Tasion Group Chief Branded Corrupt Fraudster by Deputy Chief Justice

A Corrupt and Fraudulent Deal

According to the agreed facts, the NBC required 27 Toyota branded motor vehicles. This included 23 four-wheel 5^th Element Hiluxs. Later the total order was increased to 30 vehicles.

In or around 2007 Freeway Motors bid to supply the vehicles. It quoted a price of K3,126,845.

Judge Kandakasi explains:

Mr. Tasion made representations and gave warranties that it is a bona fide car dealer, had the necessary capacity and capability to sell and supply the 27 Vehicles at the specified locations for the indicated price. Based on these representations, NBC recommended to CSTB [Central Supply and Tender Board] to award the contract to Freeway Motors. The CSTB issued a Certificate of Inexpediency and all relevant and required statutory approvals authorizing the NBC to procure the 27 Vehicles from Freeway Motors for the agreed price of K3, 126, 845.00. [Italics added]

It  has been well established in the courts, and clearly explained in the Financial Instructions issued by the Department of Finance, Certificates of Inexpediency can only be issued in response to an emergency situation. They cannot be used to circumvent public tender requirements outside of tightly circumscribed emergency situations. And they cannot be issued retrospectively, to validate an agreement already reached with a supplier.

There was no emergency in this instance. And the CSTB issued the certificate of inexpediency after a deal had already been reached with Freeway Motors. The original agreement was in breached of the Public Finances (Management) Act requirements.

Judge Kandakasi also claims the original agreement was defined by fraud: ‘I find that, Freeway Motors, made that representation when it knew very well or had reason to know that it was in no position to supply at the agreed locations the 30 Vehicles and within the agreed price and time’.

The NBC paid the full amount in advance. Judge Kandakasi states these payment was made even before a formal contract was in place: ‘…the payment of the initial contract price and the additional K1.5 million represented a substantial amount of money going out of the public purse well before an awarding of the original Contract’.

Freeway Motors had 12 months to deliver the vehicles.

Before any vehicles were delivered Sam Tasion approached the Central Supply and Tender Board Chairman, Brian Kimmins, to approve an additional K1.5 Million in demurrage [shipping related fees] and storage charges. Kimmins unlawfully signed off on the proposal and the NBC paid a further K1.5 million in taxpayers money.

Justice Kandakasi found this was a fraudulent claim. He observed: ‘I find no case has been made out for a finding that the Vehicles were imported and stored in any yard by Freeway Motors to form the foundation for its demurrage and storage costs claim of K1.5 million’.

Now Freeway Motors had K4,626, 845, of which at least K1.5 million was based on a fraudulent claim according to Judge Kandakasi. The remaining amount was secured through what the courts describe as a fraudulent sales pitch.

Initially, Freeway Motors delivered only four vehicles out of the 27 within the required 12 month period.

Then in 2009 Freeway Motors supplied to various NBC centres across PNG 13 Wingle vehicles, a new Chinese branded vehicle that has been slated in the international automotive press for its poor quality (its only saving grace being its cheap price tag!).

Kandakasi J observes ‘ according to the NBC’s submissions (not disputed by Freeway Motors) [the Wingle vehicles] were not fit for the purpose as they broke down within 6 months of their deliveries’.

Judge Kandakasi notes no agreement was in place to vary the contract. And there was no compliance with Public Finances (Management) Act 1995, which is mandatory for both contracting parties.

In a damning conclusion the government and Freeway Motors are both accused of corruption:

In these circumstances, I find the original Contract was facilitated and arrived at by fraud, misrepresentation, dishonesty and illegality for breach of the requirements, the intents and the whole purpose of the PFMA by Freeway Motors through its managing director and sole shareholder Mr. Tasion with the help of the then chairman of the CSTB. These actions constitute a serious and clear corrupt deal at its worst that falls nothing short of a fraud on the statute, namely the PFMA and its intention and purpose, the NBC, the State and the people of PNG. I also find that, those who purported to represent the NBC at the relevant time facilitated the commission of these illegal and corrupt acts by making the payments instead of refusing to pay. They had more reason than not, to refuse to make the payments, when there was no evidence of a written contract at the relevant time and lack of evidence of the parties’ agreement in terms of the original Contract and the subsequent alleged variation requiring the NBC to pay the additional K1.5 million. This factor should however, be of no relieve to Freeway Motors which initiated and committed the illegal and corrupt acts. Given that, Freeway Motors cannot gain from its own illegal and corrupt acts. Proceeding on this basis, the answers to issues 5 and 6 are in the affirmative. That is to say the Contract in this case, both in the original allegedly varied versions were void ab initio or were null and void from the very beginning. This in turn renders the payment of the initial K3, 126, 845.00 in 2007 and the further K1.5 million fraudulent.

Judge Kandakasi adds: ‘There can be no doubt that Freeway Motors … made use of the K4, 626,845.00 for its own gain. Meanwhile, NBC and hence the State did not get their value for money for 9 years and were thus deprived of the full use of those funds and go without the vehicles it contracted for’.

As a result he ordered Freeway Motors to reimburse the NBC in the amount of K3,095, 295.00 with 8% interest from the date of the issue of the writ.

Other Notable Mentions of Freeway Motors

The NBC case is not the only recorded instance of Freeway Motors coming onto the radar of agencies responsible for overseeing public integrity.

In 2000 a special investigative report was produced for the NCDC by senior police officers Carle De Silva and Sisira Nanayakkara, along with a consultant, George Pera. It inquired into a range of irregular transactions involving the NCDC, one of which included Freeway Motors.

During 1999 the NCDC purchased a Hilux Double Cab from Freeway Motors. According to the inquiry report the invoice was issued to Justin and Frank of the NCDC.

In February 1999, the NCDC paid K23,000 through cheque No.00109335. The inquiry notes: ‘Surprisingly the payment cheque had been received and identified by Mr. Justin Tkatchenko instead of it being received by the Payee Freeway Motors and identified by an officer of the Accounts Department in NCDC’.

It is also claimed in the NCDC inquiry report that on 5 February another cheque was issued in the same amount to Freeway Motors. The inquiry observes, ‘the relevant payment documents relating to the second payment are either missing or destroyed’.

The special inquiry concluded:

From the investigation conducted so far it is abundantly clear to us that a vehicle had been transacted from Freeway Motors for which two cheques for the similar amount of K23,000 had been raised to Freeway Motors upon invoices numbers 0484, ______ submitted by one Mr. Tasion, General Manager, Freeway Motors…In the said Freeway Motors invoice we find two Christian names (Justin and Frank) unless otherwise rebutted we regard these two names as Justin Tkatchenko and Frank Makanuey. To support our claim we find that Mr. J. Tkatchenko had received the cheque in question where as the actual recipient should be the Payee that is Freeway Motors. It is for J. Tkatchenko to explain as to why he involved himself in this transaction. He had also signed the Goods and Services Order and the least we could expect from him is verification of the purpose of the purchase of the vehicle details. Another significant discrepancy which may have to be explained by J. Tkatchenko is that the invoice of the vehicle had been received long before the Goods and Services Order was raised. A breach of practice and procedures relative to purchase of vehicles either breached or bypassed for which reason alone we find the entire transaction smacking of suspicion

It adds ‘to ascertain the facts surrounding this mysterious purchase and the possible second payment, the following matters have to be attended by the Police as our effort to obtain the required particulars from Freeway Motors have proved futile …We have undertaken only a fact finding inquiry and the Police may be in a position to delve further and ascertain the location of the vehicle or if it was not purchased at all and the culprits who are responsible for what we believe is a ghost transaction’.

Freeway Motors was also implicated in a series of transactions that came under scrutiny during the Commission of Inquiry into the Defence Force Retirement Benefit Fund (DFRBF).

While it has been impossible to obtain a copy of the final inquiry report, transcripts from the proceeding have been located by PNGi. They provide an insight into the core allegations:

A Red Flagged Land Transaction

During PNGi’s investigation into Mr Tasion, a National Court case was uncovered centring on a state lease over Allotment 5, section 429, Hohola, NCD.

According to the courts, in 2009 a state lease over the land was awarded to Europac Rentals without public tender. This occurred shortly after the lease was unlawfully forfeited from the original leaseholder Eda Mutual (PNG) Pty Ltd.

Europac Rentals is part of the Tasion Group. The business name itself is registered to Teddy Tasion. Teddy Tasion is  Chief Operating Officer of the Tasion Group.

The Court observes:

On 22 July 2009 Teddy Tasion applied to the Lands Department and the Minister for Lands to grant a State Lease to him trading as Europa Cars on Allotment 5, Section 429, Hohola. After the forfeiture notice was gazetted in The National Gazette [forfeiting the land from the previous owner], The Minister for Lands, through his delegate, (the First Respondent), then issued an Exemption Notice, allowing Europa Cars to be the only applicant for the grant of State Lease of the subject property. Europa’s application went before the National Land Board and a Business (Commercial) State Lease was granted to it over Allotment 5, Section 429, Hohola. This was gazetted on 12 November, 2009.

The Court ruled that the forfeiture of the land, upon which this irregular award had been premised was unlawful. Eda Mutual (PNG) Pty Ltd had not been given notice, nor had the mortgagor Nambawan Super Limited.

It is in itself a red flag the Europac Rentals obtained a state lease, without public tender, after the lease was illegally forfeited from the previous owner.

A second red flag arises when we look at some of the Tasion family’s close business affiliations with senior Lands Department personnel.

On 26 May 2009, shortly before Teddy Tasion and Europac Rentals apply for the state lease over the Allotment 5, section 429, Hohola, a company is incorporated XYZ Holdings.

Its shareholders include:

• Sam Tasion
• Dirk Tasion
• Romilly Kila Pat
• Ben Samson
• Fred Morove and
• Ian Kundin

Sam Tasion is Head of the Tasion Group.

Notable among the other shareholders are several senior Department of Lands officials.

• Romilly Kila Pat: Deputy Secretary of the Department of Lands and Physical Planning
• Ben Samson: Deputy Registrar of Titles, Department of Lands and Physical Planning
• Ian Kundin: Manager, Legal Services, Department of Lands and Physical Planning

While this is not direct evidence of wrongdoing, the irregular and unlawful conditions surrounding the lease award, and the close affiliations between the Tasion Group and senior lands officials, are red flags. This signals the need for an investigation into the propriety of this major land deal.

Over to you RPNGC

Owing to lack of capacity, lack of political will, and lack of resources, the RPNGC investigates few of the major scandals that have been reported on in the media, Commissions of Inquiry and public audits.

However, when the Deputy Chief Justice states in no uncertain terms that a senior businessman and a senior public official have been involved in fraud and corruption, surely this resounding alarm is loud enough to prompt action.

The Police Minister Bryan Kramer has promised a crack-down on corruption. He will want low hanging fruit for some quick victories.

These grapes appear to be dangling close to the ground.