however, at liberty to set tender processes. It must follow the Public Finance (Management) Act, and associated financial instructions.

It is unclear whether Haus Man Building Solutions will be seeking redress.

Zenith Construction

There is no record at the Investment Promotion Authority for a company Zenith Construction. The closest match is Zenith Limited, which shares an address with a business listing for Zenith Construction. Zenith Limited is owned by Indian nationals Salim Chamadia (90%) and Rajsekhar Patnaik (10%).

Salim Chamadia is the proprietor of Big Rooster.

Implementing the PM's Directive

Tender rules and requirements set out in law and associated financial instructions are set up to guard the public purse from potential forms of illicit conduct such as misappropriation, bribery and collusion.

When a serious breach is uncovered of these legal requirements, a rigorous investigation is required to ensure such conduct did not occur.

In the case of the Durand Farm contracts the need for such an investigation is heightened by two additional factors. The NHC and the NHEL are organisations systemically impacted by corruption at the most senior level. Second, some of the contracts awarded went to organisations in which senior public figures had an interest, and thus have a higher risk profile.

Prime Minister Marape has ordered a clean up of the NHC and associated projects. Further investigating a number of major contracts reportedly awarded to companies outside stipulated tendering process, two of which were tied to senior state officials, would appear well within the spirit of this directive.