REPUBLIC OF VANUATU

OFFICE OF THE OMBUDSMAN

PMB 9081
Port Vila
Vanuatu

PUBLIC REPORT

ON THE

ALLEGED MISUSE OF COMMUNITY DEVELOPMENT FUND

19 June 2003

8103/2003/13

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PUBLIC REPORT

ON THE

ALLEGED MISUSE
OF
COMMUNITY DEVELOPMENT FUND

SUMMARY

The Ombudsman is issuing this Public Report to show how some leaders could misuse their offices and positions for their own benefit. 

In 1996, Honourable Serge Vohor ("Hon. Vohor") was Prime Minister of the Republic of Vanuatu. The Prime Minister’s Office was responsible for the Community Development Fund ("CDF"). 

The CDF was established as a Special Fund in accordance to Section 13(1)(b) of the Casino Control Act No.6 of 1993 and section 20(2) of the Betting (Control) Act No.1 of 1993.

These laws provide for ten percent (10%) of the income earned through the gambling operations in Vanuatu to be paid into the Revenue Fund of the Government. The Prime Minister controlled the fund and it was used for developments in the communities on request.

The Government had opened an account for the CDF with the Bank of Hawaii and the only authorized signatories to the account was the Prime Minister himself, and/or in his absence, the Minister of Finance.

In 1996, Tawareka Community from South Tanna in Port Vila made a request to the Prime Minister’s Office for a bus for the community. When this request was approved by the Prime Minister, one member of that community, Mr. Mathias Teku ("Mr. Teku"), decided to use this opportunity to gain personally. So he met privately with Mr. Antoine Pikioune ("Mr. Pikioune"), former Political Secretary to the Prime Minister about the request. When the Prime Minister approved the request, Mr. Pikioune made the cheque for Vt1.000.000 and gave it to Mr. Teku instead of the Tawareka community.

Mr. Teku deposited the cheque with AGC Financial Limited and purchased a car which he used as a private taxi.

This enquiry found that Hon. Vohor assisted in the decision by providing funds to Mr. Teku, a supporter of his political party. Hon. Vohor’s action was contrary to the Leadership Code under Article 66 of the Constitution by using his office as Prime Minister to donate Vt1.000.000 from the public fund (CDF) to benefit his party supporter.

The enquiry also found that the former political Secretary, Mr. Pikioune may have also breached the Penal Code when he assisted in the decision to give public funds to a political supporter for his personal benefit. Mr. Pikioune handed the cheque to Mr. Teku, knowing that Mr. Teku would use this public fund personally.

The Ombudsman found that Mr. Teku has misused public fund for personal use. Such action is against Section 122 of the Penal Code.

Following these findings, the Ombudsman makes these recommendations:

-	That, the Police Commissioner orders an investigation into the misuse of this fund in order to recover the public money taken improperly by Mr. Teku.
-	That the State Law Office recover from Hon. Vohor, Mr. Pikioune and Mr. Teku the funds that have been used by Mr. Teku.

TABLE OF CONTENTS

SUMMARY
1. JURISDICTION
2. PURPOSE, SCOPE OF INVESTIGATION AND METHODS USED
3. RELEVANT LAWS, REGULATIONS AND RULES
4. OUTLINE OF EVENTS
5. RESPONSES BY THOSE WITH COMPLAINTS AGAINST THEM
6. FINDINGS
7. RECOMMENDATIONS
8. INDEX OF APPENDICES

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1. JURISDICTION

1.1 The Ombudsman made this enquiry in accordance with Articles 62 and 66 of the Constitution and Section 11 (1)(d) of the Ombudsman Act. These laws allow the Ombudsman to enquire into the conduct of persons working in the Government and government related bodies on their alleged improper actions. The Ombudsman could enquire into the conduct of the Prime Minister and political secretaries.

2. PURPOSE, SCOPE OF INVESTIGATION AND METHODS USED

2.1 The purpose of this report is to present the Ombudsman’s findings as required by the Constitution and the Ombudsman Act. 

2.2 The scope of this investigation is to determine:

-	whether the conduct of the Prime Minister, Hon. Vohor was proper in allowing public fund to be taken by an individual supporter?
-	whether the purpose of CDF was to assist individuals or communities?
-	whether Hon. Vohor and Mr Pikioune breached the laws.

2.3 This Office collected information and documents by informal request, summons, letters, interviews and research.

3. RELEVANT LAWS, REGULATIONS AND RULES

The full text of relevant laws, regulations and rules can be viewed in "Appendix L".

4. OUTLINE OF EVENTS

4.1 The CDF was established as a Special Fund in accordance to Section 13(1)(b) of the Casino Control Act No.6 of 1993 and section 20(2) of the Betting (Control) Act No.1 of 1993.

4.2 On 15 September 1997, a complaint was lodged to the Office of the Ombudsman against Messrs. Antoine Pikioune, William Tari and Noel Tabiusu, the political secretaries in the Prime Minister’s Office.

It was alleged that:

-	the South Tanna Community (Tawareka) in Port Vila made a request to the Prime Minister, Hon. Vohor to donate a bus for Tawareka community. This request was taken up to the Prime Minister’s Office by the Committee and was approved.

-	when funds were made available for the purchase of the bus, another member of Tawareka community, Mr. Teku met privately with Mr. Pikioune where the cheque was given to him instead of the Tawareka community as requested. The amount was Vt1.000.000. (Refer to the copy of the cheque in "Appendix A").

-	Mr. Teku deposited the cheque with AGC Financial Ltd and purchased a car to be used as a private taxi.

-	in August 1997, Mr. Teku made the arrangements with Mr. Mahit to drive the taxi and the Island Property to manage the funds of the vehicle.

-	the Tawareka community, who made the request for assistance was left out totally from the original request made to the Prime Minister’s Office. The Tawareka community then requested that the taxi/car be removed from the management of AGC Financial Ltd and Island Property and given back to them (Tawareka community) to manage.

-	It was alleged that Mr. Teku personally approached Mr. Pikioune for the cheque to be given to him.

4.3 On 13 November 1997, the former Ombudsman, Mrs. M. N. Ferrieux Patterson, wrote to Mr. Pikioune, in the Prime Minister’s Office to inquire into the wrongful donation of Vt1.000.000 to Mr. Teku instead of the Tawareka Community who claimed to have applied for it. The Ombudsman also requested Mr. Pikioune to send copies of the LPO or GPV that were made to Mr. Teku with his response. The Ombudsman also asked for the copy of the Tawareka Community’s request to be attached with Mr. Pikoune’s response.

A letter was also sent to Mr. Ian Wright ("Mr. Wright"), the Manager of AGC Finance (Vanuatu) Ltd ("AGC") to confirm whether AGC has any account with Mr. Teku for financing the car to be used for taxi purposes.

4.4 On 26 November 1997, the Ombudsman received the response from Mr. Wright. He confirmed that Mr. Teku has entered a lease for a vehicle to be used as a taxi with AGC Finance (Vanuatu) Ltd. It is the AGC’s policy for someone leasing a vehicle from the company for the vehicle to be transferred to the lessee at the expiry date of the lease. There was a deposit of VT910.000 which was paid in cash by Mr. Teku. A copy of this receipt is attached in "Appendix A1". There was no reference at all of the Tawareka Community.

4.5 On 27 November 1997, Mr. Pikioune responded that:

-	Mr. Teku made a request to the Prime Minister at the beginning of 1996 as the representative of the community of Tawareka.
-	He stated that all Government cheques are made out by a computer and are signed by the Director of Finance. This was to answer to the allegation that he wrote out the cheque that was given to Mr. Teku.
-	He also stated that due to the fact that most of the communities in Vanuatu are not constituted by law or are not legally represented, they do not have bank accounts, therefore, the cheque for one million Vatu (Vt1.000.000) was made to Mr. Teku.

There were no enclosures with Mr. Pikioune’s response.

4.6 On 3 February 1998, the Ombudsman sent another letter to Mr. Pikioune to enquire about the enclosures stated above.

The Ombudsman also sent letters to the Director-General of the Ministry of Finance and Economic Management, Mr. Jeffrey Wilfred ("Mr. Wilfred"), and the Prime Minister, Hon. Vohor, to inquire about the establishment of the CDF and the policy to use it.

4.7 On 23 October 1998, a reminder letter was sent to Hon Vohor, Prime Minister referring to the above letter.

4.8 On 26 October 1998, the Office of the Ombudsman wrote to the Director of Finance, Mr. John Luan ("Mr. Luan"), and enquired:

-	if the government funds have been used or spent improperly and not in line with the Financial Regulation? 
-	whether any advice was received from the Attorney General that such a scheme was legal and why was it allowed to continue and why was it stopped?
-	when did the Finance Department become aware of the existence of CDF account with Banque d’Hawaii Limited?

4.9 On 27 October 1998, a reminder letter was sent to Mr. Pikioune enquiring about the enclosures as stated in our letter of 3 February 1998.

The Ombudsman also wrote to Island Property Consultants Ltd (IPCL) to enquire about the arrangement made in August 1997 between Mr. Teku and Mr. Mahit. The arrangement allowed Mr. Mahit to drive the taxi and for the Island Property to look after the financial management of the taxi. IPCL was requested to provide information or documents in regards to the arrangement made.

4.10 On 2 December 1998, Mr. Luan responded by saying that they have looked through their records but they were unable to locate any information on the vehicle that was purchased from the "CDF". It could be that the vehicle was purchased after the account at Bank of Hawaii was opened.

4.11 On 4 January 1999, another reminder was sent to Hon. Vohor, Prime Minister referring to two of our letters of enquiry dated 3 February 1998 and 23 October 1998.

4.12 On 5 January 1999, a reminder letter was sent to IPCL in regards to our letter dated 27 October 1998 in which the Ombudsman requested specific information and documents in connection with the investigation.

A reminder letter was also sent to Mr. Pikioune regarding three letters of enquiry dated 3 February 1998 and 26 and 27 October 1998 that were addressed to him.

4.13 On 18 January 1999, Mr. Pikioune responded by saying that:

-	he did not have a copy of the request that Mr. Teku made to the Hon Prime Minister, however, he stated that a copy of it may be in the archives at the Prime Minister’s Office (at this stage Mr. Pikioune was no longer the Political Secretary at the Prime Minister’s Office). 
-	he stated that Mr. Teku made a request to the Prime Minister’ s Office and Hon. Vohor dealt with the request. 
-	the request was later referred to the Finance Department to process the cheque. It was at this point that Mr. Teku’s name appeared on the cheque instead of the Tawareke Community. He knew nothing about Mr. Teku’s status in UMP.

4.14 On 24 March 1999, another letter was sent to the AGC to get more information on Mr. Teku, the vehicle that was purchased and the details of the existing loan. We also enquired about Mr. Teku’s taxi licence with the Customs Department.

4.15 On 14 April 1999, Mr. Wright, AGC Manager responded that the vehicle was purchased with an amount of VT1.987.000 which includes a 3-year insurance of VT291.000. The taxi number is Rego T2245 and it is a Daewoo Racer model. The balance of the loan then was VT363.840 and he stated that the repayment of this loan is not up to date (see "Appendix B").

4.16 On 22 April 1999, the Ombudsman requested Mr. Mahit to visit the Office of the Ombudsman on 6 May 1999 to find out from him as a witness, what was his arrangement concerning Mr. Teku’s taxi.

4.17 On 23 April 1999, the Office of the Ombudsman received the Customs Department’s response by saying that they have checked their Business Licence Register Book in their office but Mr. Teku’s name does not seem to appear in their records.

4.18 On 28 April 1999, in an interview with Mr. Mahit, he stated that there had been an arrangement between Mr. Teku, the Island Property and himself after Mr. Teku had problems in paying back the loan for the taxi. He asked Mr. Mahit to pay back his loan and to date Mr. Teku has not refunded his money. He also stated that after paying for the loan, he had employed a driver for the taxi but Mr. Teku came and took the vehicle back. The taxi was later involved in an accident, and was repaired at the Socometra. (Interview note can be seen in "Appendix C").

4.19 On 7 May 1999, the Ombudsman received a response from Mr. Wilfred. He stated that the CDF was authorized under the Casino Control Act No. 6 of 1993 (Section 13) attached as "Appendix D" and the Betting (Control) Act No. 1 of 1993 (Section 20) attached as "Appendix E" to receive half of all commissions payable by operators to the Government.

This fund (CDF) was established as a "Special Fund" according to the Public Finance Act by the Minister of Finance as per his instructions of 11 August 1995 (refer to "Appendix F"). The instruction was for an account to be opened with the Bank of Hawaii. Prior to this, the account was managed by the Department of Finance, and all payments were made by government GPV. This fund did not need parliamentary approval because under the Public Finance Act Section 9.(2), Special Funds did not form part of the Revenue Fund therefore it was not obligated for such approval.

On 14 August 1995, Mr. Wilfred expressed his concerns to the Minister of Finance in a memo that under some conditions, the transactions of this fund needed to be controlled. A copy of that memo was forwarded to the Auditor General. While the account was still operating, Mr. Wilfred sought its bank statements but he was refused on the grounds that he was not a signatory to the account.

This fund was stopped in 1996 by the Casino Control (Amendment) Act No. 7 of 1996 (refer to "Appendix G") and the Betting (Control) (Amendment) Act No. 8 of 1996 ("Appendix H"), which redirected all commissions to the Government to be paid into the Revenue Fund.

These amendments were prompted by recognition of the need to utilize all government revenue for recurrent purposes in order to limit recurrent budget deficits.

4.20 On 11 May 1999, the Ombudsman requested Mr. Teku to visit the Office on 21 May 1999 to discuss the allegations on the misuse of public funds in relation to the purchase of a taxi using community funds.

4.21 On 26 May 1999, Mr. Teku was summoned because he did not respond to any of the Ombudsman’s letters.

4.22 On 8 June 1999, at the interview, Mr. Teku said that he had made a request to the Hon Prime Minister that he wanted a 4x4 truck for his own personal use. He never made the request on behalf of the South Tanna community. (A copy of the letter that Mr. Teku had written to Hon Prime Minister requesting a vehicle for his personal use can be viewed in "Appendix I"). Hon. Vohor gave him a cheque of VT1.000.000 at a small kava ceremony at his house. There were some members of the Tawareke community there but they were not there because the money was only given to him. His name was on the cheque and not the name of the South Tanna Community. He deposited this amount of money with AGC and they loaned him an amount of VT600.000 in which he used to buy his taxi. ("Appendix J" is a copy of the Interview Note).

Mr. Teku made an arrangement with Mr. Mahit because he (Mr. Mahit) claimed to have a company with the Island Property. The agreement was made for Mr. Mahit to run the taxi business and give Mr. Teku VT10.000 each month as well as pay back the loan with AGC.

Mr. Mahit operated the taxi for two months but he did not honor the agreement so Mr. Teku removed the taxi from Mr. Mahit. The taxi was however, involved in a very bad accident and it was taken to the Socometra garage to be fixed. 

4.23 On 15 November 1999, the Office of the Ombudsman requested the bank statements on the Community Development Fund account from the Banque d’Hawaii (Vanuatu) Ltd between August 1995 when it was opened, to sometimes in 1996 when it ceased to exist, to assist with the Ombudsman’s enquiry. 

4.24 On 25 November 1999, Mr. Constantin submitted the Bank Statements to the Office of the Ombudsman. This can be viewed in "Appendix K".

4.25 On 2 December 1999, the Office of the Ombudsman wrote another letter to Hon. Vohor concerning the same issue. This is because, the Ombudsman did not receive any response to any of the letters written to Hon. Vohor. By this date, Hon. Vohor was appointed as the Minister of Foreign Affairs.

4.26 On 11 October 2001, the Office of the Ombudsman sent another letter to Hon. Vohor but he has never responded to any of the Ombudsman’s letters.

5. RESPONSES BY THOSE WITH COMPLAINTS AGAINST THEM

5.1 A Working Paper was issued prior to this public report to give the individuals mentioned in this report another opportunity to respond pursuant to Article 62(4) of the Constitution. Only two responses were received to the working paper:

-	On 5 May 2003, Mr. Jeffery Wilfred, Director General (Ministry of Agriculture, Quarantine, Forestry & Fisheries) confirmed in his response that he has no comment to make.

-	On 12 May 2003, a response was received from Mr. Douglas R. Patterson, Director, Island Property. He stated in his response that it is totally false for Mr Sam Mahit to claim having a company with Island Property and also claim to anyone that he has connection with their company. A copy of Mr. D R Patterson’s response can be viewed in "Appendix M".

6. FINDINGS

6.1 Finding 1: Former Prime Minister, Honorable Serge Vohor may have breached Article 66 (1) & (2) of the Constitution.

The Ombudsman found that the former Prime Minister, Honorable Serge Vohor may have breached Article 66 (1) & (2) of the Constitution when he decided to give public money to his political supporter. His actions to give Vt1.000.000 to Mr. Teku, to purchase a car and used it as a personal taxi may have placed his position in which he could have a conflict of interest in which the fair exercise of his official duties might be compromised. Also, Hon. Vohor as a leader, used his office for personal gain when he allowed Mr. Teku to get public money and use it for personal purposes.

6.2 Finding 2: Alleged Misuse of Public Funds by former political secretary, Mr. Pikioune.

The Ombudsman also found that Mr. Pikioune has assisted to give public money illegally to an individual (Mr. Teku) for his own benefit. Mr. Pikioune may have breached Section 122 of the Penal Code Act.

6.3 Finding 3: Mr. Teku may have breached Section 122 of the Penal Code.

The Ombudsman found as well that Mr. Teku has intended to make the request on behalf of the South Tanna Community for his own benefit. His actions have revealed that he intentionally took public money and used it for his own benefit, and therefore he has breached Section 122 of the Penal Code.

7. RECOMMENDATIONS

The Ombudsman makes these recommendations following the above findings to resolve this complaint and prevent such practices to occur again in the future.

7.1 Recommendation 1:

The Police Commissioner should consider this report and instruct an investigation into the misuse of public money by Mr. Vohor, Mr. Pikioune and Mr. Teku.

7.2 Recommendation 2:

The State Law Office recovers from Hon Vohor, Mr. Pikioune and Mr. Teku the funds that have been used by Mr. Teku

Dated the 19th day of June 2003.

Hannington G ALATOA
OMBUDSMAN OF THE REPUBLIC OF VANUATU

8. INDEX OF APPENDICES

A A copy of the cheque

A1 A copy of AGC receipt

B A copy of AGC letter

C A copy of Mr Mahit’s Interview Note

D Casino Control Act 6 of 1993

E Betting (Control) Act 1 of 1993

F Minister of Finance instruction letter – 11 August 1995

G Casino Control (Amendment) Act No.7 of 1996

H The Betting (Control) Amendment Act No.8 of 1996

I Copy of Mr Teku’s personal request to Hon Vohor, Prime Minister

J Copy of Mr Teku’s Interview Note

K Bank Statements

L Relevant laws, regulations & rules

M Copy of the Island Property’s response to the Ombudsman’s Working Paper

Appendix L

CONSTITUTION OF THE REPUBLIC OF VANUATU 

CONDUCT OF LEADERS

66.(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 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 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).

DEFINITION OF A LEADER

67. For the purposes of this Chapter, a leader means the President of the Republic, the Prime Minister and other Ministers, members of Parliament, and such public servants, officers of Government agencies and other officers as may be prescribed by law.