Partners in crime: The political web that supports the illegal Kiunga Aiambak timber project

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  • About

    Indpendent investigation into the politicians and bureaucrats linked to the illegal logging project. Published by the Canberra Friends of PNG Association

Document content

  • Partners in crime
    The political web that supports the
    illegal Kiunga Aiambak timber project

    Canberra Friends of PNG Association
    May 2002

  • Page 2 of 19

  • Contents

    Executive summary
    Introduction
    The core of the scam
    Paiso Limited
    Concord Pacific
    Philip Lee
    Illegal Timber Authorities
    Illegal Tax Concessions
    The political web
    The fine detail
    Deputy Prime Minister
    Minister for Foreign Affairs
    Minister for Mining
    Minister for Works
    Minister for Transport
    Minister for Agriculture
    Ex Minister for Finance
    Ex Minister for Forests
    Governor of Milne Bay
    Member for North Waghi
    Member for Middle Fly
    Governor of Western Province
    Attorney General
    Ex Forest Authority Managing Director
    Ex Secretary for Agriculture
    Secretary for Lands
    Prime Minister
    Appendices
    Background documentation

  • Page 3 of 19

  • Executive summary

    The Kiunga Aiambak timber project has been operating since 1994. The project is widely
    known to be totally illegal and the PNG Forest Authority accepted this as early as 1995.1 The
    illegality of the project was confirmed in the Independent Forestry Review (2001)2 and has
    been publicly acknowledged by the Prime Minister.3 Local landowners have been complaining
    since 1995, calling for an Ombudsman Inquiry and for the project to be shut down.4
    However the project is still on going with more than US$50 million worth of logs having been
    exported. Meanwhile the Government has lost out on potential tax revenues because of illegal
    tax exemptions given to the project and the local people have suffered a catalogue of
    negative social and environmental impacts.
    So why has no effective action been taken to stop the project and prosecute some of those
    who have been involved? The map below may begin to give an answer to this question and
    should be seen in the context of the widespread allegations of political corruption and
    institutionalised mismanagement in the forest industry.

    The Political Web that Supports the Illegal Kiunga Aiambak Project

    The Prime Minister Philip Lee / Government Ministers
    Lee Kok Heng
    Sir Mekere Morauta Deputy Prime Minister
    Has failed to deliver on & Minister for Forests
    promises to stop the illegal Project Implementation Michael Ogio
    project and has failed to take • Illegal logging permit
    action against those in his Paiso Limited Concord Pacific • Illegal tax concessions
    Government responsible for: – Fraudulently claims to be – Malaysian owned • Sponsor for logging permits
    • Illegal logging permits a landowner company – Contractor to Paiso Ltd
    • Unlawful tax concessions
    – Logging permit holder – Philip Lee is General Minister for Foreign Affairs
    – Philip Lee owns 50% Manager and a Director Dr. John Waiko
    • Undeclared conflicts of interest
    • Abuse of position • Citizenship sponsor
    • Alleged involvement in logging • Delayed deportation
    corruption • Shared business interests
    • Attempted government loan
    Minister for Mining
    Other Members of Parliament
    Chris Havieta
    Governor for Milne Bay • Illegal tax concession
    Titus Philemon Civil Servants • Attempted financial support
    • Illegal logging permit extension • Illegal logging at Turama
    • Illegal logging at Turama Ex Government Ministers Attorney General
    Francis Damem Minister for Works
    Member for North Waghi • Philip Lee’s lawyer Alfred Pogo
    Minister for Finance
    Fabian Pok Nakikus Konga • Sponsor for logging permit
    • Illegal logging permit extension Ex Forest Authority MD • Attempted government loan
    • Illegal tax concession Thomas Nen
    Member for Middle Fly • Illegal logging permit Minister for Transport
    Cosmos Kuok Minister for Forests
    Bart Philemon
    Tim Neville Ex Secretary for Agriculture
    • Sponsor for logging permit • Sponsor for logging permit
    • Illegal logging permit Utula Samana
    • Project initiation
    • Fraudulent leases Minister for Agriculture
    Governor for Western Province Mao Zeming
    Norbert Makmop Secretary for Lands
    Guau Zurenuoc • Sponsor for logging permit
    • Sponsor for logging permit
    • Illegal logging permit
    May 2002

    The map shows some of the key people who have been involved in advocating, facilitating
    and protecting the illegal Kiunga Aiambak timber project. The map also shows how these key
    individuals are linked to the project and it graphically illustrates both the breadth and the
    depth of the political web that supports the project.
    Perhaps the central figure to the whole illegal project is Philip Lee, a Malaysian born
    businessman who has built an extensive political support network that protects him and his
    illegal operations from any semblance of outside control.
    Prominent Ministers, Members of Parliament and senior civil servants are all implicated in the
    web that ensures that the illegal Kiunga Aiambak project continues to deliver misery for local
    people and millions of dollars into the bank accounts of the fortunate few.

    1 See Appendix 1, Letters from the Acting Managing Director and Managing Director
    2 See Appendix 2, Audit conclusions and recommendations, Independent Forestry Review Team, October 2001
    3 See Appendix 3, Media statement by the Prime Minister, 14 May 2002
    4 See Appendix 4, Various landowner complaints

  • Page 4 of 19

  • Introduction
    The Kiunga-Aiambak Road Project is a highly controversial and destructive logging operation
    located in previously intact rainforests in Papua New Guinea’s remote Western Province.

    It was originally presented as a ‘development project’ to further the region’s economy, but it
    soon became clear that it was no such thing. In fact, it was nothing but a ploy for a Malaysian-
    owned logging company to gain access to valuable timber stocks legally owned by Papua
    New Guinea’s indigenous forest-dwelling communities.

    Initiated in 1995, the Kiunga-Aiambak project – which has destroyed thousands of hectares of
    pristine forest over the last seven years – appears to have been unlawful from the very
    beginning. In 1995, the then Forest Minister for Papua New Guinea, Tim Neville, issued a
    permit known as a Timber Authority to a company called Paiso Ltd, which professed to be a
    ‘landowner company’ representing the local landowners in the region.

    The Timber Authority is a legal instrument that allows its holder to fell trees 40m on either side
    of a centre-line to clear a way for road construction: in theory it was a licence for Paiso Ltd to
    construct a road between the small township of Kiunga and the village of Aiambak.

    In practice, however, the story was very different.
    “Generally this project is
    Paiso Limited was not a company owned by or
    representing local landowners. In fact, just two people seen as a thinly disguised
    owned it: Malaysian-born Philip Lee, general manager method employed by a
    and major shareholder of Concord Pacific, and a logging company to gain
    Papua New Guinean called David Kaya. access to logs for export.
    Moreover, Paiso itself had no intention of logging or of At no time since the
    building a road. It was a company in name only, with a purported issuance of the
    paid-up share capital of just 20 kina (US$6). The Timber Authority has any
    company immediately subcontracted the ‘construction aspect of due process
    work’ to Concord Pacific,5 despite the clear prohibition been observed”
    in the Forestry Act against transferring rights under a
    Independent Forestry Review Team
    Timber Authority.

    It soon became clear that the proposed ‘road project’ was simply a pretext for a much larger
    logging operation. Within a few months, Concord Pacific obtained permission from Minister for
    Forests Titus Philemon (and later from his successor Fabian Pok) for an unlawful and
    unlimited extension of the project until “successful completion”.

    The actual construction of the ‘road’ began at Aiambak in May 1995. By March 2001, around
    179km of forest had been cleared northwards towards Kiunga. But there is not – and never
    has been – a functional highway. The ‘road’ is nothing but a bulldozer track through the forest.
    It has no permanent bridges, hopelessly inadequate drainage and no surfacing – only a
    network of temporary logging roads pushing deeper into the forest on either side. Already the
    Aiambak end of the road is impassable, with another 60km to go before reaching Kiunga.

    Moreover, and as is typical in Papua New Guinea’s forestry sector, no prior informed consent
    from the rightful landowners of the resources was obtained for the project, and minimal
    royalties or benefits have been provided to them.

    Astonishingly, Concord Pacific has somehow managed to secure a far-reaching court
    injunction, which is restraining the Papua New Guinea Forest Authority (PNGFA) from closing
    the illicit project down. It also prohibits the PNGFA from seizing logs or delaying export
    permits, even though the timber is being illegally extracted. To date, the government has
    made no attempt to overturn the injunction or even to challenge the substantive issues of the
    case.

    5 See Appendix 5, Copy of the contract agreement

  • Page 5 of 19

  • The core of the scam
    The scam that is the illegal Kiunga Aiambak logging project has a very simple core structure:
    ♦ a company to apply for the logging permit under the guise of building a road
    ♦ a second company to do the logging as a contractor to the first company
    ♦ an illegal logging permit given by a ‘tame’ Minister
    ♦ illegal ‘extensions’ to the permit so that it can run without limit of time,
    ♦ a series of illegal tax exemptions given by other ‘tame’ Ministers, and
    ♦ political friends to protect the operation from being shut down.

    Paiso Limited
    Paiso Limited is the company that applied for and obtained the logging permit.
    Paiso claims to be a ‘landowner company’, that is a company that is owned and controlled by
    the local landowners in the area that it operates.6 In fact Paiso is owned by only two people,
    David Kaya, a Papua New Guinean (50%) and Philip Lee, a Malaysian 50%.7

    Concord Pacific
    Concord Pacific is the contractor engaged by Paiso to do the logging. Concord Pacific is a
    Malaysian owned company registered in PNG. The registered
    shareholders are Yaw Teck Seng (60%), Foh Choi Yong (39%) “Concord Pacific
    and Pay Chin Lee (1%). has one of the
    All the shareholders are listed in the records of the Registrar of worst records of
    Companies as being resident in Port Moresby.8 This is not true for any logging
    at least one of the three – Yaw Teck Seng is a Chinese-Malaysian company in PNG”
    timber tycoon who is the founder and Chair of the multinational Acting Managing Director
    Samling Corporation, he lives in Malaysia. PNG Forest Authority

    Philip Lee
    Philip Lee owns half the shares in Paiso Limited and is the General Manager of Concord
    Pacific.9 Philip Lee, using the name Lee Kok Heng, is also a Director of Concord Pacific.10
    Philip Lee is a somewhat controversial figure in PNG. In August 2001 he was arrested and
    later deported for being in possession of three PNG passports and a Malaysian passport and
    a Thai passport. The Malaysian passport was in the name of Khoo Wui Ting, the Thai
    passport was in the name of Chalied Plaibua.11
    In the early to mid 1990’s Lee was involved in a logging project at Ioma in Oro Province. This
    project was curtailed when the local landowners revolted, burned the logging machinery and
    physically expelling the logging company from the area.12
    Philip Lee was at the same time also involved in logging at Turama in Gulf Province (1991-
    1996) as a contractor to Turama Forest Industries.13 This is a very controversial project where
    the landowners are seeking to have the logging permit revoked and there are serious
    allegations of corruption and bribery against two senior politicians.14

    6 See Appendix 6, Affidavit sworn by David Kaya, and Appendix 9 below
    7 See Appendix 7, Company Search result for Paiso Limited
    8 See Appendix 8, Company search result for Concord Pacific
    9 See Appendix 9, Affidavit sworn by Philip Lee
    10 See Appendix 10, Who is Philip Lee
    11 The National, 6th August 2001, front page
    12 The National, 8th February 2002, front page
    13 See Appendix 11, Letter from Concord Pacific
    14 See Appendix 12, Letter from landowners

  • Page 6 of 19

  • Lee’s next logging project was at Mussau in New Ireland Province (1994-1997).15 The logging
    project there ended in disaster with an incomplete, sub standard road and unpaid royalties.16

    Illegal Logging Permits
    In April 1994, Paiso Limited was granted a Timber Authority for one year to harvest up to
    5000 cubic metres of logs.17
    In August 1994 Minister for Forests Tim Neville varied this Timber Authority. This variation
    allowed logging of a 2km wide corridor for 5 years with a maximum harvest of 210,00 cubic
    metres each year and approved Concord Pacific as the contractor for the project.18 This
    variation of the Timber Authority was totally illegal under the Forestry Act19
    By a contract dated 24th October 1994, Paiso engaged Concord Pacific as a contractor to
    carry out the actual logging and log export under the Timber Authority. This was also totally
    illegal as under the Forestry Act the rights under a Timber Authority are non-transferrable.20
    In May 1995 Minister for Forests Titus Philemon illegally extended the Timber Authority.21
    In September 1997 the Timber Authority was again illegally extended, this time by Minister for
    Forests Fabian Pok.22 On this occasion, the Minister’s action in purporting to extend the
    Timber Authority was put into effect by the Managing Director of the Forest Authority, Guau
    Zurenuoc. Despite the illegality of the Minister’s action, the Managing Director ‘granted and
    approved’ the extension.23

    In December 2001, Concord Pacific was given a further Timber Authority to extend the ‘road’
    by a further 831 kilometres.24 This Timber Authority is also totally illegal as none of the proper
    procedures under the Forestry Act have been followed.
    However, in March 2002, the Managing Director of the Forest Authority, Thomas Nen, issued
    a letter that purports to grant the approval of the National Forest Board for the new Timber
    Authority.25

    Illegal Tax Exemptions
    The Kiunga Aiambak logging project has been the fortunate beneficiary of a series of log
    export duty exemptions. These have been granted by a number of Ministers including
    Nakikus Konga, Chris Havieta and Michael Ogio.
    These tax exemptions have curiously been granted without the knowledge of the Department
    of Treasury or the Internal Revenue Commission.26
    Each of the tax exemptions have been declared illegal either by the State Solicitor or the
    Internal Revenue Commission27 and on three occasions the Prime Minister has intervened to
    revoke the exemptions.
    On at least one occasion, the granting of the tax exemption was followed by the payment of a
    substantial ‘arrangement fee’ by Paiso Limited to a consultant. This was later followed by an
    Ombudsman investigation that was halted when the Minister involved, Nakikus Konga,
    resigned from Parliament.

    15 See Appendix 11 above
    16 Landowner complaints to NGO lawyers
    17 See Appendix 13, Timber Authority
    18 See Appendix 14, Letter from the Minister
    19 Forestry Act 1993 as amended, Sections 87-90
    20 Forestry Act, Section 87
    21 See Appendix 15, Two letters from the Minister
    22 See Appendix 16, Letter from the Minister
    23 See Appendix 17, Letter from the Managing Director
    24 See Appendix 18, Timber Authority 08
    25 See Appendix 19, Letter from the Managing Director
    26 See Appendix 20, Letter from Department of Treasury
    27 See Appendix 21, Letters from the State Solicitor and Acting Chief Secretary

  • Page 7 of 19

  • The Political Web that Supports the Illegal Kiunga Aiambak Project

    The Prime Minister Philip Lee / Government Ministers
    Lee Kok Heng
    Sir Mekere Morauta Deputy Prime Minister
    Has failed to deliver on & Minister for Forests
    promises to stop the illegal Project Implementation Michael Ogio
    project and has failed to take • Illegal logging permit
    action against those in his Paiso Limited Concord Pacific • Illegal tax concessions
    Government responsible for: – Fraudulently claims to be – Malaysian owned • Sponsor for logging permits
    • Illegal logging permits a landowner company – Contractor to Paiso Ltd
    – Logging permit holder – Philip Lee is General Minister for Foreign Affairs
    • Unlawful tax concessions – Philip Lee owns 50% Manager and a Director
    • Undeclared conflicts of interest Dr. John Waiko
    • Abuse of position • Citizenship sponsor
    • Alleged involvement in logging • Delayed deportation
    corruption • Shared business interests
    • Attempted government loan
    Minister for Mining
    Other Members of Parliament
    Chris Havieta
    Governor for Milne Bay • Illegal tax concession
    Titus Philemon Civil Servants • Attempted financial support
    • Illegal logging permit extension • Illegal logging at Turama
    • Illegal logging at Turama Ex Government Ministers Attorney General
    Francis Damem Minister for Works
    Member for North Waghi • Philip Lee’s lawyer Alfred Pogo
    Minister for Finance
    Fabian Pok Nakikus Konga • Sponsor for logging permit
    • Illegal logging permit extension Ex Forest Authority MD • Attempted government loan
    • Illegal tax concession
    Thomas Nen
    Member for Middle Fly • Illegal logging permit Minister for Transport
    Cosmos Kuok Minister for Forests
    Bart Philemon
    • Sponsor for logging permit Tim Neville Ex Secretary for Agriculture • Sponsor for logging permit
    • Illegal logging permit Utula Samana
    • Project initiation
    • Fraudulent leases Minister for Agriculture
    Governor for Western Province Mao Zeming
    Norbert Makmop Secretary for Lands
    Guau Zurenuoc • Sponsor for logging permit
    • Sponsor for logging permit
    • Illegal logging permit
    May 2002

  • Page 8 of 19

  • The fine detail

    Deputy Prime Minister and Minister for Forests, Michael Ogio

    Michael Ogio has given strong and persistent support to the illegal Kiunga-Aiambak timber
    project. He has favoured the companies involved with generous and illegal tax concessions.
    He has advocated for the extension of the project and he has granted an illegal logging
    permit for that purpose.

    Illegal tax concessions:
    The Deputy Prime Minister has granted illegal tax concessions to Concord Pacific on at least
    three occasions.

    In 1997 Minister Nakikus Konga granted Concord Pacific an exemption from paying the full
    rate of log export tax.28 In 1999 the Prime Minister revoked that tax concession.29

    But in February 2000 Michael Ogio, as Acting Prime Minister and Acting Minister for Treasury
    and Finance, signed a Corrigendum to the Prime Ministers Notice of Revocation.30 This
    corrigendum stated that the Prime Minister’s Notice of Revocation did not apply to the
    Aiambak Kiunga Timber Authority.

    In issuing this corrigendum Ogio acted without the knowledge of the Internal Revenue
    Commission or the Treasury Department.31

    After considerable negative publicity, Ogio was forced to publicly retract his corrigendum. The
    Minister “I was ill-advised on this issue”.32 The Prime Minister then reversed his deputy’s
    corrigendum.33

    However, in December 2000 and while the Prime Minister was out of the country, Ogio signed
    another Notice granting a full exemption from export duty on all logs harvested under the
    Aiambak Kiunga project (and establishing the Aiambak Kiunga Main Road and Feeder Roads
    Trust Account under a trust Instrument).

    Unfortunately for Ogio his Notice was legally defective, but undeterred in January 2001 he
    issued another Notice that revoked the December 2000 Notice and granted a new full
    exemption from export duty.34

    But even now Ogio was acting unlawfully as the November 2000 budget had removed the
    power of the Minister to exempt from export duty35 and in January 2001 the Prime Minister
    had given his powers as Minister for Treasury to the Minister for Corporatization.36

    Illegal logging permit:
    In December 2000, Ogio granted an illegal Timber Authority for Stage 3 of the Aiambak
    Kiunga project.37 This was illegal as the Minister has no power to grant a Timber Authority
    and no proper application or allocation procedures had been followed. A later letter from the
    National Forest Board to the Minister confirms this.38

    28 See under Nakikus Konga below
    29 See Appendix 22, Copy of the Gazettal
    30 See Appendix 23, Copy of the Gazettal
    31 See Appendix 24, Letter from the Secretary Department of Treasury to SGS
    32 The National, March 22nd 2000
    33 See Appendix 25, Copy of Notice
    34 See Appendix 26, Copy of Gazettal
    35 See Appendix 27, Letter from Commissioner General Internal Revenue Commission
    36 See Appendix 28, Copy of Gazettal
    37 See Appendix 29, Letter from the Minister
    38 See Appendix 30, Copy of the letter

  • Page 9 of 19

  • Sponsorship for logging permit:
    In May 2000 Ogio, together with the Ministers for Transport, Works and Agriculture, made a
    submission to the National Executive Council for the extension of the Kiunga Aiambak Timber
    Authority held by Paiso Limited.39 The proposed extension was for 15 years to allow for a
    further 875 kilometres of road to be built. The submission also included a 75% exemption
    from log export duties.

    The submission ignored the view of the Forest Authority that the existing Timber Authority
    was totally illegal. The proposed extension to the Timber Authority was also totally contrary to
    the provisions of the Forestry Amendment Act 2000. The submission was heavily criticised
    by a number of Government Departments.40

    Ogio’s Track Record

    As well as his record of illegal logging permits and unlawful tax concessions in
    respect of the Kiunga-Aiambak project, Deputy Prime Minister Michael Ogio also
    has an appalling track record on other issues:

    Wawoi Guavi: In February 2002 the Minister granted an illegal 10-year
    extension to the logging permit for the giant Wawoi Guavi logging concession. He
    was acting contrary to the advice of forestry officers and did not consult with the
    National Forest Board

    Josephstaal: The Minister has on three occasions unlawfully directed the
    National Forest Board to illegally grant the Josephstaal logging concession to a
    company called ASB Timbers.

    ASB Timbers: The Minister has made at least four attempts to grant illegal
    timber permits to ASB Timbers. ASB is a shelf company with no assets and no
    forestry or other trading experience.

    The appointment of a new MD: The Minister has been incompetent in the
    appointment of a new Managing Director of the Forest Authority. Between
    February and April 2002, the Minister made at least five appointments to the post.
    Three appointments were unlawful for a failure to follow proper procedures and
    the two lawful appointments that he made he soon revoked.

    Breach of policy: The Minister has consistently breached Government Policy
    such as the Moratorium on New Logging Permits, the Implementation of the
    Review Team Recommendations, the Forestry Action Plan and the Forestry and
    Conservation Project

    Unlawful interference: The Minister has unlawfully directed State legal officers
    to settle a litigation case for K20 million and also thereby breached Government
    policy on not settling legal e cases out of court

    Breach of protocol and State security: While Acting Prime Minister in the
    absence of Sir Mekere Morauta overseas, the Minister travelled across the border
    into Indonesia with a logging company boss. The Minister did not inform either his
    own Government officials or the Indonesian authorities about the trip.

    39 See Appendix 31, Submission to NEC
    40 See further below under Ministers Pogo, Philemon and Zeming

  • Page 10 of 19

  • Minister for Foreign Affairs, Dr John Waiko

    Dr John Waiko is a long time business associate and friend of Philip Lee. The pair were
    involved in a controversial logging project in the early 1990’s and since then the Minister has
    sponsored Lee’s application for citizenship, protected him from deportation and tried to
    arrange a one billion dollar loan to the Government through him.

    Business associations:
    In the early to mid 1990’s Philip Lee and John Waiko were both involved in a logging project
    at Ioma in Oro Province. Waiko was a shareholder and Director of Binadere Holdings. Philip
    Lee was a shareholder and Director of Green Mountain.41 Binadere Holdings held a timber
    permit and engaged Green Mountain as the logging contractor.

    This project was curtailed when the local landowners revolted, burned the logging machinery
    and physically expelling the logging company from the area.42

    Citizenship sponsorship:
    John Waiko has been named as the sponsor of Philip Lee’s application for PNG citizenship.43

    Protection from deportation:
    John Waiko has effectively protected his friend and business associate, Philip Lee, from
    deportation for immigration offences.

    In 2001 Philip Lee was found in possession of three PNG passports and a Malaysian
    passport and a Thai passport. This constituted a serious contravention of a number of
    immigration rules and Lee was deported.

    Lee was subsequently allowed to return to PNG under a court order to contest his deportation
    but that case was later dismissed. However, Minister Waiko choose to ignore the advice of
    the Solicitor General and his Department Secretary and he delayed the enforcement of the
    deportation by setting up an internal ‘review’ of the case.44

    The Minister’s failure to follow legal advice and his clear conflict of interest in dealing with the
    matter of Lee’s deportation is now the subject of an Ombudsman inquiry.45

    Government loan:
    In March 2001 John Waiko, in his position then of Minister for Education, tried to arrange a
    US$ 1 billion loan to the Government to bankroll education projects.46 The loan negotiations
    were conducted through the PNG agent of a Danish Finance Company, one Philip Lee.47

    41 See Appendix 32, Company search result for Green Mountain
    42 The National, 8th February 2002, front page
    43 The Post Courier, 8th February 2002, front page
    44 The Post Courier, 5th February 2002, front page
    45 The National, 25th February 2002, page 2
    46 The Post Courier, 15th March 2001, front page
    47 See Appendix 33, Letter from the Minister and reply from Philip Lee

  • Page 11 of 19

  • Minister for Mining, Chris Haiveta

    Chris Haiveta has favoured the illegal Kiunga-Aiambak project with an unlawful tax
    concession and an attempt to provide direct government finance for the project. He also has
    strong links with Philip Lee through the controversial Turama forest project.

    Tax exemption:
    In 1997, Chris Haiveta as Minister for Finance and Deputy Prime Minister overruled the
    advice of the Internal Revenue Commission that a
    reduction in export duty given to the Kiunga-
    Between 1997 and 2000,
    Aiambak project should not be implemented and
    instead Haiveta instructed that Treasury and IRC Concord Pacific gained and
    give immediate effect to the reduction.48 the PNG Government lost
    K6,375,000 from illegal tax
    Much later, in August 1999 the State Solicitor exemptions granted by
    advised that the reduction had indeed been
    Government Ministers
    defective49 and the Prime Minister, Sir Mekere
    Official PNG Forest Authority data
    Morauta, signed a Notice revoking the tax (See Appendix 55)
    concession.

    Government financial support:
    Chris Haiveta has also intervened in the Kiunga Aiambak project by instructing, as Deputy
    Prime Minister, that the Department of Treasury refund to Concord Pacific all the costs of the
    road construction.50 It is not known whether this instruction was ever effected.

    Illegal logging at Turama:
    Philip Lee was involved in logging at Turama in Gulf Province from 1991-1996 as a contractor
    to Turama Forest Industries.51

    Chris Havieta was also involved in this project at that time as In 1994 as Deputy Prime
    Minister he intervened to ensure that Turama Forest Industries was granted access to new
    resource areas as ‘extensions’ to existing permits. These extensions were in breach of the
    Forestry Act and were given with no proper procedures being followed.52

    The Turama project is very controversial and the landowners are seeking to have the logging
    permit revoked for illegal logging outside the permit boundaries, failure to pay full royalties
    and premiums, and failure to provide promised infrastructure development and downstream
    processing facilities.53

    The landowners also allege that Chris Havieta and Ridler Kamave (Governor of Gulf
    Province) are on the payroll of Turama Forest Industries.54

    48 See Appendix 34, Letter from the Minister
    49 See Appendix 21 above
    50 See Appendix 34 above
    51 See Appendix 11 above
    52 See Appendix 35, Letter from the Minister
    53 See Appendix 36, Letter from landowners
    54 See Appendix 36 above

  • Page 12 of 19

  • Ministers for Works, Transport and Agriculture: Alfred Pogo,
    Bart Philemon and Mao Zeming

    Ministers Pogo, Philemon and Zeming have all demonstrated the strength of their allegiance
    in favour of the illegal Kiunga-Aiambak project by ignoring professional advice to the contrary
    and sponsoring submissions for the projects extension.
    In May 2002, Mao Zeming was referred by the Ombudsman Commission to the Public
    Prosecutor for prosecution under the Leadership Code on charges of misuse of public funds.55

    Sponsorship for extension:
    In May 2000 Pogo, Philemon, Zeming and Ogio made a submission to the National Executive
    Council for the extension of the Kiunga Aiambak Timber Authority held by Paiso Limited.56
    This submission was made directly counter to the advice of the Minister’s own Department
    Heads who concluded that the extension ‘should not be granted’.57
    The proposed extension was for 15 years to allow for a further 875 kilometres of road to be
    built. The submission also included a 75% exemption from log export duties. The proposed
    extension would have made the project PNG’s largest logging operation.
    The submission ignored the views of the Forest Authority that the existing Timber Authority
    was totally illegal and that the proposed extension was also totally contrary to the provisions
    of the Forestry Act.58
    The submission was heavily criticised by a number of Government Departments:
    “The Ministers who signed this submission have been extremely poorly advised, or
    otherwise. Not only is the proposal blatantly in breach of the Timber Authority
    Regulations and the recent NEC Decision No 84/2000 on Forest protection Policy, but
    it is also clearly a bogus means to obtain forest resources at a ridiculously low
    cost”59
    “In general the submission seems to be concerned mainly with logging, with a
    massive Government give-away being requested to fund the developers logging
    road’60

    Government loan:
    Minister Alfred Pogo has also been involved with Philip Lee in negotiations for Government
    loans. In March 2001 Pogo was in correspondence with Lee over a proposed US$2 billion
    loan to the Government to bankroll a transport infrastructure development programme.61 This
    was at the same time that Lee was also negotiating a similar arrangement with Minister Waiko
    for education programmes.

    Lobbying activities:
    Minister Bart Philemon has also been an active lobbyist on behalf of Philip Lee and the illegal
    Kiunga-Aiambak project. Philemon has intervened with his fellow Ministers to try and stop the
    project being disrupted by the Forest Authority62 and he has tried to get the extension of the
    project expedited.63

    55 The National, May 9th 2002, front page
    56 See Appendix 31, Submission to NEC
    57 See Appendix 37, Brief from the Department Secretaries
    58 See Appendix 38, Letters from the PNGFA Managing Director
    59 See Appendix 39, Minute to the Chief Secretary
    60 See Appendix 40, Letter from the Commissioner General
    61 Post Courier, March 26th 2002, page 3
    62 See Appendix 41 for evidence of the lobbying work undertaken by the Minister
    63 See Appendix 42, Letters from the Minister and the Ministers Advisor

  • Page 13 of 19

  • Ex Ministers Tim Neville and Nakikus Konga

    Ex Ministers Tim Neville and Nakikus Konga played a pivotal role in the establishment on the
    illegal Kiunga-Aiambak timber project. It was Neville who provided the first illegal extension
    to the timber permit and Konga who provided the first illegal tax concession.

    In May 2002, Nakikus Konga was given a five-year prison sentence suspended for 3-years in
    respect of an unrelated misappropriation charge.64

    Illegal extension to an illegal logging permit:
    In April 1994, Paiso Limited was granted a Timber Authority for one year to harvest up to
    5000 cubic metres of logs.65 In August 1994 Minister for Forests Tim Neville extended this
    Timber Authority.

    This extension allowed logging of a 2km wide corridor for 5 years with a maximum harvest of
    210,00 cubic metres each year and approved Concord Pacific as the contractor for the
    project.66

    This variation of the Timber Authority was totally illegal under the Forestry Act67 as

    • The Minister has no power to grant or vary a Timber Authority
    • There is no legal mechanism for the variation or extension of a Timber Authority
    • The original Timber Authority was itself illegal
    • Rights under a Timber Authority cannot be assigned to a contractor
    • There was no recommendation from the Provincial Forest Management Committee or
    consent from the National Forest Board
    • Regulations and guidelines prohibit a Timber Authority of more than one year in
    duration
    • Regulations and guidelines prohibit a logging corridor of more than 100 metres in
    width
    • There was no application in the prescribed form
    • There was no performance bond required

    Illegal tax concession:
    In May 1997, Nakikus Konga as Acting Minister for Finance signed a Notice of Reduction in
    Export Duty of 50% on all logs harvested under the Aiambak Kiunga Timber Authority.68 The
    reduction was backdated to January 1st.

    Konga acted without the knowledge of the Internal Revenue Commission or the Treasury
    Department.69 In the opinion of the State Solicitor, the Notice of Reduction was unlawful as
    the Minister did not have the power to grant a reduction in duty and as the Notice did not
    specify whom the exemption was being granted to.70

    By a letter dated 15th May 1997 Paiso Limited, the Aiambak Kiunga TA holder, agreed to pay
    K260,000 to a Mr David Cora as a consultation fee upon receiving the exemption permit or
    certificate. In 2000 a copy of this letter was given to the Ombudsman who immediately
    initiated an investigation under the leadership code. A few weeks later Konga resigned from
    Parliament.

    64 The National, May 27th 2002, page 4
    65 See Appendix 13 above
    66 See Appendix 14 above
    67 Forestry Act 1993 as amended, Sections 87-90
    68 See Appendix 43, Copy of Notice and Gazettal
    69 See Appendix 20 above
    70 See Appendix 21 above

  • Page 14 of 19

  • Ex Ministers Titus Philemon and Fabian Pok

    Titus Philemon (current Governor for Milne Bay) and Fabian Pok (the Member of Parliament
    for North Waghi) are both ex Ministers for Forests. While a Minister, both granted illegal
    extensions to the Kiunga-Aiambak timber permit. On both occasions they were acting against
    the advice of their Department.

    Fabian Pok is currently under investigation by the police and the Ombudsman Commission in
    relation to unconnected allegations that he defrauded the State of about K2 million.71

    Illegal extensions to an illegal logging permit:
    In May 1995 the illegal variation to the Timber Authority granted to Paiso Limited that had
    been granted by Minister Neville, was endorsed and reaffirmed by Minister for Forests Titus
    Philemon.72

    Later, in September 1997 the Timber Authority was again illegally extended, this time by
    Minister for Forests Fabian Pok.73 This extension purported to allow the project to continue
    until “successful completion”.

    These extensions were both totally illegal under the Forestry Act as

    • The Minister has no power to grant or extend a Timber Authority
    • There is no legal mechanism for the extension of a Timber Authority
    • There was no recommendation from the Provincial Forest Management Committee or
    consent from the National Forest Board
    • Regulations and guidelines prohibit a Timber Authority of more than one year in
    duration
    • Regulations and guidelines prohibit a logging corridor of more than 100 metres in
    width
    • There was no application in the prescribed form
    • There was no performance bond required

    In addition, the extension granted by Pok was also illegal as it was not specific as to time as is
    required by the Forestry Act.

    Illegal logging at Turama:
    Philip Lee was involved in logging at Turama in Gulf Province from 1991-1996 as a contractor
    to Turama Forest Industries.74

    Titus Philemon was the Forest Minister that granted the permit for the Turama logging project.
    This was investigated by the Ombudsman Commission who found that the timber permit
    issued by Philemon was “improper and had no legal backing”. The Ombudsman also
    concluded “there are reasons to believe that there may have been political interference”.75

    The Turama project is very controversial and the landowners are seeking to have the logging
    permit revoked for illegal logging outside the permit boundaries, failure to pay full royalties
    and premiums, and failure to provide promised infrastructure development and downstream
    processing facilities.76

    71 The National, February 25th 2002, page 3
    72 See Appendix 15 above
    73 See Appendix 16 above
    74 See Appendix 11 above
    75 Ombudsman report to Parliament 1995-1998
    76 See Appendix 36 above

  • Page 15 of 19

  • Member for Middle Fly, Cosmos Kuok

    Cosmos Kuok is the Member of Parliament for the Kiunga-Aiambak area and he has been a
    staunch supporter and facilitator of the project. Kuok was raised in the family of Paiso co-
    owner, David Kaya.77

    Legislation:
    In 1994 Kuok introduced legislation that was passed by Parliament endorsing a road network
    for Western Province and road links into the adjoining Provinces of Gulf and Southern
    Highlands. This legislation is often quoted as an endorsement of and justification for the
    Kiunga-Aiambak project.

    Lobbying:
    Kuok has persistently lobbied in favour of the illegal Kiunga-Aiambak project and its
    extension.78 He has been equally persistent in his failure to acknowledge or counter the
    allegations of illegality, corruption and fraud that surround the project.

    “Landowner Company, Paiso Limited, and
    Concord Pacific Limited are the companies
    that saw the needs of my electorate and
    since have done a tremendous job in
    constructing a road network”
    Kuok letter to the Minister for Transport, August 1999

    Governor for Western Province, Norbert Makmop

    Norbert Makmop has been another staunch supporter of the illegal Kiunga-Aiambak timber
    project. Like Kuok, he has persistently lobbied in favour of the project and its extension and
    he has ignored the claims of illegality.

    In May 2002, Makmop was jailed for 18-months with hard labour in respect of an unrelated
    charge of misusing of public funds.79

    Lobbying:
    Makmop has persistently lobbied in favour of the illegal Kiunga-Aiambak project and its
    extension.80 He has been equally persistent in his failure to acknowledge or counter the
    allegations of illegality, corruption and fraud that surround the project.

    77 See Appendix 44, Independent Review Team Field Report
    78 See Appendix 45 for examples of this lobbying work
    79 The National, May 16th 2002, front page
    80 See Appendix 46 for examples of this lobbying work

  • Page 16 of 19

  • Attorney General, Francis Damem

    It is said that it pays to have friends in high places and if you want protection from illegal
    activities and allegations of corruption and fraud, where better to have a friend than at the
    head of the Government’s own Attorney General’s Department?

    Legal representation:
    Francis Damem has acted as the lawyer for Philip Lee and Concord Pacific and Paiso limited
    in several legal actions relating to the Kiunga Aiambak project.

    In 1999, when the Forest Authority threatened to take action against the Kiunga-Aiambak
    timber project, it was Francis Damem who went to court on behalf of Concord Pacific and
    Paiso to get an injunction against the Forest Authority.81

    In 2000, when landowners from Kiunga-Aiambak sought a court order that the timber project
    was illegal, it was Francis Damem who went to Court to defend Concord Pacific and Paiso.82

    In May 2002, despite the express instructions of the Prime Minister, Francis Damem failed to
    attend a Court hearing on behalf of the State to overturn the injunction against the Forest
    Authority. As a result the hearing was adjourned indefinitely.83

    Friends in high places:
    Two of PNG’s national newspapers (The National and The Independent) claim to have been
    threatened by Philip Lee over news stories about his business activities.

    In February 2002, The National ran this story:

    “In mid-2001, a newspaper publisher and two senior reporters were called by Mr
    Lee to his home-cum-office in East Boroko, where he threatened to sue the
    newspaper if it continued to publish reports about his business activities in PNG.
    During the meeting, Mr Lee allegedly told the publisher to be careful as he could
    influence the appointment of certain persons to very senior positions in the public
    service”.84

    Although not stated in the report, it is understood that during this meeting Lee referred
    specifically to Francis Damem and Utula Samana (see below) as two of his ‘friends in high
    places’ who he could rely on for support.

    81 See Appendix 9 above and Appendix 47, Copy of Court Order and Letter from Francis Damem
    82 See Appendix 48, Copy of Court Documents filed on behalf of the Defendants and signed by Francis Damem
    83 See Appendix 49, Media release from PNG Forest Watch
    84 The National, February 22nd 2002, front page

  • Page 17 of 19

  • Ex Forest Authority Managing Director, Thomas Nen
    In March 2002, Thomas Nen endorsed the issuing of a new and illegal Timber Authority to
    Concord Pacific, allowing them to harvest as much timber as necessary along a further 831
    kilometre corridor through the forests of Western Province.

    Illegal logging permit:
    In December 2001, the Provincial Forest Minister in Western Province signed a new Timber
    Authority for Concord Pacific.85 This logging permits gives permission for the logging of a new
    831-kilometre corridor through the forests of Western Province.

    This Timber Authority is totally illegal as it was granted with any attempt to follow either the
    general rules for Timber Authority applications in the 1993 Forestry Act or the specific
    requirements for road-line clearances contained in the Forestry Amendment Act 2000. The
    Timber Authority is also illegal as it is not based on the informed consent of the local forest
    resource owners.

    Despite the totally illegal nature of this new logging permit, on March 25th 2002, the Managing
    Director of the Forest Authority, Thomas Nen, wrote a letter to the Minister for Transport,
    Alfred Pogo, advising that the new timber Authority had been approved by the National Forest
    Board.86

    National Forest Board minutes for 2001 and 2002 seem to show that in fact the National
    Forest Board was totally unaware of the application for the Timber Authority and that Mr Nen
    was not being honest when he said in his letter that the Board had granted its approval.

    In a further twist, it would seem that at the time that he wrote this letter, the Managing Director
    was unlawfully occupying his position at the Forest Authority as his contract of employment
    had expired on February 18th. Thomas Nen was finally removed from the Forest Authority at
    the end of March 2002.

    85 See Appendix 18 above
    86 See Appendix 19 above

  • Page 18 of 19

  • Ex Secretary for Agriculture, Utula Samana
    Utula Samana is closely associated with Philip Lee and the illegal Kiunga-Aiambak timber
    project. He has facilitated fraudulent agricultural leases and staunchly supported a rubber
    project backed by Kaya and Lee in Western Province

    East Awin rubber project: This is another project developed by Philip Lee, this time through
    his company Philip Lee Investments Limited.87 Despite clear evidence that the ‘East Awin
    rubber project’ is just another scam cooked up by Philip Lee and David Kaya through a K2
    company,88 Utula Samana has doggedly supported the project,89 which has also been heavily
    backed by the Speaker of Parliament and Deputy Governor General, Bernard Narakobi.90

    Illegal agricultural leases: Philip Lee has been able to obtain fraudulent agricultural leases
    over land at Collingwood Bay in Oro Province through his association with Guau Zurenuoc
    and Utula Samana in the Departments of Lands and Agriculture.91

    Secretary for Lands, Guau Zurenuoc
    Guau Zurenuoc has been able to assist Philip Lee both in his previous capacity as Managing
    Director of the Forest Authority and his current capacity as Secretary for Lands. In both
    positions he has shown a willingness to be involved in illegality and fraud.

    Illegal extension of an illegal timber permit:
    In September 1997 the Managing Director of the Forest Authority, Guau Zurenuoc, put the
    Minister’s illegal extension of the timber permit granted to Paiso Limited into effect.92
    Zurenuoc acted to support his Minister despite clear evidence that he was fully aware that the
    Kiunga-Aiambak project was illegal and that the Minister did not have the power to extend the
    permit, and that there were serious environmental problems with the project.93

    The action of the Managing Director was totally illegal under the Forestry Act as
    • The Minister had no power to grant or extend a Timber Authority
    • There was no legal mechanism for the variation or extension of a Timber Authority
    • The extension was not specific as to time
    • There was no recommendation from the Provincial Forest Management Committee or
    consent from the National Forest Board
    • Regulations and guidelines prohibit a Timber Authority of more than one year in
    duration
    • Regulations and guidelines prohibit a logging corridor of more than 100 metres in
    width
    • There was no application in the prescribed form
    • There was no performance bond required

    Illegal land leases:
    Philip Lee has been able to obtain fraudulent agricultural leases over land at Collingwood Bay
    in Oro Province through his association with Guau Zurenuoc and Utula Samana in the
    Departments of Lands and Agriculture.94

    87 See Appendix 50, Letter from Philip Lee
    88 See Appendix 39 above and Appendix 51, Copy of company search record
    89 See for example Appendix 52, Letter from Samana (3/5/99)
    90 See Appendix 50 above
    91 See Appendix 53, Letter from Keroro
    92 See Appendix 15 above
    93 See Appendix 54, Letters from Zurenuoc
    94 See Appendix 53 above

  • Page 19 of 19

  • Prime Minister, Sir Mekere Morauta

    The Prime Minister cannot be directly linked to any of the companies or
    individuals involved in the illegal Kiunga-Aiambak timber project, but he is
    ultimately responsible for the failure of the Government to control the illegal
    logging. Despite a number of personal commitments and Government policy
    decisions on Kiunga Aiambak, no effective action has been taken.

    In May 2002, the Prime Minister issued a statement in which he said that the Kiunga Aiambak
    project ‘should never have occurred’. He said that his Government accepted the findings of
    the Independent Forestry Review in 2001 that ’the project failed to comply with legal
    requirements’ and ‘the Timber Authority and its extensions should never have been
    granted’.95

    The Prime Minister said that the Attorney General had been instructed to go to Court on the
    following Friday to challenge the Kiunga Aiambak logging project. In fact, as we have already
    seen above, the Attorney General ignored this instruction and the court case was adjourned
    indefinitely.

    In November 2001, the Government, through the National Executive Council, endorsed a
    Forestry Action Plan that contained a number of reform measures. The Plan included a
    commitment to implement the audit recommendations of the Independent Forestry Review
    and to ‘deal promptly and effectively with legal actions’. The audit recommendation made by
    the Forestry Review for Kiunga Aiambak was that ‘court action should be taken forthwith’.

    Despite these commitments and recommendations, the Prime Minister has overseen a
    situation where for the past 6 months effectively nothing has been done to implement any of
    these measures.

    The Government has also signed a Project Agreement with the World Bank for a Forestry and
    Conservation Project. That Project includes as a general covenant, a commitment by the
    Government to implement its own Forestry Action Plan. By not taking any effective legal steps
    to halt the illegal Kiunga Aiambak project, the Government is in breach of its agreement with
    the World Bank.

    The Prime Minister is also ultimately responsible for the fact that none of his Minister’s or
    senior civil servants have been dismissed or otherwise investigated for their illegal actions in
    supporting the Kiunga Aiambak project. In particular the Prime Minister has shown a great
    deal of tolerance for his Deputy Prime Minister and Minister for Forests, Michael Ogio.

    The Prime Minister has admitted that he has difficulty controlling Mr Ogio, but has offered the
    rather limp excuse that “I can’t do everything” and said ‘that he expects the Forest Authority
    to correct abnormalities pursued by Mr Ogio’.96

    95 See Appendix 3 above
    96 Post Courier, May 24th 2002, page 2