James Marape, prime minister for less than a month, is among those found to have engaged in ‘improper conduct’

This article is more than 1 year old

This article is more than 1 year old

Papua New Guinea’s prime minister has announced a commission of inquiry into a scandalous $1.2bn loan borrowed by his predecessor’s government, after an ombudsman’s report made damning findings against nine individuals including himself.

James Marape, prime minister for less than a month after political turmoil resulted in the resignation of Peter O’Neill, was among those investigated by the ombudsman and found to have engaged in “wrong and improper conduct”.

The damning report was tabled in parliament on Wednesday but had leaked several weeks ago. It investigated dozens of allegations, including that the entire decision-making process to obtain the loan was in breach of the PNG constitution. Marape told parliament the inquiry could include multiple law enforcement agencies.

EMTV reported O’Neill had told parliament he would be the first MP to testify.

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The ombudsman found O’Neill, then prime minister, to have engaged in multiple acts which were “wrong and improper”, including failing to present the loan proposal to parliament as required by the PNG constitution.

It found O’Neill committed PNG to purchasing almost 150,000 shares in Oil Search Ltd without prior approval from the national executive committee, and that he misled the NEC to approve the loan in order to make the purchase.

O’Neill had strenuously fought the ombudsman’s investigation into the loan, which had prompted the then treasurer Don Polye to resign out of concern.

It concluded nine individuals “failed to comply with the proper process and procedures” in law relating to the government’s borrowing of $1.239bn from the Australian branch of Swiss bank UBS to buy almost 150,000 Oil Search Ltd shares in 2014.

The decision ultimately cost the country an estimated $420m after PNG had to sell its 10% stake in the company amid a commodity prices slump.

The ombudsman’s report determined multiple sections of 15 individual acts were potentially breached, including six in the constitution.

It was also highly critical of UBS, which is now under investigation by a Swiss regulator over its involvement in the loan, the Australian Financial Review reported.

The ombudsman’s report named several other ministers including Marape, then minister for finance, and Ben Micah, then minister for state investments, as engaging in conduct which was “wrong and improper”.

Marape, who is now prime minister, was wrong when he approved the payment deed when it was not properly established by law, a fact he was aware of at the time, the report said.

“With the knowledge that his actions were improper, Hon James Marape, MP, Minister for Finance still signed and approved the Memorandum of Approval, thereby enabling the [National Petroleum Company of PNG] to enter into the Transaction Documents,” it said.

The ombudsman said in his opinion the NPCP’s existence was questionable as it was not legally established at the time.

The report also identified six others including departmental secretaries, O’Neill’s chief of staff, Isaac Lupari, and the governor of the central bank, Loi Bakani.

It found 14 “irregularities”, including that the loan itself exceeded PNG’s legislated GDP to debt ratio of 35% and exceeded the legislated maximum of 125% of the total value of overseas commercial debt to estimated internal revenue, that individuals engaged private lawyers without approval, and the agreement breached tendering laws and compromised PNG’s sovereignty.

The ombudsman recommended all named individuals except Bakani be referred for investigation, under the leadership code or by the PNG Law Society.