Stealing the Public Wealth: Ghost Contracts

Anyone who has witnessed recurrent budget expenditure at a provincial or indeed national level, knows, that like a sieve, it has many holes which money falls through improperly to the benefit of public officials, politicians and their business allies.

When an administration spends large sums on car hire for example – given there is no tangible deliverable – these deals are ripe for ghost contracts, where nothing takes place except for payment. Even where there are tangible deliverables, such as road contracts, the work can be certified, even if entirely or partially incomplete, and payment made.

So, on the one hand we have seen in the investigations and reports on PNGi, how public funds are lost on service and goods contracts awarded at grossly inflated prices, with benefits shared out between conspirators, and on the other there are a whole host of frauds where nothing is delivered except a substantial reward to the criminal parties. Between both streams of misappropriation, the nation haemorrhages its taxation revenues, while a significant portion is never even generated, owing to all sorts of corporate fraud, such as transfer pricing and the fraudulent reduction in the price of public assets such as state land.

Crime pays, how elites seize the national wealth

A case in point is The State v Paul Guli, Gogumi Kimin and Andrew Kama Alake [2017] N6839.

On 14 August 2017, Paul Guli, Gogumi Kimin and Andrew Kama Alake were convicted for misappropriation from District Service Improvement Program Funds contrary to S.383A(1) of the Criminal Code Act. According to Justice Salika:

The District Treasury became a milking cow for public servants and their cronies. If not arrested this trend will continue. Proper mechanisms need to be worked out or put in place sooner as to how public funds are to be kept safe in the Districts. There are so many false claims rendered for payments in the Districts and the District public servants are all joining in on this K10 million “cake”

Justice Salika is not the only person to highlight the failings of the District and Provincial Service Improvement Programs. They have attracted plenty of public criticism* for being political slush funds which often seem to end up being stolen or misused with little accountability. 

The two programs put K10 million into each District Treasury and a further K5 million into each Province annually. 

In the current case, the accused Paul Guli and Gogumi Kimin were the District Accountant and District Administrator respectively for the Anglimp/South Waghi District in the Western Highlands Province. Andrew Kama Alake was a community representative on the Joint District Planning and Budget Priority Committee.

Between July and September 2010, various claims were submitted by different parties, including the three accused, to the District Office for vehicle hire, road maintenance, travel allowances and other services, totalling K543,575.

The claims were signed and approved by Guli and Kimin and payment made from the Anglimp/South Waghi District Services Improvement Program without approval from the Joint District Planning and Budget Priority Committee.

In total Andrew Kama Alake received K165,400 from his fraudulent claims and dishonestly applied the money to his own use and the use of others. The funds were not used for the intended purposes.

Paul Guli received K2,000 from his unlawfully claim and Gogumi Kimin K107,000, which they each dishonestly applied to their own use and the use of others.

The payments were approved by Paul Guli and Gogumi Kimin in breach of the Public Finances (Management) Act.

The crimes were uncovered and reported by a joint investigation team of police fraud investigators, Auditor General officers and Department of Finance inspectors. This comes after the district administer had been under fire for years over allegations of misappropriation.

The court found the claims for payment made by the three defendants were all false claims and they were not supported by proper documentation.

Gogumi Kimin claimed that the K105,000 payment he received was so he could remunerate his own people who worked on road maintenance projects. Although Kimin claimed he got the money and paid it to workers the court noted he called no one to support his story. There were also no proper labour lists to show who did what and when. There was no evidence from the Department of Works the maintenance was ever done.

The court also found “no good explanation” for the further K2,000 received by Kimin as an overtime payment.

Andrew Kama Alake received K165,400 in total. He said the monies were for hire of a vehicle by the District Administration for over a year and for road maintenance work which Kama Alake claims he did himself.

With respect to the car hire the Court noted:

No other witness Paul Guli or Gogumi Kimin attest to his claim. In fact
they were never asked if it was true that the District Office hired his car for
more than a year. To me it is mind boggling as to how a District office, a
government office can hire a motor vehicle for over a year. Gogumi Kimin
never gave any evidence to support Andrew Kama’s story. The question then is did the District hire his vehicle? There is no other evidence that the District
Office hired his motor vehicle.

Similar doubt was cast over Alake’s claim over road maintenance work. According to the court, Kama Alake did not call any witnesses to support his story and had no supporting documentation or other evidence to support his claims and his co-accused also gave no evidence to support his story.

The judge concluded:

I am sure the three men were acting dishonestly because I see no reason why a men of their intelligence, experience and positions as the District Accountant, the District Administrator, the Deputy Chairman of JDP and BPC would not have appreciated, as right minded people would have done, that what they were doing was dishonest and wrongful conduct. Accordingly, I am satisfied beyond reasonable doubt that their actions and conduct were dishonest and find them each guilty on the charge of misappropriation.

Read the full National Court decision.

On 17 August 2017 the three men were sentenced. Gogumi Kimin and Andrew Kama Alake each received a term of 5 years imprisonment and Paul Guli, as his culpability was deemed less, 2 years imprisonment.

Read the full sentencing decision.

It ought to be noted this was not the first time that District Administrator Gogumi Kimin and affiliates in the district administration were accused of corrupt conduct. In 2011, former Western Highlands deputy premier and Waghi community leader Yuants Kaman alleged, according to The National, that ‘public funds have been personally used by district administrator Kimin Gokumi, joint district planning and budget priorities committee (JDP&BPC) deputy chairman Kama Alake and his wife, the district treasurer and other staff‘.

This would appear to be the tip of a very big iceberg.

* Unfortunately hyper-links to the Post Courier newspaper are not accessible to readers in PNG. This is a general restriction imposed by the Post Courier which doesn’t allow PNG residents online access to the publication.