REPUBLIC OF VANUATU

OFFICE OF THE OMBUDSMAN

PUBLIC REPORT

BREACHES OF THE LEADERSHIP CODE BY SATO KILMAN,
MINISTER OF LANDS

24 February 1998

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TABLE OF CONTENTS

PREAMBLE
1 CASE NUMBER
2 THE COMPLAINANT
3 THE COMPLAINT AGAINST
4 THE COMPLAINT
5 METHOD OF INVESTIGATION
6 RELEVANT LAWS
6.1 The Constitution
7 RELEVANT MATTERS & FACTS
Mr Kilman and SK Logging
Mr Kilman and Mr Joseph Nyi, the Beneficial Owner of SK Logging
Council of Ministers’ Meeting approving the ban on export of round logs
8 REPLIES
Comments by the Ombudsman
9 FINDINGS OF MISCONDUCT
FINDING NO. 1: BREACH OF ARTICLE 66(1)(a) OF THE LEADERSHIP CODE BY MINISTER SATO KILMAN
FINDING NO. 2: BREACH OF ARTICLE 66(1)(c) OF THE LEADERSHIP CODE BY MINISTER SATO KILMAN
10 RECOMMENDATIONS
11 ANNEXURES

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PREAMBLE

'The getting of treasures by a lying tongue is a vanity tossed to and fro of them that seek death'

Proverbs 21 V 6.

This Report illustrates how easy it is for those in power to find themselves manipulated and out-manoeuvred by clever men who visit the country for purposes of exploiting the personal greed of officials who care nothing for the welfare of the country but instead see (or think they see) golden opportunities for personal gain even if it means involving themselves in fraud and deceit - and indeed in unlawful acts.

The guidelines for the conduct of a Minister in case of conflict of interest as described in the Leadership Code in the Constitution are clear. These were violated in this case with clear indication of an intention by Mr Kilman to profit from this violation.

1	CASE NUMBER

1.1	C. 310/96-97

2	THE COMPLAINANT

2.1	Own Initiative Inquiry

3	THE COMPLAINT AGAINST

3.1	Mr Sato Kilman - Minister of Lands

4	THE COMPLAINT

4.1	That Mr Kilman breached the Leadership Code by voting in favour of the Council of Ministers’ Decision No. 14 of 1997 to repeal the ban on the export of round logs from Vanuatu.

This decision also gave S.K. Logging the right to export round logs overseas. Mr Kilman is a Director of S.K Logging and earns Vt200,000 a month as a Director.

5	METHOD OF INVESTIGATION

5.1	Interview with Mr Sato Kilman

5.2	Correspondence and information from Vanuatu Financial Services Commission.

5.3	Correspondence with Juris Ozols & Associates, Mr Kilman’s lawyer.

6	RELEVANT LAWS

6.1	The Constitution

Article 66 of the constitution provides:

(1)	Any person defined as a leader in Article 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 interests or in much 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 engage 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).

7	RELEVANT MATTERS & FACTS

Mr Kilman and SK Logging

7.1	Mr Kilman is a Director of SK Logging. The shareholders of SK Logging are Astrolabe Nominees Ltd and Astrolabe Ltd from 1992-1994. The Annual Reports filed on behalf of SK Logging listed Mr Kilman as the beneficial owner of Astrolabe Nominees Ltd and Astrolabe Ltd. In 1995, the Annual Reports filed on behalf of SK Logging listed the beneficial owner of the same two companies as Mr Joseph Then Nyi('Mr Nyi'), a Malaysian national. Annexed as 'A' is a copy of the letter from the Vanuatu Financial Services Commission setting out this information. Apparently there was a change of ownership from Mr Kilman to Mr Nyi in 1995. See annexure 'A'.

Mr Kilman and Mr Joseph Nyi, the Beneficial Owner of SK Logging

7.2	Mr Kilman has been seen driving around in a new Mercedes car belonging to Mr Nyi. Mr Kilman in his Ombudsman interview advised that the car belongs to Mr Nyi and that Mr Kilman is looking after it for Mr Nyi as he lives in Malaysia. On 6 August 1997 Mr Kilman wrote a letter to the then Minister of Foreign Affairs to get a Diplomatic Passport for Mr Nyi. Mr Kilman states that he does not believe the passport was issued to Mr Nyi. When asked what his relationship with Mr Nyi is, Mr Kilman said 'Whatever business Mr Nyi wants to go in I’ll assist him.' Annexed as 'B' is a copy of Mr Kilman’s letter to Mr Fidal Soksok.

Council of Ministers’ Meeting approving the ban on export of round logs

7.3	At the Council of Ministers’ Meeting No. 19 on 18 of July 1997, Decision 141 purported to approve the lifting of the prohibition on the export of round logs. At the same meeting, the Council of Ministers further purported to 'on a trial basis' grant round log licenses to the following organisations;

-	Santo Veneer
-	Parklane Industries
-	SK Logging
-	Pacific Veneer
-	Errolumba

7.4	Mr Kilman having an interest in SK Logging was present during the Council of Minister’s deliberations per Decision 141. Mr Kilman claims that he declared this interest in this decision at the Council of Ministers’ Meeting. Mr Kilman admitted that he remained in the meeting.

7.5	The vote taken to repeal the ban on the export of round logs was unanimous. Mr Kilman voted in favour of the decision along with the other ministers.

8	REPLIES

8.1	Mr Kilman’s lawyer replied on behalf of his client. The letter dated 7 January 1998 stated that:

(a)	Mr Kilman whilst he is a Director of SK Logging ceased to have any beneficial interest 3 years ago. In other words Mr Kilman would not obtain any greater or lesser amount of money regardless of whether SK Logging were able to take advantage of the permit to export roundlogs.

(b)	Mr Kilman signed the letter for the official diplomatic passport for Mr Nyi at the request and on behalf of the Minister of Finance who wanted to arrange such a passport but was overseas at the time. It was standard procedure for Vanuatu and other countries that Trade Commissioners and other similar people have an official passport. The application had nothing to do with Mr Kilman’s outside relationship with Mr Nyi.

(c)	With regards to the Council of Ministers meeting it would have been better for Mr Kilman to have abstained from voting but his interest as a director of SK Logging had been declared, the decision treated all of the logging companies equally, there being no differentiation between any of them and there was no special benefit to SK Logging, it only got the same treatment as all the other logging companies. The Council of Ministers meeting was, in any event, unanimous thus Mr Kilman’s abstention would have made no difference.

(d)	Mr Kilman had to be at the meeting because as Minister of Lands he had to look after the interests of his portfolio and it would have been equally improper for him to have absented himself from the meeting. The decision affected the logging companies operating all over Vanuatu including Santo, Erromango and elsewhere and it was something that he as Minister of Lands ought to have deliberated upon.

(e)	Mr Kilman was only doing his colleague a favour by starting and driving Mr Nyi’s car around whilst he was overseas. There is nothing wrong with that.

* Mr Kilman’s lawyer’s letter is marked 'C'.

Comments by the Ombudsman

8.2	Even if Mr Kilman is no longer a beneficial owner (as he claims) he is a director who makes decisions for the company and earns Vt200,000 every month. Getting the permit on a trial basis will mean making more money for the company. In other words if the company has no business in Vanuatu it would no longer pay Mr Kilman a monthly director’s fee or if Mr Kilman was not effective for the company he might lose his directorship.

8.3	Whether the Minister of Finance requested the issue of the diplomatic passport is immaterial. Why would he be asking Mr Kilman to write the letter if he has his political secretaries there to work for the Ministry of Finance? I consider Mr Kilman’s letter shows that he is trying to help his friend or his 'colleague' as he calls him. We may question Mr Kilman as to who his colleagues are, ministers of the state or his business associates. There is no information in that letter as to what Mr Nyi does for Vanuatu so why should he be given a diplomatic passport.

8.4	It is accepted that Mr Kilman’s abstention from voting would have made no difference to the number of votes for the lifting of the ban on export of round logs. Morally Mr Kilman was wrong in voting in favour of the lifting of the ban because he had an interest in this matter. Maybe Mr Kilman should not be involved in logging at all. The lifting of the ban would have allowed SK Logging to make money to pay for Mr Kilman as a director earning director’s fee. In short, no business means no earnings to pay directors and shareholders.

8.5	It is not proper for Ministers of the State to be involved in private businesses because they will have to make decisions for the nation with clear conscience and put the nation’s interest before their own interest. Mr Kilman, to his credit, accepts in hindsight that he should have not voted or involved himself in this matter. I would comment on the fact that there is a conflict of interest in his position of Minister of Lands and his directorship in a logging company.

8.6	Mr Kilman’s excuse and his lawyer’s justification of it is with respect to both of them naive. Mr Kilman should think about what is stated in art.66(2) of the Constitution. Mr Kilman’s role as a director of a private logging company and as minister of the state responsible for issuing Negotiator’s Certificates to logging companies may give rise to doubt in the public mind whether he will carry out his responsibilities as imposed by subarticle (1) of the Constitution.

9	FINDINGS OF MISCONDUCT

FINDING NO. 1: BREACH OF ARTICLE 66(1)(a) OF THE LEADERSHIP CODE BY MINISTER SATO KILMAN

9.1	Mr Kilman allowed himself to be placed in a position of conflict of interest between his public interest as a Minister and his private capacity as a Director of SK Logging. In my view, Mr Kilman should have abstained from voting and also from any prior discussions. He now accepts this.

FINDING NO. 2: BREACH OF ARTICLE 66(1)(c) OF THE LEADERSHIP CODE BY MINISTER SATO KILMAN

9.2	This willingness to seek a diplomatic passport for Mr Nyi and to look after Mr Nyi’s expensive motor vehicle (who lives in Malaysia) also in my view gives considerable cause to doubt Mr Kilman’s integrity in discharging his Ministerial responsibilities independent of his business relationship with Mr Nyi. It serves to give rise to doubt in the public mind in my view. In his lawyer’s letter Mr Nyi is referred to as Mr Kilman’s 'colleague'. If Mr Kilman’s colleagues are his business partners then there is a conflict of interest. This may imply that Mr Kilman is spending more time with his business associates therefore he can relate to Mr Nyi as a colleague.

10	RECOMMENDATIONS

10.1	I recommend that Mr Kilman stop immediately being involved in both the position of Minister of Lands and Director of a logging company. The conflict of interest is potentially too high. If he continues being a director he should immediately resign as Minister of Lands.

10.2	I would encourage Mr Kilman not to seek the election. That is however a matter for him. If he does and wins a seat in Parliament I recommend that if he gets appointed as a Minister that he resigns all directorships of any companies he holds and declares his shareholdings in companies, trusts and businesses to the public. This is conducive to transparent government in my opinion.

10.3	Immediate vote of the Leadership Code Act which should outline clearly the position of Ministers with Directors in private companies.

The one prepared by the Government states clearly that in a case similar to this one, Mr Kilman could not keep his directorship, otherwise he would be in breach of Leadership Code.

Clear guidelines are needed which can only be provided for in the Leadership Code Act which has been in and out of Parliament four times. I strongly recommend that Parliament vote in the Leadership Code Act in the next session.

Dated this 24th day of February 1998.

Marie-Noëlle FERRIEUX PATTERSON
OMBUDSMAN OF THE REPUBLIC OF VANUATU

11	ANNEXURES

Annexure 'A'	-	Letter from Vanuatu Financial Services Commission.
Annexure 'B'	-	A copy of Mr Kilman letter to Mr Soksok.
Annexure 'C'	-	Mr Ozols’ letter.

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