William Duma: From Manu Manu to Horizon Oil

Manu Manu

In 2017 the then Minister for State Enterprises, William Duma, became embroiled in the Manu Manu land scandal.

Prime Minister O’Neill promised a Commission of Inquiry (CoI), which would have the powers to thoroughly investigate the matter.

With an unstable governing coalition, O’Neill mysteriously claimed he was blocked legally from convening a CoI. Instead he launched an administrative inquiry, led by John Griffin QC.

The administrative inquiry could not subpoena (compel) witnesses or documents. In effect, it had to ask parties accused of serious criminal misconduct whether they would voluntarily hand over documents that could potentially incriminate them.

Griffin QC lamented his lack of power:

It must be understood that the Administrative Inquiry did not have the powers of investigation of a Commission of Inquiry. As a result, the Inquiry could not subpoena witnesses or documents, and it could not examine persons on oath. In essence, the only material put before the Inquiry were official documents and such departmental documents as the departments chose to give to the Inquiry. [Italics added]

Perhaps not surprisingly, the star witness in the case, Christopher Polos – Duma’s alleged brother in law – refused to given evidence.

Griffin QC observed:

Mr Polos was within his rights in taking that stance because, as stated above, the Administrative Inquiry had no power to compel attendance or cooperation. The non-cooperation of Mr Polos, as well as the lack of its powers to inquire into the affairs of Kurkuramb Estates Ltd were severely limiting features in the investigative capacity of the Administrative Inquiry in this matter.

Even against this hostile backdrop the administrative inquiry was able to deliver findings that placed Duma in a damning light, in part owing to a cache of internal documents the inquiry had been able to access.

The findings centred on Portion 406, a 847.25  hectare plot of land 75 kilometers west of Port Moresby along the Hiritano Highway.

Griffin QC found that Portion 406 had been suddenly annexed by Defence Minister Fabian Pok in October 2015 under irregular conditions, to a site being proposed for the Lancron naval base relocation.

Several months prior to this annexation, on 30 July 2015, a state lease over Portion 406 was acquired by Kurkuramb Estates Limited, ‘paying no more than application fees of K650’.

Mysteriously the records relating to purchase have gone missing.

On 30 July 2015 the land was valued at K99 per hectare or K84,420 in total.

Less than six months later the land value sky-rocketed. A Valuer General’s office valuation of portion 406 dated 3 November 2015, stated the land’s value evidently leapt 555 times to K55,000 per hectare or K46.6 million in total.

It ought to be noted, valuations are based on current market value, rather than potential market value in the future.

Put simply, 3 November 2015 was a day when Kurkuramb Estate’s sole shareholder learnt that their humble K84,420 asset, acquired for K650, was now worth K46.6 million.

But who is the mysterious owner of this land whose investment just rose 555 times in value over three months?

Kurkuramb Estates’ office address and postal address, were the home and postal address of William Duma who was Minister for Transport up until 11 January 2016, when he was made Minister for State Enterprises. Duma intimated to the inquiry that a rogue element used these addresses without his knowledge.

Kurkuramb’s sole shareholder and director, Christopher Polos, was said to be Duma’s brother-in-law.

The inquiry reports: ‘On 30 August 2017, he was asked whether it was the case that Christopher Polos was the biological brother of his wife. Mr Duma answered: “Absolutely”’.

He added: ‘There is nothing wrong with having relatives and as far as I know this fellow wanted to develop that land … Everything was above board, even the process of compulsory acquisition’.

Then in a strange twist, on 29 September 2017 Duma informed the inquiry: ‘I have just found out that Christopher Polos — that is why I wanted to — I will be writing to you. I found out after my meeting with you, the last time I appeared before this tribunal, I found out that Christopher Polos is not my wife’s younger brother … Mr Duma reaffirmed that he did not know Christopher Polos who, he said, lives in North Solomons’.

Mysteriously though this resident of Bougainville, Polos, knew William Duma’s PO Box and registered address, and used them when registering Kurkuramb Estates.

A contract of sale was reached with Kurkuramb Estates on 11 December 2015. The Independent State of Papua New Guinea would pay K46.6 million on behalf of the PNGDF.

On 14 October 2016, state enterprise, Kumul Consolidated Holdings formally agreed to pay the vastly inflated sum on behalf of the PNGDF, in return for PNGDF land at Fairfax Harbour.

There was one problem with the deal struck. Kurkuramb Estates failed to affix its corporate seal to the Memorandum of Agreement.

Strangely, Kumul’s Managing Director, Garry Hersey, did not alert Christopher Polos, Kurkuramb Estate’s sole shareholder and director. Instead he emailed the State Enterprises Minister, William Duma, noting that the seal needed to be brought in.

An email from Kumul’s Corporate Secretary was forwarded by Garry Hersey to William Duma. It stated ‘Further to text William Funds gone but could they come on with the seal tomorrow please. Are you going to Hagen this weekend per chance’.

According to evidence in the administrative report, Mr Hersey issued a direction to relevant personnel for all electronic files relating to the Lancron Naval Base and Portion 406 to be deleted, and for all physical files in the possession of those parties to be handed to him. Some were however saved and given to the administrative inquiry.

Griffin QC concluded the Administrative Inquiry, noting:

There are features of the transactions that make it obvious that manipulation and dishonesty were definitely involved. Features such as the fact that the Portion 406 purchase was not approved by the Defence Council and that there was no feasibility study supporting it, and that it appears to result in the Defence Department having far more land than it needs at Manu Manu, strongly support the proposition that the compulsory acquisition of land recently granted to Kurkuramb Estates Ltd was contrived. The fact that the valuation was so far in excess of the true value suggests that the valuation was fraudulently high. The fact that the Lands Department files disappeared strongly supports the proposition that there was corruption involved.

He adds:

It is to be recalled that, in June 2015, Kurkuramb was granted Portion 406 paying no more than application fees of K650. Approximately three months later, the State commenced the process of compulsorily acquiring the interest and agreed to pay the company K46.6 million by way of compensation. Any conclusion that that occurred as a result of mere luck strains credulity. Then one goes back to the further fact that a prerequisite to the success of the transaction was apparent pressure on the government exerted by the Defence Department to acquire Portion 406 for the purposes of relocating military and naval installations in circumstances in which there was no qualified opinion to support the appropriateness of the land for that purpose.

The RPNGC in notable contrast ‘recommended that the matter had no merit for further investigations and that it be closed’.

Paga Hill

The facts of Manu Manu echo on a larger scale a previous land transaction involving William Duma, when he was Minister for Petroleum and Energy.

This lesser known deal centres on harbour front land that now forms part of the Paga Hill Estate spearheaded by the Iceland-Australian businessman Gudmundur Fridriksson.

On 27 March 2009 the Department of Lands issued a notice to show cause why leases over the land at Paga Hill should not be forfeited from its then owner Noko No. 96. This notice was posted to Noko No. 96.

Before the forfeiture was publicly gazetted, a company fully owned by William Duma, Kopana Investments, submitted an application to acquire state leases over the subject land on 27 April 2009.

Forfeiture of the land was publicly gazetted several months later on 3 September 2009. It is unclear how Duma learnt this land may soon become available for lease.

On 14 September 2009 the Minister for Lands exempted the portions from public advertisement. On 19 September 2009 the Land Board recommended the lease be granted to Kopana Investments. On 25 November the relevant states leases were awarded to Kopana Investments.

The Supreme Court concluded there was an

exemption of the land from advertisement and granting of the leases to Kopana, a company owned and controlled by a person [Duma] who appears to have been a ministerial colleague of the Minister [Temu] in whose name these various decisions were made. When it is considered that this sequence of events occurred in less than eight months and that Kopana’s application for new leases was made well before the leases were forfeited from Noko, we agree with the primary judge that there would appear to be reasonable grounds for suspicion

At the time this land deal occurred, the Paga Hill Development Company Limited – the lead corporate vehicle for the Paga Hill Estate – was seeking approval to undertake a major property development on adjacent land. The development masterplan showed that the land acquired by Duma in 2009 would be needed for the luxury development.

This point was confirmed by a high level PHDC executive. They state that Kopana’s land holding at Paga Hill borders the proposed Paga Hill Estate development. Its incorporation in the project, the senior management team believes, is essential to the proposed K3 billion venture.

During June 2015, Kopana Investments and PHDC allegedly entered into a Cooperation Agreement. Under the agreement, Kopana Investments would release its land holding to the project, in return for net equity in the development, once completed

The PHDC executive contends the precise split of equity that will be awarded to Kopana Investments for its landed contribution to the property venture will be agreed at a later date, once the development is complete, and all liabilities met.

If the facts presented by the Supreme Court and the PHDC executive are accurate, it would appear William Duma through Kopana Investments acquired land forfeited from previous owners. Kopana applied for this land before the forfeiture had been publicly gazetted, raising questions over how Duma knew this land was available for acquisition.

At the time, it  was in proximity to a major property development which was declared a project of national significance by the  government.

The land was acquired by Duma’s company without a public tender. The Lands Minister instead exempted it from advertisement before granting the portions to his colleague, William Duma. Because of its proximity to a major development the value of this land was likely to increase significantly. 

The facts of this case, as the Supreme Court note, raise serious suspicions. They also mimic some of the core features documented in the Manu Manu Administrative Inquiry.

Horizon Oil

US Businessman and close friend of the Somare family, Philip Doehrman, confessed to Singaporean authorities he would keep a contingency fund to bribe PNG officials who put roadblocks in the way of big-ticket business deals:

[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.

The allegations made in the AFR centre upon such a scenario. The AFR findings are based on a cache of leaked documents including ‘thousands of emails, faxes, letters and legal briefs’.

These leaked documents suggest Australian listed company Horizon Oil may have solicited a bribe in order to remove a roadblock to its exploration license erected by a senior PNG official, allegedly William Duma.

The cache reveals the precarious way international companies navigate PNG’s political world, walking a tightrope between legitimate and illegitimate conduct. The AFR reports:

The files document … the narrow line Horizon was already walking in PNG, with a seemingly endless list of paid political consultants and community affairs managers, who were chasing rumours about shifting power structures, seeking “per diems” for provincial staff and arranging drinks with the then prime minister Sir Michael Somare and his daughter Betha at Port Moresby’s Airways Hotel.

Horizon hired former Petroleum Minister, Sir Moi Avei, as an adviser to the board, despite warnings  he himself had been ‘implicated in some dubious licence deals etc’. Additionally ‘Sir Moi was found guilty in May 2007 on three counts of “misconduct in office” after depositing $110,000 of funds earmarked for rural infrastructure projects into his own bank account’.

Sir Moi Avei advised ‘I’ve been helping Minister Duma out for the past 6 weeks because the LNG project is in my backyard. You know how the system works “you scratch my back and I’ll scratch yours”’.

Sir Moi warned Horizon in 2009, Duma was up to something: ‘With regards to the minister [Duma] I can sense he is up to something. He did call me two weeks ago but somehow we have yet to meet in person. I’m still chasing him’.

Then the ‘something’ became clear.

According to the AFR, ‘Horizon, which has a market value of $156 million, found itself under pressure in PNG in 2010 when then petroleum minister Duma deemed it to have breached the conditions of its [gas exploration] licence and threatened to revoke it’.

A Chief Executive at Horizon Oil noted: ‘I hesitate to put this in an email but it smells like someone is setting the scene for a handout for a problem that doesn’t exist’.

Duma as Petroleum Minister and Horizon Oil were locked in a court battle, as the former opened up the license to other bidders.

Horizon Oil was looking to hold its ground, arguing it had done nothing wrong, and would not be extorted through bully boy tactics.

Then it abruptly folded.

Horizon Oil wrote a grovelling letter to Duma ‘Minister, we very much regret that this issue [the revoked licence] has led to the current situation. As always, we remain open to any suggestion from you as how the current tension might be defused’.

Lawyers advising Horizon remarked ‘The bad guys want 30%!!! Tell em they’re dreaming’.  This appears to reference a bribe or financial inducement to remove existing legal roadblocks.

However, Horizon was in no position to negotiate. They had bet their company’s future on making it in PNG. If this failed, the company failed. The AFR reports: ‘unlike the big diversified players, Horizon couldn’t simply threaten to walk away. Its big bet was in PNG.

The AFR continues: ‘By March 2011 the parties had settled their legal case and Horizon‘s stake had indeed been reduced to 70 per cent in the new licence, PRL 21. A local oil and gas company, Dabajodi International Energy (now Kina Petroleum), received 20 per cent, while a hastily restructured shell company, Elevala Energy, received the other 10 per cent’.

In a later article the AFR explains the settlement in greater detail: ‘The message got through and by March 2011, a sealed settlement had been negotiated and approved by the court. Horizon would keep 70 per cent of PRL5 (now known as PRL21), and the minister would award the other 30 per cent at his discretion. From the minister’s discretion a 10 per cent stake in PRL21 would be given to the shell company Elevala Energy Ltd, a company without the experience or capital to develop such a complex asset and whose sole shareholder, Simon Ketan, had close personal and professional links to the minister’.

According to the AFR, ‘PNG lawyer Simon Ketan became the sole director and shareholder of Elevala just four days before the licence was granted’.

‘Mr Duma confirmed he knew Mr Ketan and said they worked at the same law firm 15 years ago’, the AFR observes. Duma claims: ‘I still do not understand the basis for the assertion that Mr Ketan and I are close and that we are politically connected’.

For those with Manu Manu ringing in their ears, this has a number of parallels with Christopher Polos. Duma admitted initially Polos was his brother-in-law, claiming the miraculous K46 million deal, was just a bit of good fortune for a family member, nothing to do with him. Then he recanted his testimony, claiming Polos was not his brother-in-law.

Duma’s memory again let him down in the case of Horizon. He forgot to mention Mr Ketan had been his personal lawyer, as PNGi revealed.

With a company owned by Ketan holding a 10% stake in the license, matters returned to normal for Horizon Oil.

According to the AFR ‘On March 31, 2011, Horizon announced to the ASX [Australian Stock Exchange] its legal troubles in PNG had been settled and said it had regained its interest in the licence known as PRL 5, although the name had changed to PRL 21. The company was vague about its stake being reduced to 70 per cent and did not mention its new partner Elevala Energy or its sole director and shareholder, the lawyer Mr Ketan’.

Just 10 weeks after the license was issued Elevala Energy decided to sell out. They wanted US$10 million.

Horizon Oil’s joint-venture partners Canadian company, Talisman Energy, was lined up to purchase half of Elevala’s stake.

Talisman Energy’s Senior Counsel warned against it stating ‘there was some corrupt behaviour on the part of Elevala in the acquisition of their interest in PRL 21’.

Simon Ketan’s demeanour also caused concern at Talisman.

According to the AFR, ‘Mr Ketan failed to declare his relationship with Mr Duma in a questionnaire he signed reluctantly at the insistence of Talisman’ [Italics added].

Sensing trouble, Talisman pulled out.

The AFR notes ‘Talisman’s withdrawal left Horizon to buy Elevala’s entire 10 per cent stake for $US10.3 million … Horizon did not disclose how much it paid for the 10 per cent stake. Horizon’s 2011 accounts show acquisition costs of $US12.073 million for the year ended June 30’.

Where to Now?

Duma uses a number of tactics to deflect criticism. First, he claims his critics are motivated by personal animosity, whether it be AFR journalists or US lawyers advising Talisman Energy.

Second he concentrates press conferences on red herrings, issues that just are not issues. At his press conference regarding Horizon, for example, he repeatedly made reference to the fact he followed the guidance of the courts and the Petroleum Advisory Board. None of the matters are especially relevant to the allegations made on the basis of the leaked documents provided to the AFR.

Third, he lawyers up and issues legal threats against his critics.

Forth, and finally, Duma has his own political weight as United Resources leader.

When Manu Manu erupted the chief of police fell over himself to claim there was no case to answer, despite the disarming findings produced by a muzzled administrative inquiry.

We know how things will likely play out with Horizon Oil.

The PM issues his concern but notes due process must be done. The issue will fade away, and eventually be forgotten. Already the writing is on the wall in this respect.

The only risk for Duma in this case, is if foreign authorities embark on a bribery probe, similar to what happened with Sir Michael Somare in Singapore.

The AFR reports that the Australia Federal Police are already looking at the cache of leaked documents they obtained. Unfortunately, Australia has its own track record of sweeping scandals like this under the carpet.

The only real game changer would be if US authorities obtained jurisdiction. The US Department of Justice has a formidable track record for busting open bribery cases. Were that to be involved, PNG just might learn what transpired with Horizon oil.