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• REPORT OF THE
  ADMINISTRATIVE INQUIRY
  INTO THE LAND
  TRANSACTIONS AND DEALS
  INVOLVING THE FIVE
  PORTIONS OF LAND BY THE
  MINISTRY OF DEFENCE AND
  THE MINISTRY OF PUBLIC
  ENTERPRISES AND STATE
  INVESTMENTS

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• Page 3 of 101

• INDEX

  1. Letter to Prime Minister Forwarding Report pg 3

  2. Establishment of Administrative Inquiry pg 4

  3. Terms of Reference and Statement of Case pg 4

  4. App oi n t m ent of P er sonnel pg 8

  5. Background — PNG Defence Force Land and Naval Base Relocation
  and Relevant NEC Decisions.

  6. E xe cu t i v e S um m ar y pg 15

  7. Lack of Cooperation by Kurkuramb Estates Ltd pg 19

  8. Portion 154, Milinch of Manu, Fourmil of Aroa, Central Province pg 20

  9. Portion 422 and 423, Milinch of Manu, Fourmil of Aroa, pg 22
  Central Province

  10. Portion 406, Milinch of Manu, Fourmil of Aroa, Central Province pg 28

  11. Defence Accounts pg 64

  12. Valuation Considerations pg 67

  13. Conspiracy Theory, and the Suspension of Departmental Heads pg 74
  and Two Ministers

  14. Portion 698 pg 80

  15. Customary land owner claims pg 86

  16. Specific Issues Raised by the Terms of Reference pg 87

  17. Chronology pg 90

  18. Abbreviations pg 97

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• AMINISTRATIVE INQUIRY
  INTO SALE AND PURCHASE OF LAND PORTIONS AND FINANCIAL TRANSACTIONS
  INVOLVING STATE AGENCIES AND STATE OWNED ENTERPRISES
  Muruk House, Kurnul Avenue
  P.O BOX 782, Waigani, National Capital District, Papua New Guinea
  Phone : 323 7000/76523694 Toll Free : 1803344
  Facsimile: 323 6478 Email : [email protected]

  REPORT OF THE ADMINISTRATIVE INQUIRY INTO THE LAND
  TRANSACTIONS AND DEALS INVOLVING THE FIVE PORTIONS OF
  LAND BY THE MINISTRY OF DEFENCE AND THE MINSTRY OF
  STATE ENTERPRESES AND INVESTMENTS

  The Honourable Peter O’Neill, CMG, MP
  Prime Minister of the Independent State of Papua New Guinea
  & Chairman of the National Executive Council
  Office of the Prime Minister
  P 0 B ox 639
  Waigani
  National Capital District
  Papua New Guinea

  Dear Prime Minister
  I have the Honour of submitting the Report of the Administrative Inquiry into the land
  transactions and deals involving the five portions of land by the Ministry of Defence and the
  Ministry of State Enterprises and Investments.

  Mr John Anthony Griffin, Q.C .

  Chairman

  Dated this 7th day of October 2017.

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• 2. Establishment of Inquiry

  2.1 On 7 March 2017, the National Executive Council, chaired by the Honourable
  Peter O’Neill, Prime Minister of Papua New Guinea, appointed the
  Administrative Inquiry into the transactions relating to the acquisition of land for
  the relocation of the Papua New Guinea Defence Force land and naval bases,
  particularly the Murray Barracks, Taurama Barracks and the Lancron Naval Base,
  all of which had been located in Port Moresby [see Annexure 2(1)].

  2.2 The establishment of the Administrative Inquiry was necessitated by the general
  public’s perception and outcry that the sums paid to acquire the parcels of land
  were exorbitant and the processes adopted were highly irregular. Matters raised
  in the public outcry are referred to below.

  2.3 It is understood that due to the then pending Supreme Court litigation as to the
  validity of the Commissions of Inquiry Act (Chapter 31), the National Executive
  Council considered it prudent and cost-effective to constitute an inquiry of an
  administrative nature as opposed to a Commission of Inquiry appointed under the
  Commissions of Inquiry Act (Chapter 31).

  3. Terms of Reference

  3.1 The Terms of Reference were settled in the following terms:

  INQUIRY INTO LAND TRANSACTIONAL DEAL INVOLVING FIVE
  PORTIONS OF LAND BY THE MINISTRY OF DEFENCE AND MINISTRY OF
  STATE ENTERPRISE & INVESTMENTS

  To: Mr John Griffin QC

  STATEMENT OF CASE

  Introduction

  Serious allegations of impropriety in five (5) land transaction deals have been raised on
  the floor of Parliament and the Prime Minister is required to take appropriate action
  to the Parliament through the National Executive Council, NEC.

  The principles of accountability and transparency in the conduct of government
  business have been seriously questioned in the land transactions warranting the
  Prime Minister at the authority of the National Executive Council to take firm action.
  The Prime Minister has appointed Mr John Griffin QC to inquire into and report on
  the five transactions concerned.

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• The appointment of the Inquiry will not prevent the Police Fraud Squad, the
  Ombudsman Commission and the Department of Personnel Management from
  carrying out investigation under their legislative powers.

  Background

  The allegations are that between 2014 and 2016 five (5) land acquisition transactions
  were entered into by the Ministries of Defence and State Enterprise & State
  Investments on behalf of the Papua New Guinea Defence Force (PNGDF) under
  alleged controversial circumstances. The land transactions which are the subject of this
  Inquiry are related to and concerned with the National Government decision made in
  2012 to relocate two Papua New Guinea Defence Force barracks and two other
  facilities to new locations. These are Murray Barracks, Taurama Barracks, the Lancron
  Naval Base at the Fairfax Harbour waterfront and the PNGDF Engineering Battalion in
  Lae.

  Following the National Executive Council Decision of 2012, certain portions of land in
  the Central Province were identified for the relocation by the various agencies of
  Government including Department of Defence and State Enterprises and Investments.
  The intention of the Government was for the Department of Defence as the lead
  agency to work in close consultation and cooperation with relevant government
  agencies to implement the NEC Decision on relocation in a planned and coordinated
  manner.

  However, it has come to light recently that land acquisitions were made by Ministry of
  Defence which included the funding assistance from Ministry of State Enterprise between
  2014 and 2016. These land transaction deals involving four (4) portions of land in
  Kairiku-Hiri District of the Central Province and another portion near ATS in NCD have
  become controversial raising serious questions on accountability and transparency in
  the transactions. The portions of land are described as:

  a) Portion 422, Milinch of Manu, Fourmil of Aroa, Central Province;
  b) Portion 423, Milinch of Manu, Fourmil of Aroa, Central Province;
  c) Portion 406, Milinch of Manu, Fourmil of Aroa, Central Province;
  d) Portion 154, Milinch of Manu, Fourmil of Aroa, Central Province; and
  e) Portion 698, Milinch Granville, Fourmil Port Moresby.
  It is alleged that the Ministries and Departments of Defence and State Enterprise and
  State Investments colluded with the proprietors of the said portions of land and paid
  millions of Kina in both compensation and purchase price, and that the proprietors
  were either associates, relatives and/or friends of persons holding responsible
  positions within the Ministries of Defence; State Enterprise. Lands and Physical
  Planning, Kumul Consolidated Holdings Limited, Motor Vehicle Insurance Limited,
  State Solicitor and the Valuer General.

  Objective

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• The objective of the Inquiry is to inquire into the land transactions referred to above and
  establish if there was impropriety in the transactions, The Inquiry will enquire into the
  transactions relating to each of the portions of land and establish facts related to
  issues of statutory compliance as regards the processes and procedures followed and
  payments made in respect of each of the portions of land concerned. The inquiry will seek
  to establish if there was impropriety on the part of any of those directly or indirectly
  involved in the transactions including State Ministers, Heads of Departments and State
  Agencies, Government officials and CEOs and Boards of State owned companies.

  The Inquiry is to be completed within the time given and present its final report to the
  Prime Minister for tabling at the National Executive Council.

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• TERMS OF REFERENCE
  I, Hon. Peter OWeill, CMG, MP, Prime Minster of Papua New Guinea, Chairman of the
  National Executive Council reposing confidence in your integrity and ability to do so, hereby
  require Mr John Griffin QC to inquire into the following matters:

  a) Inquire into and establish whether the National Government through its agencies
  approved for Defence to acquire the land portions identified as:

  1) Portion 422, Millinch of Manu, Fourmil ofAroa, Central Province;
  2) Portion 423, Millinch of Manu, Fourmil of Aroa, Central Province;
  3) Portion 406, Millinch of Manu, Fourmil ofAroa, Central Province;
  4) Portion 154, Millinch of Manu, Fourmil of Aroa, Central Province; and
  5) Portion 698, Millinch Granville, Fourmil Port Moresby.

  b) Inquire into and establish facts related to the role played by the Ministries for Defence and
  State Enterprises and Investment, and other relevant Government Departments and their
  Departmental Heads including Departments of Defence, Lands and Physical Planning,
  Justice and Attorney General, Kumul Consolidated Holding Limited, Motor Vehicle
  Insurance Limited, Central Supply and Tenders Board in the acquisition of land portions
  154, 406, 422 and 423 at Manumanu in the Kairiku Hiri District of Central Province and
  Portion 698 in the NCD.

  c) Inquire into and establish whether there was statutory compliance in the land acquisition
  process.

  d) Inquire into and establish the total cost of the acquisition of the five portions of land.

  e) Inquire into and establish whether there were any circumstances of conflict of interest in
  the land deals.

  f) Inquire into and establish whether there were any wrong doings by Ministers and the
  senior o zcers involved in the land transactions deal, in the best interest of the State

  g) Inquire into whether there was any impropriety in the transactions and as to who
  benefited from the transactions.
  AND I FURTHER direct that the Inquiry be conducted in the National Capital District, or at
  such other places in Papua New Guinea or elsewhere as to you may appear necessary and
  expedient.

  AND I FURTHER direct that you shall commence with the Inquiry without delay and
  proceed therein with all dispatch and render to me your final report within 4 weeks from the
  date of commencement of inquiry.

  Dated this 7th day of March 2017

  Hon, Peter O’Neill, CMG, MP
  Prime Minister & Chairman of the National Executive Council

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• 4, Appointment of Personnel

  4.1 Mr John Griffin Q.C. was appointed Chairman of the Administrative Inquiry.

  4.2 The Secretary to the Administrative Inquiry was Mr Mathew Yuangu.

  4.3 Mr Gibson Geroro was appointed Leading Lawyer.

  4.4 Mr Herbert Wally was appointed Lawyer Assisting.

  4.5 Mr Jerry Fruanga was appointed Assistant Investigator.

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• 5. Background to PNG Defence Force land and naval bases relocation

  5.1 When the Administrative Inquiry was established, the Department of Defence
  furnished it with documentation.

  5.2 A covering letter from the Department of Defence dated 20 April 2017 also set
  out background matters: see Annexure 5(1).

  5.3 It was made clear that the matters the subject of the Administrative Inquiry arise
  primarily from the decision in 2012 to relocate military and naval installations
  away from Port Moresby. The relocation involved a number of decisions being
  made by the NEC, which commenced with a formal decision to relocate Murray
  Barracks and the PNG Defence Force landing craft base (the Lancron Naval
  Base) to new locations. Those locations were plainly intended to be selected by
  the Defence Force.

  5.4 The Defence Force letter stated that the Defence Force looked for possible sites.
  It was said that there was a desire “to obtain sites which had State Leases for
  them to be acquired easily as we did not want to be entangled in customary land
  issues with landowners causing unnecessary delay in the program”.

  5.5 The letter stated that the Department of Defence liaised with the State Solicitor
  and Department of Lands and Physical Planning on the means and process
  involved to obtain the selected land. It stated that “we were advised to use the
  compulsory acquisition process.”

  5.6 The letter then referred to land purchases at Manumanu including Portions 422,
  423 and 406, Portion 406 being said to be the one selected for the maritime base.

  5.7 The land the subject of the Administrative Inquiry consisted of four portions
  (being Portions known as 154, 406, 422 and 423) located at Manumanu. The
  other Portion, namely 698, was not part of the exercise of purchasing land for the
  purpose of relocating Murray Barracks and the Lancron Naval Base. It was land
  situated adjacent to the Port Moresby airport. Portion 154 was not purchased. It
  was vacant State land, a State Lease over the land having expired in 2006.

  5.8 During 2015, Portion 422 was compulsorily acquired for K7.4 million, Portion
  423 was acquired for K9.2 million, and Portion 406 was acquired for K46.6
  million.

  5.9 The transaction that was first brought to public attention was the purchase of
  Portion 406 for K46.6 million. Portion 406 consisted of 847.25 hectares, and the
  price reflected a per hectare rate of approximately K55,000. Portions 422 and 423
  were smaller allotments but the per hectare rate paid for the land was much the

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• same in their case. The details of these transactions are taken up in the body of
  the Report.

  5.10 The fifth property was not one which was involved in the relocation of bases
  outside Port Moresby. It is dealt with separately in Section 13 of the Report.

  5.11 It is appropriate at this point to make reference to the decisions of the NEC that
  were made in conjunction with the base relocations.

  5.12 As stated above, in 2012, a decision was taken to relocate the naval and military
  bases to new locations outside of Port Moresby. The decision was made on 18
  October 2012 when the National Executive Council in NEC Decision number
  70/2012, “Approved to relocate the Lancron Naval landing base and Murray
  Barracks to a new location outside Port Moresby”.

  5.13 The Decision also approved the establishment of a project management team to
  co-ordinate and oversee the relocation. It also directed the Minister for Lands and
  Physical Planning to assign officers to work with the project management team in
  the conduct of valuation, physical planning, surveying, land lease and registration
  of land.

  5.14 Importantly it “allocated funding of K50 million to facilitate the relocation of the
  PNGDF landing craft base and Murray Barracks including the purchase of land
  and some initial construction works on roads and other engineer services.”

  5.15 The NEC also directed the Minister for Treasury and Minister for Planning and
  Monitoring to appropriate K50 million in the 2013 development budget to
  Defence for the purpose of relocating the PNGDF land craft base and Murray
  Barracks.

  5.16 It gave approval to the Defence Council to sell the existing PNG Defence Force
  land craft base and other non-core assets and negotiate concessional loans to fund
  the new military base outside Port Moresby.

  5.17 It approved the entry by the Defence Council and the Department of Lands and
  Physical Planning into financial negotiation with parties interested in acquiring
  the existing landing craft base and acquiring or leasing Murray Barracks
  properties, with all proceeds of sale to be used for the purpose of developing the
  new site for relocation.

  5.18 It stated that PNG Ports would have the first call to purchase the block of land at
  Lancron Naval Base at a price to be discussed and agreed by all parties.

  5.19 The NEC Decision number 70 of 2012 is Annexure 5(2).

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• 5.20 By NEC Decision number 46/2013, on 21 February 2013, the NEC directed the
  PNG Department of Defence and PNG Ports Corporation to urgently convene and
  negotiate a sale contract for the Lancron Naval wharf, and directed the IPBC
  Board and management to issue all statutory and legislative approvals to facilitate
  the transaction.

  5.21 NEC Decision number 46/2013 is Annexure 5(3).

  5.22 By its Decision number 168/2014 made on 12 June 2014, the NEC noted that it
  had approved the relocation of Murray Barracks and Lancron Naval Base in
  Decision 70/2012.

  5.23 By that same Decision number 168/2014, the NEC added Taurama Barracks to
  the relocation arrangements. The Decision is Annexure 5(4).

  5.24 By Decision number 95/2015 made on 29 April 2015, the NEC approved the
  transfer of title to the existing Port Moresby precinct from PNG Ports to the
  Independent Public Business Corporation (IPBC). The Decision stated that the
  NEC approved IPBC’ s plans to purchase the Lancron Naval base site and develop
  it. It also stated that “IPBC will lease the land back to PNG Ports so that they can
  continue operation at Motukea for a fee of KI per annum.” NEC Decision
  number 95/2015 is Annexure 5(5).

  5.25 By Decision number 6/2016 made on 4 February 2016, the NEC noted the
  existence of a Memorandum of Understanding between Kumul Consolidated
  Holdings and the PNG Defence Force, for the relocation of HMPNGS Basilisk
  (Lancron Naval Base).

  5.26 Kumul Consolidated Holdings (KCH) was the successor to IPBC. Both were
  State entities.

  5.27 The meeting also “directed KCH to factor the PNGDF Basilisk relocation site,
  planning, funding, and construction requirements as part and partial (sic) of
  KCH funding for the whole Port Moresby Port Redevelopment”. NEC Decision
  6/2016 is Annexure 5(6).

  5.28 By Decision number 360 of 2015 made on 10 December 2015, the NEC approved
  the 2016 Annual Business Trust (GBT) and Kumul Consolidated Holdings
  Operating and Expenditure Budget as part of the 2016 Annual Plans pursuant to
  Section 34 of the Kumul Consolidated (Amendment) Act 2015 and by its Decision
  208 of 2016, it approved the transfer of the Lae Development Port Project funds
  to the general business trust which constituted a variation of S34(5) of the KCH
  Act (as amended). The NEC Decision 360/2015 is Annexure 5(7).

  5.29 Two decisions of the Defence Council should also be mentioned at this point.

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• 5.30 By Defence Council Order number 28 of 2014 made on 4 June 2014, the Defence
  Council referred to the construction of a new Military Barracks and approved the
  following minimum requirements for military barracks:

  1. the land must be within 50km out of Port Moresby City;
  2. the total land area must be not less than 150 hectares and not more
  than 300 hectares either in parts or as a whole. The minimum for a
  parcel of land is 100 hectares and preferably within close proximity to
  each other.
  3. the land must be accessible by road;
  4. the land must be near water source for water supply;
  5. the land must have terrain and jungle for warfare training and
  shooting range;
  6. the land must not be under disputes and preferably have a defined
  ownership by way of registration and Title.

  5.31 It also resolved that the land ownership be transferred to the Defence Force. The
  Defence Council Order number 28 of 2014 is Annexure 5(8).

  5.32 By its Decision number 1 of 2016 made on 22 January 2016, the Defence Council
  approved the Memorandum of Understanding between PNGDF and Kumul
  Consolidated Holdings (KCH) for the relocation of the Basilisk Maritime base.
  The Defence Council Order 1/2016 is Annexure 5(9).

  Public announcement and outcry

  5.33 On 1 February 2017, the Post Courier reported that Prime Minister O’Neill had
  ordered an investigation into two senior ministers over an alleged land fraud
  contract worth K46.6 million. The Ministers were Dr Fabian Pok, Minister for
  Defence, and Mr William Duma, Minister for Public Enterprises and State
  Investments. It was reported that the Prime Minister had referred the matter to
  Police for criminal investigations.

  5.34 Allegations were made to the effect that the property was acquired for the
  Defence relocation for K46.6 million. The Prime Minister spoke in terms of
  seeking to recover the amounts paid to the company from which the land was
  acquired. The property was Portion 406 Manumanu.

  5.35 The Prime Minister was also reported as stating the Chief Secretary (Isaac
  Lupari) was to investigate the matter.

  5.36 The Opposition Leader, Hon. Don Polye, was reported as describing the deal,
  purchase, payment and the involvement of State institutions and various Ministers
  as fraudulent.

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• 5.37 There was the outcry from persons claiming to be customary landowners, who
  were contending that their interests had been adversely affected.

  5.38 The Prime Minister assured the traditional landowners, however, that no
  customary interests had been affected.

  5.39 On Friday, 3 February 2017, the Opposition Leader was reported as having
  lodged a complaint with the Ombudsman Commission regarding the decision of
  Kumul Consolidated Holdings to pay the K46.6 million for Portion 406.

  5.40 The leader of the Peoples Progress Party, Hon Ben Micah, was ordered to be
  ejected from Parliament by the Acting Speaker after he raised questions
  implicating Dr Pok and Mr Duma.

  5.41 Hon. Kerenga Kua was quoted as saying that “there were multiple issues, multiple
  layers of fraud, multiple layers of non-compliance of all the requisite procedures
  that one has to follow.”

  5.42 On 7 February 2017, it was reported that the Prime Minister had recommended
  that the NEC suspend Defence Secretary, Mr Vali Asi, Lands and Physical
  Planning Secretary, Mr Luther Sipison, Valuer General, Mr Gabriel Michael,
  Kumul Consolidated Holdings Managing Director, Garry Hersey, and MVIL
  Managing Director, Jerry Wemin.

  5.43 On 8 February 2017, the NEC directed the suspension of all the above-named
  persons as well as the Land Titles Commissioner, Mr Benedict Betata [Annexure
  5(10)].

  5.44 The Chairman of the Central Supply and Tenders Board, Philip Eludeme, was
  also suspended.

  5.45 The Prime Minister was quoted as saying that “he had decided to establish a
  Commission of Inquiry to examine the allegations that have been levelled against
  senior ministers and senior members of departments.”

  5.46 He reiterated that he had referred the matter to the Police Commissioner to enable
  the Fraud Squad to carry out its own investigations and he also said that he had
  referred the matter to the Ombudsman Commission.

  5.47 The Post Courier reported on 10 February 2017 that a march of Manumanu,
  Megabaira and Pinu landowners of the Kairuku-Hiri District had not eventuated
  the previous day due to heavy police presence. The protest march was said to be
  a protest against illegal land grabbing in Central Province, particularly the
  Manumanu area.

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• 5.48 It was, on 8 March 2017, that the Prime Minister announced the establishment of
  an “Administrative Inquiry”. The Post Courier is reported as saying that the
  Prime Minister was not able to set up a Commission of Inquiry because of the
  questioning of the validity of the Commissions of Inquiry Act. He said the
  appointment would not prevent the ongoing investigations by the Police Fraud
  Squad, the Ombudsman Commission, and the Department of Personnel
  Management.

  5.49 There were also allegations raised about the Portion 406 transaction in PNG
  Blogs.

  5.50 Both Dr Fabian Pok and Mr William Duma were reported as denying the
  allegations of fraud.

  5.51 Mr Duma was given considerable press in the Post Courier on 2 February 2017. He
  was reported as saying said that there was nothing fraudulent in the process of acquiring
  the land for relocation of the Defence Force facilities. He said that the Government
  started the process through the NEC Decisions to relocate the military facilities.
  This had occurred before he became Minister for Public Enterprises and State
  Investments. He said the transactions were in line with the NEC Decisions, and
  that the Department of Lands and Physical Planning, Department of Defence
  and KCH were merely implementing the Government’s decisions.

  5.52 He said the NEC had already given approval to KCH for the purchase of the Naval
  Base before he became the Minister for Public Enterprises and State Investments.
  He identified Portion 406 as being suitable for the relocation of the military barracks
  and associated facilities. He said the PNGDF had requested the compulsory
  acquisition of Portion 406 and that the PNGDF requested KCH to assist in the
  payment of the K46.6 million to the former owner. Mr Duma said he did not at any
  stage direct or influence any of the directors of KCH to make the decision to take
  over the prime land on which the naval base was located. Mr Duma contended no
  one had specified which of the transactions had appeared illegal and fraudulent.

  5.53 On Wednesday 7 February 2017, KCH is said to have provided a brief to the
  Police Commissioner, and on 8 February 2017 KCH provided a brief to the
  Ombudsman Commission.

  5.54 On 13 February 2017, the Police Commissioner said that the matter had been
  raised with the Director of Fraud and Anti-Corruption.

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• 6. Executive Summary

  6.1 The Administrative Inquiry centred on five parcels of land, especially three
  parcels of land located at Manumanu said to be required by the Department of
  Defence for relocation of naval and military bases then located in Port Moresby.

  6.2 The occupancy of a fourth parcel of land at Manumanu mentioned in the Terms
  of Reference (Portion 154) was at all relevant times already in the ownership of
  the State. It was unaffected by an existing State Lease as the former State Lease
  over the land had expired in 2006 and had not been renewed. The State gave that
  occupancy to the Defence Department on 9 December 2015. The issues raised in
  this Inquiry do not therefore directly arise in relation to that land.

  6.3 The Terms of Reference also identified a parcel of land near the airport in Port
  Moresby which was purchased by the Department of Defence. The
  Administrative Inquiry considered that the purchase of that land did require
  investigation. However, that land was not purchased for the purpose of the
  relocation of the naval base or barracks away from Port Moresby, and the
  transaction relating to it was outside the central theme of the Statement of Case
  and Terris of Reference.

  6.4 There was a public outcry which centred at that time on the compulsory
  acquisition of Portion 406, which had been compulsorily acquired for the sum of
  K46.6 million. It was alleged to be a corrupt transaction and that the Government
  had paid an excessive amount to purchase the land. In statements made
  subsequently to suspended heads of departments, it was alleged that there had
  been corrupt conduct on the part of officers of the Defence Department and other
  departments, in particular the Lands Department. The heads of relevant
  departments were suspended, as were two ministers, Messrs Pok (Defence) and
  Duma (Public Enterprises and State Investments).

  6.5 Shortly after the Administrative Inquiry was set up, Ms Sheila Sukwianomb,
  Director Policy & Legal Branch, of the Lands Department, advised the Inquiry
  that the relevant files relating to the properties the subject of the Inquiry had
  disappeared.

  6.6 The Administrative Inquiry took the view that that fact alone demonstrated that
  there had been considerable impropriety which almost certainly included
  financial inducements to public servants.

  6.7 The Administrative Inquiry also considered that there were other features that
  pointed to a similar conclusion. These features are dealt with in the body of the
  Report.

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• 6.8 At the time the Administrative Inquiry was appointed, the validity of the
  Commissions of Inquiry Act was under challenge in the Supreme Court. The
  argument had been heard, but the Court had reserved its judgment. The judgment
  was handed down recently, upholding the legislation.

  6.9 The Government appointed this Inquiry as an “Administrative Inquiry”. The
  issues had already been referred to the Police, and the Ombudsman Commission,
  for investigation, and those investigations are understood to be continuing.

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

  6.11 The Administrative Inquiry reached the conclusion that the amount paid by the
  State for Portion 406 was plainly excessive. It considered that the most plausible
  explanation was financial inducement causing manipulation of the valuation
  process.

  6.12 The Portion 406 transaction was the one which involved by far the highest
  amount of compensation. It was acquired by way of compulsory acquisition from
  Kurkuramb Estates Ltd, whose sole director and shareholder was one Christopher
  Polos. Examination of the Portion 406 transaction showed unusual features other
  than the amount paid for the land, a notable one being that the interest in the State
  Lease was acquired less than three months after it had been granted to Kurkuramb
  Estates Ltd. Kurkuramb Estates Ltd paid valuation fees only to acquire the land,
  and within three months a compulsory acquisition process was initiated which
  resulted in it being awarded K46.6 million by way of compensation for its
  acquisition at the instance of the Department of Defence.

  6.13 The lawyers for Mr Polos, Bradshaw Lawyers, forwarded to the Inquiry a letter
  which advised the Inquiry that Mr Polos would not assist the Inquiry. Mr Polos
  was within his rights in taking that stance because, as stated above, the
  Administrative Inquiry had no power to compel attendance or cooperation. The
  non-cooperation of Mr Polos, as well as the lack of its powers to inquire into the
  affairs of Kurkuramb Estates Ltd were severely limiting features in the
  investigative capacity of the Administrative Inquiry in this matter.

  6.14 The Inquiry also related to the earlier compulsory acquisition of two properties
  that were adjacent to Portion 406, namely Portion 422 and Portion 423. They had
  been acquired slightly earlier, and the Administrative Inquiry reached the
  conclusion that the amount paid for those allotments was also excessive. In those
  cases, the land had been purchased in 2011 for an amount which represented

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• K488 per hectare, whereas the amount of compensation awarded in 2015
  represented approximately K55,000 per hectare.

  6.15 Insofar as the information provided to the Inquiry constituted potential evidence,
  it was all of a circumstantial nature. It saw no actual instance of information as to
  payments made to other persons. This perhaps is not surprising since most of the
  information given to the Inquiry was from the Departments. However, the
  Inquiry thought that the most plausible explanation for the size of the government
  valuation of the properties was financial inducement.

  6.16 At the time the Inquiry was appointed, the matters that are the subject of the
  Inquiry had already been referred to the Police and the Ombudsman Commission.
  As distinct from the Administrative Inquiry, the Police and the Ombudsman
  Commission have substantial investigative powers. The Administrative Inquiry
  was of the view that, in the circumstances, findings of impropriety ought only be
  made after full investigations have been made by bodies with coercive powers.
  Full investigation was required to establish the extent of the wrongdoing and the
  persons involved.

  6.17 Despite the limitations it operated under, the Administrative Inquiry was however
  able to establish a large number of facts relating to the transactions, and has been
  able to indicate areas in which, in its view, further investigation is plainly
  required.

  6.18 The actions of the Government in obtaining the properties brought about a
  number of claims by persons who were asserting customary interests in the land.
  The full text of the claims are annexures to the Report. The Administrative
  Inquiry concluded, however, that all of the land in question had been acquired by
  the Colonial Administration, and in all instances at some stage the properties had
  become subject of State leaseholds. State leases were current in four of the five
  properties at the time of their acquisition at the instance of the Defence
  Department, and as a result, the Administrative Inquiry reached the conclusion
  that none of these claims are viable.

  6.19 For reasons that will be apparent from the Report, the Administrative Inquiry
  considered that there would plainly be a case of corruption against Mr Duma if it
  were the case that he controlled the affairs of Kurkuramb Estates Ltd.

  6.20 For reasons that will also be evident from the Report, the Administrative Inquiry
  found it very strange that the direction to the Lands Department to compulsorily
  acquire Portion 406 came from Minister Pok, especially as there was no Defence
  Council recommendation for the acquisition of Portion 406 and there had been no
  feasibility study. The Administrative Inquiry thought the allegation of corruption
  against Dr Pok would be strengthened if Mr Duma were shown to have been in
  control of the affairs of Kurkuramb Estates Ltd. The reasons for this conclusion
  appear in Section 11.

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• 6.21 The position of the heads of departments involved in the matter is considered in
  Section 13 of the Report.

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• 7. Lack of Cooperation by Kurkuramb Estates Ltd

  7.1 On 18 May 2017 the Inquiry received a letter from Messrs Bradshaw Lawyers.
  The letter indicated that Bradshaw Lawyers were acting on behalf of Kurkuramb
  Estates Ltd. The letter made reference to the establishment of the Inquiry, and
  noted that the term, “g”, of the Terms of Reference for the Inquiry stated:
  “Inquire into whether there was any impropriety in the transactions and as to who
  benefitted from the transactions”.

  7.2 Bradshaw Lawyers stated that their client was concerned about the above term,
  particularly the requirement that the Administrative Inquiry should inquire “as to
  who benefittedfrom the transactions”.

  7.3 Part of the letter pointed out that the client of Bradshaw Lawyers was a company,
  and the client’s shareholder was a private individual.

  7.4 The letter proceeded to state that “our client therefore cannot be subject to” an
  Administrative Inquiry. The letter concluded: “We are instructed that our client
  won’t agree to or participate in any investigation or inquiry into or concerning
  terms (0 above”.

  7.5 The analysis of the transactions made by the Administrative Inquiry shows that
  the most significant transaction, especially in money terms, was the transaction
  involving Kurkuramb Estates Ltd, namely the compulsory acquisition of Portion
  406 at Manumanu. Also, Item (8) in the Terms of Reference is an aspect of the
  company’s affairs with which the Inquiry was particularly concerned.

  7.6 Not having the powers of a Commission of Inquiry, the Administrative Inquiry
  was not in a position to dispute the content of the letter from Bradshaw Lawyers.
  The consequence was that no information, or documentation, could be obtained
  from either Kurkuramb Estates Ltd or its principal, Christopher Polos. The
  Administrative Inquiry was not able to require Mr Polos to attend and give
  evidence on oath.

  7.7 It will be evident however from the analysis of the Portion 406 transaction in this
  Report that the inquiry into Kurkuramb Estates Ltd, its registered principal and its
  documentation would be an essential part of any proper investigation into the
  compulsory acquisition of Portion 406.

  7.8 The Administrative Inquiry wishes to make it clear that Mr Polos was perfectly
  entitled to take the stance indicated above. In circumstances in which the
  Administrative Inquiry was not entitled to require Mr Polos to cooperate, Mr
  Polos was not bound to assist the Administrative Inquiry.

  7.9 The letter of 18 May 2017 from Bradshaw Lawyers is Annexure 7(1).

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• 8. Portion 154

  8.1 One of the areas of land which the Department of Defence proposed to utilise for
  the relocation of the military installations is described as Portion 154. That land
  is proximate to Portions 406, 422 and 423, Manumanu. Unlike the other parcels
  of land at Manumanu referred to in the Terms of Reference, Portion 154 was not
  acquired for the purpose of relocation of military installations. Instead, as a
  previous State Lease over the property had expired in 2006 with no further
  subsequent grant of lease the land, it was capable of being applied to Defence use
  by means of the usual procedure followed in such instances, namely grant of a
  Certificate of Occupancy by the State in favour of the Department of Defence.
  That is what occurred in this case. A Notice of Reservation was signed by Mr
  Sipison, the Secretary for Lands and Physical Planning, on 9 December 2015
  [Annexure 8(1)], and advertised in the National Gazette on 10 December 2015
  [Annexure 8(2)].

  8.2 A submission was made to the Administrative Inquiry by Mr Java Beraro. Mr
  Beraro stated he was the representative of “Magabaira Village — Kabadi”
  customary landowners.

  8.3 The accompanying statement disputed the State title to the “Southern portion of
  Portion 154, Land in Kabadi, Central Province”. [Annexure 8(3)]

  8.4 As previously stated, the Administrative Inquiry was advised on 20 June 2017,
  that the Lands Department files relating to Portion 154 were among the missing
  files at the Department. That information was part of broader information given
  to the Administrative Inquiry by Ms Sheila Sukwianomb, Director — Policy &
  Legal Services, Department of Lands, as to the “files missing” in the department.

  8.5 Accompanying documentation to Mr Beraro’s statement included a letter from
  Central Provincial Administration Lands & Planning dated 24 January 2011. The
  letter was signed by Gelu Raga, Lands Officer [Annexure 8(4)].

  8.6 Mr Raga stated that Portion 154 was acquired State land. He stated that the
  nature of the title was as documented in a document marked “DA213” . He stated
  that the area was 2023.43 hectares, as shown by registered Survey Plan 48-19.

  8.7 He stated that “the status of land under such acquisition is usually fully
  purchased land”.

  8.8 Mr Raga further stated that “a registered manual lease” for 99 years had issued in
  favour of Kanosea Estate in 1907. The term of the lease was from 19 April 1907
  to 19 April 2006.

  8.9 Mr Raga concluded that the land was “State land with an expired registered
  lease”.

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• 8.10 The Department of Lands has stated that the document “DA213” is a missing
  document. Despite the fact that that document cannot be produced for
  examination, the Administrative Inquiry sees no reason for going behind the
  content of Mr Raga’s letter.

  8.11 Accordingly, the Administrative Inquiry concluded that the claim described by
  Mr Beraro is not a viable claim.

  8.12 Other customary rights claims are dealt with in Section 14.

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• 9. Portions 422 and 423
  9.1 Portions 422 and 423 may be dealt with together.

  9.2 The recent history of Portions 422 and 423 Manumanu is that, prior to 2011, there
  was an allotment of land in Manumanu which was owned by Seromu Investments
  Ltd. Its property description was Portion 389, Milinch of Manu, Fourmil Aroa.
  That land had been the subject of State Leases commencing in 1968. It was
  proximate to Portion 154, the area referred to in the previous section of this
  Report, and also proximate to Portion 406, which will be dealt with in Section 10.

  9.3 In 2011, companies associated with Mr Philip Eludeme agreed to purchase part of
  Portion 489, for the sum of K200,000. The land was then subdivided. Three
  portions were created, Portion 422, Portion 423, and Portion 2724.

  9.4 As a result of these arrangements, Portion 422 became the subject of a new State
  Lease issued in favour of Flystone Amusements Ltd, and Portion 423 became
  subject to a lease to Kosi Investments Ltd. Those companies were the companies
  associated with Mr Eludeme.

  9.5 The land purchased by Flystone Amusements Ltd contains 138.45 hectares. It
  was initially called Portion 2722, but it became Portion 422. The portion acquired
  by Kosi Investments Ltd was initially Portion 2723, and it became Portion 423. It
  contained 170.5 hectares.

  9.6 The third portion, being the portion that was not subsequently compulsorily
  acquired, contained 100 hectares. It appears to have retained its portion number
  of 2724.

  9.7 The total area of the land purchased by the Eludeme interests was therefore 409
  hectares. The purchase represented a per hectare purchase price of K488. Mr
  Eludeme said he had incurred survey fees of K60,000 following the purchase and
  also that he had fenced the land.

  9.8 The two portions of land the subject of the Inquiry were advertised for sale in
  November 2014 through Mr Eludeme’s agent, Belden Memi & Associate
  Valuers, Auctioneers and Real Estate Agents.

  9.9 Belden Memi & Associate Valuers, Auctioneers and Real Estate Agents
  advertised Portions 422 and 423 for sale in November 2014. The advertisements
  were published on 18 November 2014 and 20 November 2014. The
  advertisements were identical and one of the advertisements is Annexure 9(1).
  Portion 422 was advertised in the following terms:

  “138.45 Hectares, boundary fence, access roads, 1 x cow paddock under
  construction, 2 water ponds, adjacent to Hiritano Highway, fairly flat all
  through.”

  9.10 Portion 423 was advertised as follows:

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• “170.85 Hectares, boundary fence, access roads, leads to sea, adjacent to
  Hiritano Highway, and Portion 2722.”

  9.11 A written submission was prepared in relation to this matter on behalf of the
  Eludeme interests by Messrs Sirae and Co. Lawyers dated 11 May 2017.

  9.12 In the submission, it is stated that, on 5 March 2015, Belden Memi & Associate
  Valuers, Auctioneers and Real Estate Agents rejected an offer by the Department
  of Defence to purchase the properties [Annexure 9(2)]. It is said that the
  Department of Defence offered K7.2 million for Portion 422 and K9.2 million for
  Portion 423 [Annexure 9(3)].

  9.13 That was followed by the issue of a Notice of Compulsory Acquisition in respect
  of each of the pieces of land. That notice, which also embraced other properties
  not relevant to this matter, was signed by Romilly Kila Pat as delegate of the
  Minister for Lands and Physical Planning. The Notice, which is annexed
  [Annexure 9(4)], declared that the land was being “compulsorily acquired for
  public purposes and purposes connected with the defence or public safety of the
  Papua New Guinea being for the relocation of the Defence Force Murray
  Barracks”.

  9.14 The Notice of Compulsory Acquisition was issued on 22 April 2015, following
  which Belden Memi and Associates indicated, by letter dated 27 April 2015 to the
  Defence Council, that the owners would agree to sell the land. The Defence
  Council had approved the purchase of the two Portions on 27 February 2015
  [Annexure 9(5)].

  9.15 The Lands Department issued Notices to Treat dated 22 November 2015 to
  Flystone Investments Ltd [Annexure 9(6)] and Kosi Investments Ltd [Annexure
  9(7)]. These notices were signed by Mr Luther Sipison, the then Secretary of
  Lands and Physical Planning in his capacity as delegate of the Lands Minister.
  Presumably this step was taken because Notices to Treat had not been served
  earlier in the year, notwithstanding the issue of Notices of Compulsory
  Acquisition at that time.

  9.16 A Notice of Compulsory Acquisition of Portion 422 and Portion 423 was reissued
  on 30 November 2015 [Annexure 9(8)], after the Ombudsman had, on 9 October
  2015, issued a clearance for the transaction to proceed on a compulsory
  acquisition basis. The transactions were finalised on 3 December 2015 by way of
  instruments entitled Sale and Transfer of Land [Annexure 9(9)] and Deed of
  Release [Annexure 9(10)]. Subsequently, a Certificate under Section 13(6) of the
  Land Act 1996 was published in the National Gazette on 24 December 2015
  dispensing with the notice to treat process [Annexure 9(11)].

  9.17 As stated above, Mr Eludeme was, until his suspension on 8 February 2017,
  Chairman of the Central Supply and Tenders Board. The Central Supply and
  Tenders Board had a prior involvement with the matter in that, at an earlier stage,
  the Board advertised publicly for procurement of land for the Department of
  Defence’s intended purposes, and a tender process was put into place.

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• 9.18 Mr Eludeme’ s lawyers dealt with this issue in the written submissions. They
  stated:

  “As far as our client is aware, in respect of CSTB tender process, CSTB
  advertised publicly sometime back for procurement of land for the
  Department of Defence ‘s intended purpose, however, there were no bids
  for the tender. There being no bids for the tender, the Department of
  Defence was advised of the same and that there was nothing else the CSTB
  can do under its tender process. That it was now up to the Department to
  acquire land on its own.”

  9.19 Mr Eludeme also disclosed a letter he wrote to the Ombudsman Commission
  dated 10 July 2015. In that letter Mr Eludeme disclosed as “major transactions”
  the compulsory acquisition of Portion 422 for K7.2 million from Flystone
  Amusements Ltd by the Defence Force of Papua New Guinea, and the
  compulsory acquisition of Portion 423 from Kosi Investments Ltd by the Defence
  Force for the sum of K9.2 million. He disclosed that the two companies were
  owned by him and his family members, and he stated that the interest in those
  companies had also been disclosed in his annual returns to the Chief
  Ombudsman. He further stated that he disclosed the transactions under section 4
  of the Organic Law on Duties and Responsibilities of Leaders and Public
  Officers.

  9.20 He asked the office to inform him urgently should it wish to inquire, or require
  further information, or did not agree with the transactions going through.

  9.21 The letter concluded:

  “Please be advised that should I not have any word from you within the
  next 14 days, I will assume [the Ombudsman Commission] has no issues
  and will allow the transactions to proceed.”

  9.22 Copies of the letter were sent to various people, including Mr Romilly Kila Pat,
  the then Secretary of the Department of Lands and Physical Planning.

  9.23 Mr Eludeme also disclosed to the Inquiry the reply of the Acting Chief
  Ombudsman. The reply letter referred to the fact that the Ombudsman
  Commission had, on 1 October 2015, granted Mr Eludeme approval to go ahead
  with the major transactions he declared to the Commission his letter of 10 July
  2015. The letter had permitted Mr Eludeme to proceed with his arrangements
  with the relevant government entities and the relevant banks “in finalising those
  business transactions”.

  9.24 The Commission proceeded to advise Mr Eludeme that if, in the course of
  conducting his leadership duties and responsibilities in the future, a conflict of
  interest situation arose, he should notify the Ombudsman Commission as soon as
  possible.

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• 9.25 The letter thanked Mr Eludeme for notifying the Commission of the “major
  transactions involving you and your companies”.
  9.26 Mr Gabriel Du Karap of GDK Valuers and Property Consultants, who is a private
  registered valuer, valued Portion 422, as at 1 March 2015, at K7. 2million. He
  valued Portion 423 at K9.2 million as at 1 March 2015.

  9.27 Mr Du Karap’s valuations are Annexures 9(12) and 9(13) respectively.

  9.28 These valuations represented K52,004.33 per hectare for Portion 422, and
  K53,848.41 per hectare for Portion 423.

  9.29 The wording on the Du Karap valuations would suggest that Mr Du Karap made
  his valuations on behalf of the Department of Defence, but apparently he was
  instructed by Mr Eludeme’s agent, Belden Memi and Associates. Mr Moses Kila,
  the Assistant Valuer General, signed valuations at slightly higher figures than Mr
  Du Karap’s figures. Mr Kila’s valuations are Annexures 9(14) and 9(15)
  respectively.

  9.30 What the Panel finds strange about the transactions with respect to Portions 422
  and 423 is the valuation evidence.

  9.31 Mr Eludeme’s agent put forward to the Lands Department the valuations prepared
  by Mr Du Karap, a former Lands Department employee who had become a
  private valuer. His valuations reflected a value in excess of K50,000 per hectare.
  For reasons advanced elsewhere in this Report, the Panel considers that that value
  is vastly excessive.

  9.32 It is not unusual in valuation for the owner’s valuer to put forward a high
  valuation. As has often been said, valuation is not an exact science, and the
  owner’s valuer can legitimately put forward a valuation which is as high as he can
  genuinely support by way of argument.

  9.33 One then expects the acquiring authority’s valuer to produce a valuation which at
  least exposes the fact that the owner’s valuation is or may be excessive.

  9.34 In this case, Mr Kila’s valuation did not achieve that effect because Mr Kila’s
  valuation, in the case of both properties, was even higher than the owner’s
  valuation. One would expect Mr Kila’s valuation to place emphasis on the fact
  that the same land had been purchased by Mr Eludeme’s interests in 2011 for a
  price which reflected K488 per hectare, particularly as Mr du Karap’s valuation
  must have placed little if any emphasis on that.

  9.35 The earlier transaction reflecting K488 per hectare was said by Mr Eludeme to be
  a forced sale. However, it was also a sale in the market place, and it was the sale
  of the same land only a few years earlier. Ordinarily, it would have to be viewed
  as an extremely significant indicator of value, if not the most significant indicator.

  9.36 The Administrative Inquiry was of the view that the most plausible explanation
  for Mr Kila’s valuation and behaviour was financial inducement. On Mr Gabriel’s

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• Page 29 of 101

• account, Mr Kila had no right to carry out valuations for amounts over K500,000
  at all. The valuations he produced on their face appeared to be stamped and
  signed in such a way as to convey the impression that they were prepared by the
  Valuer General. They give no indication that they were prepared by Mr Kila. In
  the case of Portion 422 and 423, he produced valuations which could not have
  taken into account the previous sale of Manumanu land, of which the land being
  valued was a part. He claims to have relied, for comparable sales, on land in, and
  in the vicinity of, Port Moresby, whereas this land was 80 kilometres away.

  9.37 When first interviewed by the Administrative Inquiry he did not mention his
  valuation of Portions 422 and 423, but only his valuation of Portion 406.

  9.38 Mr Kila stated that he had received no financial benefit from his valuations.

  9.39 For his part, Mr Eludeme claimed that he had nothing to do with the valuation
  exercise.

  9.40 The valuation issue is further addressed in Section 12. The Administrative Inquiry
  questioned both Mr Kila and Mr Eludeme. Significantly, however, the
  Administrative Inquiry was not entitled to cross-examine either Mr Eludeme or
  Mr Kila on oath. That was a restrictive feature of the limited investigative
  powers which applied to the Administrative Inquiry and which was of special
  relevance in this instance.

  9.41 The Portion 422 and 423 transactions, therefore, must be placed alongside other
  items which require further investigation.

  Mr Eludeme — Panel’s Conclusions

  9.42 As stated above, Mr Eludeme informed the Administrative Inquiry that he had
  nothing to do with the valuation of Portions 422 and 423. He also said that the
  Du Karap valuations were obtained by his agent.

  9.43 It would appear surprising that Mr Eludeme would have taken no interest in the
  valuations, particularly as he was the Chairman of the Central Supply and
  Tenders Board.

  9.44 In the compulsory acquisition of Portion 422 and Portion 423 it was plainly a
  highly desirable factor, from the point of view of the owner of the land, that Mr
  Kila should produce valuations which were in higher sums than the amounts
  contained in the valuations of the private valuer, Mr Du Karap. That factor in
  real terms rendered the situation one in which it could not be successfully argued
  by the State that the compensation should be any less than Mr Du Karap’s
  figures.

  9.45 Neither of those factors however proves that Mr Eludeme provided Mr Kila with
  financial inducement to produce unduly favourable government valuations of
  Portions 422 and 423.

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• 9.46 As the principal of the corporate owners of Portions 422 and 423, Mr Eludeme
  would have benefited from any action directed at inflating the assessment of the
  value of Portions 422 and 423 for the purpose of the compulsory acquisition of
  those properties. Accordingly, further investigation of these transactions should
  entail further investigation of the circumstances surrounding the compulsory
  acquisitions of Portions 422 and 423, including the relationship (if any) between
  these transactions and the Portion 406 transaction. That is not to say that it is
  likely that further investigation will establish a case against Mr Eludeme. Further
  investigations may in fact establish the reverse, namely that there is no case
  against Mr Eludeme. But, for the reasons advanced, further investigation is
  necessary.

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• 10. The Portion 406 Transaction
  (1) Former State Lease

  10.1 In 2009 a State Lease was granted over Portion 406 in favour of M&M
  Investments Pty Ltd. The commencement date was 6 August 2009.

  10.2 The lease was made subject to the following conditions:

  (a) The lease shall be used bona fide for Agriculture (Mix Farming) purpose.

  (b) Rent shall be a One Thousand Five Hundred (1,500.00) Kina per annum for the
  first ten (10) years of the lease at which time the annual rental will be
  reassessed at five per centum (5%) of a reappraised valuation of the subject
  land or at whatever other rate that maybe decided as being appropriate at the
  time and such reappraisals shall be made every ten (10) years thereafter.

  (c) Of the land suitable for cultivation the following proportions shall be planted in
  a good and husbandlike manner with a crop or crops of economic value which
  shall be harvested regularly in accordance with sound commercial practice.

  i. One-fifth in the first period of five (5) years of the term;

  ii. Two-fifths in the first period of ten (10 years of the term; and

  iii. Three fifths in the first period of fifteen (15) years of the term.

  (d) Provided always that at any time during the first period of two (2) years it
  appears to the Land Board that reasonable efforts are not made to fulfil the
  improvements conditions, it may recommend the Minister for Lands, may if he
  thinks fit by Notice in the National Gazette in accordance with the provisions of
  the Land Act No. 45 of 1996 forfeit the lease accordingly.

  (e) The lessee or his agent shall take up residence or occupancy of his/her block
  within six (6) months from the date of grant.

  10.3 A map attached to the State Lease showed the area of Portion 406 to be 847.25
  hectares.

  10.4 A Notice issued by the Secretary for Lands set out the application fees payable by
  M&M Investments Pty Ltd as follows:

  • Survey fee K600
  n Lease preparation fee K 50
  Total K650
  10.5 There was an accompanying document prepared by Mr Chris Kabaru, the then
  Valuer General. That document stated that the land was located outside the

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• physical planning development area and was classified as Rural and suitable for
  agricultural development. It stated that no services were connected to the property
  and all amenities like shops, schools, banks, general hospital, post office and local
  market were provided from Port Moresby.

  10.6 The document stated that the land is located approximately 75 kilometres west of
  Port Moresby along the Hiritano Highway.

  10.7 The Valuer General noted that the land was “generally level throughout”, a
  feature which the Panel observed on inspection of the property.

  10.8 The unimproved value of the land upon which the annual rental was based, was
  assessed at K30,000 as at 25 February 2009. This assessment of the unimproved
  value of the land amounted to a per hectare value of slightly more than K35 per
  hectare.

  10.9 An accompanying Inspection Report stated that there were no improvements on
  the land. It stated there once existed improvements consisting of a house, sheds,
  gates, fencing and windmill. These items were all removed by people living
  nearby after a cattle ranch had ceased its operation on the land in the early 1990s.
  The Inspection Report states that the previous cattle ranch was known as the
  Rorona Cattle Ranch. The report also stated that the Portion was mostly flat,
  unoccupied and undeveloped.

  10.10 M&M Investments Pty Ltd was said to be a 100% national owned company of
  which the principal owners were from the Kenosi area.

  10.11 The Inspection Report revealed that the company had lodged an expression of
  interest letter which contained its proposals for the development of the area plus a
  business plan. The business plan revealed that the company wished to establish a
  cattle project.

  10.12 The company had indicated it would secure funding of about K2 million through
  the Livestock Development Corporation, a State-owned entity. In addition, it was
  indicated that the applicant would like to procure stock and rebuild the ranch on
  the property.

  10.13 Mr George Michael Sariman was a director of M&M Investments Pty Ltd. Mr
  Sariman provided the Administrative Inquiry with a number of development and
  business proposals which had been prepared for Portion 406, one of which was
  for the prospective cattle ranch development. Another development proposal was
  a Poultry development including a feed mill. Another proposal was a cocoa
  development and the fourth was a subdivision proposal.

  10.14 It is a reasonable inference that none of the proposals was put into place before
  the Lands Department took action to forfeit the M&M Investments Pty Ltd lease
  in 2014.

  10.15 Mr Sariman says that title was granted to his company on 13 October 2009,
  following which he undertook a number of development plans and feasibility

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• studies, and that the company consulted various financiers, potential development
  partners and other potential stakeholders.

  10.16 He says that, in 2011, his company commenced the “Rorona Redevelopment
  Project” as planned, and was in dialogue with the Livestock Development
  Corporation. He says that the project did not materialise when there was a
  change in the hierarchy in that entity.

  10.17 He states that the company then went into planning and researching other
  agriculture options. He says the company was approached by a number of
  potential development partners and financiers. Whilst those negotiations were
  still pending the company undertook a chicken farming and poultry processing
  operation, and cocoa development. He says the company also engaged the
  services of a surveyor to do a ground re-survey of the land providing for
  subdivision into 5 portions.

  (2) Forfeiture of M&M Investments’ State Lease

  10.18 Mr Sariman states that M&M’s surveyor was attending to the matter of the
  registration of the prospective subdivision when he saw a Notice to Show Cause
  dated 28 February 2014, a forfeiture notice dated 14 April 2014, and a gazettal of
  the forfeiture notice G151 of 24 April 2014.

  10.19 Mr Sariman said his company had not received or seen a notice of any kind in
  relation to the forfeiture.

  10.20 He subsequently saw a further notice, namely a “Notice of Compulsory
  Acquisition”, which was published in The National newspaper.

  10.21 Mr Sariman states he was shocked to learn that the company’s land had come into
  the ownership of Kurkuramb Estates Ltd.

  10.22 On 23 February 2016, the company engaged Wariniki Lawyers to act on its
  behalf.

  10.23 M&M Investments Pty Ltd instituted proceedings in the National Court
  challenging the forfeiture of the land by the Department of Lands, and the
  subsequent compulsory acquisition. The defendants named in the proceedings
  include the Independent State of Papua New Guinea, Kurkuramb Estates Ltd and
  Kumul Consolidated Holdings.

  10.24 The Administrative Inquiry does not propose to address the entitlement of the
  State to effect the forfeiture of the interests of M&M Investments Pty Ltd partly
  in view of the fact that that issue is before the National Court. Furthermore, the
  unavailability of the Lands Department file would render any attempted
  resolution of that issue difficult, as would the fact that the Administrative Inquiry
  is not in a position to resolve factual issues that appear to be involved, in
  particular as to whether a notice of forfeiture was served on M&M Investments
  Pty Ltd in accordance with the requirements of s. 122 of the Land Act 1996.

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• 10.25 The Administrative Inquiry does however propose to comment on the separate
  issue of the motive behind the forfeiture action taken by the Lands Department.
  The issue in that regard is whether the forfeiture action was genuine forfeiture
  action on the basis that M&M Investments Pty Ltd had not carried out the
  improvement conditions or whether, on the other hand, officers of the Lands
  Department effected the forfeiture for an ulterior motive or motives.

  10.26 In support of the view that the forfeiture was a bona fide forfeiture procedure is
  the fact that an inspection of the land at about the time of the forfeiture would
  probably have revealed non-compliance with the improvement covenants. As
  indicated above, the companies planned enterprises had not come to fruition as
  planned. Furthermore, Mr Sariman has not suggested that he kept the Lands
  Department informed of the progress he was making in his endeavour to establish
  a commercial enterprise.

  10.27 On the other hand, there was no evidence that the Lands Department made any
  comprehensive inquiry to ascertain how the company was progressing. The
  action of the Lands Department is also inconsistent with the Panel’s belief that
  there were and are many cases in Papua New Guinea of landowners who have not
  complied with improvement conditions but whose land has not been forfeited.

  10.28 The forfeiture may have occurred because the Lands Department officers had
  knowledge of the prospect that Portion 406 might become of interest to investors,
  and may even have had advance warning of potential interest in the area by the
  Defence Department. They may have wished to clear M&M Investments Pty Ltd
  off the title for that reason. An illicit motive behind the forfeiture is more
  consistent with the removal of the file relating to the forfeiture action. If the
  forfeiture had been a genuine forfeiture based on non-compliance with covenants,
  there would appear to be no reason why there would be any interest in causing the
  removal of the file relating to that transaction.

  10.29 An associated possibility is that Portion 406 was actually identified by Lands
  Department officers as a property that could be recommended to Defence for
  relocation purposes, and that the forfeiture action was taken for that reason. Of
  course, another possibility is that the forfeiture was genuine, but an astute
  observer of State Lease forfeitures observed that the forfeited land was land
  which was or might become of interest to the Defence Department.

  10.30 The file relating to the advertising of the land and its grant to Kurkuramb is
  missing, although it is known that a State Lease was granted to Kurkuramb of
  Portion 406 on 30 July 2015 [Annexure 10(1)]. It is also a very unusual feature
  that Portion 406 was advertised for tender in circumstances in which adjacent
  land (i.e. Portions 422 and 423) was being sought by the Department for defence
  purposes. If the forfeiture of Portion 406 was genuine, one would have thought
  the inquiries would have been made of the Defence Department at that point in
  time. The Lands Department and its valuers were involved in the acquisition of
  422 and 423. Those acquisitions took place over almost the whole of 2015, the
  very period in which the grant of Portion 406, and the subsequent compulsory
  acquisition of Portion 406, occurred.

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• ( 3) The Defence Decision in Favour of Manumanu

  10.31 On 27 February 2015 the Defence Council, by decision number DCO 05/2015
  had approved Portions 2722 and 2723, Milinch of Manu, and Fourmil Aroa, for
  the new Defence Force site. The Defence Council noted that Portion 2722
  comprised 138.45 hectares and its sale value was K9million. It also noted that
  Portion 2723 comprised 170.85 hectares and its sale value was K 13million. As
  indicated previously Portion 2722 subsequently became Portion 422, and Portion
  2723 became Portion 423, and those Portions were acquired later in 2015 from
  Flystone Amusements Ltd and Kosi Investments Ltd. As previously stated, these
  Portions are adjacent to Portion 406. The detail of the purchase of those portions
  was set out in section 8.

  10.32 In relation to the relocation of the Lancron Naval Base the Defence Council
  noted:

  “… that the relocation of the Lancron Naval Base, HMPNGS Basilisk has
  recommended investigation under the same program and may have a bearing on
  the budget however discussions is ongoing with PNG Ports to provide upfront
  payment for the sale of the Lancron which can be used to acquire land for the new
  site.”

  10.33 On 25 August 2015 a meeting occurred between Mr Hersey, the Managing
  Director to Kumul Consolidated Holdings, a State Enterprise, the Commander of
  the PNGDF, the Defence Secretary and the Defence Project Director, to discuss
  the relocation of the Lancron Naval Base. Apparently further meetings occurred
  over the next 12 months, but the records of any such meetings have not been
  made available. Kumul Consolidated Holdings is a statutory corporation
  established under the Independent Public Business Corporation of Papua New
  Guinea (Kumul Consolidated Holdings (Amendment Act) 2015.

  10.34 On or about 21 October 2015, presumably as a result of the above meetings, a
  non-binding Memorandum of Understanding (“MOU”) was entered into between
  KCH and the PNGDF to facilitate the relocation of the Lancron Naval Base. The
  MOU was to operate for a period of 12 months. The relevant terms were as
  follows:

  “Article 4 The KCH to draft a Project Plan and Project Budget in relation to
  the efficient relocation of HMPNGS BASILISK from Lancron to a
  location to be nominated and selected by the Defence in
  accordance with the mechanisms set out in the said Project Plan
  and Project Budget. KCH will submit the Project Plan and
  Project Budget for review within 3 (three) months from the
  execution of this MOU

  Article 5 The Defence will provide all the necessary information such as
  the facility requirements, concept plans, cost estimates etc. if

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• available, upon request by KCH to assist KCH in the preparation
  of the project plan and budget.
  The KCH and Defence are to jointly prepare a Business Case for
  Article 6 review and adoption by the Parties within 3 (three) months from
  the execution of this MOU.
  Article 7 Both parties to work together in implementing a Business Case
  for the sale of the navy base (Section 53 Allotment 9, Granville,
  and NCD) and to relocate to a new site.”

  10.35 It seems that no Project Plan and/or Project Budget was ever prepared as
  envisaged by the MOU.

  10.36 Further, the Inquiry has sighted no “Business Case”.

  10.37 In a draft and unsigned submission to the Defence Council dated January 2016,
  the following was noted in relation to “possible sites for the relocation of
  HMPNGS Basilisk”:

  “Possible sites

  15. Since the agenda for the relocation of BASILISK was first mooted a
  number of persons and entities who have varying degree of interest in
  the relocation have proposed potential sites for the relocation of
  HMPNGS BASILISK These sites include:

  15.1 Arutu Land, 226 hectares (Next to PNG Dockyard-Motukea)

  15.2 Avenel Engineering Services, 10 hectares (Fairfax Harbour)

  15.3 Rigo

  15.4 Bootless Bay

  15.5 Gaba-Gaba

  15.6 Gavuone

  15.7 Gabadi

  16. The suitability of the sites however have been subject to normal military
  considerations such as strategic, tactical, logistic, base support and
  security etc. Initial Plans Branch analysis reveals the follows:

  16.1 Gabadi — no detail available

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• 16.2 Gavuone — Identified as not suitable

  16.3 Gaba-Gaba — Details not available

  16.4 Bootless Bay — Details not available

  16.5 Rigo — Details not available

  16.6 Avenel Engineering Services, 10 hectares (Fairfax Harbour) far too
  small; and

  16.7 Arutu Land, 226 hectares (on offer to PNGDF)

  17. Initial analysis reveals that the best option among all the possible sites
  being suggested is the Arutu Land comprising 226 hectares next to PNG
  dockyard — Motukea. Land ownership has been confirmed by three (3)
  Land Court cases, ILG registration and Landowners sponsored survey of
  the customary land

  18. Arutu Land is on offer to PNGDF for the relocation of HMPNGS
  BASILISK Ownership issues of the other sites have not been
  established, and if required to do so may take a lengthy period of time.”

  10.38 The document is an example of the lack of mention of Portion 406 in Defence
  documentation. As will be apparent from the discussion below, the Defence
  Force was actively seeking to obtain land at Manumanu during 2015, and had in
  fact recommended the purchase of Portions 422 and 423 for that purpose on 27
  February 2015. Yet Manumanu is not mentioned on the list.

  10.39 By letter dated 15 October 2015 the Minister for Defence, Hon. Dr Fabian Pok
  MP, wrote to the Acting Secretary of the DLPP in the following terms:

  “My Ministry and PNGDF have identified Portion 406 and 154, Milinch
  Manu, Aroa, Central Province as suitable locations for the construction of a
  new military barracks and associated facilities.

  As Portions 406 and 154 are currently Agricultural Leases held by private
  interests I request the Department of Lands to compulsorily acquire these
  portions for the State (PNGDF) for military purposes under the compulsory
  acquisition process provided in the Land Act.”

  10.40 That statement was incorrect inasmuch as Portion 154 was always the property of
  the State, having reverted to the State when the earlier State Lease expired in
  1907.

  10.41 The Minister’s response on 15 October 2015 appears to be the first time Portion
  406 had been officially mentioned as a site. However, it will be recalled that on

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• 27 February 2015 the Defence Council appears to have approved Portions 2722
  and 2723 for the new Defence Force site. As stated above, those portions (now
  Portions 422 and 423 respectively) are adjacent to Portion 406 at Manumanu. Of
  course, it may well be that Defence had shown interest in the Manumanu area
  prior to 27 February 2015 and, as 27 February 2015 was the date of the approval
  of Portions 422 and 423 for that purpose, it would be surprising if that had not
  been the case. A review of facts given to the Prime Minister in this matter stated
  that it was in 2014 that the Defence Ministry and Organisation had identified the
  two portions of land that became Portion 422 and Portion 423 [See Annexure
  10(2)].

  10.42 The basis for the selection of Portion 406 is not clear. Its acquisition does not
  appear to have been endorsed by the Defence Council, and there is no information
  to suggest that its acquisition was ever supported by a feasibility study. Further,
  at Manumanu the Defence already had 2331 hectares available, namely 2023
  hectares on Portion 154, 138 hectares on Portion 422, and 170 hectares on Portion
  423. Further, Portion 406 was well away from the sea.

  10.43 As indicated below, KCH appointed an Independent Committee to investigate
  allegations of misconduct by its Managing Director, Mr Hersey.

  10.44 The Independent Committee appointed by KCH referred to the fact that Mr
  Hersey was advised that the PNGDF had acquired land adjacent to Portions 422
  and 423, namely Portion 154, Milinch of Manu, Fourmil Aroa, Central Province.
  Such advice was given in February 2016.

  10.45 Such advice was incorrect if only because, as stated above, Portion 154 was at all
  material times owned by the State, the earlier State Lease having expired in 2006.
  However, the advice demonstrated that Defence had realised for some time that it
  would be in order for it to use the vacant Portion 154 for Defence purposes.

  10.46 The advice to Mr Hersey was in the following terms:

  “… [the PNGDF] has also identified another portion of land located adjacent to
  those three (3) already acquired, that backs onto the sea there that would be very
  conducive for our new naval base to be relocated there.

  That land is described as Portion 406, Milinch of Manu, Fourmil Aroa,
  Central Province which has been valued by the Valuer General for a sum of
  K46,600,000.00, and it has a total land area of 2000 hectares.

  We have done all the process required by the Department of Lands to transfer
  the title of that agricultural State lease over to our organization already and
  now have it reserved for PNGDF purposes awaiting payment to be made to the
  former leaseholder so that it can give vacant possession of it [to] us.

  There has been ongoing negotiations with PNG Ports Limited as your agent to
  purchase our Naval base at Port Moresby harbour since that NEC decision to

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• relocate it, and in that regard we propose that your organization purchase the
  new location (Portion 406, Milinch of Manu, Fourmil of Aroa, Central
  Province) for us to relocate our naval base there and we will liaise with the
  Department of Lands to transfer our title over Lancron Naval Base over to our
  organization to facilitate your redevelopment plan there to build Lakatoi city as
  you endeavour.

  We leave this proposal unto your good self to bring before your board to
  deliberation and approval if all is in order.”

  10.47 The relevant letter is dated 26 February 2016 and co-authored by Mr Vali Asi,
  Secretary for Defence and Brigadier General Gilbert Toropo [See Annexure
  10(3)].

  10.48 The terms of the proposal from the Secretary of Defence and PNGDF
  Commander therefore provided that:

  (a) the PNGDF (through the State via the DLPP) had compulsorily acquired
  Portion 406 in accordance with the Land Act 1996;

  (b) compensation would be payable to the landowner for the compulsory
  acquisition, which would be paid by KCH on behalf of the PNGDF; and

  (c) in exchange for the payment of such compensation on its behalf, the
  PNGDF would arrange the transfer of ownership of the Lancron Naval
  Base to KCH.

  10.49 As the Independent Committee appointed by KCH pointed out, the proposal was
  “problematic for several reasons”:

  (a) The PNGDF did not own the Lancron Naval Base and had no right to
  sell it. The land was owned by the State and was reserved for the
  purpose of public defence. The PNGDF only had rights of occupation;

  (b) The restrictions applicable to the Lancron Naval Base would equally
  have applied to Portion 406;

  (c) The Secretary for Defence had no power to bind the State unless
  expressly so authorised. Without such express authorisation, any
  purported power of sale exercised by the Secretary for Defence as
  regards the Lancron Naval Base would be ultra vires or outside the
  scope of the Secretary’s powers.

  (4) Grant of Portion 406 to Kurkuramb Estates Ltd

  10.50 As stated above Portion 406 was the subject of the issue of a State Lease issued
  on 30 July 2015. The State Lease was expressed to be for agricultural purposes.
  It was issued to Kurkuramb Estates Ltd (KEL) in respect of the whole of Portion
  406.

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• 10.51 It has not been possible to examine the chain of title for Portion 406 because the
  file in the Lands Department cannot be found. Accordingly, it is not known
  precisely how the land came to be in the hands of KEL. It is one of the files that
  has “disappeared”. It is said that there were three applicants for the land, and the
  Land Board recommended KEL as being the successful applicant. Precise details
  of the dealings that preceded the issue of the title are also not known although, as
  stated elsewhere, it is known that Portion 406 had earlier been the subject of
  forfeiture when owned by Mr Sariman’s company, M&M Investments Pty Ltd,
  such forfeiture being based on alleged non-compliance with development
  conditions to which the State Lease was subject.

  10.52 An examination of the State Lease reveals that the unimproved value of Portion
  406 as at 30 July 2015 was said to be K84,420. The area comprised 847.25
  hectares. This represented K99 per hectare.

  10.53 Following receipt of Dr Pok’s letter, on 21 October 2015 a Notice to Treat for the
  compulsory acquisition of Portion 406 had issued by the Department of Lands to
  KEL, seeking to acquire Portion 406 for the declared public purpose of defence
  [Annexure 10(4)]. The notice was thus given less than three months from the
  grant. That notice commenced a compulsory acquisition process pursuant to the
  Land Act 1996. In response to the Notice to Treat, KEL advised the Secretary for
  Lands that:

  (a) It was the registered owner of Portion 406;

  (b) The land comprising Portion 406 was “very big” and was “located near
  the Hiritano Highway” and was “suitable for large scale commercial
  farming”; and

  (c) KEL would accept K55 million as compensation for the State’s
  acquisition.

  10.54 On 28 October 2015, the predecessor of Kumul Consolidated Holdings (KCH),
  namely Independent Public Business Corporation (IPBC), and the Department of
  Lands, conducted a joint inspection of the Lancron Naval Base and prepared a
  detailed report regarding the nature of the tenure underlying the lease. It also
  made clear what had to be done to issue a lease to KCH. What would have been
  required was a valuation, revocation of the reservation, reallocation and an
  application to the Land Board for the issuance of a new State Lease.

  10.55 On 3 November 2015, for the purposes of the compulsory acquisition the Valuer
  General issued a Certificate of Valuation over Portion 406 valuing the land at
  K46.6 million. The valuation was prepared by Moses Kila, the Assistant Valuer-
  General. The valuation again represented approximately K55,000 per hectare.
  The content of the valuation document is considered later. The valuation is
  Annexure 10(5). The valuation is considered more fully in Section 12. The
  Administrative Inquiry considered that the factors applicable to Mr Kila’s
  valuation of Portion 406 were the same as those applicable to the valuation of
  Portions 422 and 423 (above). Again, the Administrative Inquiry considered that

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• the most plausible reason for Mr Kila’s behaviour and valuation was financial
  inducement. Another possibility would be fear of retribution.

  10.56 On 3 December 2015 a Notice of Compulsory Acquisition in respect of Portion
  406 was published in the National Gazette No. G793 by the Secretary for the
  Department of Lands as a delegate of the Minister for Lands [Annexure 10(6)].
  Upon publication of the Notice, KEL’s interest in Portion 406 was converted to a
  right of compensation under the Land Act 1996 which then enlivened the
  principles under Part 4 Division 3 by which “just compensation” (as envisaged
  under section 53 of the PNG Constitution) for compulsory acquisition should be
  assessed.

  10.57 Notice of the compulsory acquisition of Portion 406 was also published in The
  National Newspaper on 7 December 2015 [Annexure 10(7)].

  10.58 At that point, KEL and the State made an agreement dated 11 December 2015
  entitled “Sale and Transfer of Land” [Annexure 10(8)]. By that agreement, KEL
  agreed to sell and transfer Portion 406 to the State for K46.6 million. The
  agreement was signed by Mr Luther Sipison, Acting Secretary for Lands, as the
  delegate of the Minister for Lands on behalf of the State, and Mr Christopher
  Polos on behalf of KEL. In the Panel’s experience, this step is often taken by
  parties when compulsory acquisition has occurred and the parties, recognising
  that the State is entitled to complete compulsory acquisition, make a contract for
  the sale and purchase of the land. In this instance, the Panel is of the view that
  the making of the contract of sale did not appear to have converted the
  compulsory acquisition to a consensual purchase and sale arrangement. It was
  merely an effective way of completing the acquisition. However, why the State
  did not then simply pay the amount of K46.6 million directly to KEL is not made
  clear.

  10.59 On 11 December 2015, Kurkuramb Estates Ltd and the State entered into a “Deed
  of Release” [Annexure 10(9)] which in part provided:

  “A. THAT [the State] hereby pays to [KEL] a total sum of FORTY SIX
  MILLION AND SIX HUNDRED THOUSAND (K 46,600,000.00) and

  [KEL] accepts the payment as full and final Purchase Price of [Portion 406].”

  10.60 The Deed of Release between KEL and the State also provided a break-up of the
  consideration for Portion 406, which purports to have been based upon “the
  Valuation Certificate” issued by the Valuer General. The break-up was as
  follows:

  “Payment details of K46,600,000.00 as per the Valuation Certificate

  Land value = K46,600,000.00
  Improvement = NIL
  Total payable = K46,600,000.00”

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• 10.61 Thus, the entire purchase price for Portion 406 was attributed to land value only.
  The Inquiry is not aware of any improvements to the land having been made.

  10.62 On 4 February 2016 the NEC Decision No. 06/2016 had approved the PNGDF
  Basilisk relocation site requirements as being “part and partial [sic] of KCH’s
  funding for the whole of the proposed Port Moresby Port Redevelopment”.

  10.63 On 8 February 2016, the Department of Lands issued a Notice of Reservation for
  the PNGDF over the whole of Portion 406. Pursuant to that Notice, Portion 406
  was reserved by the State for the purpose of public defence [Annexure 10(10)].

  10.64 By letter dated 26 February 2016 from the PNGDF to Mr Hersey, KCH was
  notified of the compulsory acquisition of Portion 406 for the amount of K46.6
  million and was asked to finance the relocation on behalf of PNGDF in exchange
  for title to the Lancron Naval Base.

  10.65 The letter from the PNGDF also enclosed a copy of the Deed of Release between
  the State and KEL wherein KEL agreed to release the State in exchange for
  K46.6 million “as per a Valuation Certificate”. The letter was signed by Mr Vali
  Asi, Secretary for the Department of Defence, and Brigadier General Gilbert
  Toropo, Commander of the PNGDF. It was copied to the Minister for Defence
  and the Minister for PEST.

  10.66 The letter of 26 February 2016 gave an incorrect description of Portion 406:

  “… we have also identified another portion of land located adjacent to those
  three (3) already acquired, that backs onto the sea there that would be very
  conducive for our new naval base to be relocated there.

  That land is described as Portion 406 Milinch, Fourmil Aroa, Central
  Province which has been valued by the Valuer General for a sum of K 46,
  600,000.00 and it has a total land area of 2000 hectares”.

  10.67 The view of the Inquiry is that Portion 406 does not “back onto the sea” as
  claimed. The entire area of Portion 406 is in fact landlocked. It is several
  kilometres further from the sea than Portion 154, which itself is several
  kilometres away from any navigable water. Further, Portion 406 is not 2000
  hectares in size, but 847.25 hectares.

  10.68 On 20 January 2017, KCH appointed an Independent Committee to investigate
  allegations made against Mr Hersey. The Independent Committee was critical of
  Mr Hersey accepting these misrepresentations at face value. The Committee
  apparently thought he should have instituted searches, or made an inspection of
  the land, to ascertain exactly where the land was, its title, root or validity, its size
  and its true value. The Independent Committee thought that such inquiry should
  have been the subject of basic due diligence investigations.

  10.69 The Independent Committee thought that the failure on the part of Mr Hersey to
  ascertain basic facts or to apply any form of reasonable due diligence and

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• competent analysis to the PNGDF’s proposal resulted in the Board ultimately
  being misled.

  10.70 Following some other correspondence, by letter dated 24 May 2016 Mr Hersey
  wrote to the State Solicitor seeking clearance of a proposed NEC submission for
  approval to transfer the Lae Port Development Project Trust funds and GST
  refunds for the purpose of, among other things, “funding the purchase of land
  (K25 million of the K47 million purchase price) to enable the relocation of the
  PNG Defence Force to commence”. The letter was copied to the Minister for
  PESI and the Chief Secretary [Annexure 10(11)].

  10.71 The Independent Committee pointed out that this letter did not mention Portion
  406 or any details of the proposal from the PNGDF despite the fact that Mr
  Hersey knew that the PNGDF intended to relocate to that land and that Kumul
  Holdings were asked to provide funds for payment to pay for compensation to
  KEL. The Independent Committee thought that basic and prudent due diligence
  would have demanded that Mr Hersey would also have sought clearance from the
  State Solicitor on the entire PNGDF proposal, yet this was never done until
  January 2017, much later and after the payment of K46.6 million to KEL had
  already been made.

  (5) Payment of K46.6 million to Kurkuramb Estates Ltd

  10.72 By letter dated 18 July 2016, Harvey Nii Lawyers on behalf of KEL served a
  notice pursuant to section 5 of the Claims By and Against the State Act upon the
  Attorney-General, Ano Pala MP, making known KEL’s intention to make a claim
  against the State for payment of the outstanding purchase price of K46.6 million
  for Portion 406. That letter was copied to the Acting Secretary for Lands, the
  Secretary for the Department of Defence, and the Solicitor General.

  10.73 By letter dated 10 August 2016, the Secretary for Defence wrote to Mr Hersey
  and stated that “it has now come to my attention that KEL has given notice of its
  intention to sue the State” for non-payment of compensation. The Secretary for
  Defence further stated:

  “My department and the PNGDF do not want to see such legal proceedings
  complicate and delay our relocation programs any further …”.

  10.74 On or about 15 August 2016, Harvey Nii Lawyers, on behalf of KEL, issued a
  Writ of Summons against the Secretary for the Department of Lands, as First
  Defendant, and the State, as Second Defendant, seeking payment, among other
  things, of the then outstanding K46.6 million compensation amount that had been
  agreed for Portion 406. KCH was not initially named as a party to the court
  proceedings although its subsequent joinder, upon its application, is the subject of
  pending Supreme Court proceedings.

  10.75 In August 2016 a report on the proposed Lancron Naval Base Relocation had
  been tabled before the KCH Investment Committee for consideration. The
  Investment Committee report noted, relevantly, as follows:

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• “KCH COMMENTS

  At this stage there is substantial work to be done. The project scope and
  budget on the development of the new site is yet to be defined, which requires
  funding to investigate. The PNGDF appears to have neither the funding nor
  the resources to develop a set of requirements for the new base. The Lancron
  Navy Base does not yet have a State title which allows it to be dealt with. It
  will be required for the further redevelopment for the Port Moresby Port
  precinct so these issues will have to be dealt with.

  10.76 The Independent Committee thought that there should have been a properly
  vetted Business Case, a Budget and Risk Analysis, together with expert advice on
  the exact state of the Lancron Naval Base and how KCH should structure the
  proposed transaction to project this position and the public monies of which it was
  obliged to protect as trustee. However, no such documentation was sought or tabled.

  10.77 In the circumstances, the Independent Committee did not think that the payment
  of K46.6 million for Portion 406 should have been made.

  10.78 The Independent Committee thought that the evidence strongly suggested that there
  was a deliberate and calculated attempt on the part of Mr Hersey and certain senior
  KCH staff members to not only deceive and mislead the Board, including by failure
  to tender the Investment Committee Report to the Board, and failing to give full,
  frank and material disclosure of relevant facts and circumstances that were within
  Mr Hersey’ s direct knowledge. Instead, information was submitted to the Board
  in a rushed, piecemeal and selective way that effectively concealed the true nature
  of the entire Portion 406 transaction and did not disclose the unacceptable risks it
  posed to KCH’s interests.

  10.79 By an email dated 6 September 2016, Ms Tabari prepared and forwarded a draft
  Board Paper to Ms Taunao for “review and comments”. The draft Board Paper had
  the following specific and relevant comment in it under item 5:

  “5 RISKS AND ISSUES

  There have been months of internal division within PNGDF about where the
  new site for relocation. Whilst all of their planning team have been working on
  Arutu land (Portions 33270 — 3329C) near Motukea it appears that this have
  been recently superseded by a new decision to purchase Portion 406 Milinch
  of Manu, Fourmil of Aroa, Hiritano in Central Province. Furthermore,
  KCH staff have been informed by the PNGDF Project team that another submission
  in support of yet another alternate site is currently being developed and is
  expected to be submitted to the Defence Committee soon. This uncertainty
  could mean that KCH end up paying for land which is never used by PNGDF.

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• By proceeding to purchase land before completion of the Masterplan and
  Budget, it will be very difficult to gauge the degree of difficulty to implement
  the ultimate goal of relocation Lancron Naval Base. It could mean that KCH
  will have spent a considerable amount of money on a project that may never be
  implemented.

  Relocation of Lancron Navy Base might be of commercial interest to KCH if
  the site can be redeveloped into high value waterfront land. However, given the
  uncertainties mentioned above, the timing of moving PNGDF may mean any
  commercial return on this land might be delayed an indefinite period into the
  future.”

  10.80 The Independent Committee concluded that this email was not shown to the
  Board.

  10.81 The Board Paper dated 7 September 2016, signed by Mr Hersey, contained the
  following item 5:

  “5.1 RISKS AND ISSUES

  It is worth noting that there appears to be some differences of opinion within
  PNGDF about where the new site for relocation. Whilst all of their planning
  team have been working on Arutu land (Portions 3327C-3329C) near Motukea
  it appears that this have been recently superseded by a new decision to
  purchase Portion 406 Milinch of Manu, Fourmil of Aroa, Hiritano in Central
  Province. However, it should also be noted that there is political will for this
  process to proceed as it is supported by the Government and responsible
  Ministers.

  Relocation of Lancron Navy Base might be of commercial interest to KCH if
  the site can be redeveloped into high value waterfront land. However given the
  uncertainties mentioned above, the timing of moving PNGDF may mean any
  commercial return on this land might be delayed an indefinite period into the
  future.”

  10.82 The funding resolution had been amended to read:

  “… it is recommended that the Board: …

  approve for KCH to provide funding of K46.6 million to the PNG Defence
  Force to finance the settlement of the compulsory acquisition process for
  Portion 406, Milinch of Aroa, Manu, Central Province of which finalisation is
  subject to:

  • Conclusion of Contract of Sale
  • Consideration of novation of Deed of Settlement on land from PNG
  Defence Force to KCH”

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• 10.83 At its meeting on 12 September 2016, the Board resolved in accordance with the
  Investment Committee’s recommendations as set out in the final Board Paper. A
  contentious issue has arisen as to whether this constituted a resolution to pay
  Kurkuramb Estates Ltd the K46.6 million, or whether it was only a conditional
  authorisation to do so.

  10.84 In an email dated 19 September 2016, Mr Massa of Dentons Lawyers set forth his
  preliminary advice as follows:

  “This is where we are at, which is probably where we will end up assuming we
  get the answers from Lands Department that we are expecting in the next day or
  so:

  • Rather than the State either (a) assigning/novating the Deed of Sale and
  Transfer of Land to KCH, or (b) the State on-selling the land to KCH, the
  most appropriate course of action would be for the State to grant a 99 year
  lease to KCH.
  • The land rental payable by KCP to the State for the 99 year State Lease
  would be K46. 6m (i.e. the amount which the State owes Kurkuramb
  Estates Ltd (KEL) as compensation for the compulsory acquisition of
  land).
  • The K46.6m land rental would be paid upfront in a single lump sum
  payment at the direction of the State to KEL.
  • The State Lease would include a covenant that the Department of Defence
  be granted exclusive occupancy of the land for the duration of the lease
  unless earlier surrendered by Defence.
  • KCH would need NEC approval (in accordance with the KCH Act) to
  enter into the lease and make the upfront lump sum rental payment to the
  State.
  • The State uses the K46.6m received from KCH to settle its outstanding
  liability to KEL.
  • KEL then has no further claim against the State for compensation having
  already discharged all prior interest in the land which vested in the State
  when notice for the compulsory acquisition was published in the National
  Gazette and National newspaper.
  • A 99 year State Lease (rather than a sale or assignment) avoids any
  concerns as to whether public procurement/CSTB is necessary for the
  State to sell the land to KCH. It also avoids any consideration as to
  whether stamp duty or Ministerial approval is necessary, although neither
  should be in any event.
  • Based on the information supplied to us, it appears that all necessary
  steps in the State ‘s compulsory acquisition of the land from KEL were
  complied with in accordance with the relevant provisions of the Land Act.
  • We make no comment on whether KEL was the lawful owner of the land in
  the sense that there is a clean chain of title to KEL and now the State.
  However, we have no reason to suspect that there has been any fraud or
  that KCH has constructive notice to the contrary such that the State’s title

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• as recorded on title (and KCH’s leasehold interest once granted) is prima
  facie indefeasible.”

  10.85 By an email dated 22 September 2016 from Ms Taunao to Mr Hersey, Mr Hersey
  received an unsigned copy of a further advice from Dentons Lawyers in relation
  to the proposed acquisition of Portion 406. In essence, the advice was that, to
  protect its interests, KCH should acquire title to Portion 406 by paying K46.6
  million to the State, and then leasing it back to the PNGDF. The advice
  specifically noted that KCH needed NEC approval for this arrangement and that it
  needed to be specifically included in KCH’s annual plan.

  10.86 The Independent Committee took the view that Mr Hersey thus knew that NEC
  approval was required after receiving the advice from Dentons. However, that
  advice was never acted upon or tabled before the Board for consideration.

  10.87 In the meantime, by letter dated 23 September 2016, KEL had written to the
  Secretary for the Department of Defence requesting that “K46 million” be paid to
  KEL’s account as consideration for the compulsory acquisition of Portion 406.
  Effectively the advice was that, to protect its interests, KCH should acquire title
  to Portion 406 by paying K46.6 million to the State and then leasing it back to the
  PNGDF. Among other things, the advice specifically noted that KCH needed
  NEC approval for this arrangement and that it needed to be specifically included
  in KCH’s Annual Plan.

  10.88 The Independent Committee concluded that Mr Hersey certainly knew that NEC
  approval was required after receiving the advice from Dentons. However, the
  Independent Committee inferentially criticised the managing director because that
  advice was never acted upon or tabled before the Board for consideration.

  10.89 By letter dated 5 October 2016 Mr Hersey wrote to the Commander of the
  PNGDF and noted that the MOU between KCH and the PNGDF dated 21
  September 2015 had expired on 21 September 2016. The letter also specifically
  noted that the “obligations under the MOU are incomplete and the KCH Board
  would like, with your concurrence, to extend the MOU for another 12 months”.

  10.90 The letter attached a variation to the MOU which purported to extend it for a
  further 24 months. The letter was copied to the Secretary for Defence.

  10.91 The Independent Committee thought that this communication by the managing
  director was significant because it implied that he was cognisant of the need for a
  proper “Project Plan”, “Project Budget” and “Business Case” to support the
  proposed PNGDF relocation.

  10.92 Pursuant to the variation agreement the MOU was in fact extended for a further
  24 months. The variation agreement was signed on 5 October 2016 under the
  common seal of KCH by Mr Jayaraj (Acting Corporate Secretary) and Mr
  Hersey, and by the Secretary for Defence and the Commander of the PNGDF on
  behalf of the PNGDF. However, despite the extension, the relevant documents
  envisaged by the MOU were never completed. It appears they were ignored or
  disregarded.

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• (6) Lancron Naval Base

  10.93 On 5 October 2016 under an instrument entitled “Revocation of Certificate
  Authorising Occupancy”, the Secretary for the Department of Lands, as delegate
  for the Minister for Lands, revoked the reservation for the Lancron Naval Base.
  As a result, the land ceased to be reserved for defence purposes. Notice of the
  revocation was published in the National Gazette on Friday, 7 October 2016. The
  Lancron Naval Base is also referred to as HMPNGS Basilisk.

  10.94 The Independent Committee found it difficult to understand why the reservation
  status of Lancron Naval Base was revoked when defence personnel and naval
  assets were still stationed at the base. This was further complicated by the letter
  of the Secretary for Lands dated 29 September 2016 which stated his
  understanding that “feasibility studies are underway at the relocation site and the
  PNGDF is yet to move”. The Independent Committee drew attention to the lack
  of tenure and potential national security issues this presented to defence assets.

  10.95 On 11 October 2016 the Secretary for Defence wrote to Mr Hersey as follows:

  “Our valuers have valued the Naval Base (Basilisk) at K50 million and we
  have already provided KCH with copies of the valuation. As we have now
  surrendered our Certificate of Occupancy in favour of KCH, KCH owes us K50
  million.

  In accordance with NEC Decisions Nos 70/2016, 168/2014 and 06/2016, we
  now request that you pay K46 million on behalf of the State to the former
  owners of land (on which the new military base will be located) and K4
  million to the PNGDF Trust Account to enable us to start preliminary works to
  relocate to the new military barracks.”

  10.96 By email dated 12 October 2016, Ms Bala advised what remained to be done to
  “obtain (the) title deed” to the Lancron Naval Base including that:

  “KCH should compile concept plans, development proposals and a detailed
  survey plan;

  KCH should obtain NCDC Physical Planning approval for the development
  and a rezoning of the Lancron Naval Base to commercial use; and

  After Planning permission is obtained, KCH should apply for a direct grant of
  a State Lease from the Minister for Lands rather than making application to the
  PNG Land Board”

  10.97 The Independent Committee thought that this email from Ms Bala was the first
  time that KCH senior management had been informed of the extent of the tasks

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• remaining to be performed and the considerable delays that were inevitable. The
  Independent Committee’s report states that “before this date, the Board and
  presumably those in management had understood that the issue of the State Lease
  over the Lancron Naval Base required only Land Board approval. However,
  basic due diligence would have revealed the true state of affairs and the extent of
  the requirements that needed to be complied with”. The Independent Committee
  stated that the Board was induced to the belief that a State Lease for Lancron
  Naval Base had been issued and was available for transfer to KCH, which was
  not the case at all.

  10.98 An application was then made by KCH for a Special Purpose Lease to be issued
  to KCH. The application was lodged on 13 October 2016.

  10.99 It is understood that that application remained pending at the time the payments
  to KEL were made.

  (7) KCH agrees to Pay K46.6 million to KEL

  10.100 On 14 October 2016 KCH entered a Memorandum of Agreement with KEL and
  PNGDF under which it agreed to pay K46.6 million to KEL. The Independent
  Committee stated that this agreement was never tabled before the Board for
  approval.

  10.101 Mrs Kari Taviri, the Manager — Legal Services of Kumul, told the Independent
  Committee that the document was not brought to the KCH legal team’s attention
  until the morning of execution on 14 October 2016. She said that she was
  adamant that the MOA was drafted without any legal due diligence or proper
  Board approval.

  10.102 Mrs Taviri also told the Independent Committee that Mr Hersey told her to take
  out the anti-corruption clause in the document.

  10.103 The Independent Committee thought that Mr Hersey’s decision to omit the clause
  and depart from standard KCH practice was very disturbing.

  10.104 The MOA was signed that day in the boardroom of KCH. It provided, amongst
  other things, that KCH would pay (on behalf of the State) to KEL the unpaid
  compensation amount of K46.6 million in two instalments, the first instalment
  being K20 million and the second instalment of K26 million three months from
  the date of the payment of the first instalment.

  10.105 The MOA was signed under KCH’s common seal by Mr Jayapal Jayaraj, the
  acting corporate secretary, Mr Hersey on behalf of KCH, the Secretary for
  Defence on behalf of the Department of Defence, and Mr Christopher Polos on
  behalf of KEL.

  10.106 The common seal of KEL was not affixed to the document until later because Mr
  Polos did not bring it to the signing venue.

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• 10.107 The NEC decision No. 95/2015 dated 29 April 2015 required all contracts
  relating to the Lancron Naval Base relocation to be signed by the Managing
  Director and the KCH Chairman, or two directors of KCH. In apparent breach of
  this directive that did not occur, and it has been alleged that the Board was left in
  the dark about the substantial liability that KCH had assumed under the MOA.

  10.108 The Committee concluded that Mr Hersey embarked on an unauthorised and
  intentional course of conduct to pay the K46.6 million to KEL.

  10.109 Mr Hersey is alleged to have given instructions to release the K20 million
  immediately, notwithstanding that the MOA had not been properly executed by
  KEL.

  10.110 The funds were transferred, on 14 October 2016, to KEL.

  10.111 An email from Mr Jayaraj informed Mr Hersey that the K20 million had been
  transferred to KEL notwithstanding that the Kurkuramb seal had not been placed
  on the document to complete the MOA execution.

  10.112 That email from Mr Jayaraj was forwarded by Mr Hersey to Mr Duma:

  “Further to text William

  Funds gone but could they come on with the seal tomorrow please. Are you
  going to Hagen this weekend per chance?”

  10.113 Mr Duma responded:

  “Garry,

  I am in back in Porn now, and will wait for you to return before I leave for
  Hagen over this weekend.

  Please call me as soon as you can. […]

  William”

  10.114 This is one of the matters which caused the Independent Committee to conclude
  that it appeared that Mr Duma was in a position of influence over Mr Hersey.
  10.115 It appears that the MOA was finally sealed by KEL and signed by its director,
  Christopher Polos, on 18 October 2016.

  10.116 There was a delay in the receipt of the K20 million into the KCH account.
  Apparently the bank initially rejected the payment on the ground that KEL’s bank
  account was inactive. That caused the bank to return the funds to KEL.
  However, the problem was rectified, and on 19 October 2016 Mr Jayaraj was
  advised that the payment of K20 million had been made to KEL’s account.

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• 10.117 As stated above, the prospective State Lease for the Lancron Naval Base in
  favour of KCH had still not been issued.

  10.118 With respect to the second tranche payment of K26.6 million Mr Jayaraj told the
  Independent Committee that Mr Hersey called and instructed him to arrange the
  payment for KEL that day. Mr Jayaraj advised Mr Hersey that there were
  insufficient funds in the general business trust account to allow that to occur. Mr
  Hersey then instructed that Mr Duma had a dividend cheque from MVIL, and to
  send someone to collect and bank the cheque and have it cleared that same day.

  10.119 In a statement dated 31 February 2017, Mr Jayaraj stated, in relation to the second
  tranche payment:

  “(a) Garry Hersey was saying he was under pressure from the Minister and
  wants the payment done at the earliest. He never mentioned the name of the
  minister. I guessed he might be referring to Minister William Duma.

  I was not involved in the matters leading up-to the signing of the MOA on this
  land deal, hence and I am not aware of any Ministerial involvement during the
  process. This process was managed by a separate transaction team working
  closely with Garry Hersey.

  Because Garry Hersey kept on calling and mentioning pressure from the
  Minister, I responded in the email to tell the Minister the payment could be
  done next week”

  10.120 At the direction of Mr Hersey, a payment instruction dated 23 December 2016
  was forwarded to Bank of South Pacific authorising payment of K26.6 million
  from the general business trust account to KEL’s account at Kina Bank. The
  Bank of South Pacific advised that the payment of K26.6 million was processed
  and cleared on that date.

  10.121 It is evident that a strange feature of the transaction is that no concern appears to
  have been demonstrated about the prospect that Kumul was not at that time to
  receive any form of title over the Lancron Naval Base notwithstanding that
  substantial amounts of public money were being paid.

  10.122 The Independent Committee received evidence to the effect that Mr Hersey
  issued a direction to relevant personnel for all electronic files relating to the
  Lancron Naval Base and Portion 406 to be deleted, and for all physical files in the
  possession of those parties to be handed to him. Some of the electronic files were
  saved by Ms Taunao onto an external hard drive. The Independent Committee
  considered that that suggested a deliberate attempt to destroy and conceal
  evidence.

  10.123 In a supplementary statement to the Committee dated 9 March 2017, Mr Jayaraj
  attached a copy of the State Lease over Portion 406. The Independent Committee

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• stated that this was the first time that the lease document had appeared in any of the
  material provided to the Committee by KCH despite several prior requests. In a
  supplementary statement to the Committee dated 9 March 2017, Mr Jayaraj stated
  that he had received it from the Minister himself in addition to other documents.
  Among the documents provided by the Minister to Mr Jayaraj was a copy of “the
  Owner’s Copy” of the State Lease for Portion 406.

  10.124 On or about 23 January 2017, Mr Jayaraj wrote to Dentons Lawyers and
  O’Brien’s Lawyers purporting to withdraw the Board’s instructions to Dentons
  Lawyers and 0′ Brien’s Lawyers, advising that they were to cease acting on the
  matter. Upon learning of this, the Committee requested Mr Jayaraj to clarify why
  the instruction to recover the monies had been terminated and at whose direction.

  10.125 Mr Jayaraj responded in a supplementary statement dated 28 February 2017, that he
  had been summoned to the Office of the Minister, along with the CFO, Mr Apaitia
  Veiogo, and the Board Secretary, Ms Lucy Sabo-Kelis.

  10.126 At the meeting, Mr Jayaraj said that the Minister said the Board had no authority
  to engage lawyers on the matter and should withdraw instructions.

  10.127 Mr Jayaraj says that, on that basis, he wrote to Dentons Lawyers and O’Brien’s
  Lawyers and withdrew instructions. The Independent Committee thought this
  was an extraordinary intervention by the Minister into KCH’s internal affairs.

  10.128 The Independent Committee pointed out that, under the KCH Act, the affairs of
  KCH are to be conducted free of political influence or direction.

  10.129 The Independent Committee considered that this was an extraordinary
  intervention by the Minister into the internal affairs of Kumul, particularly when
  there was standing resolution by the Board which was intended to recover the
  monies.

  10.130 By email dated 25 January 2017, Mr Duma wrote directly to Mr Erik Andersen of
  Dentons Lawyers in the following terms:

  “Dear Mr Andersen,

  I do not normally as a Minister intervene in routine matters involving the
  boards and the management of entities I have Ministerial responsibilities over
  but I am forced to communicate with you directly as a result of a
  sensationalised article in the PNG Blog yesterday.

  The matter which you are familiar with starts with a decision of the KCH
  Board to approve a transaction, which started even before I became Minister
  responsible for KCH.

  The management of KCH have in their Brief to both myself and the KCH
  Board advised that the transaction in question is in order, and this supports

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• the decision of the KCH Board. I am aware that the Board of KCH have not
  yet resolved to engage the services your firm.

  In the absence of a Board resolution to engage your services, no Director
  (including the Chairman and Deputy Chairman) of KCH acting unilaterally on
  his own, has the authority to engage our services, and KCH will not be
  responsible for your fees. If the Board does not resolve to engage your
  services in due course, then there should not be any issue.

  As of today, you have no instructions to act on behalf of KCH, the Board and
  the management of KCH.

  Sincerely,
  William Duma.”

  10.131 The Independent Committee noted that, in his email to Mr Andersen, the Minister
  referred to the “Brief’ that had been submitted to the Board and himself
  apparently as proof that “the transaction in question is in order”. However, the
  Independent Committee noted that the Minister had personal input on those briefs
  before they were signed and submitted. It considered that the reliance that the
  Minister placed on those documents was therefore improper.

  10.132 The Independent Committee report refers to the fact that the Committee was
  informed by Mr Jayaraj that the naval base land had previously been exempted
  from public tender in favour of KCH by the Department of Lands.

  10.133 Mr Jayaraj had also informed the Committee that it was only a formality for the
  PNG Lands Board to grant a State Lease for the Lancron Naval Base in favour of
  KCH, once the Land Board met and considered the matter.

  (8) Mr Duma’s Account of Events to the Administrative Inquiry

  10.134 Mr William Duma was Minister for Public Enterprises and State Investments. In
  was reported in the Post Courier on 8 February 2017 that Mr Duma had been
  suspended. Mr Duma states that he voluntarily stepped aside.

  10.135 Mr Duma attended at the Administrative Inquiry’s Office at the Government
  Printing Office, Waigani, on Tuesday, 30 August 2017 and Friday, 29 September
  2017.

  10.136 Mr Duma also held a discussion with the Chairman of the Administrative Inquiry
  in Brisbane on 5 August 2017.

  10.137 Following the recent election, Mr Duma was re-elected and was re-appointed
  Minister for Public Enterprises and State Investments. Mr Duma stated that he
  regarded his suspension as no longer applicable in circumstances in which there
  had been an election, and he had been appointed as Minister following that
  election.

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• 10.138 Mr Duma provided the Administrative Inquiry with a lever arch folder containing
  22 documents. On 22 August 2017 he provided some further documents in
  relation to Kurkuramb Estates Limited. His letter of 3 February 2017 to the
  Ombudsman Commission [Annexure 10(12)] succinctly set out his position. He
  also produced further documents later, and the documents he produced formed
  part of the record of the Inquiry.

  (9) Kurkuramb Estates Ltd — Companies Register documents

  10.139 Mr Duma agreed that the registered office address for Kurkuramb Estates Limited
  was previously shown as Section 30, Allotment 6, Port Moresby, National Capital
  District, and that that address was his home address. He made the point that the
  current details in the Companies Register do not include his home address.

  10.140 The previously registered company extract for Kurkuramb Estates Limited as at
  24 October 2016 is Annexure 10(13).

  10.141 The registration has since been changed 1.

  10.142 Mr Duma also agreed that the registered company extract of his company,
  Kopana Investments Limited, showed him as a director and gave his residential
  address as the address referred to above, namely Section 30, Allotment 6, Port
  Moresby. The Company Extract details of Kopana Investments Ltd as at 31
  January 2017 show the residential address of Mr Duma as Section 30, Allotment
  6, Granville, Port Moresby [Annexure 10(14)].

  10.143 He said he was not aware until January of this year, when he met Mr Paul Nerau,
  that his home address had even been registered as the address of the company,
  Kurkuramb Estates Limited. He said it was a mistake and that it did not make
  sense to provide a home address as the address of a company.

  10.144 Mr Duma said he thought the Registrar should explain how it came about that his
  private address had become the registered office of Kurkuramb Estates Limited.

  10.145 He said he had nothing to do with the registration of the documents filed at the
  company’s office in connection with Kurkuramb Estates Limited.

  10.146 On 29 September 2017, Mr Duma said to the Inquiry: “I have got nothing to do
  with Kurkuramb Estates”.

  10.147 Mr Duma agreed that PO Box 556 Port Moresby had been his postal address for
  many years. When it was put to him that that postal address was given to the
  Registrar of Companies in connection with Kurkuramb Estates, he stated that he did
  not provide that. Annexure 10(13), being the previous Company Extract for
  Kurkuramb Estates Ltd, gives the registered postal address for Christopher Polos
  as PO Box 556, Port Moresby, as well.

  The change was part of changes registered on 15 January 2017.

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• 10.148 In his session with the Chairman on 5 August 2017 Mr Duma stated that he did
  not dispute that he was related to Christopher Polos. On 30 August 2017, he was
  asked whether it was the case that Christopher Polos was the biological brother of
  his wife. Mr Duma answered: “Absolutely”.

  10.149 The Chairman asked Mr Duma: “So Christopher Polos is your brothe•-in-law?”
  and Mr Duma answered “Yes”.

  10.150 In the course of his attendance on the Inquiry on 29 September, Mr Duma stated
  that he had just found out that Christopher Polos was not his brother-in-law.

  10.151 He stated:

  “I have just found out that Christopher Polos — that is why I wanted to — I will
  be writing to you. I found out after my meeting with you, the last time I
  appeared before this tribunal, I found out that Christopher Polos is not my wife
  ‘s younger brother. He is someone who is from North Solomons Province, who
  was educated at the Hutjena High School. He uses the name Christopher Polos.
  He was adopted by one of my wife’s aunties. My wife’s younger brother ‘s
  name is Kayboy — Kayboy Polos. After my meeting with you, I went and — there
  was something that did not sound right to me so I had to check. So I will be writing
  to you in this regard.”

  10.152 He said that this meant that there is no biological connection between Christopher
  Polos and his wife.

  10.153 He reiterated that his wife’s younger brother is Kayboy Polos, not Christopher
  Polos.

  10.154 Mr Duma was asked whether Christopher Polos lived with his family, to which
  he replied in the negative. He said: “No, I have got no connection with him.
  Kayboy also does not live with me. He is a married man, he lives on his own”.

  10.155 Mr Duma was asked: “So Christopher Polos does not live with your family and
  has not ever lived with your family?”

  10.156 Mr Duma responded: “No, none whatsoever. In fact none of my wife’s relatives
  live with me. I have got too many people from my electorate who live with me”.

  10.157 One of the allegations in PNG Blogs was that Christopher Polos performed a
  wide variety of functions, including personal aide, gardener, housekeeping,
  repairs and maintenance for Mr Duma. When that was put to Mr Duma he said it
  was “absolutely not true”. Mr Duma said he did not have any gardeners or
  cleaners in his house, he did those things himself. He did have helpers who were
  actually on the payroll, and Parliament paid them, but they were all in his
  electorate.

  10.158 Mr Duma reaffirmed that he did not know Christopher Polos who, he said, lives
  in North Solomons. He did not dispute that Christopher Polos was the sole

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• director and shareholder of Kurkuramb Estates, but he said he had no connection
  with Christopher Polos.

  10.159 In a letter to the Administrative Inquiry dated 5 October 2017 [Annexure 10(15)],
  Mr Duma said:-

  “There was a misunderstanding which I need to clarify after my last
  appearance at the Inquiry Office.

  I have since made further inquiries and have realised that the correct name of
  my brother in law is Kayboy Palos, not Christopher Polos who is related to
  my spouse’s aunty and who lives in Bougainville and who uses my spouse’s
  family name.”

  10.160 It was put to Mr Duma that there is a creek called “Kurkuramb” which flows into
  the Rogen River at Mt. Hagen in close proximity to his village. Mr Duma
  disputed that. He contended that there is a creek called “Rogen”, but that was
  further away from his village on the other side.

  10.161 Mr Duma confirmed that he had previously stated that Kurkuramb Estates
  Limited is Mr Christopher Polos’ company.

  10.162 He denied receiving any payments from Kurkuramb Estates Limited in relation to
  the Portion 406 transaction.

  10.163 He said he was not able to comment on the proposition that K20 million was
  transferred to Kurkuramb even prior to the Kurkuramb seal having been placed
  on the underlying document. He stated: “These are matters which are not within
  my knowledge. I am not qualified to comment”.

  10.164 Mr Duma agreed that he was asked whether he could find Mr Polos to bring
  along the seal for the execution of the Memorandum of Understanding. He said:
  “That is a matter that Polos and Garry should know. That has got nothing to do
  with me”.

  10.165 He agreed that he knew that the first tranche of K20 million was returned,
  initially, on account of the fact that it was rejected by the bank.

  10.166 He denied that he knew that Mr Hersey had issued a direction to relevant
  personnel for all electronic files related to the Lancron Naval Base and Portion
  406 to be deleted and for all physical files in the possession of those parties to be
  handed to him.

  10.167 He had denied that he had said that he wanted any payment “done at the earliest”.

  10.168 He denied that he was the one who produced the owner’s copy of the State Lease
  in favour of Kurkuramb.

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• 10.169 On the allegation that he was involved in the payments, Mr Duma stated: “I was
  not involved in the decision-making process”. He also said “I was not allowed to
  take part so I never had an opportunity to disclose the fact that Christopher was a
  relative”.

  10.170 He denied that there was any conflict of interest on the ground that he was not
  involved in the decision-making process to pay the money to Kurkuramb. He
  said that the fact that it was the chairman and the directors who approved the
  payments had been ignored.

  10.171 He disagreed with the proposition that the Lancron Naval Base was a long way
  from obtaining a title. He said: “From what I have seen, they formally applied for
  a State Lease, they paid the lease fees and it is registered and the exemption was
  granted. So under the Land Act, once you are given an exemption, no one else
  applies, only you. So it is only a matter of formality for you to appeal to the Land
  Board, to make a formal submission, formal application to access that land. So
  that is as good as having the title”.

  10.172 As to the value of the Lancron Naval Base, he said that there were inconsistent
  valuations, but he relied on the figure of K50 million that was used by the
  Secretary for Defence when he wrote to KCH and said “This is the figure”.

  10.173 When it was put to him that there were serious and potentially irreconcilable
  differences within the PNG Defence Force as to the selection of Portion 406 for
  the purposes of defence relocation, he said: “if that were the case, why did the
  Commander and the Secretary sign the [Memorandum] of Variation? There is an
  MOU that the Commander signed and I should point out that why was not the
  Commander asked to step aside?” [Annexure 10(16) is the Memorandum of
  Understanding dated 21 September 2015; Annexure 10(17) is a KCH letter from
  Mr Hersey to Commander Defence Force dated 5 October 2016; and Annexure
  10(18) is the undated executed Memorandum of Variation].

  10.174 Mr Duma disagreed with the proposition that the Board’s resolution in relation to
  the payment of the K46.6 million was a conditional approval of the payment.

  10.175 He was of the view that it was necessary to look at the Memorandum of
  Understanding signed by KCH, Defence and Kurkuramb Estates Limited.

  10.176 He was very definite that there was nothing inappropriate in him, in the
  circumstances, seeking to revoke the decision to brief Dentons Lawyers and
  O’Brien’s Lawyers. The decision had been taken by KCH to make the payment,
  and, in the opinion of Mr Duma, the Board should defend the decision. It was
  really a case of the engagement of lawyers to investigate the Board’s own
  decision. It was not appropriate, in his view, to have an investigation if the
  Board’s conduct was not itself examined. He addressed the Chairman, Deputy
  Chairman and Directors to the effect that he had not at any stage directed or
  approached any of the members of the Committee to approve the transaction. He
  told the Directors that if the Board wished to engage a law firm to investigate the
  matter, it should be done in consultation with him as Minister because it was the
  Board decision that was being questioned, not his. The Terms of Reference had
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• to include their conduct as directors, given that they approved the transactions.
  His position was that the law firms or lawyers should only be engaged by the
  collective resolution of the Board.

  10.177 Mr Duma was highly critical of the Independent Committee, including of the fact
  that the Committee did not ask him to give his account.

  10.178 Mr Duma said that he could not believe that an allegation had been made that, in
  relation to the payment of the second tranche, namely the K26.6 million, the
  cheque was collected by him and provided to Kumul staff to bank. He said: “I
  cannot believe that such an allegation has been made”, and he proceeded to state
  that he denied it “absolutely”.

  10.179 With respect to his reliance upon the 2012 NEC Decision he was asked whether it
  was the general practice of the NEC to make a decision in those terms, or whether
  it was ordinarily the case that any land involved would be specified.

  10.180 Mr Duma said that “depends” on what the policy of the Government was at that
  particular time. It is the case that the State Solicitor, Mr Rolpagarea, had
  expressed the view that, whilst the Portion 406 transaction had not been expressly
  authorised by the NEC Decisions, it was broadly authorised by them. The State
  Solicitor also referred to the approval of the KCH accounts by the NEC. See the
  State Solicitor’s letter of 27 January 2017 [Annexure 10(19)].

  10.181 In relation to the assertion that he had exerted undue influence over Mr Hersey,
  Mr Duma stated: “And for them to say I have placed undue influence, I take
  exception to that because honestly speaking, I did not. I have always been very
  honest and I am also honest in saying these gentlemen is related to me. There is
  nothing wrong with having relatives and as far as I know this fellow wanted to
  develop that land. He acquired that, he applied to the Board like anyone else.
  There were others too who applied for the same land and he comes from that
  area, despite what others are saying. Polos is watchdog and he has not said
  anything yet but he is from that area. He had his own plans to develop that area and
  when the State came for the land, and when he realised that the other land had
  been sold already, who would not — the process of acquiring title in the first place
  no one was alleged of fraudulent conduct and that evidence of Sipison confirmed
  that. Everything was above board, even the process of compulsory acquisition.”

  10.182 It is correct that Mr Duma was not given the opportunity of responding to the
  matters the Independent Committee raised with respect to his conduct. That is no
  criticism of the Independent Committee because it was conducting an internal
  investigation into the conduct of an officer of Kumul. Nonetheless the fact
  remains that Mr Duma’s responses were not sought or provided.

  10.183 The Administrative Inquiry did put the significant parts of Mr Duma’s alleged
  conduct to him, and he denied all allegations of impropriety.

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• (10) Mr Duna — Panel’s Conclusions

  10.184 Mr Duma’s relevant conduct has been summarised above as were his responses to
  the serious allegations that have been raised in this case.

  10.185 For reasons given already, on the facts presently known to the Administrative
  Inquiry, no conclusion ought to be reached about Mr Duma’s role in any
  conspiracy or fraudulent misconduct. Mr Duma has denied any wrongdoing.

  10.186 For reasons already given, the Administrative Inquiry is a very limited Inquiry
  with extremely limited powers for investigation. In Mr Duma’s case, in
  particular, there are complete areas of investigation that could not be undertaken
  by the Administrative Inquiry, but which would need to be undertaken before any
  conclusions could be reached.

  10.187 Mr Duma’s true relationship with the company Kurkuramb Estates Limited is a
  crucial area of investigation because Kurkuramb Estates Limited was the entity
  which, on the face of the documentation, was entitled to the sum of K46.6 million
  compensation by reason of the compulsory acquisition of Portion 406, of which it
  held a State Lease. Investigation needs to include investigation as to whether,
  contrary to the Minister’s claims, he controlled the affairs of Kurkuramb Estates
  Limited. The Administrative Inquiry was of the view that there would plainly be a
  case of corruption against Mr Duma, if contrary to his denials, he had control
  over the affairs of KEL. That would demonstrate a link between Mr Duma and
  the compulsory acquisition of Portion 406. As stated above, he said to the
  Inquiry: “I have got nothing to do with Kurkuramb Estates.”

  10.188 The Administrative Inquiry was not empowered to conduct such an investigation.
  Furthermore, Christopher Polos, who is shown in the Companies Register to be
  the sole director and shareholder of Kurkuramb Estates Limited, declined to
  cooperate with the Administrative Inquiry. As already pointed out, Mr Polos was
  perfectly within his rights in taking that stance since the Administrative Inquiry
  was not vested with any powers to summons witnesses to attend, or to examine
  them on oath.

  10.189 As already stated, it cannot be assumed that further investigations will implicate,
  rather than exonerate, Mr Duma. Mr Duma as well as the other affected parties,
  and the public generally are entitled to have this matter fully investigated. The
  issues are in the hands of the police, and the investigations should continue until
  completion. The Administrative Inquiry expresses the hope that this Report will
  be of assistance to the police in their continuing investigations.

  10.190 As to the conflict of interest issue with respect to Mr Duma, who did not disclose
  any relationship with Kurkuramb Estates Limited in circumstances in which he
  was instrumental in payments being made by KCH to that company, Mr Duma
  has put forward the contention that he was not obliged to make any disclosure in
  that regard because he was not party to the decision of Kumul Consolidated
  Holdings to pay the K46.6 million to Kurkuramb Estates Limited. This aspect of
  the matter, in relation to which the question of control of Kurkuramb Estates Ltd

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• is again highly significant, should be investigated and resolved by the
  Ombudsman Commission.

  (11) Independent Committee Appointed by Kuntul Consolidated Holdings
  re Hersey

  10.191 It was on 20 January, 2017, that Kumul Consolidated Holdings appointed the
  Independent Committee to investigate allegations made against the then
  managing director of Kumul, Mr Garry Hersey.

  10.192 The Independent Committee subsequently reported to Kumul the final version of
  the Independent Committee’s report being dated 12 April 2017.

  10.193 Part of the investigation conducted by the Independent Committee related to the
  Portion 406 transaction.

  10.194 To assist in its examination of the matter, the Independent Committee obtained a
  report from an accounting firm, JAJ Associates. That report showed the financial
  details relating to the Portion 406 transaction.

  10.195 The Inquiry was informed that Mr Hersey had been suspended on full pay,
  following which he had been refused entry to Papua New Guinea. The
  Independent Committee expressed the view that that initial suspension appeared to
  be in breach of Mr Hersey’s employment agreement. However, as indicated below,
  Mr Hersey was eventually suspended and terminated by the NEC.

  10.196 The Independent Committee proceeded upon the assumption that PNG Ports
  Limited had effected a lawful assignment of its rights in respect of the Lancron
  Naval Base to KCH. The Administrative Inquiry has proceeded upon the same
  assumption.

  10.197 The Committee made the following recommendations:

  “(a) the Board make a recommendation to the NEC for the immediate
  termination of Mr Hersey by the Head of State, acting on advice, in
  accordance with clause 21(D of the Employment Agreement;

  (b) further or in the alternative, the Board make a recommendation to the
  NEC for the immediate termination of Mr Hersey by the Head of
  State, acting on advice, in accordance with clause 19( c)(V) of the
  Employment Agreement;

  (c) the Board consider instructing Ashurst lawyers to immediately
  commence legal proceedings against Mr Hersey for breach of
  contract and that, pending determination of such action, KCH pays
  the balance of Mr Hersey’s entitlements into the National Court Trust
  Account as security for damages and applies for an immediate freeze

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• of any of Mr Hersey’s assets in PNG that could potentially be used to
  satisfy judgement;

  (d) the Board immediately refer the matter to appropriate law
  enforcement authorities for further investigation with a view to
  determining whether criminal charges, including fraud, should be
  laid against persons involved in the Portion 406 transaction as well
  as possible prosecution for breaches of the Leadership Code;

  (e) a full, thorough and independent audit be undertaken on all KCH
  books, accounts and records during the period of Mr Hersey’s tenure to
  ascertain the legality of all major expenditure and all major
  transactions entered into by KCH under Mr Hersey’s direction,.

  0 the Board consider introducing appropriate policies, controls and
  structures to ensure that future major commercial transactions are
  comprehensively evaluated and vetted by appropriately skilled staff
  within clearly established risk parameters, guided as necessary by
  independent professional advice, and that public monies held in trust are
  adequately and robustly protected from misuse; and

  (g) clear and strict reporting lines and obligations are established within
  KCH’s internal management structure to ensure that the Board
  maintains complete and regular oversight and approval over critical
  management decisions, including by requiring regular management
  reports showing progress against approved Annual Plans and
  Budgets.”

  10.198 At the time the Independent Committee was appointed, no actual allegations had
  been formulated.

  10.199 Having read the material that had been prepared, the Independent Committee
  served Mr Hersey with a Notice of Allegations it had prepared.

  10.200 The Independent Committee saw its primary function as establishing, on a prima
  facie basis, whether or not the conduct alleged of Mr Hersey constituted serious
  misconduct within the meaning of clause 19(c)(iv) of Mr Hersey’s employment
  agreement, and that it was to report accordingly.

  (12) Allegations against Mr Hersey in relation to the Portion 406
  transaction

  10.201 The Independent Committee particularised the allegations against Mr Hersey as
  follows:

  “(a) That Mr Hersey failed to give full, frank and material disclosure to the
  Board on key legal and commercial risk issues that impacted the
  Portion 406 transaction including the basis for payments that were

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• made to KEL and the basis for valuations that had been obtained and
  represented to the Board.

  (b) That Mr Hersey failed in his duties as a director to ensure that KCH’s
  interests were properly and adequately protected, including by not:

  (i) disclosing any conflict of interest or bias as regard any aspect
  of the transaction;

  (ii) obtaining NEC and Board approvals before entering into
  binding contractual arrangements;

  (iii) obtaining and, where necessary, acting upon external
  professional advice;

  (iv) obtaining legal clearance from the State Solicitor before
  entering into binding contractual arrangements;

  (v) ensuring proper legal and financial due diligence was
  conducted before monies were paid,.

  (vi) ensuring that there was an adequate arms’ length agreement in
  place between the parties before monies were paid;

  (vii) ensuring that the Portion 406 transaction satisfied all necessary
  legal requirements; and

  (viii) ensuring that the transaction was structured in a way that
  KCH’s interests were adequately protected including by
  registering an appropriate security to protect its interests;

  (c) That Mr Hersey failed in his duty as a director to ensure that the
  relevant Board Paper was properly vetted by the Investment
  Committee, and contained all information material to a reasonable and
  prudent investor, before it was tabled before the Board for approval;

  (d) That Mr Hersey ‘s conduct throughout the Portion 406 transaction
  demonstrated a complete breakdown of proper legal, internal
  management and accounting processes within KCH;

  (e) That Mr Hersey failed to properly report and account to the Board in a
  prompt and timely manner (or at all) as to the proposed initiating of
  conduct of and execution of relevant transaction documentation
  including changes in transaction structures and finances;

  That Mr Hersey ignored or disobeyed Board resolutions or failed to
  implement them properly or fully;

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• (g) That Mr Hersey failed to properly and fully inform the Board of all
  relevant matters which he knew or ought to have known;

  (h) That Mr Hersey failed to perform any proper due diligence before
  seeking Board approval;

  • That Mr Hersey presented to the Board an inadequate, selective and/or
  factually incorrect Board paper that did not accurately advise the
  Board of the state of the transaction, the relevant risks and issues and
  which recommended decisions which were either not required or
  impossible to implement;

  • Mr Hersey failed to advise the Board that NEC approval was required
  for the transaction;

  (k) That Mr Hersey exposed KCH to unacceptable legal and commercial
  risk;

  (l) That Mr Hersey failed to bring to the attention of the Board changes in
  circumstances which impacted on or rendered unnecessary previous
  Board decisions or conditions imposed by the Board;

  (m) That Mr Hersey expended K46.6million without Board authority and
  without legal authority so to do;

  (n) That Mr Hersey failed to comply with internal KCH directive and
  guidelines; and

  (o) That Mr Hersey acted in breach of his financial authority or limits.”

  10.202 It is to be noted that no direct allegation was made to the effect that Mr Hersey
  received any form of benefit from the Portion 406 transaction. The Independent
  Committee did however refer the Portion 406 transaction to law enforcement
  agencies for further investigations with a view to determining whether criminal
  charges, including fraud, should be laid against persons involved in the Portion
  406 transaction. The Independent Committee was also critical of Mr Hersey for
  telling a staff member to remove the anti-corruption clause from Kumul’s
  agreements.

  10.203 It should be observed at this point that there were various allegations made
  against Mr Hersey which did not relate to the Portion 406 allegation, such as
  allegations relating to overseas travel, the appointment of consultants, overseas
  borrowings, the breakdown and hostility in Mr Hersey’s relationship with State
  owned enterprises, lack of interpersonal skills, the termination and alleged
  intimidation of staff, exercise of scrutiny and vetting of Board powers, and in his
  conduct of internal legal, management and accounting processes.

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• 10.204 The Independent Committee, having been requested to submit its report on 12
  April 2017, did so prior to Mr Hersey being furnished with any detail of the
  allegations against him, or having received his responses to such allegations.
  This appears to have occurred because the Independent Committee was placed
  under considerable time pressure to produce its report.

  10.205 One must obviously be very careful in assessing the view of the Independent
  Committee, having regard to the fact that the findings were made without hearing
  Mr Hersey’s account of the events.

  10.206 In relation to the Portion 406 transaction, the Committee was satisfied that there
  was “more than sufficient evidence to substantiate each of the allegations raised
  above” and that Mr Hersey had committed serious unlawful breaches of his
  statutory, contractual and/or common law duties as a director. The Committee was
  satisfied that such breaches amounted to fundamental breach and/or serious
  misconduct within the meaning of clause 19(c)(iv) and (v) of the employment
  agreement so as to warrant immediate termination by the Head of State acting on
  the advice of the NEC.

  10.207 The Committee considered that Mr Hersey had acted wilfully and intentionally, and
  in concert with certain members of KCH management, to deliberately mislead
  the Board on a range of critical issues relating to the Portion 406 transaction.

  10.208 The Independent Committee found that the payment of K46.6 million to KEL at the
  direction of Mr Hersey was both “grossly irresponsible and improper”. It said
  that it was also done without prior NEC or Board approval, in circumstances in
  which Mr Hersey knew this was a strict requirement.

  10.209 The Independent Committee expressed the view that the Minister for PESI
  appeared to exercise undue influence over the Portion 406 transaction. It stated that
  the evidence suggested that the Minister was linked to KEL in some way at the
  time of the relevant transaction, and that Mr Hersey was well aware of this. It stated
  that the apparent conflict of interest on the part of the Minister was never disclosed
  by Mr Hersey to the Board. It should be mentioned at this point that the Independent
  Committee did not give Mr Duma the opportunity to appear before, or make
  submissions to, the Independent Committee.

  10.210 It is unnecessary to relay in this report the findings of the Independent Committee in
  relation to the other allegations against Mr Hersey. In general, the Independent
  Committee concluded that there was insufficient evidence to make findings or
  recommendations in relation to those allegations. As a result, it would be correct to
  say that the Independent Committee’s recommendations to the NEC to the effect
  that Mr Hersey should be suspended and terminated were based on Mr Hersey’s
  conduct in relation to the Portion 406 transaction.

  10.211 It should however be observed that part of the alleged misconduct of Mr Hersey
  was based on the term of his employment contract, and his duties as a director of
  Kumul.

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• (13) Hersey Response to Allegations

  10.212 Mr Hersey has provided written responses to the allegations against him. That
  response evidently did not reach the Independent Committee before it reported on
  the matter.

  10.213 He states that he did, at all times, ensure that the interests of KCH were properly
  protected, and he states that his actions, correspondence and interaction with
  KCH staff, including the legal team and the third parties involved in the Portion
  406 transaction, were reflective of this position.

  10.214 He says he did provide all information available to KCH to the Board. He says
  that the Board Paper sets out all information known to him and KCH to the Board
  in detail. The Board Paper had stated that the Valuer General provided the
  information in respect of the purchase of the land.

  10.215 He maintains that there was no conflict or bias, and states that the committee did
  not give proper details or facts supporting the claim that there was. He stated that
  he obtained all NEC and Board approvals for the transaction.

  10.216 He states that he obtained external legal advice from Gadens in regard to the
  structuring. He took advice from the Legal Manager.

  10.217 He instructed the KCH legal team to undertake due diligence of the transaction.
  At no time did he act independently of that advice, nor did he enter into anything
  without advice from the Legal Manager.

  10.218 He stated that the agreement in place for the monies to be paid was “arm ‘s length
  agreement”. The KCH Legal Department was instructed to prepare the
  documentation for all aspects of the transaction, and he took advice from the
  Legal Manager. He at no stage acted independently of that advice.

  10.219 With Gadens and the General Manager, he ensured that the transaction was
  structured in the most appropriate manner.

  10.220 The transaction was properly vetted by the Investment Committee comprising of
  Moses Maladina, Michael Koisen and Richard Tengdui, and the Committee
  recommended the transaction to the Full Board. The Board Paper contained all
  the information it should have contained for a proper and informed decision to be
  made. The Paper was prepared by the relevant portfolio manager who was
  meticulous in the preparation of her board papers.

  10.221 He denied that the transaction demonstrated a complete breakdown of the proper
  legal, internal management and accounting processes within KCH. The
  appropriate processes were followed.

  10.222 He had reported to the Board as and when required. The Board approved the
  transaction and its implementation. He says he had never ignored or disobeyed a
  Board resolution, or failed to implement a Board resolution.

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• 10.223 He conveyed to the Board all information known to him about the transaction.

  10.224 There was considerable discussion between himself, the Portfolio Manager, the
  CFO and the Legal Manager regarding the structure and financing of the
  transaction, and consensus was reached and the transaction implemented.

  10.225 Letters of Advice from the State Solicitor regarding the role of KCH and the
  transaction confirmed that further NEC approval was not required given the
  approval by NEC of the KCH Annual Plan.

  10.226 He had NEC and Board approval to expend the K46.6million; he complied with
  Board directives and he did not breach his financial authority.

  (14) Administrative Inquiry Conclusions re Hersey

  10.227 Mr Hersey’s suspension is in a different category from the other suspensions.
  Going by the documentation made available to the Administrative Inquiry, he
  appears to have been suspended and terminated on the ground of breaches of his
  Employment Contract with Kumul. He has foreshadowed action for wrongful
  dismissal. The suspension and termination were effected by the NEC.

  10.228 The Administrative Inquiry is of the view that breach of contract, as such, does not
  fall within its Terms of Reference. Accordingly, the Administrative Inquiry
  considers it to be outside its scope to deliberate on Mr Hersey’s suspension or
  termination.

  10.229 The Independent Committee does not appear to have put to Mr Hersey that he
  committed any breach of the criminal law, and Mr Hersey has denied all
  wrongdoing. In those circumstances in particular, it would be inappropriate for the
  Inquiry to deliberate on Mr Hersey’s suspension or termination.

  10.230 In summary, the Administrative Inquiry makes no determination about Mr
  Hersey’s conduct. This is not intended to render issues relating to Mr Hersey
  immune from investigation by other investigative bodies should such bodies
  consider that issues involving Mr Hersey warrant further investigation.

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• 11. Defence Accounts

  11.1 It is necessary to examine the account given to the Inquiry by the Defence Force in
  relation to the selection of Portion 406 for compulsory acquisition.

  11.2 Brigadier General Toropo, the Commander of the PNG Defence Force, attended at the
  Inquiry to give information on 9 September 2017.

  11.3 The Brigadier General said he had been Commander for over 3 years. He referred to
  the fact that the relocation decision came to involve both Murray Barracks and
  Taurama Barracks.

  11.4 The relocation of the Lancron Naval Base envisaged that Lancron would be given
  over to commercial activity, and the Naval Base would be transferred out of Port
  Moresby as well. Brigadier Toropo said the Lancron Naval Base was still being used
  by the Navy. He said that was because an alternative site had not been found. He
  agreed that, neither before nor after the acquisition of the Manumanu land had there
  been any expert analysis of the suitability of Manumanu for naval purposes. No
  written report had been prepared.

  11.5 Although he had supported the decision to move the naval base to Manumanu, he
  stated that it was preferable for the maritime base to be within the vicinity of the Port
  Moresby area. He stated:

  If there is any site available, Motukea should be a suitable site.

  11.6 The Brigadier General appeared to be quite doubtful as to whether “bigger boats”
  could be accommodated at Manumanu.

  11.7 The late Mr Vali Asi, Secretary for Defence, gave his account to the Administrative
  Inquiry on Thursday 20 July 2017. He said that, having been Secretary for Defence in
  1986-1989 period, he was re-appointed on 14 October 2015.

  11.8 His view was the Manumanu land was suitable for maritime purposes. He stated that
  his view was based on “the advice we got from our technical people” and that “the
  Commander will answer for that”. He said he was never involved in any decision as to
  whether the land at Manumanu was suitable for naval purposes but his belief was that
  it was suitable.

  11.9 He was under the impression that “Portion 154 goes to the sea”. When it was put to
  him that the nearest water was the Galley Reach River which was almost 4 kilometres
  from Portion 154, Mr Asi appeared to have no real knowledge of the relationship
  between land and sea in the area.

  Dr Fabian Pok

  11.10 On 15 October 2015, Dr Pok sent a letter to Mr Luther Sipison, the Secretary for
  Department of Lands and Physical Planning.

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• 11.11 The letter reads as follows: –

  Re: Intention to shift Murray Barracks and Lancron Navy base to Portion 406
  The National Executive Council in its Decision 168/2014 has authorised the
  PNGDF to relocate its current military establishments away from NCD.

  My Ministry and PNGDF have identified Portions 406 and 154, Milinch
  Manu, Aroa, Central Province, as suitable locations for the construction of new
  military barracks and associated facilities.

  As Portions 406 and 154 are currently Agricultural Leases held by private
  interests, I request the Department of Lands and Physical Planning to
  compulsory acquire these portions for the State (PNGDF) for military
  purposes under the compulsory acquisition process provided under the Land
  Act. Please therefore initiate the necessary process under the Land Act to
  compulsorily acquire these portions for the PNGDF. ”

  11.12 As previously stated, the content of the letter was incorrect insofar as Portion 154 was
  at all material times the property of the State.

  11.13 As also previously stated, the Defence Minister’s letter of 15 October 2015 appears to
  be the first time Portion 406 had been officially mentioned as a site.

  11.14 It is also highly significant that Dr Pok was a member of the Defence Council, and
  accordingly must have known that Portion 406 had not been approved by the Defence
  Council to be part of the new Defence site, although Portions 422 and 423 had been
  approved on 27 February 2015.

  11.15 In his account of events to the Administrative Inquiry, Dr Pok acknowledged that the
  land was not approved by the Defence Council. He said that it was desirable land
  because it had no real problems in relation to customary ownership. That was “one
  point to consider”.

  11.16 He referred to the fact that a feasibility study and design had been carried out on how
  Murray Barracks would look in the future, but he did not suggest there was any
  feasibility study performed as to the suitability of Portion 406.

  11.17 The significant feature of Dr Pok’s account, therefore, is that it confirms that he gave
  Ministerial impetus on the compulsory acquisition of Portion 406 in circumstances in
  which there was no Defence Council approval of that purchase and no feasibility
  study.

  11.18 In the absence of a Defence Council Decision and a feasibility study, it may be
  inferred that it was Dr Pok who gave the necessary direction that Portion 406 be
  compulsorily acquired, and thereby provided a cover for the lack of approval.

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• Inquiry Conclusions re Dr Pok

  11.19 It is very strange that Dr Pok should have authorised the compulsory acquisition of
  Portion 406 at all, let alone that he should have done so in the absence of a Defence
  Council decision and a feasibility study. However, such action would not have been
  corrupt had Dr Pok been lending his support to the compulsory acquisition of Portion
  406 solely for the purposes of what he considered to be in the bests interests of the
  Defence Department.

  11.20 But if he was acting in the interests of another or others, including Kurkuramb Estates
  and himself, his actions of course would have been corrupt. This therefore provides a
  further reason as to why the affairs of Kurkuramb Estates need to be properly
  investigated.

  11.21 The allegation of corruption against Dr Pok would be strengthened if it did transpire
  that Mr Duma controlled the affairs of Kurkuramb Estates. Then it would have been a
  case of Dr Pok having authorised compulsory acquisition of a property owned by a
  company controlled by another minister, with that being a compulsory acquisition
  which turned out very favourably to the property owner. In that event, an inference of
  collusion between the two ministers could be drawn.

  11.22 However, as stated above, Mr Duma has firmly denied that he controlled the affairs of
  KEL. As matters stand, there is no basis for thinking that Dr Pok should have realised
  that Mr Duma controlled the affairs of Kurkuramb Estates, because Mr Duma is very
  firm that he did not do so. Accordingly, no basis for drawing such an inference arises.

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• 12. Valuation Considerations
  12.1 Aspects of the valuations have already been referred to and considered in Sections 9
  and 10 of this Report. The object of this Section is to add some additional matters.

  12.2 Mr Gabriel Michael said that he had been with the Valuer General’s Office for over
  20 years, and had been Valuer General since 2014.

  12.3 Mr Michael stated that all compulsory acquisitions have to come to him by means of a
  request from the Department responsible for organising the acquisition. The letter is
  normally written to the Secretary of the Department, that is to say the Secretary for
  Lands. The letter ordinarily asks for the Valuer General’s Office to prepare a
  valuation.

  12.4 Mr Michael says that, in this instance, in respect of Portions 406, 422 and 423, he was
  not informed of any such request, if there was one.

  12.5 In his experience, “all compulsory acquisition is done by the State”, and the State is
  liable for all compensation.

  12.6 He said that the established procedure was that Mr Kila had to go through him to
  obtain approval to prepare a valuation report for a compulsory acquisition. He could
  sign for a compulsory acquisition valuation below K500,000, but not over K500,000.
  In 2014 Mr Michael had circulated a document dated 25 February 2014 containing
  this instruction: See Annexure 12(1).

  12.7 He said that, when the three valuation reports relevant to the Inquiry were done in
  November 2015, he was not on leave. He conceded that he may have gone on duty
  travel, but he cannot recall doing so. When he went on duty travel, that would last for
  a week or a few days. The reports were not referred to him. He had not signed the
  reports.

  12.8 This was the first time he was aware of any valuer in his office signing for a valuation
  above K500,000. Any such valuation should have been signed by him.

  12.9 So far as the stamp is concerned, he said that one stamp is kept in his office. The
  other stamp was for Moses Kila to use when he signed off for valuations below
  K500,000.

  12.10 Mr Moses Kila attended on the Inquiry on two separate occasions.

  12.11 He said that there was no working file of documents pertaining to Portion 406. The
  reason was that he did the valuation in a hurry. When asked why he was in a hurry,
  he said he was pressured by officers of the Defence Department.

  12.12 Although he did not refer to any comparable sales in his report, he identified a
  document as containing those sales he said he had examined. A copy of that
  documentation is Annexure 12(2). The notable feature of all of the sales is that they
  were properties in or on the fringe of Port Moresby.

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• 12.13 He stated that he signed the valuation certificate because Mr Gabriel was not
  available. He claimed Mr Gabriel was away on duty travel.

  12.14 On the second occasion he attended the Inquiry, which was on 30 August 2017, he
  was asked why he had not revealed, on the first occasion, that he had signed
  valuations for Portions 422 and 423.

  12.15 The explanation that he gave was that Portions 422 and 423 had been valued by a
  private valuer. He said that “they said for us to cancel” since the valuations had
  already been done. He agreed that he had prepared the valuations, but said they were
  “disregarded because it was said that a private valuer had already done it so we
  should not be doing it and so we only did 406”. He said that he “never gave” the
  reports for 422 and 423.

  12.16 He agreed that he stamped reports for Portion 422 and Portion 423 and applied his
  own signature to them, as he had for the Portion 406 report.

  12.17 He said that subsequently the value for Portion 406 was set at K46 million because it
  “was adopted from this private valuer”, the valuer being Gabriel Du Karap of GDK,
  Valuers and Property Consultants.

  12.18 It was put to him that the value that he placed on 422 and 423 was actually higher
  than the value placed by Mr Du Karap on those properties. Mr Du Karap had placed
  K7.2 million on Portion 422, whereas Mr Kila’s value was K7.615 million. As to
  Portion 423, Mr Kila had placed a value of K9.397 million on the land, whereas Mr
  Du Karap had given a value of K9.2 million.

  12.19 Mr Kila found it difficult to explain why he had put a higher value than Mr Du Karap
  on the 422 and 423 properties. He said:

  “It is reasonable because, like I said, valuation is not exactly what — if you put it
  on 9. 7, it does not mean that I will put on it 9.7 as well. It depends on how you
  interpret the data and how you can reason to say that you use this rate or this,
  whatever; depending on the factors that may influence some things. Like I do not
  think the same way as you think, you see. It is a little bit like economics and
  psychology and all these kinds of things. So if you think differently, I may have a
  slightly different value because I think of it in a different way. So long as it does
  not differ, not a very big difference is in there.”

  12.20 He said the private valuation had been given to “people from Defence”. He said that
  in this instance the requesting authority was the Secretary for the Department of
  Defence. He said that, in this instance, Defence was “the client to this private
  valuer”.

  12.21 He said that the use made of the private valuer, and the adoption of the private
  valuer’s figures, was done by “Defence Department”, the “personnel from the Office
  of the Secretary of Defence”. He was not able to say who those people were.

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• 12.22 Mr Kila claimed that he did not know what the purpose of ascertaining the market
  valuation of Portions 422 and 423 was. He did not know that those two allotments
  were being purchased by the Government. He said he did not know, in the case of
  422 and 423, that the valuations were for the purpose of compulsory acquisition. He
  said that “all they asked was for the market value”.

  12.23 When pressed as to why he did valuation documents himself and signed them in
  relation to 422 and 423, he stated “Well, we thought we were going to give it to them
  but then they said, ‘no it was already being done, so we cannot do it again’. That is
  what they said.”

  12.24 He said he did not adopt the figure just because it was given by a private valuer. He
  claimed to have done his own analysis, including obtaining his own data. That was
  the same set of data as he used for Portion 406.

  12.25 He said there were not many sales in the area in relation to agricultural land. He was
  challenged as to whether his valuation for Portion 406 was a one-page valuation, and
  he said: “No, there are several pages to it-. There was not just the page with his
  signature on it. He claimed to have given over copies of the other pages, but said “I
  do not know if you people have copies”.

  12.26 He produced the document which he said constituted the additional pages for his
  valuation of Portion 406. They were the pages that contained the details of sales in
  and close to Port Moresby. They are Annexure 12(2).

  12.27 He said that he did take into account comparable sales, he just did “not put it in the
  report”. This further material was “in the office”. He said he had given people copies
  of that.

  12.28 In relation to his valuation of Portion 406, he stated, referring to the valuations of
  Portions 422 and 423, “we almost adopted the same rate”. When asked why he did
  that he said: “Because we are just around the same area, just adjacent”.

  12.29 He was asked whether, when he valued Portion 406, he just took the per hectare rate
  that the private valuer had adopted for the other two properties, 422 and 423. He said:
  “No, it is slightly different”. He said his reason was the variable sales.

  12.30 He said he never obtained a copy of any minute sent by Mr Michael containing a
  direction to the effect that nobody in the office should do a valuation over K500,000,
  without that matter being referred to Mr Michael. Mr Kila said he was only verbally
  informed to that effect. He said: “Verbally, he had mentioned that my limitations are
  K500, 000” . That was around February 2014 that Mr Michael said that.

  12.31 He said he did not comply with the requirement that he should refer a valuation over
  K500,000 to Mr Michael. The reason he gave was: “Because in his absence I was like
  pressured”. The pressure that occurred was applied by Defence Force officers
  through Mr Moni.

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• 12.32 He said he was never paid any money in connection with the valuations and received
  no benefits. He was not aware of anybody else in the Valuer General’s office
  receiving any benefits.

  12.33 When asked where Mr Michael was at the time he prepared his valuations, Mr Kila
  said “he had some problems so he was away from the office”. He was away “a week
  or so”.

  12.34 Mr Michael sent a letter to the Administrative Inquiry dated 26 July 2017. He gave
  this description of the discussion between Mr Kila and himself concerning the
  valuation of the Manumanu land prepared by Mr Kila. Mr Michael stated:

  “For this letter of request officially requesting the Office of Valuer General to
  carry out the Valuation, as I was not involved in this Valuations I called for Mr
  Moses Kila the Assistant Valuer General who actually did the valuation to explain
  as to how these valuations were done. He responded stating that the Defence
  Secretary’s Office requested these valuations. An officer from the Defence
  Secretary’s Office came to the Valuer General’s Office requesting for the
  Valuation verbally and he was asked to fill in a Valuation Request Form and
  Valuation Instruction Numbers were issued for Portion 406 with an
  Instruction No. COR 2015144 and Portion 2722 with an Instruction Number
  COR 2015142 and Portion 2723 with an Instruction Number of COR 215/43;
  these Portions 2722 and 2723 were later changed to Portions 422 and 423 by
  the Office of the Surveyor General. Moses Kila also stated that the Valuation
  he did was for Portion 406 Milinch Manu Fourmil Aroa only and he did not do
  the Valuations for Portions 422 and 423 Milinch Manu Fourmil Aroa as the
  Defence Secretary’s Office said they have engaged private valuers to carry out
  the reports. I therefore conclude here that Valuation Instruction Numbers were
  issued based on the Defence Secretary’s Officer filling in an Official Valuation
  Request Form.”

  Value of Land

  12.35 The assessment of compensation arising from the compulsory acquisition of land is to
  be determined in accordance with the provisions of the Land Act 1996, in particular
  sections 23 and 24.

  12.36 Under those provisions, the value of the land is to be determined at the date of
  acquisition.

  12.37 Under s. 23(2), “in determining the value of land acquired under this Act, regard shall
  not be had to any increase in the value of the land arising from the carrying out of, or
  the proposal to carry out, the public purpose for which the land was acquired”.

  12.38 In other words, in the circumstances of the present case, the fact that the Department
  of Defence demonstrated interest in the acquisition of the land, and in conducting
  military operations on it, could not be relied upon to increase the value.

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• 12.39 The value to be ascribed to the land is the “market value” which is defined as being
  “the estimated amount which the lessee’s interest in the State Lease might reasonably
  be expected to realise on the date of valuation in an exchange between a willing
  vendor and willing purchaser in an arm’s length transaction after proper marketing
  wherein the parties had each acted knowledgeably, prudently and without
  compulsion”.

  Relevant Comparable Sale

  12.40 The Administrative Inquiry has had regard to the State valuation in relation to land
  known as Portions 11 and 152, Milinch Granville, Fourmil Moresby, Central Province
  in assessing the compensation payable as a result of compulsory acquisition of
  agricultural leases. The property was situated on the north-western outskirts of Port
  Moresby and the southern part of the holding was approximately 16 kilometres north-
  west of the Port Moresby Central Business District. There was a bitumen road from
  Port Moresby which went past the property. It was a sealed two-lane carriageway
  with gravel shoulders. It was in good condition. Good access was available direct to
  the property from the road.

  12.41 The lease was expressed to be a “Pastoral Lease” and, as such, the property could
  only be used for grazing or pastoral purposes.

  12.42 Reticulated electricity and telephone services were available to the property. No town
  water or sewerage services were provided.

  12.43 The compulsory acquisition of Portions 11 and 152 was effective on publication of the
  Notice of Acquisition in the National Gazette on 18 December 2007. The registered
  proprietor was Takoa Pastoral Co. Limited.

  12.44 The property had formerly been a grazing property (it had been called Fairfax Cattle
  Station) and it had apparently been abandoned. The property was mostly cleared land
  with some regrowth areas and indications of previous improved pastures in selected
  areas. The property comprised extensive areas of gently sloping to gently undulating,
  fully cleared grazing paddocks with reasonable natural grasses. The soils were of
  moderate to low fertility and this, combined with the low rainfall, lack of permanent
  water and lack of water storage facilities restricted the carrying capacity at the time.

  12.45 The area of property was large, namely 4,323.078 hectares. The lease term was for 99
  years, and the commencement date had been 29 March 1955.

  12.46 The unimproved value of the land at the time had been assessed at K39,900 for
  Portion 11, and K416,500 for Portion 152. The then current annual rental was
  K22,700 per annum.

  12.47 The valuation had been conducted on behalf of the State by Mr John F. Purcell of
  Asia Pacific Valuations Pty Ltd. Mr Purcell was a certified practising valuer.

  12.48 Mr Purcell valued the property at K565,000. This reflected a per hectare rate of K350
  for Portion 11 and K300 per hectare for Portion 152.

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• 12.49 The report is Annexure 12(3).

  12.50 It will be seen that the report analyses several comparable sales.

  12.51 Mr Purcell concluded that the sales evidence for pastoral/grazing properties indicated
  that the land rates ranged from around K300 to K600 per hectare. The range of values
  reflected the size, quality and location of the holding.

  12.52 Mr Purcell considered that discount had to be allowed for:

  n The lower than average carrying capacity;
  • A poorer (less fertile) soil quality;
  • Absence of improved pastures;
  • Low rainfall in the area;
  n Limited stock watering facilities;
  • Lack of any significant farm infrastructure;
  n Deterioration whilst operative as a cattle farm.

  12.53 Conversely, some of the attributes of the subject property had to be recognised
  including:

  • Close proximity to Port Moresby;
  • Good all weather access roads;
  n Some underlying capital appreciation to recognise the increasing
  development in the general locality.

  12.54 Mr Purcell’s valuation was prepared some eight years prior to the relevant valuations
  in the present case. However, the Administrative Inquiry is not aware of any major
  alterations in value of agricultural land within driving distance of a major city that
  would justify the huge difference between the per hectare value determined in that
  case, and that determined in relation to the Manumanu land.

  12.55 From the description given in Mr Purcell’s valuation, the quality of the land acquired
  from the Takoa Pastoral Co. Limited was probably slightly inferior to the Manumanu
  land. On the other hand it was 16 kilometres from Port Moresby, whereas the
  Manumanu land is 80 kilometres from Port Moresby. Like Portions 11 and 152,
  Portion 406 Manumanu was a failed cattle property.

  12.56 It is beyond argument that the values attributed to Portions 406, 422 and 423 for the
  Manumanu land in the du Karap and Kila valuations, reflecting as they do a per
  hectare rate in the region of K55,000, cannot possibly be sustained. A more
  appropriate per hectare value is the rate per hectare paid by Mr Eludeme’s interests to
  purchase Portions 422 and 423 in 2011, namely K488 per hectare.

  12.57 The unimproved values applied by the Valuer General to State Leases of Portions
  406, 422 and 423 were totally inconsistent with the Du Karap and Kila valuations.
  Whilst it is appreciated that such valuations are often assigned administratively
  without there being any requirement of detailed value assessment, the valuations are
  intended to reflect the unimproved value of the land. They form the basis for the

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• calculation of the annual rental. As previously stated, the values were generally
  consistent with the K488 per hectare figure paid by the Eludeme interests, and totally
  inconsistent with the K55,000 per hectare figure.

  12.58 The valuation evidence therefore also requires further examination by an authority
  with full investigative powers. One reason for that is that it does involve conflicts in
  accounts. As has been seen, there is a conflict between the account given by the
  Valuer General, Mr Michael Gabriel, and that given by the Assistant Valuer General,
  Mr Moses Kila. For reasons given in relation to the Administrative Inquiry’s general
  lack of powers, the Administrative Inquiry is not capable of resolving a conflict of
  that kind, not having the power to examine persons on oath or the power to require
  attendance of other persons to give evidence about particular matters.

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• 13. Conspiracy Theory and Suspension
  13.1 As has already been indicated, several heads of department were suspended pending
  investigation into matters the subject of this Administrative Inquiry.

  13.2 As stated above, the departmental heads suspended on 8 February 2017 were the
  Defence Secretary, Mr Vali Asi, Lands and Physical Planning Secretary, Mr Luther
  Sipison, Valuer General, Mr Gabriel Michael, Kumul Consolidated Holdings
  Managing Director, Garry Hersey, MVIL Managing Director, Jerry Wemin, Central
  Supply and Tenders Board Chairman, Mr Philip Eludeme, Lands Titles Commission
  Chairman, Mr Benjamin Betata, and the State Solicitor, Mr Daniel Rolpagarea. The
  remarks in this section do not apply to Mr Eludeme or Mr Hersey, who are considered
  separately in this Report.

  13.3 The very fact that those senior officers covering a number of departments and State
  entities were suspended demonstrate that there was an allegation of suspicion of
  conspiracy including corruption on a large scale.

  13.4 That the allegation or suspicion was nothing short of large scale conspiracy is clear
  from the content of the allegations. This is exemplified by the “Show Cause” letter of
  15 May 2017 which Mr Luther Sipison, the Secretary of the Department of Lands &
  Physical Planning received from his Minister, Mr Benny Allan.

  13.5 The Show Cause notice given to Mr Sipison is Annexure 13(1). Looked at in
  conjunction with known facts, it shows that the central allegations were that the
  compulsory acquisition of Portion 406 was corruptly contrived, and that a high
  valuation was corruptly obtained, thereby enabling a corrupt party or parties to receive
  the high amount of compensation assessed in respect of the value of the land. The
  contriving included the prior obtaining of the grant of the land, which may never have
  been intended to be used for agricultural purposes, but, rather, was intended to be
  available to be compulsorily acquired at the instance of the Department of Defence.
  The letter began:

  “In a letter to you dated 3 February 2017, the Prime Minister directed you to
  respond to allegations and to explain your involvement with others in the
  compulsory acquisition of land at Manumanu to facilitate the relocation of the
  Defence Force Lancron Naval Base, namely:
  a) compulsory acquisition of Land Portion 406, Milinch Aroa, Central
  Province;
  b) execution of the MOA between the Department of Defence, Kumul
  Consolidated Holdings Limited, and Kurkuramb Estates Limited;
  c) valuation of the said land through the Valuer General’s Valuation Report,.
  d) Transfer of the Title to Kumul Consolidated Holding Limited of Lancron
  Naval Base (Section 53 Allotment 9 Granville);
  e) related acquisition of other land by the Department of Defence for the
  purpose of relocation of Lancron Naval Base; and
  0 availability of other information relevant to the said land acquisition.”

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• 13.6 The paragraph setting out the allegations against Mr Sipison appears at the top of page
  2 of the letter:

  “The evidence in the possession of the State shows that you have used your
  position of power and influence as a senior officer of the national public
  service, in conspiracy with others, for the purpose of defrauding the State and
  defrauding customary land owners in that you participated in and/or
  facilitated the compulsory acquisition of the said Manumanu land’ at Portion
  406, Mil inch Aroa, Central Province.”

  13.7 These were extremely serious allegations. They were allegations of criminal conduct.

  13.8 Of all the heads of department that were suspended, the allegations against Mr Sipison
  and Mr Vali Asi, the Secretary for Defence, might be thought to carry the most
  traction inasmuch as the facts point mostly to facilitative actions within the Lands
  Department and the Defence Department. In particular, substantial manipulation
  appears to have occurred in the Lands Department.

  13.9 The Inquiry turns therefore to the responses by Mr Sipison and Mr Asi.

  13.10 Mr Sipison’s responses to the allegations are comprehensively set out in a letter he
  sent to the Administrative Inquiry dated 18 May 2017. That letter is Annexure 13(2).

  13.11 In that letter Mr Sipison states it was not his intention to defraud the State in any way.
  He considered the relocation of the Force to be a matter of national interest, and
  officers were designated to administer specific functions within his department.

  13.12 He did not in any way or manner exert pressure or threats to officers.

  13.13 The valuation of Portion 406 was carried out in the Valuation Division which he says
  functions independently of the Lands Department.

  13.14 He stated that the valuation of Portion 406 and other land of interest to the PNGDF
  was “only an indicative figure to assist and guide the State Agency involved in this
  compulsory acquisition which will form the basis of them to negotiate with the lease
  holders”

  13.15 He continues:

  “Therefore, it is not the intention of my Department to allow PNGDF
  and its stakeholders to fix their pricing of the private land solely on the
  valuations done by the Valuation Division. The same applies to all
  other valuations on any property to serve as the basis of owners and
  buyers to negotiate and agree within themselves.”

  13.16 He continued:

  “It was a private and individual decision of the management of
  PNGDF and its leadership to agree on the final acquisition price,
  which they themselves will pay for and on behalf of the State. As such

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• my Department and I had very little or no involvement in the
  negotiation of the final price of the Portion 406 and all other land that
  were of interest to PNGDF for their relocation exercise.”

  13.17 He said the Memorandum of Understanding signed between the Department of
  Defence and Kumul Consolidated Holdings and Kurkuramb Estates Ltd were private
  dealings to which neither he nor the Lands Department were parties.

  13.18 Mr Sipison denied that he had conspired with others to defraud the State and
  customary landowners in facilitating the compulsory acquisition of the Manumanu
  land.

  13.19 Further, he denied he had personally benefitted and enriched himself from the
  acquisition payment by Kumul Consolidated Holdings Limited to Kurkuramb Estates
  Ltd.

  13.20 Before his unfortunate death of 6 August 2017, Mr Vali Asi had attended on the
  Administrative Inquiry on 28 July 2017 to give his account of relevant matters.

  13.21 In his discussions with the Administrative Inquiry, he said that he had trusted the
  correctness of the valuation to the Valuer General.

  13.22 He said he had seen no evidence of anyone in the Defence Department getting any
  money out of the Manumanu transaction. He said he had no dealings with Kumul
  Consolidated Holdings Ltd about the matter. He did not know Mr Christopher Palos
  and knew nothing about the company, Kurkuramb Estates Ltd.

  13.23 The Government acted swiftly by suspending the heads of several departments. In
  most of the departments, some action had taken place which apparently facilitated the
  Portion 406 transaction.

  13.24 The fact that the Government acted so swiftly was not surprising, because it was
  presented with a transaction which suggested that it had been caused to purchase land
  for K46.6million for a naval base when the land was landlocked and several
  kilometres from the sea. Features of the transaction appeared to show that at least two
  departments must have been manipulated to bring about that effect, and that many
  public servants could have been involved in the process. The manipulation included
  causing the Defence Department to make a seemingly irrational decision as to the
  purchase. On any basis, the amount paid appeared to evidence manipulation of the
  valuation process, and the result was nothing short of an expensive and operational
  disaster.

  13.25 As to the heads of department, assuming that they were not knowing participants in
  the fraud, the fact that their departments became vehicles through which fraud was
  committed had to be seen as raising questions of the adequacy of the administration of
  their respective heads.

  13.26 The Administrative Inquiry does not consider that it is to sit in judgment on the
  Government’s suspensions. The Administrative Inquiry would not dispute that, in the

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• situation described above good governance required the Government to act promptly
  and decisively to express its concern at the lack of proper administration that was
  apparently involved.

  13.27 The suspension of the heads of departments may have been made on an alternative or
  different basis from the “conspiracy” basis, namely that the departmental heads had
  not adequately administered their respective departments.

  13.28 It will be recalled that the “Statement of Case” referred to the fact that “the principles
  of accountability and transparency have been seriously questioned in the land
  transactions warranting the Prime Minister at the authority of the National Executive
  Council to take firm action”.

  13.29 However, the fundamental allegation in this matter is of criminal conduct, probably of
  a conspiratorial nature. Perpetrators of such conduct are likely to seek to ensure that
  others who are not part of any conspiracy or criminal conduct are not alerted to the
  true nature of the actions that are being taken. That being so, the disclosure of the
  alleged conduct can hardly indicate, in itself, that the heads of departments were at
  fault. Having regard to those considerations, the Panel takes the view, on the basis of
  the information supplied, that none of the heads of departments currently on
  suspension have been shown to have been derelict in their duty in this way.

  13.30 In short, the expression of the Government’s reasoning behind the suspensions it
  made of departmental heads was based on the proposition that those departmental
  heads were parties to a conspiracy to defraud the Government. In the limited
  investigation it was able to make, the Administrative Inquiry saw no direct evidence,
  and insufficient circumstantial evidence, to show that the departmental heads were
  party to a conspiracy to defraud the Government.

  13.31 That was particularly the case with State entities such as the MVIL, Land Titles
  Commission and the State Solicitor’s office.

  13.32 The Panel sees no reason for declining at this stage to act upon the denials of
  misconduct made by Messrs Luther Sipison and Vele Asi, and sees no basis for
  thinking that the allegations against them would suffice to prove that they were parties
  to a conspiracy of a kind described in Mr Allan’s Show Cause notice. Having reached
  that conclusion in relation to Mr Sipison and the late Mr Asi, the Panel does not
  consider it necessary to deal explicitly with each of the departmental heads. In short,
  on the material presently available, there would be no prospect of any conspiracy
  allegation being sustained against any of them either.

  13.33 The State Solicitor, Mr Daniel Rolpagarea, was also suspended. Mr Rolpagarea gave
  some advices with respect to the Portion 406 transaction at the point at which it came
  to involve KCH. The Panel has considered the advices, and sees no reason why any
  allegations could be sustained against Mr Rolpagarea either. Mr Rolpagarea, for
  example, advised in a letter to Kumul Consolidated Holdings dated 27 January 2017
  (copied to the Minister for Public Enterprises and State Investments, Mr Duma) that,
  taking a broad view, the acquisition of Portion 406 could be said to be authorised by
  the 2012 NEC Decision. The Administrative Inquiry considers that view to be fairly

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• open. The expression of that view certainly falls well short of evidence that Mr
  Rolpagarea was party to any criminal conduct.

  13.34 The Administrative Inquiry sees no reason to doubt the account of events given by Mr
  Michael Gabriel, the Valuer General. It saw no irregularity in Mr Joe Wemin
  releasing an MVIL dividend to KCH simply because it partly funded the payment of
  K46.6 million to Kurkuramb Estates Ltd by KCH. The Administrative Inquiry failed
  to discern any relevant connection between Mr Betata and the assertions of fraud and
  illegality the subject of the Inquiry.

  13.35 All that is not to say that there was no large conspiracy of the kind referred to in the
  letter to Mr Sipison. The prospect that there was such a conspiracy cannot be
  excluded. All that is being said is that the Administrative Inquiry did not see
  sufficient evidence to support the expressed allegation that the departmental heads
  were party to a conspiratorial agreement.

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

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

  13.38 As stated above, the action against the various senior officers of the State, and the
  allegations made against them, are plainly based on the theory that a large number of
  personnel across a number of departments, including the Heads of some departments,
  and in two cases Ministers, conspired together (and presumably with several others) to
  manipulate the compulsory acquisition of Portion 406 at an inflated price and to divert
  the proceeds of the acquisition of the property into their hands.

  13.39 There is circumstantial evidence which supports the notion that there was a wide-
  ranging conspiracy, such as the lengths some personnel in the Lands Department have
  gone to in removing all the files containing evidence relating to the transactions. If
  there was a large and wide-ranging conspiracy of that kind, it could only be
  demonstrated to the requisite degree by an exercise of full investigative powers. As

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• has been indicated, the Administrative Inquiry does not have these powers. There are
  other possibilities. One such possibility is that one person, or a small number of
  persons, garnered sufficient cooperation from public servants across the relevant
  departments, particularly in Lands and Defence, to achieve the same ends. Once
  again, circumstantial evidence also supports that possibility. Again, however, that also
  could only be demonstrated by a full investigation.

  13.40 The Panel is therefore strongly of the opinion that full investigations of this matter
  should be completed by the Police and the Ombudsman Commission, as appropriate.

  13.41 Whether the suspensions were and are justified on a “good governance” basis, or on
  the footing that the departmental heads must take responsibility for such events when
  they occur, is a matter for the Government. The Panel simply makes it clear that, in its
  opinion on the facts presently known to it, the suspensions cannot be justified on the
  basis that the nominated departmental heads were parties to a conspiracy. Of course,
  that view would need to be altered if further investigations demonstrated otherwise.

  13.42 It should be added that the Administrative Inquiry also seeks to make it clear that its
  analysis is in no way intended to bind others who are charged with the duty of
  investigating these serious matters.

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• 14. Portion 698

  14.1 The final property transaction the subject of the Administrative Inquiry relates to
  Portion 698, Milinch Granville, Fourmil, Moresby. This transaction is a stand-alone
  transaction in that the acquisition of the property had nothing to do with the relocation
  of the Naval Base or the Taurama or Murray Barracks.

  14.2 It is also different from the Manumanu transactions because, whilst it attracted
  criticism by settlers living on the land, to the Panel’s knowledge it has not been the
  subject of public criticism.

  14.3 It is however another instance of an acquisition of land for the purposes of the
  Defence Force which deserves criticism. According to correspondence supplied to the
  Administrative Inquiry by the Department of Defence, the Defence needed a property
  in Port Moresby to house a long-range recon (reconnaissance) unit. Mr John Porti, in
  a letter dated 13 August 2014 to Mr Romilly Kila Pat [Annexure 14(1)] suggested the
  compulsory acquisition of Portion 698, a block of land adjacent to the airport
  containing 30.6 hectares. The owner of the land was Kitoro No 64 Ltd. The principal
  of Kitoro No 64 Ltd was Mr Tim Neville. His company had purchased the land in
  2009. Mr Neville held a Valuer General valuation in the sum of K9 million as at 28
  October 2011. The valuation report is Annexure 14(2). The valuation report recited
  that the term of the State Lease was for a period of 69 years commencing 7 May 1964.

  14.4 The report recited that there were no improvements on the land, but that some areas of
  the land parcel were occupied by squatter settlers.

  14.5 The valuation, which is under the hand of Mr Kwapena, stated that the valuation was
  based on sales of similar State Leases and land transactions within the vicinity of the
  subject property at 7/8 mile and neighbouring 9 mile in Bomana or Bomana/Laloki
  areas.

  14.6 The land was actually situated in 8 mile.

  14.7 On 12 August 2014, Mr Douglas Ure, Secretary of Kitoro No. 64 Ltd, wrote to the
  Secretary for Defence, Mr John Porti, in the following terms:

  “Dear Secretary,

  I am aware that the National Executive Council under the O’Neill/Dion
  Government made a decision some two years ago to relocate sections within the
  Papua New Guinea Defence Force unit to help alleviate the current
  congestion and also to facilitate the natural expansion of the forces units.

  I believe that the PNGDF under its approved white paper is currently seeking
  expressions of interest for suitable and affordable land packages to be able to
  undertake such an exercise. Obviously as you are undoubtedly aware State
  lease with a current title is becoming in reality a critical issue;

  1. Prohibitive in price; and

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• 2. A highly scarce resource

  The Company can currently offer I believe an extremely suitable portion of land
  that could be highly beneficial for the PNGDF’s requirements. The said land is
  currently located immediately adjacent to the existing Defence Force ATS Unit
  at the Jackson’s International Airport, Port Moresby.

  The Portion of land is under State Lease and is currently unencumbered and
  comprises of 75 acres 1 rod 20 perches or approximately 37 hectares. The land
  is under State Lease Portion 698 Granville Port Moresby. I believe that the
  proximity to the existing ATS plus the size of land would be extremely valuable
  to the PNGDF’s relocation and urgently needed expansion programs.

  The Company is therefore offering the said Portion of Land for sale at K14
  million Kina to meet the PNGDF’s requirements.
  Should you be interested we await your favourable response at which time we
  would be happy to enter into further discussions to proceed to Contract and the
  conclusion of the sale to the benefit of both parties.

  We have also attached a current copy of the same Titles for your perusal.

  In the meantime, we await your response.”

  14.8 On 19 September 2014, Mr G J Sheppard of Messrs Young & Williams Lawyers
  wrote to Mr Dairi Vele, Secretary and departmental head of the Department of
  Treasury, as follows:

  “Dear Mr Secretary,

  ACQUISITION OF PORTION 698, MILINCH GRANVILLE, FOURMIL
  MORESBY

  We act for and are instructed by Kitoro No.64 Limited (“Kitoro’).

  Kitoro is the leaseholder of Portion 698, Milinch Granville, Fourmil Moresby
  (“Portion 698′).

  We are instructed that our client had reached agreement with the respective
  Departments of Lands, Treasury and Defence that the State would acquire and
  purchase our client’s Portion 698 at the agreed price of K14 (fourteen)
  million kina and that such payment would be made upon the acquisition of
  Portion 698.

  Kitoro instructs that on 5 September 2014 the Minister for Lands acquired
  Portion 698 by issuance of a Notice under section 12(1) of the Land Act 1996.
  To date, our client has not been paid for the purchase of Portion 698.

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• By this letter we write to respectfully request that your Office issue payment to
  our client for Portion 698 at the earliest.

  Failing a satisfactory and timely response, we are instructed to commence
  immediate Court proceedings against the State for breaching the terms and
  conditions for purchase of our client ‘s Portion 698.

  Please let us have your response to this letter by and before 4.00pm on 23
  September 2014.

  We look forward to your positive and timely response. Our client reserves all
  of its rights.”

  14.9 It would seem that the Department of Defence then paid a sum of KI5.4 million for
  the purchase of the land. It would appear from a letter from Mr Vali Asi, then
  Secretary of the Department of Defence, to Messrs Young & Williams Lawyers, that
  the purchase price was paid over without any arrangements being made that would
  effect the transfer of title. This appears to follow from the letter dated 9 February
  2016 from the Department of Defence to Messrs Young & Williams Lawyers:

  “Dear Sir,

  RE DEMAND TO TRANSFER THE TITLE FOR LAND PORTION 698,
  MILINCH GRANVILLE, FOURMIL MORESBY FROM KITORO NO 64 LTD
  TO DEPARTMENT OF DEFENCE

  We understand that you acted for Kitoro No 64 Ltd to sell their
  aforementioned land to our organisation in around September 2014 when
  settlement was reached and we paid a sum of K15,400,000.00 to your client as
  full and final payment for the purchase of their land located at the back of the
  Jacksons Airport for our PNGDF Warrior Training depot to be relocated
  there.

  We further note that only a Notice of Compulsory Acquisition was issued on the
  05th of November 2014 and no Sale and Transfer of that land including a Deed
  of Release over that portion of land were executed.
  Also, a Notice of Reservation of that land for our purposes so a Certificate
  Authorizing Occupancy (COA) or a title proper can be issued to our
  organisation has not been done to date.

  Those necessary steps as required under the Land Act to formalize transfer of a
  State lease over to our organisation has not been completed by yourself on behalf
  of your client, with the concerned officers at the Department of Lands &
  Physical Planning to date.

  You have failed to comply with your end of this land sale contract to have the
  title transferred to us and only pushed consistently for payment to be made
  with our previous management who made it to your client who has made off with
  that money without completing the sale properly.

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• It is also surprising that the State Solicitor was never involved in the whole
  process to guide you along in the process involved in compulsory acquisition of
  land and hence no legal clearance is on file to support that sale.

  As such, we now demand that you liaise with your client to complete the
  compulsory acquisition process with the concerned Lands Department officers
  to have the title transferred and given to us within a month from the date of this
  correspondence.

  Failing that we will have no option but to commence legal proceedings against
  your client and yourself for failing to hold up your contractual obligations and
  claim for associated damages as a result of that.

  Please do not hesitate to contact our Principal Legal Officer, John Sebby who
  has carriage of this matter if need be to further discuss this or clarify any issues
  involved.

  Your consideration and prompt action in this regard is highly appreciated.”

  14.10 A letter from Mr Sheppard to the Principal Legal Officer, Department of Defence
  dated 3 March 2016 appears to confirm that is the case. That letter [Annexure14(3)]
  contained the following paragraphs:

  “We confirm that we acted for Kitoro No. 64 Ltd in the conveyance transaction
  of the above portion of land. Our Mr. Kenneth Frank (now His Honour
  Justice Frank) had carriage of this matter and has since left the firm.

  We note from your letter the transaction is yet to be completed for formalise
  transfer of a state lease over to your organisation. We will now liaise with our
  client to complete the compulsory acquisition process with the relevant
  Department Lands Officers.

  We understand the severity of this transaction and will undertake to complete the
  conveyance process as timely and swiftly as possible. Please bear in mind that
  we will be dealing with the Lands Department and most lodgements can take a
  considerable amount of time to settle, in this instance the Registrar of Titles.”

  14.11 So far as the Administrative Inquiry is aware, there still has been no transfer of the
  title from Kitoro No 64 Ltd to the State. The transaction appears quite irregular, at
  least on the following bases:

  (a) There is no contract or other document specifying the terms on which the land
  was purchased and sold;

  (b) Insofar as the transaction was sometimes referred to as a compulsory
  acquisition, it did not appear to comply with the requirements of the Land Act
  1996 relating to compulsory acquisition.

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• Page 87 of 101

• (c) The consideration was paid over by the Defence Department to the lawyers for
  Kitoro No 64 Ltd without the usual exchange taking place which would have
  enabled the obtaining of title.

  (d) There was no approval of any kind to authorise the transaction, whether by the
  Defence Council, the Minister or the NEC. As to the NEC, the Decision
  70/2012 could not be relied on to support the transaction if only because the
  transaction was not a transfer of a base away from the city of Port Moresby.

  14.12 The Administrative Inquiry was asked to identify whether there was statutory
  compliance in the transactions.

  14.13 The documentation produced in relation to this transaction is somewhat ambiguous.
  Some of it speaks in terms of compulsory acquisition, and some of it speaks in terms
  of contract. The uncertainty emerges for example, in Mr Dairi Vele’ s letter dated 10
  September 2014 [Annexure 14(4)] .

  14.14 Looked at in terms of compulsory acquisition, whilst Mr Romilly Kila Pat, the then
  Secretary for Lands executed on 5 September 2014 a Notice of Compulsory
  Acquisition, there is no evidence of a Notice to Treat under S13 of the Land Act, or
  the publication of a Notice for Compulsory Acquisition in the National Gazette in
  accordance with S 12(1) of the Land Act 1996.

  14.15 Looked at in terms of contract, the Administrative Inquiry has not been provided with
  any contract of sale and believes there was no such contract brought into existence.

  14.16 The failure to serve a notice to treat in accordance with Section 13 of the Land Act
  1996, and the failure to publish the notice in the National Gazette appears to carry the
  consequence that any compulsory acquisition procedure was flawed.

  14.17 Although there was no valid compulsory acquisition or a contract of sale, the
  Secretary for Defence, Mr John Porti, appears to have yielded to the demands for
  payment made by the lawyers for Kitoro No. 64 Ltd, and K15.4 million was evidently
  paid to Messrs Young and Williams Lawyers. The payment may have represented
  K14 million plus a further K1.4 million for GST. The payment was demanded in a
  letter from Young & Williams Lawyers dated 19 September 2014, but the actual date
  of payment is not specified in the material supplied to the Administrative Inquiry.

  14.18 As indicated above, no appropriate arrangement appears to have been made for the
  State to obtain title to the land.

  14.19 It seems the Department of Defence has never taken possession, and that the land
  remains occupied by settlers.

  14.20 The Administrative Inquiry endeavoured to obtain the cooperation of Mr Tim Neville,
  the principal of Kitoro No. 64 Ltd, but despite the fact that he was given ample
  opportunity to cooperate with the Administrative Inquiry, he did not do so. He plainly
  also declined to instruct his lawyers to provide documentation in their file to the
  Administrative Inquiry. He was entitled to take that stance because the
  Administrative Inquiry had no power to compel the cooperation of informants.

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• Page 88 of 101

• 14.21 Some information relevant to this matter was provided by Dr Fabian Pok. Dr Pok
  stated that he had been called to a meeting at the Grand Papua Hotel. At the time he
  knew of the proposed transaction, because he knew that it had been the subject of
  discussion between the Secretary for Lands and the Secretary for Defence. The
  Secretary for Lands at the time was Mr John Porti. When he attended at the meeting,
  he met Messrs Tim Neville and Ben Micah.

  14.22 Dr Pok says that they asked him to sign papers relating to the sale and purchase of the
  land. However, he declined to do so. He said words to the effect that the NEC
  Decision was very straight forward in referring to land outside the National Capital
  District.

  14.23 Dr Pok said that the transaction proceeded despite his refusal to approve it. The
  Department of Defence had K25 million in its trust account. Dr Pok was aware of the
  fact that the purchase price was made available out of those funds by Mr Porti, acting
  along with the Secretary for Treasury, Mr Vele, and the Secretary for Lands, Mr
  Romilly Kila Pat.

  14.24 Dr Pok confirmed to the Inquiry that Portion 698 had not been applied to any Defence
  Force purpose. He also said that he knew about the 28 October 2011 valuation by the
  Valuer General which valued Portion 698 at K9 million.

  14.25 Dr Pok said he was very angry about the transaction.

  14.26 Because of the nature of the transaction, Dr Pok demanded that the purchase price of
  K14 million be restored in the next budget.

  14.27 The Administrative Inquiry endeavoured to have Mr Porti attend to give his version of
  this matter, as well as some other matters. However, Mr Porti no longer lives in Port
  Moresby, and the Administrative Inquiry did not succeed in its endeavours to have
  him attend.

  14.28 The analysis of the transaction cannot be taken further in the absence of a right to
  exercise coercive powers. It should be among the matters investigated by the Police
  and the Ombudsman Commission.

  14.29 The Administrative Inquiry is of the view that the investigation it has been able to
  carry out demonstrated a lack of discipline in the Department of Defence in relation to
  the acquisition of land for the Department’s purposes. The purchase transactions
  displayed no due diligence on the part of relevant Defence parties, rendering the
  system liable to corruption. The major transaction, in monetary terms, namely the
  Portion 406 transaction, in which compensation was assessed at K46.6 million, had
  not been the subject of any feasibility study showing that the land was suitable for
  Defence purposes. The lack of discipline is further demonstrated by the Defence
  acquisition of Portion 698.

  14.30 The Administrative Inquiry received documents from some of the settlers who reside
  on Portion 698. The Inquiry regards the claims by the settlers as being outside the
  Terms of Reference.

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• 15. Claims by Customary Landowners of Magabairi and Pinu Villages, Kabadi, Hiri
  District, relating Claims to Portion 154, Milinch of Manu, Fourmil of Aroa, Central
  Province

  15.1 In Section 8 the Panel expressed the view that the landowners represented by Mr
  Beraro have no viable claim to Portion 154 or any part thereof

  15.2 The Panel has also examined documents submitted to the Administrative Inquiry by
  persons claiming customary interests in land the subject of the transactions, namely:

  (a) Adu Charlie, Deputy Chairman, representing landowners of Magabairi
  village, Kabadi, in submitted documents dated 11 April 2017 [Annexure
  15(1)];

  (b) Reverend John Gape Ovia of Oviakubuna Clan of Vanuapaka Tribe,
  representing Pinu landowners, in submitted documents dated 19 April
  2017 [Annexure 15(2)];

  (c) Mr Abel Ao Ovia, Secretary of the Abadi Pinu Pressure Group
  Committee representing Pinu village, in submitted documents dated 19
  April 2017 [Annexure 15(3)];

  (d) Mr George Ure, chief of Kerekubuna clan of Pinu Village, in submitted
  documents dated 23 April 2017 [Annexure 15(4)].

  15.3 The customary landowners question the process followed in the alienation of their
  land in the early years of the twentieth century.

  15.4 They also seek review of the proposed establishment of military facilities on
  Manumanu-Gabadi customary land.

  15.5 They have asked for all the subject land to be returned to the legitimate landowners,
  and have asked that all the perpetrators be referred for criminal prosecution.

  15.6 They asked that compensation be paid to the customary landowners for the unlawful
  deprivation of their land.

  15.7 The Panel refers again to the letter of Mr Raga sent in connection with Portion 154. It
  is apparent that the land the subject of Portions 406, 422 and 423 was all acquired by
  the State about 100 years ago. That fact alone means that there are no viable
  customary claims to the land. Of course, in the case of Portions 406, 422 and 423,
  there is a difference in that, at the time of acquisition, registered State Leases existed
  on the land. This merely rendered customary claims even less viable, because of the
  indefeasibility conferred upon registered State Leases.

  15.8 The Panel is of the opinion that in no instance can there exist any viable customary
  claim to any of the land the subject of the Inquiry.

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• Page 90 of 101

• 16. Specific issues raised by the Terms of Reference
  16.1 The following addresses the particular matters raised in the Terms of Reference. As in
  the rest of this Report, the answers provided assume the correctness of material that
  has been supplied to the Administrative Inquiry:

  Term of Reference (a)

  16.2 The National Government did not expressly authorize the Department of Defence to
  acquire the land at Manumanu, especially Portion 406. It is argued however that it did
  so inferentially in NEC Decision 70/2012 and later Decisions. This issue was
  addressed by Mr Rolpagarea, State Solicitor, in a letter dated 27 January 2017. Mr
  Rolpagarea was of the view that the wording was in the nature of a broad
  authorisation and that the proposition that the NEC had sufficiently authorised the
  acquisitions was broadly open. The Administrative Inquiry sees no reason to go
  behind that view of that aspect of the matter.

  16.3 Portion 154 was at all relevant times owned by the National Government, and the land
  was unaffected by the existence of any State Lease. As it was entitled to do, the
  National Government authorised Defence to use the land pursuant to a Notice of
  Reservation dated 9 December 2015. The National Government did not authorise the
  acquisition of Portion 698.

  Term of Reference (b)

  16.4 Matters relating to the role played by the National Government and department heads are
  dealt with in the body of the Report. The position of the departmental heads is
  specifically addressed in Section 12.

  Term of Reference (c)

  16.5 There was apparent statutory compliance in the acquisition of Portions 422, 423 and 406.
  Portion 154 was not compulsorily acquired. Statutory compliance appears not to have
  occurred in the case of Portion 698. That issue is dealt with in Section 13.

  Term of Reference (d)

  16.6 The cost of acquisition in each case was: –

  Portion 422 K7.2 m
  Portion 423 K9.2 m
  Portion 406 K46.6 m
  Portion 154 Inapplicable
  Portion 698 K15.4 m

  87

• Page 91 of 101

• Term of Reference (e)

  16.7 Conflict of interest issues arise in connection with Mr Philip Eludeme and Mr William
  Duma. They are dealt with in Sections 8 and 9 respectively.

  Terms of Reference (f) and (g)

  16.8 Issues of wrongdoing and impropriety, and the limitations the Administrative Inquiry
  laboured under in dealing with those issues, are dealt with in Sections 9, 10, 12 and 13
  of the Report.

  16.9 As to who benefitted from the transactions, it is apparent that Mr Eludeme and his
  associated companies benefitted from the Portions 422 and 423 transactions. The
  Administrative Inquiry’s limited powers prevented it from establishing who benefitted
  from the Portion 406 transaction especially because it was unable to conduct a proper
  investigation into the affairs of Kurkuramb Estates Ltd. The Administrative Inquiry
  was likewise unable to establish who may have benefitted from the Portion 698
  transaction. The former owner of Portion 698, Kitoro No 64 Ltd, was the entity that
  was entitled to benefit from that transaction.

  88

• Page 92 of 101

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  Lo a l l . a – ,ziwyee A*.ti s

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  89

• Page 93 of 101

• 17. CHRONOLOGY
  1. 25 February 2009
  The Valuer General Mr Chris Kabaru, in an Inspection Report
  notes that Portion 406 is “generally level throughout”, and
  assesses the unimproved value of the subject land at market
  value of K30,000

  2. 6 August 2009 Issue of State Lease over Portion 406 in favour of M&M
  Investments Pty Ltd, commencement date of 6 August 2009

  3. 23 March 2011 Eludeme interests purchase part of Portion 389 from Seromu
  Investments Ltd at selling price of K200, 000
  4. 28 October 2011 Valuation Report as to Portion 698 done by Valuer General of
  the Department of Lands and Physical Planning and a
  Valuation Certificate of Portion 698 issued

  5. 18 October 2012 NEC Decision number 70/2012

  6. 21 February 2013 NEC Decision No 46/2013

  7. 4 July 2013 Portion 389 surveyed and subdivided into several portions

  8. 28 February 2014 Notice to Show Cause as to why M&M Investments’ State
  Lease should not be forfeited
  9. 14 April 2014
  Mr Sariman states he became aware of the forfeiture notice
  when the M&M’s surveyor was attending to the matter of the
  registration of the prospective subdivision, where he saw a
  Notice to Show Cause dated 28 February 2014 and other
  documents

  10. 14 Apri12014 Date of Forfeiture Notice directed to M&M Investments

  11. 24 April 2014 Forfeiture Notice published in the National Gazette G151 of 24
  April 2014

  12. 4 June 2014 Defence Council Order No. DCO 28 of 2014

  13. 12 June 2014 NEC Decision No. 168/2014

  14. 6 August 2014 State Lease over Portion 422 granted to Flystone
  Amusement Ltd

  15. 6 August 2014 State Lease over Portion 423 granted to Kosi Investments
  Limited

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• Page 94 of 101

• 16. 6 August 2014 Seromu Investments Ltd granted State Lease over Portion
  2721

  17. 12 August 2014 Letter by Mr. Douglas Ure, Secretary of Kitoro No. 64
  Limited, to Mr. John Porti, Secretary for Department of
  Defence, making an offer for the sale of Portion 698 to
  Department of Defence

  18. 13 August 2014 Defence Secretary John Porti replies to Mr. Douglas Ure of
  Kitoro No. 64 Limited re acquisition of Portion 698 for
  Defence purposes

  19. 13 August 2014 Defence Secretary John Porti writes to Mr. Romilly Kila Pat,
  Secretary for Department of Lands and Physical Planning re
  intention to acquire Portion 698, Milinch of Granville, Fourmil
  of Moresby

  20. 18 November 2014
  & 20 November 2014 Portions 422 and 423 advertised in the National and Post
  Courier for sale by the owners, through their agent, Belden
  Memi & Associates

  Defence Council Decision number DCO 05/2015 approving
  21. 27 February 2015
  Portion 422 and 423 as Defence site
  22. 1 March 2015 Two Valuation Certificates issued by GDK Valuers and
  Property Consultants valuing Portion 422 at K7,200,000
  and Portion 423 at K9,200,000

  23. 5 March 2015 Of f er s t o pur ch as e P o r t i on s 4 22 an d 4 2 3 by t h e
  Department of Defence were refused by way of a letter by
  Philip Eledume’s agent, Belden Memi & Associates.
  24. 22 April 2015
  Lands Dep art ment i ssues Not i ces of Com pul sory
  acquisition of land signed by Secretary Romily Kila Pat on
  the 22nd of April 2015, to acquire Portions 422 and 423
  totalling and published the same in National Gazette No.
  G786 of 1st December 2015

  25. 29 April 2015 NEC Decision No. 95/2015

  ?6. 10 July 2015 Philip Elud eme, as Ch airman of CSTB wr ites to
  Ombudsman Commission, disclosing dealings

  27. 30 July 2015 State Lease issued to Kurkuramb Estates Ltd (KEL) in respect
  of the whole of Portion 406

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• Page 95 of 101

• 28. 25 August 2015 Meeting between Mr Hersey, the Managing Director to Kumul
  Consolidated Holdings, the Commander of the PNGDF, the
  Defence Secretary and the Defence Project Director, to discuss
  the relocation of the Lancron Naval Base

  29. 9 October 2015 Ombudsman Commission responds to Mr Eludeme’s letter
  dated 10 July 2015, giving clearance to go ahead with the
  transactions relating to the two portions of Manumanu land

  30. 15 October 2015 Dr Pok, Minister for Defence, forwards letter to Secretary of
  Lands Department informing him that Portion 406 has been
  identified for military purposes and seeking compulsory
  acquisition

  31. 21 October 2015 Non-binding Memorandum of Understanding (“MOU”) entered
  into between KCH and the PNGDF to facilitate the relocation
  of the Lancron Naval Base

  32. 21 October 2015 Notice of Treat issued for Portion 406.

  33. 28 October 2015 The predecessor of Kumul Consolidated Holdings (KCH),
  namely Independent Public Business Corporation (IPBC), and
  the Department of Lands and Physical Planning, conduct a joint
  inspection of the Lancron Naval Base and prepare detailed
  report

  34. 3 November 2015 Mr. Moses Kila, Assistant Valuer General of Valuer
  General Office of the Department of Lands & Physical
  Planning signs Valuation Report for Portion 422 in the sum of
  K7,615,000

  35. 3 November 2015 Mr. Moses Kila, Assistant Valuer General of Valuer
  General Office of the Department of Lands & Physical
  Planning signs Valuation Report of Portion 423 at K9,397,
  000

  36. 22 November 2015 Lands Department issues Notices to Treat to Kosi
  Investments Ltd and Flystone Amusement Ltd.

  37. 24 November 2015 Kosi Investments Ltd and Flystone Amusements Ltd
  respond to the Notice to Treat

  38. 27 November 2015 Defence Council Order No. DCO 05/2015, notes NEC
  Deci si on 70/ 201 2, app ro vi ng r el ocat i o n of Murr ay
  Barracks, Taurama Barracks and PNGDF Naval Landing
  Craft Base

  39. 30 November 2015 Notice of Compulsory Acquisition of Portion 422 and 423
  by the State reissued

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• Page 96 of 101

• 40. 3 December 2015
  Notice of Compulsory Acquisition in respect of Portion 406
  published in the National Gazette No. G793 by the Secretary
  for the Department of Lands and Physical Planning as a
  delegate of the Minister for Lands
  41. 3 December 2015 Purchase of both Portions 422 and 423 finalised

  42. 7 December 2015 Notice of Compulsory Acquisition of Portion 406 referred to in
  The National Newspaper

  43. 9 December 2015 Notice of Reservation of Portion 698 for military purposes and
  Certificate Authorising Occupancy issued by Department of
  Lands and Physical Planning to PNG Defence Force
  44. 9 December 2015 Notice of Reservation under Section 49 of Land Act issued
  regarding Portion 154 by Mr. Luther Sipison, a delegate of the
  Minister

  45. 10 December 2015 Notice of Reservation dated 9th December 2015, by Mr. Luther
  Sipison, a delegate of the Minister, published in the National
  Gazette No. G806

  46. 10 December 2015 NEC Decision 360 of 2015
  47. 11 December 2015 KEL and the State make an agreement entitled “Sale and
  Transfer of Land”. By that agreement, KEL agreed to sell and
  transfer Portion 406 to the State for K46.6 million. The
  agreement was signed by Mr Luther Sipison, Acting Secretary
  for Lands, as the delegate of the Minister for Lands on behalf of
  the State, and Mr Christopher Polos on behalf of KEL.

  48. 11 December 2015 Kurkuramb Estates Ltd and the State enter into a “Deed of
  Release”

  49. 22 January 2016 Defence Council Decision number 1 of 2016

  50. 4 February 2016 NEC Decision No. 6/2016
  51. 08 February 2016
  Notice of Reservation under Section 49 of Land Act 1996
  issued by Mr. Luther Sipison, Secretary of Department of
  Lands & Physical Planning
  52. 8 February 2016
  The Department of Lands and Physical Planning issues Notice
  of Reservation for the PNGDF over the whole of Portion 406
  53. 9 February 2016 Mr. Vali Asi, Secretary for Defence writes to Messrs Young
  and Williams Lawyers demanding transfer of Title for Portion
  698 Milinch of Granville, Fourmil Moresby from Kitoro No. 64
  Ltd to Department of Defence

  93

• Page 97 of 101

• 54. 23 February 2016
  M&M Investments Ltd engages Wariniki Lawyers to act on its
  behalf to institute proceedings in the National Court
  challenging the forfeiture of Portion 406 by the Department of
  Lands and Physical Planning, and the subsequent compulsory
  acquisition
  55. 26 February 2016
  By letter from the PNGDF to Mr Hersey, KCH is notified of
  the compulsory acquisition of Portion 406 for the amount of
  K46.6 million and asked to finance the relocation on behalf of
  PNGDF in exchange for title to the Lancron Naval Base
  56. 3 March 2016
  Mr. Greg Sheppard of Messers Young & Williams Lawyers
  writes to Mr. John Sebby Principal Legal Officer of
  Department of Defence re completion of conveyance re Portion
  698
  57. 15 August 2016
  Harvey Nii Lawyers, on behalf of KEL, issues a Writ against
  the Secretary for the Department of Lands and Physical
  Planning, as First Defendant, and the State, as Second
  Defendant, seeking payment, among other things, of the then
  outstanding K46.6 million compensation amount that had been
  agreed for Portion 406
  58. 30 August 2016
  Report on the proposed Lancron Naval Base relocation tabled
  before the KCH Investment Committee

  59. 19 September 2016 Mr Massa of Dentons Lawyers sets forth preliminary Advice to
  KCH Board
  60. 23 September 2016
  KEL writes to the Secretary for the Department of Defence
  requesting that “K46 million” be paid to KEL’s account as
  consideration for the compulsory acquisition of Portion 406

  61. 5 October 2016 The Secretary for the Department of Lands and Physical
  Planning, as delegate for the Minister for Lands, revokes the
  reservation for the Lancron Naval Base

  62. 7 October 2016 Notice of revocation published in the National Gazette
  63. 11 October 2016
  Letter Secretary for Defence to Mr Hersey seeking that KCH
  pay K46million on behalf of the State to the former owners of
  Portion 406
  64. 14 October 2016 KCH enters Memorandum of Agreement with KEL and
  PNGDF tinder which it agrees to pay K46.6 million to KEL

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• 65. 14 October 2016
  Email from Mr Jayaraj informs Mr Hersey that K20 million has
  been transferred to KEL notwithstanding that the Kurkuramb
  seal had not been placed on the document to complete the
  MOA execution. That email from Mr Jayaraj was forwarded by
  Mr Hersey to Mr Duma
  66. 18 October 2016 MOA finally sealed by KEL and signed by its director,
  Christopher Palos

  67. 8th December 2016 Mr. Garry Hersey, Managing Director of KCH writes to Acting
  Chairman of Motor Vehicle Insurance Limited requesting
  MVIL to pay its interim and final dividends for years 2009,
  2011, 2014 and 2016
  68. 19 December 2016 Mr. Garry Hersey, Managing Director of KCH, sends letter to
  Mr. Eno Darea, Acting Chairman of MVIL

  69. 22 December 2016 State Solicitor, Mr. Daniel Rolpagarea by letter to Mr.
  Sipison, Secretary for Department of Lands & Physical
  Planning gives legal clearance for settlement of Portions
  422 and 423
  70. 23 December 2016
  Payment of K26.6million by KCH to KEL, funded by MVIL
  dividend paid to KCH
  71. 20 January 2017
  KCH appoints Independent Committee to investigate
  allegations made against Mr Hersey

  72. 23 January 2017 Letter Mr Jayaraj to Dentons Lawyers and O’Brien’s Lawyers

  73. 25 January 2017 Email by Mr Duma to Mr Erik Andersen of Dentons Lawyers
  74. 1 February 2017
  The Post Courier reports that Prime Minister O’Neill has
  ordered an investigation into two senior ministers over an
  alleged land fraud contract worth K46.6 million

  75. 2 February 2017 Press statement by Mr Duma
  76. 3 February 2017
  Opposition Leader reported as having lodged a complaint with
  the Ombudsman Commission regarding the decision of Kumul
  Consolidated Holdings to pay the K46.6 million for Portion
  406
  77. 7 February 2017
  It was reported that the Prime Minister had recommended that
  the NEC suspend Defence Secretary, Mr Vali Asi, Lands and
  Physical Planning Secretary, Mr Luther Sipison, Valuer
  General, Mr Gabriel Michael, Kumul Consolidated Holdings
  Managing Director, Garry Hersey, and MVIL Managing
  Director, Jerry Wemin

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• 78. 7 February 2017 KCH said to have provided a brief to Police Commissioner

  79. 8 February 2017 KCH said to have provided a brief to the Ombudsman
  Commission

  80. 10 February 2017 The Post Courier reports a cancelled march re Manumanu

  81. 13 February 2017 Police Commissioner states the matter has been raised with the
  Director of Fraud and Anti-Corruption

  82. 8 March 2017 The Prime Minister announces the establishment of
  “Administrative Inquiry”

  83. 12 April 2017 Independent Committee makes recommendations re Hersey

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• 18. ABBREVIATIONS

  Administrative Inquiry means the administrative investigative body chaired by Mr John
  Griffin QC, as appointed by the Prime Minister and Chairman of the National Executive
  Council on 7 March 2017, to inquire into the land transactions involving five portions of land
  by the Ministry of Defence and Ministry of State Enterprises and Investments

  Board means the Board of Directors of KCH

  CSTB means Central Supply and Tenders Board established under the PFMA
  DLPP means Department of Lands & Physical Planning

  Independent Committee means the Committee appointed by the Board to investigate certain
  allegations of misconduct
  IPBC means the Independent Public Business Corporation of PNG (now named KCH)
  K means the Kina

  KCH means Kumul Consolidated Holdings (formerly named IPBC) a statutory corporation
  established under the KCH Act
  KCH Act means the Independent Public Business Corporation of Papua New Guinea
  (Kumul Consolidated Holdings (Amendment Act) 2015 (as amended)
  KEL means Kurkuramb Estates Limited
  Kina means the currency of PNG
  Land Act means the Land Act 1996 (as amended)
  Land Board means the Land Board established under the Land Act 1996 (as amended)
  MOA means the Memorandum of Agreement made on 14 October 2016 between KCH, KEL
  and PNGDF under which KCH agreed to pay K46.6 million to KEL.
  MOU means the non-binding Memorandum of Understanding dated 21 October 2015
  between KCH and PNGDF

  MVIL means the Motor Vehicles Insurance Ltd established under the Motor Vehicles (Third
  Party Insurance) Act (Chapter 295), a State owned enterprise under the KCH Act

  NEC means the National Executive Council of PNG established under section 149 of the
  PNG Constitution

  Panel means the members of the Administrative Inquiry who conducted the inquiries
  constituted by Messrs John Griffin QC, Gibson Geroro, Herbert Wally and Jerry Fruanga.

  PEST means Public Enterprises & State Investments
  PFMA means the Public Finance (Managemen) Act 1995 (as amended)
  PNG means Papua New Guinea

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• PNGDF means the Papua New Guinea Defence Force State means the Independent

  State of PNG

  Valuation Act means the Valuation Act (Chapter 327)

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