REPUBLIC OF VANUATU
OFFICE OF THE OMBUDSMAN

PUBLIC REPORT

Pursuant to Art 63 (3) of the Constitution

ON THE 

ABUSE OF VNPF TENDERING PROCEDURES BY VNPF BOARD AND MANAGEMENT

This report contains the findings of fact, opinions, views and the recommendations of the Ombudsman pursuant to the Constitution of the Republic of Vanuatu and the Ombudsman Act No. 14 of 1995.

19 June 1997

TABLE OF CONTENTS

PREAMBLE

1	SUMMARY

2	JURISDICTION

3	RELEVANT LAWS

4	COMMENTS BY THOSE AFFECTED BY THE PRELIMINARY REPORT

5	FINDINGS OF FACTS

Introduction
Furniture Tender
Earlier negotiations with Snoopy
Trip to Australia and purchase of personal furniture
Concluding comments

6	REVIEW OF THE REPLIES TO THE PRELIMINARY REPORT

Mrs Ietonga Aiong’s reply
The Ombudsman’s comments
Mr Josias Moli’s reply
Ombudsman’s comments
Mr Daniel Joli’s reply
Ombudsman’s comments
The VNPF Board members’ reply
Ombudsman’s comments
VNPF: Trip to Australia: Finding No. 1
Ombudsman’s comments
VNPF Reply: Finding Nos. 2, 4 and 6 (refer to reply)
Ombudsman’s comments

7	FINDINGS OF MISCONDUCT

VNPF Board Members
VNPF Board Chairman - Mr Samson Toara
VNPF General Manager - Mr Josias Moli

8	RECOMMENDATIONS

9	CONCLUSION

10	INDEX TO APPENDICES

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PREAMBLE

" .. For even thy brethren, and the house of thy Father, even they have dealt treacherously with thee, believe them not, though they speak fair words unto thee ..."
JEREMIAH 12 v 6.

This report deals with yet another incident, which though small in itself and apparently insignificant, is an example of the ethical and moral slackness and the ignoring of proper and legal procedures by officials for personal gain in either cash or kind.

Successive revelations arising from complaints to the Ombudsman’s Office show unmistakably signs of the widespread moral decadence which afflicts many officials whenever they are appointed to any position which offers opportunity for making dishonest "deals" of one kind or another.

The only encouraging sign which I am beginning to perceive is a gradually increasing ground swell of contempt and anger among the population for the unscrupulous misuse of power and insatiable greed. Many citizens are now asking me, not only in my Office, but on the streets and in the stores when they can expect some action to bring these alleged offenders to trial justice, either via suspension or by court action where appropriate.

The accused officials blatantly deny the evidence lined up by investigation and resort instead to insupportable and lying accusations against the Ombudsman and staff.

Hundreds of thousands of public Vatu are being expended by the Ombudsman’s Office in the hope that many millions of Vatu will be recovered or saved as a result of their patient and painstaking investigations.

However if offenders are to go unpunished and able to make reckless and lying counter charges, the system of justice can only fall further into disrepute.

The public are complaining that much of the entire machinery of government appears to be devoted to political party manoeuvring, and the accumulation of a backlog of unanswered letters and applications for investment licences and other matters.

Perhaps this minor report will help a little to increase pressure for the desperately needed changes which are so long overdue.

1	SUMMARY

1.1	On 13.03.95, upon receiving a complaint, I commenced an enquiry into the conduct of the Vanuatu National Provident Fund (VNPF) management relating to the purchase of office furniture for its new Head Office. I did this because I believed that the decision by the VNPF management and Board to accept a tender offer from Snoopy’s Stationery & Office Supplies (Snoopy) might be bias, unfair and based on personal rather than commercial interests. Snoopy’s tender was the second highest tender out of 4.

1.2	The deal with Snoopy for supplying the VNPF with the new head office furniture and equipment revealed a number of serious concerns about the VNPF Board process of decision.

1.3	For the reasons that follow in this report, my present opinion is that my initial concerns are justified. The facts relevant to my opinion are:

(a)	The VNPF Board did not make the effort to visit the supplier Better Price who was the lowest tenderer, to inspect their furniture and to enquire and negotiate if Better Price could buy their old existing furniture.

(b)	Better Price had offered two choices with a relatively good product and the lowest price. It had also offered to store VNPF’s old furniture in their premises and sell them for VNPF, offering therefore a solution for the old furniture.

(c)	Snoopy’s Stationary started negotiations with the VNPF for supplying the furniture in late 1993. This was before the new Head Office was even built, and before any tender for furniture was advertised.

(i)	Snoopy’s Manager, Mr Daniel Joli (Mr Joli) wrote letters and had regular meetings with the VNPF General Manager (GM), Mr Marakon Alilee (Mr Alilee) and later changed to Mr Josias Moli (Mr Moli); and also the VNPF Board Chairman, Mr Nicholson Worek (Mr Worek) which later changed to Mr Samson Toara (Mr Toara).

(ii)	The Chairman, Mr Worek replied to him favourably;

(iii)	This was before the VNPF Board had discussed the matter or tendered it out;

(iv)	Snoopy had offered to trade in VNPF’s old furniture and the Chairman Mr Toara had expressed a strong interest in that alternative.

(d)	VNPF’s tender notice published in the Vanuatu Weekly did not say or mention at all that preference would be given to a supplier who would trade in VNPF’s old furniture. 

(e)	Snoopy paid for 3 VNPF officers travel and accommodation cost to travel to Brisbane and back to view the furniture at the Bendix factory (the manufacturer). Actually Snoopy offered to pay for 2 and the board approved Mr Moli and Mrs Ietonga Aiong (Mrs Aiong), VNPF operations manager, to go but then later the Board Chairman Mr Toara asked to be included on the list to go, and Snoopy accepted.

(f)	On their trip to Australia 2 of the officers, the GM Mr Moli, and the Chairman of the VNPF board Mr Toara ordered and later received personal furniture at the expense or by way of loan from VNPF.

1.4	Some of the VNPF Management and Board of Directors appeared to have intentionally abused the tendering procedures to favour Snoopy based on personal interest and gain. Additionally, this case has revealed the lack of any written procedures (such as tendering ) setting out how major purchases are to be done.

2	JURISDICTION

2.1	Pursuant to article 62 of the Constitution and section 14 of the Ombudsman Act No.14 of 1995, ("Act") I have jurisdiction to enquire into the conduct of certain public bodies or persons on receiving a complaint or on my own initiative. I have determined that this complaint against the VNPF management and Board falls within my jurisdiction into the complaint.

3	RELEVANT LAWS

3.1	S15 of the VNPF Act No.1 of 1986 provides:

The Board shall be the trustee of the Fund.

3.2	The VNPF funds belong to the VNPF members. The Board is the statutory body that is appointed to look after and manage the fund.

3.3	S14(2) of the Ombudsman Act provides the following:

In addition to the persons referred to as leaders under article 67 of the Constitution, leaders shall include

	(f)	all heads or members of Boards of statutory authorities.

3.4	Art 66(1) and (2) of the Vanuatu Constitution provides:

(1)	Any person defined as a leader in Art 67 has a duty to conduct himself in such a way, both in his public and private life, so as not to:

a)	place himself in a position in which he has or could have a conflict of interest or in which the fair exercise of his public or official duties might be compromised;

b)	demean his office or position;

c)	allow his integrity to be called into question; or

d)	endanger or diminish respect for and confidence in the integrity of the Government of the Republic of Vanuatu.

(2)	In particular, a leader shall not use his office for personal gain or enter into any transaction or engaged in any enterprise or activity that might be expected to give rise to doubt in the public mind as to whether he is carrying out or has carried out the duty imposed by subarticle (1).

3.5	S16 of the VNPF Act quotes:

The moneys belonging to the Fund shall be invested by the Board in accordance with policy guidelines approved by the Minister for the time being responsible for finance and by the Central Bank of Vanuatu after consultation with appropriate departments of the Government which will have primary regard to the interests of members on the one hand, and the needs for assisting the financing of balanced social and economic development on the other. Such investment guidelines shall have regard to the need for a balanced portfolio bearing in mind the need for sufficient Vatu liquidity, prudent diversification and rates of returns on the various sources of investment.

3.6	S19 of the VNPF Act provides:

(1)	All expenses incurred in carrying out the provision of this Act into effect and in connection with the administration of the Fund shall be paid out of the moneys of the Fund.

(2)	For the purpose of this section, such expenses shall include such expenditure as the Board shall consider reasonably necessary or desirable for the benefit or credit of the Fund.

4	COMMENTS BY THOSE AFFECTED BY THE PRELIMINARY REPORT

4.1	Under S16 (4) of the Ombudsman Act No. 14 of 1995, preliminary reports were sent to those being affected by the report to give them opportunity to make their comments and replies to allegations made against them.

4.2	In compliance with this, the preliminary report was issued on 4 April 1997 to all those affected for their comments on the report. In response we received comments from the following people:

-	Mrs Ietonga Aiong 

-	Mr Josias Moli

-	Mr Daniel Joli

-	The VNPF Board members

5	FINDINGS OF FACTS

Introduction

5.1	The VNPF was set up in November 1986 with only about 4 officers. Over time, the VNPF grew bigger and more staff joined the office. In late 1992, the VNPF Management recommended that a VNPF Head Office building be erected on a land owned by the VNPF. In 1993 the building was designed and after the Board approved it, it was actually built.

5.2	Before the building was completed, the Management decided to put out the furniture tender. The idea of the tender originally was to target the local furniture companies either in Vila or Santo in preference to overseas companies. The reason for this was to provide services for local people and also that funds circulated within the country. The idea was good as it was aimed at helping Vanuatu’s economy. However all the tenderers who submitted tenders were going to order furniture from overseas.

5.3	Early in 1994 the GM at that time was terminated (Mr Alilee) and the new GM was Mr Moli who took up the decision left by the former GM.

Furniture Tender

5.4	On 26.11.94 the VNPF management published a tender notice in the Vanuatu Weekly issue No.521 for the VNPF new Head Office furniture and equipment (Refer to copy of tender notice annexed as "A"). The tender notice was short and brief. It did not mention the fact that preference may be given to a supplier who would trade in the VNPF’s old furniture as part of the price for the new furniture. Unaware of the trade in facility, (except Snoopy’s Stationery), various suppliers offered the following tender bids:

1.	Snoopy’s Stationary and Office Supplies
	VT 16.395.500	
2.	Better Price (2 options) 	VT 12.507.716
	
	VT 10.975.840
	
3.	Stop Press	VT 16.000.000
	
4.	Iprotec	VT 33.017.930	

5.5	On 10 February 1995 the Board sat and discussed the tender offers. Based on the assessment done by the Architect Geoffrey Feast (annexed as "B") the Board decided that before a final decision was taken at the next meeting on the 24 February 1995 the following was to be done:

(a)	Check with Better Price (the lowest tenderer) on the chairs both on quality and on the present price.

(b)	If there was a possibility that Better Price would trade in the VNPF’s old furniture.

5.6	Better Price had the lowest tender price and it also had offered the best deal to VNPF. It had offered to take away the VNPF old furniture, store them in their premises and sell them for them; and to be paid only 5% commission on the sale price.

5.7	The Better Price overall deal was undoubtedly better than Snoopy’s offer because:

(a)	VNPF would have received some money by selling the pieces of furniture separately through Better Price, or may be more money than that received from Snoopy.

(b)	even if VNPF had given the old furniture to Better Price or to their contributors, or thrown them away, any of the 2 offers of Better Price with or without the selling of their old furniture was a better financial deal than Snoopy. The most expensive quote of Better Price was still VT. 3,887,784 cheaper than Snoopy’s.

Snoopy:	Original tender offer	VT. 16,395,500	
'	Less: VNPF old furniture	VT. 1,516,500	
'		VT. 14,879,000	
'			
Better Price:	Original tender offer	VT. 12,507,716	
'		____________

VT. 12,507,716	

(c)	As the Better Price tender was not accepted, we don’t know what amount of monies the sale of the old furniture would have been, but it can be stated that at least VT 2,371,284 were overspent. Snoopy tender even including the purchase of the old furniture was still VT 2,371,284, more expensive than Better Price tender without any monies of the old furniture. Taking into account that the sale of the old furniture by Better Price would have generated some monies, the likely loss for the people of Vanuatu is superior to VT 2,371,284 and there is no clear explanation from the management or the Board members why they did not see that the Better Price tender offer was better than Snoopy.

(d)	As far as the furniture quality is concerned the VNPF Architect said in the summary of his report that:

(i)	the desks offered by Snoopy and Better Price Option 1 are of similar quality;

(ii)	the seating offered by Snoopy is likely to be of better quality than that offered by Better Price, but the architect also wrote that the seating "appeared to meet their performance specification although they were significantly cheaper than the Bendix Seating offered by Snoopy’s".

5.8	However, no one from VNPF:

(a)	visited officially Better Price to request to see what the furniture would be;

(b)	went to see Better Price’s catalogue;

(c)	checked with Better Price (the lowest tenderer) on the chairs both on the quality and the price as requested by the Board decision of 24.02.95;

(d)	but they went that distance to Australia to see Snoopy’s furniture;

(e)	spoke with anyone from Better Price according to Mr Josias Moli’s own statement, and the Better Price staff’s statement.

5.9	As it turned out the Board members Mr Toara, Mr Charlot Salwai (Mr Salwai), Mr Andre Manamuri (Mr Manamuri), Mr Alexander Palavi (Mr Palavi), Mr Petre Malsungai (Mr Malsungai) and Mr Tom Kalorib (Mr Kalorib) did not actually walk down to Better Price (about 2 minutes’ walk) as had been proposed, nor did the GM Mr Moli or the Operations Manager Mrs Aiong obtain officially the requested information. On 24 February 1995, the Board sat again and approved the quotation from Snoopy without checking with Better Price as to the quality of its chairs and the trade-in facility.

Earlier negotiations with Snoopy

5.10	However, right back in late 1993 Snoopy had started negotiations with the VNPF GM Mr Alilee and the Board Chairman Mr Worek to supply the furniture (refer to copy of letter to VNPF dated 19th October 1993, annexed as "C").

5.11	Negotiations between the two parties continued. The VNPF management went to Snoopy to look at the quality of the furniture. The Director of Snoopy Mr Joli had regular meetings with the VNPF GM, Mr Worek and later Mr Moli at the VNPF Office. Sometimes Mr Joli called in the VNPF Office to check on his quotations. There was plenty discussions going on between Snoopy and the VNPF management and none between Better Price and VNPF management.

5.12	On 21 June 1994, the former VNPF Board Chairman Mr Worek replied (annexed as "D") to Snoopy’s letter notifying him that the tender notice would be put out shortly. He also told Snoopy that it was quite likely that Snoopy would win the tender because of its proposal to buy the old furniture. This is how his letter reads:

"RE: FURNITURE FOR NEW VNPF HEAD OFFICE

I refer to your letter to the Fund dated 19th October 1993 and your meeting with the General Manger on 3rd June 1994 about your interest on the above.

The VNPF Board will shortly put the furniture for tenders and it is quite likely that you will win the tender because of your proposal to buy the existing furniture.

Yours faithfully 
N Worek 
VNPF Board Chairman."

(emphasis added)

5.13	This letter was written even before the tender was advertised. The various bidders could not offer their tender prices and have the chance to compete with each other. Therefore the Board could not look at all the offers on an equal basis and then make a decision based on commercial reasons. It is important to remember that even when the tender notice did come out it did not mention at all that preference may be given to a tenderer who would trade in the VNPF’s old furniture. The other tenderers therefore were at a disadvantage compared to Snoopy.

5.14	From the letters on file and confirmed by Snoopy, the deal with Snoopy to supply the VNPF furniture included the following:

(a)	Snoopy financing the cost of 2 return tickets, allowances and accommodation for 2 VNPF senior officers to travel to Brisbane for about a week to view the furniture at the Bendix factory, the manufacturer. The offer was extended to 3 when the Chairman, Mr Toara, insisted upon being invited too; and

(b)	VNPF financing the cost of 2 Bendix staff to come to Vanuatu and to assemble the furniture fittings. (This was however not done because VNPF did not agree once they found out the cost, so Snoopy’s staff ended up assembling the furniture themselves). 

Trip to Australia and purchase of personal furniture

5.15	During the visit to Australia on March 1995, the 3 VNPF staff, Mr Moli, the GM, Mrs Aiong, the Operations Manager and Mr Toara, the VNPF Board Chairman looked at personal furniture for themselves. Two of these officers finally purchased furniture. They were Mr Moli and Mr Toara.

5.16	The purchase of furniture by these people was after the Board’s decision approving the VNPF Board members and management to obtain a loan for furniture from VNPF. This was approved by the Board Mr Toara, Mr Salwai, Mr Manamuri, Mr Palavi, Mr Malsungai, Mr Kalorib and Mr Moli on 04.08.94.

5.17	On 02.10.95 Mr Moli bought 2 round tables (VT 19,970 each) costing VT 39,940. They are used in the VNPF house that Mr Moli occupies.

5.18	Mr Toara’s personal furniture cost VT 257,100. They were bought on 31.12.95. Upon interviewing him, Mr Toara claimed that the money concerned (VT 257,100) was his special allowance (apart from his sitting allowance) which as being the Chairman, he is entitled to. He said that it is not treated as loan.

5.19	The VNPF however, confirmed that this amount of VT 257,100 was paid by VNPF but was being treated as a loan on the Chairman’s account. 

5.20	Mr Toara had an existing VNPF housing loan of over VT 16 Million. The board went ahead and approved him another furniture loan regardless of the existing housing loan amount. On 08.01.96 the balance stood at VT 18,422,236 (the highest housing loan granted by VNPF) when the furniture loan amount of VT 257,100 was added to the housing loan. He has never repaid any monies from the beginning of the loan.

Concluding comments

5.21	Therefore my conclusion is that Snoopy got the tender because:

(a)	there was a pre-arrangement between Snoopy where they were given preferential information that no other tenderer was given;

(b)	Messrs Moli, Toara and Mrs Aiong were attracted to a free trip to Australia; and

(c)	Mr Toara demanded a trip to Australia from Snoopy, and obtained it.

5.22	As a result the other bidder’s rights for their tender offers to be considered fairly and equally were abused. The other bidders, particularly the lower tenderers Stop Press and Better Price, were cheated. Additionally, the chance to take the lowest price of best quality furniture was wasted. As a result of that VNPF members’ money has been wasted.

5.23	What is perhaps worse is the misuse of VNPF money for the personal needs of Messrs Moli and especially Toara. According to s19 of the VNPF Act (refer 3.6 above, page 4), the only expenses that are allowed or are proper must relate to investment and administration of the VNPF, and for the interest of all the contributors/members of the Fund, the workers of Vanuatu.

6	REVIEW OF THE REPLIES TO THE PRELIMINARY REPORT

Mrs Ietonga Aiong’s reply (see Annex "E")

6.1	In the GM’s reply, Mrs Aiong commented that the purchase of personal furniture by Mr Moli and Mr Toara was not a misuse of VNPF’s money because Mr Moli’s furniture was bought for the VNPF residence that he was living in. Second, she stated that Mr Toara’s furniture was a result of a loan and that it was therefore a very valid investment.

The Ombudsman’s comments

6.2	Mr Moli’s Case: Paying for furniture for the GM’s residence is unreasonable. It is not a valid investment in my opinion under s16 of the VNPF Act (refer 3.5 above, page 4). The Act provides that the monies "shall be invested by the Board in accordance with policy guidelines approved by the Minister and by the Central Bank of Vanuatu". Furniture, as opposed to investment in land and bank deposits, loses value immediately after purchase and has to be eventually replaced. There is no return on the money spent on the furniture. In terms of S16 of the VNPF Act, this cannot be seen as a valid investment of the workers of Vanuatu’s money. The house, as real estate, made available to the GM, on the face of it, is a reasonable investment.

6.3	Secondly, my opinion is that purchase of furniture for personal use in the General Manager’s home is not a legitimate expense "incurred in carrying out the provisions of this Act"" nor is it "connected with the administration of the Fund" as required by s19 of the VNPF Act (refer 3.6 above, page 4). By contrast, furniture used in the VNPF’s work offices of cause is an expense incurred in connection with the administration of the fund. It is therefore in my view unlawful for VNPF money to be used in this way. The GM can quite easily out of his/her own salary, pay for his/her own furniture. In this respect VNPF money has been misused.

6.4	Mr Toara’s case: Mr Toara already had the largest housing loan with VNPF. As at 08.01.96 when the furniture loan amount of VT 257,100 was debited to his housing loan the balance of his housing loan was over VT. 18 million. Mr Toara had not repaid any monies of his VT 18 millions loan, and it is very surprising that more monies were lent to him, and certainly it represented and represents a very bad use and a very high risk for the VNPF monies.

Mr Toara showed that he was only concerned with his own personal interest and the advantages he could get out of his position. He ignored the only interest that was relevant i.e. the interest of the workers of Vanuatu. He was the chairman of the board whose specific job was to protect the workers of Vanuatu’s retirement money. Instead, Mr Toara with the help of the Board extended his own loan. Mr Toara has never repaid any monies on his two loans by the VNPF. In my opinion, if Mr Toara at that time of extending his loan knew or did not care whether or not he could pay his loan back then he has acted fraudulently against the workers of Vanuatu.

Mr Josias Moli’s reply (see Annex "F")

6.5	Mr Moli said that he was not attracted to the trip to Australia. He said that the trip was a package offered by Snoopy and was approved by the Board.

6.6	He also commented that the furniture he bought were not his property but the VNPF’s. Therefore he has not misused VNPF’s money and he has not breached the Leadership Code and the VNPF Act.

Ombudsman Comments

6.7	The trip to Australia was a package offered by Snoopy, therefore it was an issue that Snoopy and the Management (including Mr Moli) agreed on before the Board actually approved it. The Board did its part of approving it later when it was already been agreed on between Snoopy and the Management.

6.8	For the comments on his furniture, refer to section 6.3 for the Ombudsman’s comment. Furthermore, Mr Moli did not check the options with Better Price and never contacted the Better Price management.

Mr Daniel Joli’s reply

6.9	Mr Joli comments is attached (Annexed as "G") at the back of the report. Mr Joli comments are general. In his general comments, he said that there was no pre-arrangement with VNPF on the contract with Snoopy.

Ombudsman’s comment

6.10	They were given preferential information that no other tenderer was given. The evidence are attached in Annexures "C" and "D" at the back of the report, where it is clear that discussions were made between the two parties well before any tender was put out to the public.

The VNPF Board members’ reply

6.11	The VNPF Board members made their comments on the Preliminary report in a reply (annexed as "F"). Please refer to the reply to correspond with the Ombudsman’s comments as follows:

6.12	Against Section 5.4 of the Preliminary report the VNPF Board commented that they do not see any breach of law and that the complainant of this issue should fetch a lawyer and take the VNPF Board to court. They also said that it is not the Ombudsman’s duty to "prosecute" the Board and to tell them what to do.

6.13	The VNPF Board commented that the Management members of VNPF actually went down to Better Price and checked the furniture and reported the conditions to the Board.

6.14	The Board members said:

"The management had reported to the Board in spite of the lowest tender, the furniture that Better Price is trying to offer looked out of date, very old, not of quality to dress out the new building of the VNPF head quarters and this is why the Board had rejected the Better Prices’ options".

6.15	According to interviews with the General Manager, Mr Moli and Mrs Ietonga, they never went physically to Better Price to look at any furniture, and never checked the Better Price tenders as requested by the Architect and the Board.

Ombudsman’s comment

6.16	

(a)	The VNPF Board members are not being "prosecuted". They are being investigated for their conducts in accordance with s62 of the Constitution and for alleged breaches of the Leadership Code in accordance with s66 of the Constitution.

(b)	The VNPF Board members are within the Ombudsman’s jurisdiction as "leaders".

(c)	The Ombudsman role is to investigate complaints, maladministration and /or Leadership code breaches. The facts of this matter fall into both categories.

6.17	Further investigations after receipt of the reply revealed that there is no record held by VNPF to establish who (if anyone at all) from the VNPF Management went to Better Price to check their furniture, apart from the Architect. There was no report made by the management on the condition of the furniture. The minutes of the Boards meetings mention nothing about the Management’s visit to Better Price. No-one at VNPF could show or tell me anything to support this statement.

VNPF: Trip to Australia: Finding No. 1

6.18	The Board commented to Finding No. 1 that they did not agree to it. For them they said that it was clear that the tender was transparent.

Ombudsman’s comments:

6.19	It was not a transparent tender because:

(a)	Negotiations with Snoopy were undertaken earlier before publishing the tender notice; and

(b)	The tender notice made no reference to the fact that preference would be given to a tenderer who would make a trade-in with the old furniture. (this was exactly what Snoopy’s had negotiated with the VNPF Board before the contract went to tender).

VNPF Reply: Finding Nos. 2, 4 and 6 (refer to reply)

Ombudsman’s Comments:

6.20	In my opinion, the reply shows that the Board members have very little understanding of their role as trustee of the VNPF funds. Indeed as they point out in their reply, the furniture is very much a liability rather than an asset.

6.21	The reply concludes by denying that there was any maladministration or Leadership Code breaches by them. I have expressed the contrary opinion and at the end of the day, it will be for the workers of Vanuatu to make up their own minds about whether the VNPF Board acted correctly.

7	FINDINGS OF MISCONDUCT

VNPF Board Members

Finding No. 1:	FAILURE BY THE VNPF BOARD MEMBERS TO SET UP ADEQUATE TENDER PROCEDURES

MEMBERS:

-	SAMSON TOARA

-	CHARLOT SALWAI

-	ALEXANDER PALAVI

-	PETRÉ MALSUNGAI

-	TOM KALORIB

-	ANDRÉ MANAMURI

-	JOSIAS MOLI

7.1	The VNPF Board members listed above failed to create a standard written tendering procedure in the first place that would set out how major purchases are to be done. Such a written document could have directed the decision making process of the Board.

FINDING NO. 2:	MALADMINISTRATION BY BOARD MEMBERS:

-	SAMSON TOARA

-	CHARLOT SALWAI

-	ALEXANDER PALAVI

-	PETRÉ MALSUNGAI

-	TOM KALORIB

-	ANDRÉ MANAMURI

-	JOSIAS MOLI

7.2	The VNPF Board of Directors abused the tendering system adopted to favour Snoopy based on personal interest and gain. This is because they failed to check with Better Price the quality and price of the chairs and about the possibility of Better Price trading in the VNPF’s old furniture.

7.3	I consider that the VNPF Board, Messrs Toara, Salwai, Manamuri, Palavi, Malsungai and Kalorib’s actions were negligent in that they failed to:

(a)	make sure that the original tender stated a preference for a tenderer who would make an offer on the old VNPF furniture;

(b)	to properly study the alternative from Better Price; and

(c)	ensuring that the General Manager had checked with Better Price on the quality and price of the chairs and also that if there was a possibility that Better Price would trade in the VNPF’s old furniture as requested by their Board decision.

FINDING NO. 3:	IMPROPER ACTION BY MR WOREK, FORMER CHAIRMAN OF VNPF

7.4	The previous chairman of the VNPF Board Mr Worek acted improperly by privately notifying the director of Snoopy by his letter of 21.06.94 that Snoopy might win the tender because of his proposal to buy VNPF’s old furniture, before the tender notice was published.

FINDING NO. 4:	BREACH OF TRUST AND OF THEIR DUTIES AS TRUSTEES BY THE MEMBERS OF THE BOARD OF THE VNPF:

-	SAMSON TOARA

-	CHARLOT SALWAI

-	ALEXANDER PALAVI

-	PETRÉ MALSUNGAI

-	TOM KALORIB

-	ANDRÉ MANAMURI

-	JOSIAS MOLI

7.5	According to s15 of the VNPF Act, the VNPF Board is the trustee of the fund. This means that they are to look after and manage the fund on behalf of the contributors, members of the Fund.

7.6	The Board members Messrs Toara, Salwai, Manamuri, Palavi, Malsungai Kalorib and Moli have breached the above Act by allowing unnecessary expenses:

(a)	to favour Snoopy rather than awarding the tender to the lowest tenderer; and

(b)	by allowing Mr Toara to buy personal furniture with the VNPF’s members’ money by way of an unauthorised loan.

FINDING NO. 5:	BREACH OF THE LEADERSHIP CODE BY THE MEMBERS OF THE BOARD OF THE VNPF:

-	SAMSON TOARA

-	CHARLOT SALWAI

-	ALEXANDER PALAVI

-	PETRÉ MALSUNGAI

-	TOM KALORIB

-	ANDRÉ MANAMURI

-	JOSIAS MOLI

7.7	S14 (2)(f) of the Ombudsman Act provides that Statutory Board members are also classified as "leaders" as per art 66 of the Constitution. The VNPF Board members Messrs Worek, former Board Chairman, Toara, Salwai, Manamuri, Palavi, Malsungai, Kalorib and Moli breached the Constitution’s Leadership Code (art 66) by acting in breach of it and taking decisions for their own interest and not for the interest of the workers of Vanuatu whom they represented.

7.8	As a result of the above, the Board Directors have failed to meet the standard expected of leaders under art 66(1) of the Constitution (refer to 3.4 above at page 3).

VNPF Board Chairman - Mr Samson Toara

FINDING NO. 6:	BREACH OF SECTION 16 AND 19 BY THE CHAIRMAN OF THE BOARD: SAMSON TOARA

7.9	Being the Chairman of the Board, Mr Toara knew very well the purpose of the VNPF funds, yet he decided to obtain an illegal loan out of VNPF money to buy his personal furniture in Australia.

7.10	Mr Toara also knew his existing housing loan he had with VNPF was already too big for him to repay (total VT 18.422.236 in January 1996). It was a gross abuse of power to add another amount onto the existing one when he knew he could not repay and had not repaid his original loan. His loan and that of others from the VNPF will be the subject of another report.

FINDING NO. 7:	BREACH OF THE LEADERSHIP CODE BY SAMSON TOARA

7.11	Because of finding no.6, Mr Toara’s actions were also in breach of the Constitution’s Leadership Code (art 66) quoted in section 3.4. He has used his office for personal gain and acted in total conflict of interest. He knew he was acting wrongly and for his own personal advantage in recommending to grant a new housing loan which was not for buying a home. He knew and the Board members also knew that he could not reimburse his existing loan as his monthly loan repayment was already more than his monthly salary as 1st Secretary. Yet he requested an additional loan and granted himself more money as Chairman of the Board. He also tried to mislead the Ombudsman during his interview by saying that the furniture was bought on a special allowance (ref: 5.18), in fact, this special allowance did not exist (ref: 5.19). He furthermore asked to benefit from the trip to Australia, even though it did not appear necessary for him to go.

VNPF General Manager - Mr Josias Moli

FINDING NO. 8:	WRONGFUL PURCHASE OF PERSONAL FURNITURE BY MOLI JOSIAS

7.12	Even though the furniture purchased is being used in the VNPF house that he is living in, Mr Moli actually chose the furniture and bought them for his own interest. This again has nothing to do with investment or administration of VNPF.

7.13	Mr Moli acted contrary to s16 and 19 of the VNPF Act (refer 3.5 and 3.6 above page 4) which states that VNPF funds will only be used for investment, and to meet the VNPF administration expenses. Funds used to buy furniture for the GM’s residence have nothing to do with either investment nor administration.

FINDING NO. 9:	NEGLIGENCE AND DISOBEDIENCE BY MR JOSIAS MOLI

7.14	Mr Josias Moli has been considered as negligent and disobedient because he did not follow the Board meeting decision of 24.02.95 to contact Better Price for further negotiations.

FINDING NO. 10:	BREACH OF LEADERSHIP CODE BY MOLI JOSIAS

7.15	Because of finding no. 8, Mr Moli breached the Constitution’s Leadership Code (art 66) quoted in 3.4 above at page 3. He has personally gained from his office both by accepting a trip to Australia to check Snoopy’s furniture and not walking down to Better Price to have a look at the chairs after the Architect’s comment of 30.01.95; whereas he went many times to Snoopy’s to arrange the deal with them.

8	RECOMMENDATIONS

8.1	Finance regulations: Since VNPF is a big money-making body and is involved with a number of schemes that involves a lot of VNPF money, the Management and Board of VNPF are recommended to create a standard set of finance regulation (similar to that of the Government Interim Financial Regulations) in order that all expenses from VNPF money may follow proper and reliable procedures.

8.2	Independent board: An independent and technically competent Board of Directors must be selected, who would truly and competently represent the workers of Vanuatu’s interest. This may be a professional trustee corporation.

8.3	Mr Josias Moli: He should not be appointed in a position where he would be responsible for handling public monies or deciding about public monies’ use.

8.4	Mr Samson Toara: Having borrowed unreasonably from VNPF and not reimbursed, and because of the above list of misconduct, we make the same recommendation as for Mr Josias Moli; i.e.: that he should not be appointed in a position where he would be responsible for handling public monies or deciding about public monies’ use.

9	CONCLUSION

In accordance with s23 of the Ombudsman Act No.14 of 1995 and s63(4) of the Constitution, I am forwarding a copy of this report to the President, the Prime Minister, and the relevant public authorities. According to the Constitution their duty is to "decide upon the findings of the Ombudsman within a reasonable time and the decisions, with reasons, shall be given to the complainant forthwith".

I therefore request all the appropriate authorities to decide upon these findings within 21 days upon the date of receipt of this report:

-	His Excellency the President of the Republic of Vanuatu

-	The Honourable Prime Minister

-	The Honourable Minister of Finance

-	The Chairman of VNPF Board

-	The Acting General Manager of VNPF.

Dated this 19th day of June 1997.

MARIE-NOËLLE FERRIEUX PATTERSON
OMBUDSMAN OF THE REPUBLIC OF VANUATU

10	APPENDICES

Number	Description
	
Annex "A"		Tender Notice
	
Annex "B"		Architect’s Report
	
Annex "C"		Negotiation letter from Snoopy’s to VNPF
	
Annex "D"		Letter of former chairman of VNPF, Mr N.Worek to Snoopy’s
	
Annex "E"		Mrs Aiong’s reply to the Preliminary Report
	
Annex "F"		Mr Moli’s reply to the Preliminary Report
	
Annex "G"		Mr Joli’s reply to the Preliminary Report
	
Annex "H"		VNPF Board members’ reply to the Preliminary Report

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