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