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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    Report of 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. Commonly known as the ‘Manumanu report’.

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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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  • 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

    2

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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 : mynangu64@gmail.com

    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.

    3

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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.

    4

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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

    5

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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.

    6

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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

    7

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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.

    8

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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

    9

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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).

    10

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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.

    11

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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.

    12

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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.

    13

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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.

    14

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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

    16

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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.

    17

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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.

    18

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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).

    19

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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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  • Page 24 of 101

  • 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:

    22

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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.

    23

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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.

    24

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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

    25

  • 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.

    27

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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

    28

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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

    29

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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

    78

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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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  • (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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  • 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.

    86

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  • 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

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  • 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

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  • Chgat ill

    lcsovo eisiicl ity
    Lo a l l . a – ,ziwyee A*.ti s

    Pr 1,
    min
    A 3 1 1t m I r sgy4 N t l g a w r
    .3!

    89

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  • 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

    90

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  • 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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  • 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

    92

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  • 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

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  • 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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