This article is more than 1 year old

This article is more than 1 year old

A company owned by Papua New Guinea’s prime minister, Peter O’Neill, won a $32m government contract to build bridges in the country via a process with “serious procurement irregularities” that may have violated anti-corruption guidelines, the Guardian can reveal.

The 2015-16 building project was fraught with problems, requiring the Asian Development Bank (ADB) to temporarily stop payments and send in inspectors. Eventually, the contract was terminated and had to be retendered to a Chinese company.

The revelations centre on Wild Cat Developments Ltd, of which O’Neill was the sole shareholder at the time the contracts were granted by the ADB.

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O’Neill came to power in 2011 and has had corruption allegations levelled at him in the past, but according to some experts this is the first time he has been revealed to have been involved in such a questionable deal by an international body while prime minister.

“The PM’s conflicts of interest are legion, but there has never been anything like this ADB report before,” said Kristian Lasslett, an investigative criminologist who has been researching corruption in PNG for more than a decade.

“O’Neill is PNG’s Mr Teflon, while others around him have crashed against the rocks, he seems to escape unscathed. This ADB investigation is a bone-shaking exception to the rule. An international body has uncovered activity by a company he owns which appears to fit within the dictionary definition of fraud.”

The prime minister’s office issued a statement disputing the allegations, saying: “The ADB-funded joint venture contract that you are referring to was awarded in accordance with all procurement processes of government and the ADB.”

The statement said O’Neill had not been present when cabinet made the decision to award the contract to his company, in keeping with PNG law that requires politicians to excuse themselves from decision-making processes if there is a potential conflict of interest.

It also said the prime minister did not receive any income from the company and divested himself of shares in it upon realising the potential for a perception of a conflict of interest.

The revelations raise questions about O’Neill’s business dealings at a time when he is trying to promote PNG as a site for tourism and investment at the Apec leaders’ forum, which takes place this week.

How a multimillion-dollar deal fell apart

In 2014, Wild Cat, in partnership with contractors Golding PNG Ltd, won a $32.86m contract from the ADB to build 12 bridges in the West New Britain province of PNG.

The contract was part of a $100m project, funded 90% by the ADB and 10% by the PNG government, to improve road access for the rural population, something direly needed in PNG, where about 85% of people live in rural areas.

More than a year after the contract was awarded, ADB inspectors found work had begun on three of the 12 bridges and just 10% of work had been completed, despite 60% of the money having been paid.

The ADB asked the Department of Works to monitor the sites to ensure progress was made and temporarily suspended payments due to the lack of progress.

Shortly after these problems, O’Neill sold his shares in Wild Cat, which was renamed Construction and Procurement Services Ltd in October 2016.

Timeline How the Wild Cat project unfolded Show Hide Prime Minister Peter O'Neill officially acquires Wild Cat Developments Ltd Joint venture between Wild Cat and Golding PNG Ltd wins $32.86m contract to build 12 bridges Construction begins ADB's Office of Anticorruption and Integrity visits the project, finds that only 10% of the work is done despite 60% of the money having been paid ADB temporarily suspends disbursements of payments O'Neill sells Wild Cat Developments, company is renamed Construction and Procurement Services Ltd Wildcat-Golding joint venture suspended - ADB reports progress is now at 65% Wildcat-Golding contract officially terminated Chinese state-owned company China Jiangsu International ETCG Ltd given a $14.328m contract to complete the project

The ADB published a report into the procurement process for the project in August 2017 in which it outlined a series of issues with the awarding of contracts, including “deficiencies in financial management” and “potential integrity violations”.

After this report, the ADB terminated the Wild Cat-Golding contract “due to poor contractor performance” and in June 2018, a new contract worth $14.328m for completion of the project was awarded to China Jiangsu International ETCG Ltd, a Chinese state-owned company.

O’Neill’s office disputed this, saying: “The contract was terminated by mutual consent by both parties, not because of the audit reports as you have suggested.”

The August report redacted the names of all companies and individuals involved, but the Guardian and the local investigations group PNGi can reveal that the ADB criticised the joint venture partnership that included Wild Cat. Problems with the contract process included:

The Wild Cat-Golding joint venture was an “unqualified contractor” that “did not meet the financial capacity, equipment, key personnel and work experience requirements”.

One of the companies in the joint venture submitted incomplete, unaudited financial data and had made a loss for the years submitted. This matches the financial situation of Wild Cat as described by a liquidator’s report.

One of the two companies, believed to be Wild Cat, “potentially misrepresented” its financial situation to the ADB by submitting “inconsistent financial data”.

The Wild Cat-Golding joint venture was recommended on the bid evaluation report despite another bidder being recommended as the lowest evaluated bidder.

The bid evaluation report recommending Wildcat-Golding had an identical “signature page” to the report recommending the other company win the contract.

“The ADB report shows a company owned by the prime minister not only secured a lucrative multimillion-dollar government contract that the taxpayers of Papua New Guinea will be paying off, but that his company obtained the contract through spurious means and then failed to complete the project,” claimed Lasslett.

“The ADB report follows in the footsteps of two commissions of inquiry that released damning findings against Peter O’Neill 15 years ago. While the pattern of conduct is broadly similar, this is the first time Peter O’Neill has been implicated in such spurious deals as prime minister.”

A senior legal figure in PNG, who did not wish to be named, said: “It must be doubted that O’Neill’s company would have won the contract if he was not prime minister.”

‘Dangerous territory’

It is unclear how long O’Neill has been involved with Wild Cat. Company records show he became its sole shareholder in January 2014, through his company LBJ Investments. But according to Hansard records, in August 2014 O’Neill said of Wild Cat: “I have a shareholding in that company for many years.”

The prime minister’s office said O’Neill had not misled parliament: “Mr O’Neill stated that Wildcat had been operating in his province for many years and has contributed substantially to the development of the province.”

After O’Neill sold his shares in Wild Cat, the new owner began filing annual returns dating back to 2012, which show the company’s balance sheet improving dramatically over the years of the contract, from net assets of 1.55m kina ($460,000) in 2013, the year before the contract was awarded, to 37.3m kina ($11.1m) in 2015, the first full year of the contract.

The prime minster’s office said: “Mr O’Neill did not receive any income including director’s fees or dividends from the investment in this company.”

Lawrence Stephens, the chairman of the board of Transparency International PNG, said politicians in PNG often had an “arrogant attitude” and “confidence in their own impunity”.

“It is bad enough that this appears to happen with such frequency in PNG, in handling our own funds. When it comes to displaying similar arrogance towards international institutions, in arranging international funding, committing PNG to additional debt, and failing to maintain reasonable standards of accountability then we are headed towards dangerous territory.”

Golding Contractors did not reply to requests for comment.

PNGi is a network of investigative specialists who administer three anti-corruption platforms: PNGi Central, PNGi Portal and PNGi Take Action.