The Wartoto crime spree remembered

Defrauding remote communities

In 2011, Taskforce Sweep discovered that Sarakolok West Transport Ltd (SWTL) registered a number of subsidiary companies, which were used as conduits to obtain state funding. Once any one company was awarded funding from a government department, the money was then allegedly remitted to SWTL. The managers of SWTL would act as directors, managers and/or account signatories of subsidiaries.

Sweep (2012:114) noted that ‘the government’s budget appears to have been infiltrated by people with vested interests’. Evidence presented to the National Court, indicates several government officials – some of whom remain in senior posts –were implicated in Wartoto’s misappropriation schemes.

One of the conduits used by Eremas Wartato to defraud the state of public funds was Travel Air Ltd. The business name, Travel Air, was registered on 8 September 2010. However, the company, Travel Air Ltd, was incorporated on 15 June 2011.

It was Taskforce Sweep’s claim that  K10 million was fraudulently released by Mr Paul Tiensten (National Planning Minister 2007-2011) to Travel Air, before it was incorporated under the Companies Act 1997.

The case proceeded to the National Court in September 2013. Evidence presented to the Court indicates that Paul Tiensten colluded with Eremas Wartoto between 1 May 2010 and 31 March 2011 to defraud the government of K10 million, with the connivance of William Sent (Acting First Assistant Secretary, Department of National Planning and Monitoring) and Ruby Zarriga (Acting Secretary, Department of National Planning and Monitoring).

The money was placed under the Department of National Planning and Monitoring’s (DNPM) remit, through the Public Investment Program (PIP). In 2010 the DNPM initiated the ‘Air Freight Subsidy’ development program to provide financial support for third level airline operators that cater to remote areas.

A senior official from the Auditor General’s Office, Ekip Kop, found that an undated and unsigned proposal for funding was submitted in October 2010 by a business named, Travel Air. A second proposal was submitted in March 2011.

On 23 March 2011 Mr Tiensten directed Ms Zarriga to release K10 million from the 2011 budget for the benefit of Travel Air. On the same date Ms Zarriga asked Mr Takale Tuna, the Acting Deputy Secretary (PIP), to appraise the application.

Mr Tuna, then gave verbal directions to Paul Daggun, the Assistant Secretary, that the Minister wanted the requisition raised immediately. A Cheque, No. 158, was made payable to Travel Air on 31 March 2011 for collection by Mr Wartoto. The evidence suggests that Mr Tiensten made the decision to release funding, without following the correct procedure.

Records show that Travel Air was registered with the Investment Promotion Authority (IPA) on 8 September 2010 as a business name. It was not an operating airline, only a business name with no aircraft. The company named, Travel Air Ltd, was incorporated on 15 June 2011 – two months after the money was handed to Mr Wartoto to subsidise his non-existent company. In other words, when Mr Wartoto submitted the proposal for funding Travel Air Ltd was neither registered as a company, nor an operational airline, as claimed.

The funds granted to Mr Wartoto were, in fact, used as seed capital to start up a new business, and not as projected under the Air Freight Subsidy development project, to subsidise an operational airline.

A DNPM minute dated 21 March 2011 exerted serious influence over the decision process. According to the National Court, it contained false and misleading statements.

The minutes, which were evidently written by William Sent (Acting First Assistant Secretary, DNPM), falsely claimed that: ‘Travel Air is a company servicing the remote areas of the country and the airline operates two (2) Dash 8/100 aircrafts’. The court found that Travel Air never operated Dash 8/100 aircraft. In the judgement it was also observed: ‘Mr Sent said Kandrian, Bialla and Palmalmal would be the areas of focus with this funding, however there is no evidence that those areas were and are serviced by Travel Air and so that representation was not true. In fact that was a total misrepresentation and a blatant lie’.

Justice Salika claims: ‘The point about Mr Sent’s minute to Mr Takale Tuna and Ms Ruby Zarriga is that both these very senior officers ought to have known that what Mr Sent had stated in his minute were not true and accurate, yet they went ahead and approved the request for the requisitions to be signed’. He argues:

It seems to me the Senior Officers of the Department appear to be performing their duties to ensure the K10 million was released to Travel Air. They did so with respect to please their “political master,” with the hope to gaining in turn favour from him in that Ms Zarriga was an Acting Secretary while Mr Takale Tuna as Acting Deputy Secretary (PIP).

The Court concluded that the decision to release funding to Travel Air should have been made by the National Executive Council (NEC) on the basis of consultations with the Treasury Department, Department of Transport and Civil Aviation Authority. It was not within Tiensten’s gift as Minister to direct his senior officers to make the K10 million payment. Tiensten acted outside of his responsibilities and the department officers – Tuna, Zarriga, Sent,  Daggun – bypassed the proper appraisal process by his direction.

Justice Salika concluded:

In my opinion the proposal of Travel Air for the South Coast Economic Development Corridor Freight Subsidy was a “front”. This is because an airline company cannot have a freight subsidy unless it is already flying to those areas earmarked. In this case Travel Air was not yet operating and flying anywhere in PNG. To get the K10 million some convincing plan had to be devised and the airfreight subsidy scheme plan was a good cover to request for the K10 million to start an airline.

On 28 March 2014, Justice Salika sentenced Mr Tiensten to 9 years imprisonment with hard labour, with possible 4 years suspension upon restitution of K10 million within four years.

Incredibly, recent news reports indicate that Tiensten has not been serving his sentence in prison. It is claimed in fact that he is one of several criminals ‘allowed to serve extended periods of their sentences outside the Bomana prison’. In Tiensten’s case he is allegedly completing a degree in law at the University of Papua New Guinea.

Concerning Mr Sent, Mr Tuna, Mr Daggun and Ms Zarriga, the National Court determined that Mr Tiensten was wielding “political muscle” over the Acting Secretary and her officers, who were acting under the Ministers directives in an effort to secure his favour.

It appears only William Sent has been committed to trial on an unrelated corruption matter – a committal  that has been delayed by a series of appeals.

With respect to the Tiensten-Wartoto affair the District Court claims there is insufficient evidence to bring the civil servants to trial.

Stealing from high school students

While Eremas Wartoto did not face justice for his role in the Travel Air fraud, he was convicted for another major crime.

In 2011 Mr Wartoto was charged with two counts of misappropriation, for dishonestly taking state funds. During November 2011, he was committed by the District Court to stand trial in the National Court .

To dodge responsibility, Wartoto filed an application on 3 June 2013 in the National Court seeking a permanent stay on the criminal proceedings. Justice Salika dismissed the application on 15 August 2013. Mr Wartoto unsuccessful appealed in the Supreme Court.

At the time, the Travel Air Ltd owner lived in Cairns, Queensland, between mid-2011 and May 2013 on a 457 visa obtained through his car rental business, Travel Car (Australia) Pty Ltd. The car hire business was registered in Australia during 2004.

Wartoto was sponsored by his own company to obtain the visa on the grounds that a general corporate manager was needed in the area. The Papua New Guinea government requested that the fugitive be barred from Australia.

While Wartoto took refuge in Australia to avoid trial, the Australian federal government ignored requests to have the fugitive returned for trial.

However, action was finally taken when an Australian journalists reported, on the day of Australian PM’s visit to PNG in May 2013, that the Australian Federal Police ignored a request from PNG’s National Court to detain the fugitive. Wartoto returned to PNG, but remained in hiding.

In May 2013, Mr Wartoto’s vehicles, properties and bank accounts in Australia were frozen  by the Australian Federal Police, pending the finalization of the criminal charges (Hansard Report, 2013). MP Kerenga Kua, of the National Alliance Party, asserted that Mr Wartoto’s assets would be made available as means for restituting misappropriated money, upon being found guilty (Hansard Report, 2013).

The United Church of Australia (2014:7) listed Wartoto’s properties that were frozen by the Australian Federal Police:

• Bentley Park, bought for $247,000 in February 2004. It was jointly owned by Eremas Wartoto and Louisah Wartoto and the Westpac Bank provided the mortgage. The mortgage was cancelled on 9 July 2010. The property was gifted to Eremas Wartoto Pty Ltd on 22 June 2010.
• Edmonton, bought for $540,000 in September 2007. The ANZ bank provided a mortgage. A second mortgage was provided by Litia Ilam and Louisah Wartoto as Trustees of Wartoto PNG Trust on 23 November 2012.
• Cairns, bought for $575,000 in April 2010. Jointly owned with Louisah Wartoto. The ANZ bank provided the mortgage.
• Cairns, bought for $415,000 in November 2010. The ANZ Bank provided the mortgage on the property. A second mortgage was provided by Litia Ilam and Louisah Wartoto as Trustees of Wartoto PNG Trust on 23 November 2012.
• Mount Sheradan, bought for $515,000 in January 2011. The ANZ Bank was the mortgagee. A second mortgage was provided by Litia Ilam and Louisah Wartoto as Trustees of Wartoto PNG Trust on 23 November 2012.

In 2011 Mr Wartoto was indicted on two counts of misappropriation pursuant to Section 383A of the Criminal Code Act 1974, through his company Sarakolok West Transport Ltd (SWT). The company was awarded state funding to conduct renovation works on Kerevat National High School.

This occurred after the Central Supply and Tenders Board (CSTB), at the request of the DNPM, issued a Certificate of Inexpediency in November 2008, allowing a “closed tender”.

This was unusual as under the Financial Instructions the “closed tender” process is allowed only in special circumstances, such as a natural disaster, civil unrest or a public health emergency. Nevertheless, the Certificate was issued, so the argument goes, because the deteriorating state of the facilities posed a risk to school students and staff.

The contract, valued at K7,989,892.00 was promptly awarded to SWT in November 2008. The sum was paid out in two instalments of 85% (K6,791,408.20) in advance and 15% (K1,198,483.80) 10 months after the commencement of works.

The upfront payment of 85% was advised by the CSTB in a letter bearing Mr Brian Kimmin’s signature, dated 28 November 2008, sent to the Secretary of DNPM, Mr Joseph Lelang from Mr Wartoto’s Cairns address. The letter was faxed from a number registered under Travel Car Cairns, Australia. Mr Kimmins denied any association with the company, claiming his signature was forged. Additionally, the CSTB does not have the authority to make funding arrangements, or advance payment.

In cross examination Mr Lelang applied to be excluded from giving evidence. His application was dismissed. Mr Kimmins did not directly deny signing the letter, but instead insisted that he could not have signed it because he was not authorised to order such an instruction. Lelang’s poor demeanour and Kimmins’ question dodging rose suspicions.

Justice Manuhu, of the National Court, advised that ‘Joseph Lelang and Brian Kimmins should be thoroughly investigated for their blatant facilitation of procedural breaches in this matter’, and prosecuted if warranted. Mr Lelang is currently a Member of Parliament and sits as a chairman on a number of committees. Mr Kimmins was the Chairman of the CSTB, but it is unclear if he still holds a position in government.

Mr Francis Dolan, an expert in investigative accounting, conducted a forensic examination to determine where the funds for the school renovation went. The K6,791,408.20 was deposited into SWT’s ANZ Bank Ltd account BSB 018909 on 29 January 2009. There were a number of other deposits totalling K1,264,056.86, bringing the balance of the account to K8,055,464.20. By 26 June 2009 the account had reached a negative balance of K65,590.17.

Mr Dolan tracked back all of the transactions made during this period and found numerous accounts had received funds from SWT for purchase of vehicles, to service loans for Wartoto’s Australian properties, and transfers to overseas accounts. In the evidence presented to Justice Manuhu it is clear that there was expenditure not related to the Kerevat works.

Among the accounts to which Mr Wartoto lodged money were his spouse’s, Louisah Wartoto, account, Litia Ilam and John Ilma. It was further alleged that the vehicles purchased were for Mr Wartoto’s car hire business in Cairns, Queensland.

Not surprisingly when assessment was made of ‘completed’ work on the Kerevat school –  SWT allegedly began work in December 2008 and completed work in January 2010 – inspectors found that the work was incomplete and substandard. No work had been done to sewerage and water supply, which were in the greatest need of renovation.

Only K346,145.51 (5.1%) was expended on the project, while the remaining K6,445,262. 69 (94.9%) was spent on other purposes unrelated to the School.

The National Court accordingly found Mr Wartoto guilty of misappropriation. The two related officials have not been prosecuted, but investigation into Mr Kimmins’ and Mr Lelang’s involvement was recommended.

Outstanding allegations

The TFS investigation reported that SWTL owned companies have been paid as follows in ten identified cases:

Sweep claims ‘SWT uses its own managers to be signatories of those companies’ bank accounts and uses other persons as directors of the company. When the funds are paid into those accounts, most of these funds are then remitted to the main SWT account or to other subsidiaries of SWT’. Sweep warns these companies are ‘conduits to obtain funds by false pretence’.

Conclusion

With the complicity of senior civil servants – only one of whom has been successfully committed to trial, although on an unrelated matter – Eremas Wartoto robbed school students and remote communities to fund a business empire, and jet-setting lifestyle.

All of this came to an end when Wartoto and his right hand man Paul Tiensten were sentenced to 10 and 9 years prison respectively. It appears from recent reports both men are enjoying life as free men in Port Moresby.

For those who follow the law and work hard, this is a timely lesson. Rob from the vulnerable and you will be rewarded. But is this the kind of country we want to raise our children in?