Improper Sale of Government Houses by the Office of the Prime Minister under Maxime Carlot Korman [1998] VUOM 7; 1998.07 (3 March 1998)

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IMPROPER SALE OF GOVERNMENT HOUSES BY THE OFFICE OF THE PRIME MINISTER UNDER THE FORMER PRIME MINISTER MAXIME CARLOT KORMAN

There are not many actions which deserve more contempt than the discrimination against the deserving poor in order to reward those who are already provided for. It is shameful when an action of apparent generosity is found out to be an undeserved gift to a friend, or a relative who is already better provided for than those unfortunate people who get overlooked despite their greater need. It is the duty of good leaders to recognise and to give awards to those who deserve or need them most.

It is disreputable to pretend to be fair and even-handed when all the evidence points to favouritism and unworthy actions. This report gives evidence of inappropriate bias in favour of selected recipients and is particularly offensive because the properties involved belong to the public, and by undervaluing them, assets are stolen directly from that public, in order to benefit selected favourites. If favours are to be given, the Constitution states that the only basis for discriminating in favour of certain groups appears in the end of article 5(1)(k) where it says:

1.1 This report is about the Government houses ('Houses') and land sold in 1994. They were formerly owned by the two colonial powers, Britain and France up to 1980. At independence in 1980 they became the properties of the Vanuatu Government and the properties of the People of Vanuatu.

1.2 The houses were held by the Vanuatu Government on behalf of the People of Vanuatu. These houses belonged to the People of Vanuatu. In the 1980s the Lini Government intended to sell the houses. The reason was that it was costing the Government too much in public funds for maintenance. The Lini Administration did not go ahead with the sale for unknown reasons.

1.3 After the change of Government in 1991 when the Union of Moderate Parties ('UMP') headed the first Coalition Government under the Prime Ministership of Mr Maxime Carlot Korman ('Mr Korman'), the Council of Ministers decided to sell the houses. The houses were allocated to mostly politicians who obtained loans from Vanuatu National Provident Fund Housing Loan Scheme ('VNPF Loans') as detailed in this Office’s report of 17 December 1997, known as the VNPF Housing Loans Report.

1.4 The Council of Ministers’ decision to sell the houses was an executive decision without any legal basis. The appropriate law regarding the sale of Government assets, specifically, the Finance Regulations were ignored.

1.5 The Ombudsman started an enquiry into the sale of the houses following numerous complaints received by the Office of the Ombudsman on how these public assets were sold. The main points revealed by the enquiry were that:

(a) the Government Finance Regulations which came on effect in July 1993 regarding the disposal of public assets were not followed during the sale process.

(b) The properties (land and houses together) were undervalued by the Government Valuation Section headed by Mr Emile Olsen ('Mr Olsen') as principal valuer.

(c) The allocation was discriminatory. Mostly politicians - ministers, political secretaries, supporters and sympathisers of (mostly) UMP Party were allocated the houses.

1.6 The Council of Ministers’ ('COM') decision that first priority be given to the President, Prime Minister, Ministers, political appointees and other public officers was totally discriminatory. Other people, including those civil servants who were occupying those houses then and who were also interested to purchase them, missed out along with the rest of the population.

1.7 Mr Korman made sure that the houses were allocated to the Ministers (including himself) and Members of Parliament ('MPs') within his cabinet when he tabled his paper in the Council of Ministers’ meeting concerning the sale of the houses.
Mr Korman was responsible for the sale of the houses as it was handled by his office and primarily, one of his secretaries, Mr Jack Kallon ('Mr Kallon') (the Prime Minister’s Office). (Refer Appendix 'A', 'A1', 'A2', 'A3').

1.8 The Prime Minister’s Office did not possess any legal authority to recommend how the houses should be disposed of. Nor did they possess any power to actually sell the houses.

1.9 According to one purchaser, Mr Korman verbally promised houses to the Heads of the Departments handling the administrative steps regarding the sale in return for their help. The Departments and their heads concerned were:

The Department of Lands was responsible for preparing all lease documents for the sale of Government houses for the Minister of Lands’ approval. It was also responsible to obtain the payments for the properties before the transfers were signed

The Department of Survey was responsible for the survey works on the land titles and drawing the survey plans for the leases.

The Government Valuation Section within the Department of Survey determined the values of the lands and the buildings. These were under valued.

The Department of Land Records registered most of the transfers from Government to the purchasers of the houses.

1.10 The work of the heads of the above-mentioned departments on the sale of the houses had made it possible for their Heads to acquire a house easily. Although they were paid for doing their jobs regarding the sale of the houses, they decided to accept the offer from Mr Korman who allocated each of them[1] a house for processing the sales rapidly. This is seen as using their positions for their own personal gains. The Prime Minister Mr Korman has no authority to make such promises as to who should get the houses and the VNPF loans.

1.11 After receiving the copies of the Preliminary Report, none of the above officers denied the allegations made against them in this section of the report.

2.1 Pursuant to articles 62(1) and 62(2) of the Constitution and section 14(1) of the Ombudsman Act, the Ombudsman has jurisdiction to investigate into administrative defects and improper administrative practices. Additionally, the Ombudsman has jurisdiction to investigate possible breaches by leaders of the Leadership Code.

2.2 Accordingly, the Ombudsman has jurisdiction to investigate the sale of Government houses and to determine whether the process adopted by the Office of the Prime Minister to sell the houses was in accordance with the laws of Vanuatu. If not then it amounts to maladministration. Deliberate and reckless breaches of the law for private gain whilst in public office is not only maladministration but also contrary to the Leadership Code.

(a) Whether the Prime Minister’s Office handled the sale of the houses in accordance with the law (and if it had any legal authority in the first place);

(b) If it was true that the houses were allocated to mostly politicians and supporters of the political parties then in power;

(c) Whether the values of the properties as determined by Valuation Unit within the Lands Survey Department were the best reasonable values for the properties, given that they were public assets;

(d) The reason behind the lowering of Mrs Maria Kalsakau’s ('Mrs Kalsakau') original value of the property from 14 million vatu to 9.9 million vatu by Mr Olsen the Government valuer, and whether it was proper and legal for such a reduction to happen;

(e) Why the values of some lands were maintained while the rest of the values of the lands were increased; and

(f) Why the property originally wanted by Mr Olsen was undervalued and then purchased by the former Minister of Finance Willie Jimmy.

3.1 In accordance with art. 62(3) of the Constitution, the Ombudsman is empowered to request any person likely to assist her or furnish her with information and documents needed for her inquiry. Based on these powers, documents and information were obtained from the responsible Government Ministries, Departments as well as from other sources.

3.2 Under s17(1) of the Ombudsman Act No.14 of 1995 it is the duty of the Ombudsman where it is possible to obtain evidence and information through informal request, requesting the cooperation of the parties concerned.

4.1 On or about 3 February 1998 I sent a secret preliminary report to 70 persons Replies received and Ombudsman’s comments are reported on in section 7

4.2 The purpose of this preliminary report is to obtain comments and submissions from those complained against and/or affected. Obtaining the comments and submissions is in accordance with art 62(4) of the Constitution and s.19(5) of the Ombudsman Act No.14 of 1995.

(1) An accountable officer shall personally carry out his duties as will satisfactorily discharge his responsibilities under these Financial Regulations.

(b) prompt collection, recording, banking and bringing to account of all revenues due to Government and any other public moneys accountable for by him;

(1) Where an accountable officer is of the opinion that there is a reasonable possibility of recovering a debt through legal action, he shall submit a detailed written report on the debt to the Attorney General, through the Director General of Finance, with a copy to the Auditor General. The report shall contain full details of any action taken to recover the debt.

(1) Where an item of revenue is overdue for more than six months and where, for any reason whatsoever, action to recover such an item has not been taken in accordance with these Regulations, the accountable officer shall submit a detailed written report on the matter to the Director General of Finance together with the Arrears of Revenue Return. The report shall include:

(a) the reason why action has not been taken in accordance with Financial Regulations;

(b) recommendations as to what action should now be taken in an effort to recover the debt; and

(1) To dispose of Government property, a Board of Survey ('Board') shall be appointed by the Director General of Finance to establish the correct procedure to dispose such Government property;

(b) A representative of the Department responsible and preferably an expert on the asset or item to be examined by the Board;

5.7 FR 314 empowers the Board to complete a survey report on the items to be sold which is to be signed by all the members of the Board.

(1) The Board to inspect the item, report on the item and recommend on how the item should be disposed of, whether by:

(2) The Board shall state why or how the item came to be lost, obsolete, surplus or unserviceable and make recommendations to stop such happening from occurring again.

(3) The Director General of Finance after considering the Board’s report recommends to the Minister of Finance the appropriate method of disposal.

(4) The Minister of Finance then issues instructions on the proper method of disposal.

5.9 S.150 of the Penal Code Act CAP. 135 states that no person shall discriminate against another person regarding his right to the supply of goods or services.

5.10 Article 5 of the Constitution provides for each person’s fundamental rights without discrimination including

5.11 Discriminating against other people and violating an individual’s fundamental rights under the Constitution causes a leader to violate also article 66(1) of the Constitution of Vanuatu under the Leadership Code. It says a leader in public and private life must not:

(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;

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

5.13 Clause 9.15 of Vanuatu Public Service Staff Manual which states that in all aspects of their conduct with regard to public affairs all public officers:

(a) must show the responsibility and restraint which their position as public officers demands;

(b) should not seek to use their public office or status for political or sectional purposes;

(c) should not conduct themselves in such a way as to bring their office or the service into disrepute, or in such a way as to create a conflict, or the appearance of a conflict, between their private interest and their public duty; and

(d) should not engage in conduct to the prejudice of law and order the Government of the day, or service discipline.

(i) is guilty of any improper conduct in his official capacity, or of any other improper conduct which is likely to affect adversely the performance of his duties or is likely to bring the Public Service into disrepute.

6.1 The sale of Government houses was originally initiated by the Vanu’aku Party Government in 1980s. This did not eventuate until the UMP led coalition Government came to power in 1991 and decided to process the sale. The sale took place only after Mr Korman the then Prime Minister tabled a paper on the sale at the COM meeting on 02.12.93. The COM approved the sale of the Government houses to the following:

6.2 For ease of reference the essential facts revealed by the Ombudsman Office’s enquiry are set out below in a chronology. Following the chronology this report details further information obtained from investigation and interviews carried out by the Ombudsman.

18.01.93 Mr Korman tabled a paper on the sale of the houses at the extraordinary COM’s meeting where it was approved and they authorised Mr Korman to proceed with the sale. (Refer Appendix 'A').

21.07.93 The third Secretary to the Prime Minister’s Office Mr Jack Kallon
'('Mr Kallon') requested the Director of Survey Department Mr Arthur to assist in surveying and valuing all lands and houses listed for sale. (Refer Appendix 'B').

06.08.93 The Government Housing Officer Mr John Markal ('Mr Markal') requested Mr Olsen to value the lands and buildings and to submit a report to the Housing Office. (Refer Appendix 'C').

25.08.93 Mr Olsen determined the values of the lands and houses listed for sale.

02.12.93 The COM met and decided that the first priority for the sale of the houses be given to a group of Government employees as mentioned in section 6.1 above.

03.12.93 The Acting Secretary to the COM Mr Gerard Leymang confirmed to Mr Korman for the record the COM decision of 02.12.93.

04.02.94 The Vanuatu National Provident Fund Board ('VNPF Board') decided that a Housing Loan Scheme for Government Officials be established, especially for those purchasing Government houses following directions from COM as detailed in this Office’s VNPF Report of 17 December 1997.

1994 - 1995 Most of the purchased houses were registered after funds were made available from the VNPF as detailed in this Office’s VNPF Report of 17 December 1997.

6.3 The Ombudsman’s Office’s investigation found that the sale of the Government houses based on a Council of Ministers’ decision on 02.12.93 without any legal basis. The Executive and the Prime Minister’s Office totally ignored the Government Finance Regulations which apply for the sale of Government assets. Further, the COM did not obtain legal advice from the Attorney General.

6.4 On 08.05.95 the then Attorney General Mr Patrick Ellum ('Mr Ellum') wrote to the Director of Public Service Department. In his letter Mr Ellum stated that the situation regarding the sale of the houses was disorganised and confused. The Attorney General advised that no further sales of government houses should take place until the legality and the policy had been resolved. The Attorney General’s letter was copied to the Minister of Lands, Mr Paul Telukluk and Mr Kallon from the Prime Minister’s Office (Refer Appendix 'H').

6.5 Mr Telukluk later requested Mr Ellum to advise on possible legal defects in the policy for the sale of the houses. By his letter dated 23.08.95 Mr Ellum advised the Director of Public Service Department (copied to Mr Telukluk) that he had never been requested by the COM to provide legal advice on the sale either before or after the decision was made. Significantly, Mr Ellum also identified the relevant sections of the Constitution and the Government Finance Regulations which the COM should have followed in the sale of the houses. The Attorney General stated that for the COM to sell the houses to themselves and political secretaries without competitive tendering was not in accordance with the Constitution or the law and that the sale could be challenged and set aside by the Court (Refer Appendix 'I').

6.6 The Ombudsman’s Office decided to look only at the values of the land. This was because at the time of investigation some houses had deteriorated since 1993 (time of sale) whilst other houses had since been renovated. Land however does not 'age' or 'wear out' in the same way as houses do. We therefore decided to look at the market values of the land as at 1993 when Mr Olsen determined the values of the land.

6.7 Mr Olsen was responsible for the valuation of the sold Government houses. In his interview with the Ombudsman, Mr Olsen stated that he is French educated.

6.8 In the early 1960s he says that he went to New Caledonia to do a course in electricity. He later went to France to do the same course in which he obtained a certificate. On his return he was employed by the Department of Survey working under two Canadian experts in valuation and property tax in the 1960s.

6.9 Mr Olsen gained experiences in the field of valuation only through the above experts from Canada. He does not possess any qualification or has not even attended any courses in valuation since he started working in the Valuation Section in 1976. Neither of Mr Olsen’s two officers have any qualifications or a better knowledge in valuation. The Government Valuation Office therefore employs no qualified valuers.

National Housing Corporation ('NHC') rate of 1,375VT/m2 versus Olsen’s 200-800VT/m2

6.10 Government lands were undervalued by Mr Olsen as the rates per square metre for different locations in Port Vila did not reflect market rates at all. Mr Olsen’s rates ranged from 200 vatu to 800 vatu per square metre. Mr Olsen’s rates did not even come close to the National Housing Corporation ('NHC') rate of 1,375 vatu per square metre applied for all properties it manages for low income earners.

6.11 NHC is a Government statutory body. The properties it manages are situated in areas that are considered to be the cheapest housing areas in Port Vila. However, Mr Olsen’s rates as applied to all lands sold with the Government houses in most cases were less than half the NHC budget housing rate. They were however not in the cheapest housing areas of Port Vila.

6.12 According to the NHC, the minimum rate per square metre of land in town for ni-Vanuatu with low income is 1,375 vatu as applied by NHC. Their ni-Vanuatu clients are mostly low income earners with salaries ranging from 25,000 vatu per month to 60,000 vatu per month. They went on to state that the above rate is still in use to-day and that it is the cheapest rate of land available in Port Vila (Refer Appendix 'G') - that is with the exception of the 71 Government houses and land sold that are the subject of this report.

6.13 If Mr Olsen had used NHC’s low income earner rate of 1,375 vatu per square metre the people of Vanuatu would have earned an additional 85,000,000 vatu from the Government houses’ sales. The total value of all the lands determined by Mr Olsen was 50 million vatu compared to a total value of 130 million vatu if NHC’s rate of 1,375 vatu per square metre was applied on the same lands. The difference of 85 million vatu represents a major loss of revenue to the people of Vanuatu especially when there are not enough funds to even hire a women’s doctor (gynaecologist) in the whole country.

6.14 The real or true loss is much bigger. If the properties had been sold at market value, the total value of the land sold would have been around VT 202.000.000 instead of VT 50.000.000. This represents a real loss of VT 152.000.000 for the people of Vanuatu to allow these 71 'chosen' people to acquire properties. (Refer Appendix 'D').

6.15 It also means that if the new owners sold their land today or had sold their land at the time, they could have made a good and easy profit - maybe quadruple their capital right away after purchasing their property.

Mr Olsen freezes value of 8 pieces of land for eight special people at 1989 values

6.16 The Ombudsman’s Office learnt that in 1993 Mr Olsen increased the 1989 values of all the lands to be purchased with Government houses with the exception of 8 properties. For these eight properties he decided to maintain the 1989 values in 1993 for the following purchasers of Government houses. The properties were purchased by the persons set out in the table below. The table also shows the 1989 and 1993 values.

(The private valuation figures were obtained from an experienced real estate agent and valuer and set out at 1993)

6.17 Mr Olsen’s explanation to the Ombudsman’s Office for not increasing the land values to 1993 rates was because the COM never requested him to increase them. (Refer Appendix 'F').

6.18 A private Real Estate Agent advised that in its opinion the estimated market rate for the land title 11/OE24/024 purchased by Mr Willie Jimmy was 2,500VT/m2. Mr Olsen however, used a rate of 300VT/m2. Mr Jimmy’s land has an area of 1,350 square metres. Therefore the following comparison can be made:

6.19 On this basis Mr Jimmy can be seen to have benefited personally in the amount of almost 2.9 million vatu. This is as a result of a decision he took with other Ministers acting in his public capacity. Using his position as a Minister (a public servant) he created a bargain for himself in his private capacity.

6.20 Interestingly, we found that Mr Jimmy’s property was the very same one that Mr Olsen had been living in before its sale. Mr Olsen himself wanted to buy the property. This may explain why it was so grossly undervalued by himself. Mr Olsen obviously wanted to pay the lowest price possible so valued the land very low.

6.21 Unfortunately for Mr Olsen he was unsuccessful in benefiting from his misconduct. This was because someone higher in the hierarchy, Mr Willy Jimmy, then Finance Minister, noticed this property at a bargain price and took it away from Mr Olsen.

6.22 The Ombudsman’s Office investigation revealed that Mr Olsen reduced Mrs Kalsakau’s value of the property (land and house) from 14.4 million vatu to 9.9 million vatu. The value of the land was reduced from 1.1 million vatu to 795,000 vatu while the value of the building was reduced from 13.3 million vatu to 9.1 million vatu.

6.23 This was done due to Mrs Kalsakau’s complaint that the original value (14.4 million vatu) was too high. Mrs Kalsakau was then Prime Minister Korman’s Second Secretary. This was confirmed by Messrs Olsen and Tary in their interviews with the Ombudsman. (Refer Appendix 'E', 'E1'). As a result Mrs Kalsakau did not need to take all of the housing loan originally granted to her of VT 16.045.711 by the VNPF as reported at paragraph 9.47 of this Office’s VNPF Report of 17 December 1997.

6.24 The NHC confirmed that the area of the lands under their responsibility which are sold to ni-Vanuatu low income earners range from 260 square metres to 740 square metres. There is nothing less or more than the above areas. They apply the rate of 1,375 vatu per square metre which is shown on the table of values provided in this report. Most of the government lands sold with houses have areas over 1,000 square metres and were valued at very low prices by Mr Olsen, much lower than the NHC values and private valuers’ valuation for the lands as mentioned earlier.

6.25 The buyers of all lands with areas of 1,000 square metres and over are shown on the table below comparing the Government values with the private valuers’ values. This is to show a total amount of loss to the people of Vanuatu due to Mr Olsen’s unrealistic valuations.

Name of Lessee	Land title	Land Area	Government price	Private valuers value
Thompson Kawai (PA) UMP Charlot Salwai (PA) UMP Alfred Carlot (PA) UMP Gerald Teilemb (PA) UMP Leichichi Ruru (PA) UMP Anderson Garae (PA) UMP Amos Bangabiti (M) UMP Jack Kallon (PA) UMP Julian Ala Anna Bihu (PA) UMP Selwyn Aru Henri Taga (PA) UMP Gilbert Mermer (PA) UMP Adrian Malere (PA) UMP Antoine Pikioune (PA) UMP Aime Malere (PA) UMP Charlie Pakoa (PA) UMP Fred Timakata Willie Jimmy (M) UMP Thomas Brothy (M) UMP Ben Beru (PA) UMP Francis Felomaki (PA) UMP Daniel Ishmael Alfred Masing (SP) UMP Romain Batick (M) UMP Roslyne Tor Tensley Lulu Fabien Malep (PA) UMP Emile Waniel (PA) UMP M. Yakeula Tom Bakeo Reuben Tamata Edwin Arthur Edward Tambisari (M) PDP Emile Olsen Paul Telukluk (M) UMP Henry Crowby Sethy Regenvanu (M) PDP Maria Kalsakau (PA) UMP Irene Bongnaim (PA) UMP John Markal Luke Dini Carlot Korman (PM) UMP Andre Lesines (PA) UMP Emmanuel Signo Joel Kaltamat Tom Nalau Charlie Nako (M) UMP Theodore Solong (PA) UMP John L. Solomon (MP) UMP Yvette Sam (PA) UMP Morsen Tangarasi (PA) UMP Nicholson Worek(PA) UMP John Miller (PA) UMP Tiro Vanua (PA) PDP Kaltau Aiong (PA) UMP	11/OE24/025 11/OE33/020 11/OD33/021 11/OD33/022 11/OD33/023 11/OD33/024 11/OD33/025 11/OD33/026 11/OD33/027 11/OD33/029 11/OD33/028 11/OD33/030 11/OD33/031 11/OD33/032 11/OD33/033 11/OD33/034 11/OE31/043 11/OE23/028 11/OE23/030 11/OE24/024 11/OD33/042 11/OC31/035 11/OC31/036 11/OC31/044 11/OD33/036 11/OD33/037 11/OD33/038 11/OD33/039 11/OD33/040 11/OD33/041 11/OD33/045 11/OD33/046 11/OD33/047 11/OD33/048 11/OF24/020 11/OB24/023 11/OB24/050 11/OB33/027 11/OB31/069 11/OB33/033 11/OD22/066 11/OD22/067 11/OE21/021 11/OE23/029 11/OE24/035 11/OE21/017 11/OE21/019 11/OE21/022 11/OE22/019 11/OE22/022 11/OE22/025 11/OE22/026 11/OE22/027 11/OE22/028 11/OE22/029 11/OE24/032 11/OE24/033	1095 1676 1667 1588 1689 1553 1439 1518 1439 1949 1786 1659 1835 1676 1514 1605 1170 1229 2008 1350 2280 1519 1519 1519 1246 1159 1150 1027 1188 1240 1235 1377 1562 1949 1699 2068 1225 1682 1800 1325 1223 1629 2370 1565 2500 1282 1660 2738 1137 1081 1034 1281 1052 1201 1200 1011 1011	547,500 905,040 900,180 857,520 912,060 838,620 777,060 819,720 1,157,760 1,052,460 964,440 895,860 990,900 905,040 908,400 963,000 229,250 553,050 1,004,000 405,000 1,231,200 820,260 820,260 820,260 672,840 625,860 621,000 554,580 641,520 669,600 666,900 743,580 843,480 1,169,400 1,019,400 982,300 1,041,250 841,000 1,800,000 795,000 733,800 977,400 948,000 1,282,500 2,025,000 346,140 830,000 547,600 306,990 291,870 279,180 345,870 284,040 324,270 324,000 606,600 606,600	2,737,500 3,352,000 3,334,000 3,176,000 3,378,000 3,106,000 2,878,000 3,036,000 2,878,000 3,898,000 3,572,000 3,318,000 3,670,000 3,352,000 3,028,000 3,210,000 1,170,000 3,072,500 5,020,000 3,375,000 4,560,000 3,038,000 3,038,000 3,038,000 2,492,000 2,318,000 2,300,000 2,054,000 2,376,000 2,480,000 2,470,000 2,754,000 3,124,000 3,898,000 3,737,800 5,171.000 3,062,500 4,205,000 7,200,000 5,035,000 3,669,000 4,887,000 7,110,000 7,695,000 6,250,000 1,282,000 1,660,000 2,738,000 1,137,000 1,081,000 1,034,000 1,281,000 1,052,000 1,201,000 1,200,000 2,527,500 2,527,500

6.24 Mr Olsen breached his duties by undervaluing a lot of Government properties. He gave special treatment to please the politicians by further decreasing the already undervalued prices. The land values as determined by Mr Olsen are unrealistic, much cheaper than what is offered in the NHC’s low cost housing Scheme and far below the real market values.

6.25 Mr Tary confirmed also that there was no committee set up to be responsible for the sale, instead Mr Kallon (the third secretary to Prime Minister Korman in the Prime Minister’s Office) was doing everything. Mr Tary explained that there should have been a Tender Board appointed to handle the sales. This is what is required by FR 313 (set out at 5.6 above). He also agreed that the values were not fairly done and not reasonable and that a qualified person should have been employed in the Valuation Section.

6.26 The Director of Lands, Mr Roger Tary, stated in his interview with the Ombudsman that the only procedure followed to sell the houses was that approved by the COM. That was for the houses to be sold to the President of the Republic of Vanuatu, Speaker of Parliament, Prime Minister, Ministers, Political Secretaries and other Public Servants. This is consistent with the two lists of people prepared by the COM who were approved cheap and preferential loans by the VNPF as reported in this Office’s VNPF Report of 17 December 1997. Set out below are the relevant paragraphs from the VNPF report:

8.24 At some unknown date earlier, a list of 13 names including all 11 Ministers and the then Speaker (Hon Alfred Masseng (UMP)) was submitted to VNPF. This was for the purchase of Government properties. On 18.03.94 the list of all Ministers and the former President was approved by the Board. They were then granted loans. (Appendix I)

8.25 From interviews conducted by the Ombudsman, it is evident that Ministers of the Government and political appointees did not apply to VNPF as other members had done. After the Board had approved the list, the Board then requested the management to send out application forms to all the politicians in the approved list. The forms were completed and submitted to the management for safe keeping. This is confirmed by the fact that some of these applicants applied after the Board had already approved the amounts of their loans (Appendix J).

8.26 On 10.06.94 sixteen (16) political appointees on a list of eighteen (18) were approved by the Board and were granted loans. The same procedure was followed for other politicians; i.e. no loan application was made by the leaders . Their loans were approved from a list and then application forms were sent out to those in the approved list. After the forms were completed, they were then sent back to the management for safe keeping. (Appendix K). The existence of the two lists was separately confirmed by current VNPF General Manager Mrs Aietonga Aiong and VNPF Housing Supervisor Menzies Samuel. When the Ombudsman’s Office requested copies of these two lists they could no longer be found.

6.27 In her interview with the Ombudsman Mrs Marguerite Yakeula stated that she was interested in the house she was occupying (house No. 142). As she did not get any response to her first application, she submitted it direct to the Prime Minister’s Office.

6.28 Mrs Yakeula then learnt that that the house was already allocated to Mr Alfred Massing who was then the Speaker of Parliament. The Prime Minister’s Office decided as to which house should be allocated to Mrs Yakeula although she did not apply for the house she was allocated. The Prime Minister’s Office simply crossed out house number 142 and replaced it with 225 representing the number of the house the Prime Minister’s Office had allocated to her.

6.29 The Ombudsman contacted the heads of Government Departments who did not purchase a Government house to get their opinions on the sale of the Government houses. The 10 heads of Departments, who were contacted, all stated that they were never informed officially about the sale. They were all of the opinion that the sale and allocation of the houses was done behind locked doors and that the Prime Minister’s Office decided as to who should get a house and who should not.

6.30 They all said that they too were interested in buying a Government house but they were never informed and no offer was made to them. Some of them were surprised to learn that the houses they were occupying and were interested to purchase were already allocated to politicians. The Departmental Heads said that the allocation of houses to a few heads of Departments and to some ordinary civil servants remains a mystery to them. They believe that the allocation of the houses to the below civil servants was politically based.

They never made any written application for acquiring the houses they are currently occupying. This was confirmed by the Director of Lands Survey Department,
Mr Edwin Arthur, on 29.07.97 when he was contacted by the Office of the Ombudsman on this matter and in his interview with the Ombudsman.

*Refer to section 7 of this report for clarification from Mr Tom Bakeo regarding his name being mentioned in this part of the report. Mr Tom Bakeo stated that there was no political decision made to allocate the house to him. He had previously during the Vanu’aku Party Government applied for the house and that he has spent a lot of money to maintain it. He thought it was fair that he should be given the opportunity to purchase the house.

6.32 Although Mr Andre Lesines did not respond to our preliminary report it was revealed that the land allocated to him has no house on and the land remains Government asset as no payment has been made by him. This was confirmed by the Department of Lands.

6.33 Some of the Heads of Departments and Senior Officers submitted their applications but never received any response. They only learnt later that the houses they applied for had been allocated to politicians. For instance the occupant of the Government house on land title 11/OB31/069 who is a Director of a Government Department submitted his application for the house but received no response. It was only revealed to him later on that the house was allocated the then Deputy Prime Minister, Mr Sethy Regenvanu.

6.34 A Senior Officer in the Department of Local Government lodged an application for the house on land title 11/OD33/029 and received no response. He was only made aware after the sale that the house has been allocated to another person. Another head of Department who has been serving the Government for 16 years submitted several applications for the house he was and is still occupying and received no reply. (Refer Appendix 'K').

6.35 The following people were allocated Government houses but as no payments were made the properties have remained Government assets:

Refer to section 7 of this report for replies from people whose name are mentioned in this section and the appendix section numbered 1 to 18.

6.36 Only Mr Tensley Lulu is occupying the house and paying rent to the Government.

6.37 Mr Irene Bongnaim has just moved into the house in October 1997. He made arrangements with the Housing Officer Mr John Markal for the rent to be deducted from his salary to the Government. Although Mr Markal confirmed this, he failed and was slack to follow up with the Finance Department to ensure the above deduction was done.

6.38 This purchaser, Mr Tom Nalau only paid 100,000 vatu as part payment of the total price of the house allocated to him:

6.39 Tom Nalau is still working for the Public Service. The payment was made in 1996 and it was the only payment made for the house. Mr Nalau is occupying the house. He still owes the Government an amount of 2 million vatu. Nothing has been done by the Department of Lands to recover the debt. This is a loss of 2 million vatu to the people of Vanuatu. Refer to section 7 of the report for Mr Tom Nalau’s reply. Mr Nalau did not purchase the property and sent us proof that he has been paying rent to the Government.

House and land occupied but not purchased (thus not paid for) -Messrs Bongnaim and Lesines

6.40 The following two people although they have not purchased the Government houses allocated to them Mr Bongnaim has not been paying rent on the property he is occupying.

6.41 Mr Bongnaim[2] was allowed to pay no rent since he occupied the house in October 1997 because of the slackness of the Housing Officer, Mr John Markal and of the Head of Land Records, Mr Tamata. Till today’s date Mr Markal says he has received no answer from Mr Tamata.

Mr Lesines was allocated the above property, he has not paid for the property, (land only) and the property should be regarded as a Government asset. Mr Lesines did not reply to the preliminary report.

Persons borrowing money from VNPF or NBV for land and house purchase but no records showing receipt of money by Finance Department on behalf of Vanuatu Government

6.42 The following people have obtained funds from different financial institutions to purchase the Government houses allocated to them which they now own and occupy. However, there is no record information available at the Department of Finance to show that the money borrowed was ever handed over to the Finance Department houses have been paid.

6.43 It appears that these houses have never been paid for. The Vanuatu Government have never received the money lent. It appears that these people have borrowed money from their NBV and VNPF and used the funds for other purposes.

Refer to section 7 of the report for the replies of those who are mentioned in this section.

Mr Pikioune Antoine and Mr Alfred Maliu did not answer our preliminary report and the allegations that the VNPF monies had not reached the Government of Vanuatu. we therefore have to assume that our record of facts is correct

We obtained confirmation from the Finance Department and the Lands Department that even though allegedly Mr Tary obtained a loan at NBV, he never paid his loan and managed to get the property fully transferred and registered in his name.

The others Mr Felomaki and Crowby answered us and insisted that they have been repaying their VNPF loans when they have employment and that the money was originally directly transferred from the VNPF to the Vanuatu Government.

Even though he was responsible for the payment, Mr Mangawai Michael was unable to confirm whether Mr Felomaki and Mr Crowby paid or not or whether their cheques got lost but their names did not appear on the list given to us by the Department of Finance. We have tried to get the Department of Finance to check again, but they cannot find trace of the payments. The Department of Finance is unable to trace back information.

Responsibility for record keeping of sale of Government houses - Michael Mangawai, Principal Lands Officer

6.44 It was revealed that the Principal Lands Officer Mr Michael Mangawai ('Mr Mangawai') from the Urban Section of the Department of Lands was responsible for all matters regarding the sale of the government houses. This included the issuing of invoices to those who have not paid for the houses and are in occupation.

6.45 Additionally, all files for leases of government houses are kept separate from the Department of Lands’ filing cabinets. They were and are kept in Mr Mangawai’s office where other officers including the accountants do not have access to. Therefore, it was the sole responsibility of Mr Mangawai to make sure that all debts for sale of government houses were collected.

6.46 This was confirmed by Mr David Schupp from Finance Department who also added that Mr Mangawai had several meetings with Finance Department to discuss the outstanding payments for the sale of government houses. The Ombudsman’s Office was also informed that although the Finance Department reminded the Lands Department and Mr Mangawai to take steps to obtain the monies owed on these sales, Nothing at all was done!

6.48 In his interview with the Ombudsman Mr Mangawai stated that the responsibility in recovering all debts on sale of government houses is a collective one. Besides him, he stated that two Financial Officers of the Department namely, Mrs Mary Tensley and Mr Thomas Malvanu are also responsible in issuing invoices to debtors. This was denied by the two officers. They stated that the recovering of the outstanding payments for the houses is the responsibility of Mr Mangawai and that they are only responsible for land rents and land premiums for other Government lands.

(Refer to section 8 of this report for the two Financial Officers’ comments as a response to the allegation made by Mr Mangawai in this section of the report.)

6.49 Mr Mangawai, Mr Malvanu and Mrs Tensley when asked whether they applied the appropriate sections of the Financial Regulations to recover the debts, they responded to say that they were not aware of the contents of the Financial Regulations and do not have access to one at the Department of Lands. This is a very poor excuse. If they did not have a set of the Financial Regulations they should have obtained a set or even photocopied a set from another department. Pretending not to know the law is not recognised by the law to be an excuse, particularly for public servants dealing with the country’s assets.

6.50 Mr Mangawai stated that the reason for Finance Department not taking any legal proceedings against the debtors for government houses was because they had other priority cases to deal with. When the Ombudsman contacted the officer responsible at the Department of Finance, namely, Mr Wilson Iauma, he stated that there is no such thing as priority cases as they deal with any case as soon as they receive a report with all necessary documents.

6.51 Mr Iauma also said that the Department of Lands has never submitted any report on outstanding debtors to the Finance Department. Had there been a report submitted they would have started legal proceedings against the defaulters. He further stated that the Department of Finance deals with all Government Departments equally to help recover all outstanding payments as long as each responsible Department submits a report on the debts with relevant documents as evidence to base on.

6.52 When this was put to Mr Mangawai he said that he had about two meetings with the Director of Finance Mr Jeffrey Wilfred in 1996/97. At these meetings he alleged that they discussed the legal proceedings against the debtors. Mr Mangawai admitted that he never submitted any written report to the Department of Finance before or after their discussions on the debts.

7.1 I received replies from former Ministers namely Messrs Willie Jimmy, Charlie Nako and Maxime Carlot Korman. Their replies are listed as appendices to this report. I now turn to summarise the main points of each reply and comment on those points.

(a) The Ombudsman should not continue to request for information under the Ombudsman Act No.14 of 1995 as it has been repealed by Parliament. If there is no Court ruling as yet, the Parliamentary decision remains valid, therefore the bill has no effect at this point in time.

7.2 Mr Jimmy is incorrect. The repealed Act does not come into force until the President signs it. The Repeal Bill has not been signed and the President has referred it to the Supreme Court because he considers it unconstitutional. Only if it is held by the Court to be unconstitutional then will it be repealed. Until then it remains law. The Attorney General or any lawyer can confirm these basic facts for Mr Jimmy if he should choose to take legal advice.

(b) The Ombudsman Marie Noëlle Ferrieux Patterson had some interest in the Sale of Government properties because of her interest in the Island Property Real Estate Agent in Port Vila managed by her husband on their behalf.

7.3 The Ombudsman does not have any interests in the properties or in Island Property Real Estate. A basic search of the Companies Office records will confirm that for
Mr Jimmy. Mr Jimmy knows this and raises this regularly, presumably for the purpose of discrediting the Ombudsman and deflecting attention from his own conduct. His comment is made just to create confusion. Furthermore no real estate company was involved in any of these 71 sales as the Prime Minister’s Office made sure that it was a very closed deal and opening these sales to the private agents would have defeated their plans of doing 'secret deals’ among themselves.

(c) I do hope that the various reports produced at this crucial time which aimed to topple UMP leaders in the coming general election due 6th March achieved its goal and fulfil your wishful thinking and those associated with the Ombudsman’s Office in doing so.

7.4 Mr Jimmy is avoiding to answer the allegations made against him. Presumably this is because Mr Jimmy cannot dispute the facts stated in the report. As far as it may be relevant the number of reports on Mr Jimmy and his colleagues are simply a reflection of a persistent refusal to follow the law and Constitution. If Mr Jimmy feels he is being picked on in bad faith he should take the Ombudsman to Court.

7.4 'Mi olsem wan Minister mo Member blong Kaonsil blong Minister long tataem mi bin approvum dicision blong salem ol kapman haus long tataem.'

7.5 The Council of Ministers can only make decisions in accordance with article 39 of the Constitution. They cannot act above and beyond the laws of Vanuatu. The decision to sell these government houses was not in accordance with a law or the Constitution and this contradicts article 39 of the Constitution. The decision was therefore illegal. Mr Nako fails to understand this very basic and most fundamental point - the Executive are under the law.

(a) The Government which is the houses owner, has decided to sell the houses. So it is a legal sale carried out by the elected Government, official Representative of the people of the Republic.

7.6 It is true that the houses were owned by the Government but the Government must dispose of them following a law of Vanuatu. There are laws and regulations available in the country to safeguard the disposal of Government assets. The Government is still bound by these laws and regulations. Mr Korman however by his comment mixes the Government with himself. It appears that he sees the two as one and the same.

7.7 Mr Korman cannot justify the legal basis of the sale. In other words, he failed to mention the laws that the Council of Ministers based on to decide on the Sale of the Government houses or what law the Office of the Prime Minister complied with to sell the houses. Any elected government is still bound by the laws of this country. Mr Korman is aware that the Attorney General considered the decision of the Council of Ministers to sell the houses unlawful (see 6.4 and 6.5 above).

(b) I have already given the reasons as to why the houses were being sold to the Government leaders.

Whatever reasons Mr Korman provided, it is important for him to know that the decision to allocate the houses to Government leaders was:

(c) The state of the houses was very poor. The value of the houses had been inspected by the Government Evaluation agency, the only person who has the legal ability to officially carry out such a task.

7.8 I agree that the houses were very old. The lands were not old and were valuable.
Mr Olsen grossly undervalued the land. The Government should have collected a reasonable revenue if the lands have been reasonably valued by the so called Government Valuer. The job was for the Government Survey Board under FR 313 (refer 5.6 above).

(d) The reasons as to why the value of the houses has been reduced or increased were determined according to the Government Evaluation Agency’s skills.

7.9 This statement is nonsense. The Government Valuer, Mr Olsen has no valuation qualifications. His gross undervaluation of the land as explained above shows this. His only role was as a pawn of the political elite. If he was a qualified professional and politically independent he would have used market values on the land sold. That is self evident.

(e) This is an internal, technical and governmental point that I think does not fall within the jurisdiction of your office.

7.10 Mr Korman is incorrect. Had he obtained legal advice from the Attorney General he would have been advised that article 62 of the Constitution states that the Ombudsman may enquire into the conduct of all public servants, public authorities and ministerial departments as well as cases of leadership misconduct. This was confirmed in the Supreme Court’s decision in the Air Vanuatu case. The Government did not appeal this decision so the Government must be taken to accept it.

7.11 The Ombudsman Act No.14 of 1995 in addition provides that the Ombudsman may also enquire into the conduct of any State Service, member of any State Service or any Government Body. The Act under section 14(1)(d) also provides for the Ombudsman to enquire in alleged breaches of the Leadership Code.

7.12 Accordingly, the decision of the Council of Ministers to sell the government houses, the allocation of the houses by the Office of the Prime Minister to the purchasers and the administration of their sale fall within the jurisdiction of the Office of the Ombudsman.

(f) In contradiction with your report, the Prime Minister’s Office has never sold any houses. The houses were sold by the Government of the Republic of Vanuatu.

7.13 The recommendation made in Mr Korman’s paper tabled at the Council of Minister’s meeting stated that the Council of Ministers request the Prime Minister to proceed with the SALE of Government houses according to the rules defined during their meeting. It is believed that the Prime Minister’s Office complied with this recommendation to allocate the houses to those chosen to purchase them. The fact that those on the list for loans from VNPF got them and ended with the best houses confirms that the Prime Minister’s will as leader of the COM was made a reality.

7.14 The following political appointees who received our preliminary report also submitted their replies.

7.16 Mr Irene Bongnaim also replied that he has completed all other fees regarding his lease for the land. This was confirmed by all relevant documents showing that the fees have been paid. (Refer Appendices 1 to 18).

7.17 Mr Bongnaim also stated that he has made some payments for the house. His political gratuity of VT 251,564 also confirmed it by showing his receipts of payment. The Department of Lands also confirmed receipt of payment. (Refer Appendices 1 to 18).

(a) It is very dangerous to assume that market principles apply in every sector in Vanuatu.

7.18 Perhaps this is true. The assumption is not one that has simply been made in respect to the sale of Government houses. The Ombudsman considers that on objective analysis the land was grossly undervalued. At the end of the day this is the national wealth or property of the people of Vanuatu.

7.19 Mr Ala will be familiar with article 7 of the Constitution which sets forth fundamental duties of all citizens. Article 7(1)(d) states that it is the fundamental duty of every ni Vanuatu citizen:

(b) If the Ombudsman suggests that the Government and the people of Vanuatu will incur loss for selling the government houses under market value, how does that suggestion reconcile with the argument that for the last ten to twelve years some of the civil servants mentioned in this report have made a lot of contributions to the welfare of the people of Vanuatu but were being paid under market rates.

7.20 Mr Ala is saying that because some civil servants have contributed to the welfare of this country they should be given special treatment. Those civil servants receive salaries from the Government. If they feel that they have been paid under the market rate they have all the right to seek employment else where there is higher pay

7.21 If certain civil servants are given that special treatment and forgetting the rest of the population it would go against the principle of equal treatment under the law and administrative action provided in article 5(1)(k) of the Constitution. The only basis under the Constitution for discriminating in favour of certain groups also appears in the end of article 5(1)(k) where it says:

7.22 Mr Ala is not female, a child, a member of an under privileged group nor does he live in an under developed area. Therefore it would be unconstitutional for him to receive special treatment as a public servant. The National Housing Corporation provides cheap basic housing for poorly paid ni Vanuatu. This type of program is what the exception to article 5(1)(k) is expecting or providing for.

7.23 The Ombudsman’s Office was surprised at the points raised in Mr Ala’s reply given his previous tenure of the post of Solicitor General.

7.24 Principal Lands Officer responsible for Sale of Government Houses said that he:

(b) blamed the Finance Department for failing to inform his Department about the Financial Regulations.

7.25 The Ombudsman comments to the points of Mr Mangawai are answered all together with those of his co-workers Mrs Tensley and Mr Malvanu after all three replies are set out.

(a) She did not remember seeing a copy of the Financial Regulations in the Department of Lands.

(b) The Sale of Government houses was allocated to Mr Mangawai. He never instructed us to issue invoices or do other matters regarding the same. The file for the Sale of Government houses are kept (separate) in his office and none of us have access to the files.

(c) I am directly responsible for land rents and land premiums for other Government lands but not the Sale of Government houses. I would have accepted if I had been accused of breaching the Financial Regulations in regard to land rents and land premiums for other Government lands.

(a) Sale of Government houses is under the responsibility of Mr Mangawai. It was allocated to him and he keeps all the files in his office which we do not have access to.

(b) There was no instructions given to us to handle the matter in issuing invoices. We are only responsible for land rents and land premiums for other Government lands but not the Sale of Government houses.

(c) Since I commenced my employment with the Department of Lands I have not seen a copy of the Financial Regulations in the Department of Lands.

(1) All public officers should be familiar with the contents of the Financial Regulations which cover the performance of their duties.

(2) Ignorance of the content of the Financial Regulations cannot be accepted as an excuse.

7.30 Mr Mangawai admitted over the phone that the Sale of Government houses was allocated to him. This was also confirmed by the Department of Finance that
Mr Mangawai is directly responsible for the Sale of Government houses.

7.31 Mr Mangawai was previously the Acting Director for the Department of Lands (Urban Section) in 1996. He is currently the Principal Lands Officer. Mr Mangawai has been in the Department for about 8 years and is now responsible for collection of public moneys.

7.32 It is absolutely unbelievable to note that Mr Mangawai, being the former Acting Director of Lands Department (Urban), currently the Principal Lands Officer (Urban), who has been in the Department for about 8 years and who is now responsible for collection of public moneys, does not even know or is not aware that there are Government Financial Regulations put in place since July 1993. He is now trying to put the blame on his junior officers when it is clear now that he is almost totally responsible for the failure to collect the debts of his department.

7.33 He should have made sure that those junior officers under him had access to the relevant laws and regulations governing their duties. Although he had several meetings with the officers of the Finance Department regarding the outstanding land payments and land rents he failed to enquire about the Financial Regulations or getting a copy for his department.

7.34 The following former and current Public Servants who were allocated Government houses also submitted their replies. Copies of some of the replies are listed as appendices to this report.

(a) There should have been a proper and legal procedure adopted for the Sale of Government houses.

(b) Allocation of the houses was done following an application submitted not knowing what the consequences would be.

(c) House allocated to me but I did not move into it as I have not made any payment. As such the property remains State asset.

(d) The houses whether properly or improperly sold they have been grossly undervalued and it would be best for the State that rectification orders are sought from the Court regarding the matter.

7.36 Indeed, the Sale of Government houses did not have any legal basis. The decision of the Council of Ministers to sell the houses contradicted articles 39 and 66 of the Constitution. The people of Vanuatu have been deprived of the benefit from the Sales values because the houses were grossly undervalued.

7.37 Mr Tom Nalau however after receiving our preliminary report he came back to say that as he is still working in the Public Service his salary is deducted every pay day as rent to the Government. This was confirmed by a copy of his pay slip attached as appendices to this report 1 to 17. Mr Nalau did not purchase the Government house even though he paid Vt100.000 and he provided evidence to the Ombudsman that he pays monthly rent to the Government.

Finding No. 1: Decision No.206 of the Executive (Council of Ministers) for the sale of Government houses was unlawful and thus contrary to article 39(1)

8.1 The Council of Ministers’ decision to sell Government houses was illegal. It was illegal as it was contrary to the existing laws.

8.2 Article 39(1) of the Constitution requires that the executive power vested in the Council of Ministers has to be exercised in accordance with the Constitution or a law. No law exists in Vanuatu allowing the COM to allocate houses to themselves and others chosen by them.

8.3 In my opinion, Decision No.206 of 02.12.93 is therefore null and void. The sale of the houses made pursuant to this decision is also null and void. Without a law allowing for the sale of the houses it was illegal. The Council of Ministers cannot act outside and above the law. This was the Attorney General’s advice to the Director of Public Service Department and copied to the Minister of Lands Mr Paul Tulukluk on 23.08.95 (Appendix I) when asked to look at the legality.

to approve the sale of the houses to themselves where there was a conflict of interest: Section 66.1(a) and 2 of the Constitution.

8.4 The conduct of Prime Minister Korman and his cabinet was not only unlawful, it was also in gross breach of the Leadership Code as they decided to approve that some of the houses be sold to themselves.

8.5 There was a clear conflict of interest. Without doubt the cabinet Ministers have used their public positions and offices for their own personal gain. By breaching the laws they have also demeaned their positions and office.

8.6 Approving the sale of government houses at grossly undervalued land prices to themselves, their political Secretaries and the supporters and sympathisers of the political parties in Government suggests that they have no integrity. Their behaviour and conduct will have diminished respect and confidence in the Government. It is difficult not to consider their use of their Ministerial powers as anything other than corrupt.

Finding No. 3: COM decision No.206 was discriminatory and contrary to articles 5(1)(k) and 7(1)(d) of the Constitution

8.7 The Executive approved that the houses were to be sold to only certain groups of people (refer 6.1). Many occupants of the houses then were never given any chances to purchase the houses although they were also interested to purchase them. Some even applied but their applications were unsuccessful. Other people in the community would have been unaware that the 50 properties were for sale.

8.8 The above decision was discriminatory as it was made mainly on the grounds of political opinions. The politicians did not belong to the category of underprivileged groups as mentioned in the Constitution (article 5).

8.9 In addition, the decision was contrary to article 7(1)(d) which provides that every person in Vanuatu has the duty to preserve and look after the national wealth. Selling these properties at a gross undervalue was the opposite of what article 7(1)(d) (refer paragraph 7.10 above).

Finding No. 4: Maladministration; failure by COM to obtain legal advice from Attorney General before deciding on the sale of the Government houses.

8.7 The COM failed to obtain legal advice from the Government lawyer, the Attorney General on the sale of the houses. The Attorney General is one of the two Chief Legal Officers of the Republic of Vanuatu. He is experienced and expert in the laws of Vanuatu.

8.8 By failing to obtain legal advice from the Attorney General the COM ended up acting contrary to article 39(1) of the Constitution and other relevant laws. In my opinion responsible leaders should seek legal advice from their lawyer the Attorney General and follow it. He was only asked to give legal advice after the COM had already made the decision and most of the properties have been already transferred (Refer paragraphs 6.3 to 6.5 above and Appendices 'H' and 'I').

Finding No. 5: Maladministration, negligence and breach of the Leadership Code by Mr Telukluk, former Minister of Lands and Mr Tary, former Director of Lands

8.9 Mr Telukluk contacted the Attorney General later in the process to enquire into the defects in the policy for the sale of the houses. He was clearly informed of all the implications of their wrongdoings including that the sale could be challenged in Court.

8.10 Mr Telukluk took no steps at all to follow the proper legal course and undo the unlawful decision. It appears he wanted to pursue the wrong road for his own benefit and for the benefit of the COM.

8.11 He also signed consents to transfers to lease and allowed them even though they were not paid allowing these buyers to improperly obtain the Government property (such as Roger Tary, and Alfred Maliu A. Pikioune) and did not ensure that they saw proof of the payments ( Francis Felomaki, Henry Crowby).

Finding No. 6: Breach of the Leadership Code by Mr Roger Tary, former Director of Lands, misappropriation and assisting other misappropriation of 2 Government Houses

8.12 Mr Tary also may have contributed to the misappropriation of at least 2 properties owned now by A. Pikioune, and Alfred Maliu, (refer 6.43 and 6.44 above). He allowed their transfers to be processed as if the properties had been paid when they had not been paid for.

He committed at least serious maladministration by not ensuring that some payments were registered at the Lands Department (none at the lands department could confirm whether payments were received for the properties in the name of Francis Felomaki and Henry Crowby)

8.13 I consider that he actually committed direct misappropriation when he processed his own transfer without paying. They all should be held liable for any monies the Government might have lost as these properties have been since mortgaged. (see paragraph 6.43).

Finding No. 7: Breach of FR 313, 314 and 316 by Mr Korman, former Prime Minister, Mr Kallon, 3rd secretary at Prime Minister, Mr Tary, Director of Lands, and Mr Mangawai, Lands Officer, and therefore further breach of the Leadership Code and maladministration

8.14 Mr Korman breached FR 313, 314 and 316 which provide the procedure of disposing a Government asset (refer paragraphs 5.6 to 5.8 above). In his paper which was tabled in the COM meeting, Mr Korman specifically stated how the houses were to be sold and who to be sold to. He breached the purpose and spirit of these important Government Regulations by allocating the houses to mostly the members of his cabinet and the supporters of the political parties in power. The others as mentioned above assisted him in these breaches.

8.15 There is no law in place in Vanuatu which empowers the Prime Minister to sell any Government asset. The action of Mr Korman to sell Government houses was illegal. He has mismanaged the properties of the people of Vanuatu by selling them at very low values to the members of his cabinet and the supporters of those political parties in Government. Mr Korman fell far below the standards that are required by leaders as set out in the Leadership Code. His integrity is totally put into question.

Finding No. 8: Mr Olsen failed as Head of Government Valuation Section to ensure that these Government assets were valued at reasonable market values.

8.16 Mr Olsen failed on his part to make sure that the Government lands and houses were valued at reasonable prices where the people would get more benefit from the sale. Valuing the houses at very low prices deprived the people of maximum benefit they would have derived from the reasonable prices of the properties (refer 5.4, Appendix 'D').

8.17 The Ombudsman’s Office found that the People of Vanuatu have lost a minimum of
VT 80.000.000 and perhaps as high as VT 148.000.000 (market value). Everyone is aware nowadays of the daily difficulties, the lack of services and it appears unfair to favour only politicians and their friends instead of the people.

Finding No. 9: Breach of Clause 9.7 of Vanuatu Public Service staff Manual by Messrs Arthur, Tamata, Olsen and Tary

8.18 Messrs Arthur, Tamata, Olsen and Tary breached the above section of the Public Service Staff Manual (refer paragraph 5.12 above). This was when they accepted the offer of a Government house each as a return for misusing their administrative powers regarding the sale of the houses. It appears that this was effectively a bribe from
Mr Korman to secure their cooperation in an unlawful and illegal program. They have used their positions and duties for their own personal gains (refer paragraph 1.9 and 6.31).

Finding No. 10: Breach of paragraph 9.15 of Vanuatu Public Service Staff Manual by Mr Olsen and acted corruptly

8.19 Mr Olsen’s conduct in doing the following has brought his office and the service into disrepute and also created a conflict of interest between his private interest and his public duty:

(a) undervalued the Government houses (200-800VT/m2) far below the National Housing Corporation rate of 1,375VT/m2 used for budget houses of small land areas for low income earners (refer paragraphs 6.10 to 6.15 above);

(b) maintained the 1989 land values in 1993 without any valid reasons for eight purchasers of Government houses of whom seven are the supporters of the UMP Party (refer paragraphs 6.16 to 6.17 above);

(c) reduced Mrs Kalsakau’s value of the property from 14.4 million vatu to 9.9 million vatu without justifying the reduction (refer Appendix 'D', and paragraphs 6.22 to 6.23); and

(d) Valued at cheap values the properties because he knew that if he facilitated the whole process, he would be one of the few chosen to have a house at a cheap price (refer paragraph 6.18 to 6.21).

8.20 The above facts taken together strongly point to the conclusion that Mr Olsen was corrupted and acted corruptly.

Finding No. 11: Breach of Leadership Code by Messrs Tary, Tamata and Arthur as they were acting for their own gain to acquire the houses

8.21 The conduct of these Government officers also appears to have been corrupt. They accepted Mr Korman’s offer of allocating each of them a house for carrying out with their duties which they are paid by the Government to do in breach of the law. There was a clear conflict of interest. The officers’ duties enabled them to gain personally by having a house offered to each of them. They are leaders under s.14(2)(g) of the Ombudsman Act. These officers have used their offices for personal gain.

8.22 It appears that Mr Tamata, Director of Lands Records has got powers and the duty under the Land Leases Act to ensure that the transactions are proper. Mr Tamata should have checked with the Attorney General Chambers. He knew there were problems and a very serious controversy. The fact that he benefited from the Scheme throws a very serious doubt on his integrity. Mr Tamata was asked by the housing officer to check the list of people who purchased these properties on 17.11.97. At the date of this report, no answer has been received, showing where his priorities were not.

Finding No. 12: Breach of FR 19 by Messrs Mangawai, Malvanu and Mrs Tensley - maladministration:

8.23 Messrs Mangawai, Malvanu and Mrs Tensley breached FR 19 (refer paragraph 5.2 above). They did not carry out their duties as accountable officers under the Financial Regulations. They failed to promptly collect all revenues due to the Government as well as failed to make monthly submissions to the Director General of Finance of all arrears of revenue (debts).

Finding No. 13: Breach of FR 67 by Messrs Mangawai, Malvanu and Mrs Tensley - maladministration

8.24 These three officers breached FR 67 (see paragraph 5.3 above). They failed to submit a full written report to the Director General of Finance when they realised that the normal recovery action taken had not been successful in recovering the debts on the sale of government houses.

Finding No. 14: Breach of FR 68 by Messrs Mangawai, Malvanu and Mrs Tensley - maladministration

8.25 The three (3) officers breached FR 68 (refer paragraph 5.4 above). They failed to submit a detailed report on the debts owing to the Attorney General through the Director General of Finance. This was despite the fact that they knew that there was (and still is) a reasonable possibility of recovering the debts through legal action.

Finding No. 15: Breach of FR 74 by Messrs Mangawai, Malvanu and Mrs Tensley - maladministration

8.26 They also breached FR 74 (refer paragraph 5.5 above). Some of the houses sold have not been purchased but are occupied. Others were allocated to the intended buyers but they were not purchased or occupied. No revenue in the form of the purchase prices have been received over six (6) months or alternatively. They also failed to submit a written report to the Director of Finance as required by FR 74. This is gross maladministration.

Finding No. 16: Breach of clause 9.15 of the Public Service Manual by Messrs Mangawai, Malvanu and Mrs Tensley

8.27 The officers breached the above section of the Public Service Staff Manual (refer paragraph 5.13 above). This is as a result of the previous findings in that they have acted:

(b) in a situation where their office and the service have been brought into disrepute; and

Finding No. 17: Unlawful conduct of Messrs Mangawai, Malvanu and Mrs Tensley that might have brought the public service into disrepute

8.28 The officers were found to have acted in contrary to the provisions of section 11(c) and (i) of the Public Service Act 9 refer paragraph 5.14 above). They were negligent, careless and incompetent in the discharge of their duties and were guilty of improper conduct by:

(a) failing to comply with the Financial Regulation as accountable officers to help recover all debts on the sale of the government houses;

(b) causing the Government to continue to lose revenues which should have been promptly collected to fund essential services for the benefit of the people of Vanuatu if they had complied with the Government Financial Regulations.

9.1 The Council of Minister’s decision to sell the Government houses had and has no legal basis. The Council of Ministers and others have unjustly benefited from the houses by purchasing them at very low prices through the Council of Ministers illegal decision. The people of Vanuatu have lost a lot of their revenue through this illegal and very cheap sale. The houses must be returned. Alternatively, the difference between the true value and what was actually paid must be paid to the Vanuatu Government.

9.2 It is worthwhile mentioning the following facts mentioned earlier in this report:

(a) Article 39 of the Constitution provides that the Council of Minister must make their decisions in accordance with a law or the Constitution. The Council of Ministers’ decision to sell the Government houses did not comply with the requirement of article 39 of the Constitution as there was no law allowing them to sell the houses themselves without following the Financial Regulations.

(b) The Council of Ministers did not seek legal advice from their lawyer the Attorney General before they decided on the Sale of the Government houses. Mr Ellum, the Attorney General advised (after the Sale had eventuated) that the decision by the Council of Ministers to sell to themselves and political secretaries without competitive tendering was not in accordance with the Constitution or a law and that the decision could be challenged and set aside by the Court.

9.3 Now that is has been discovered that the decision was illegal the houses which belong to the people of Vanuatu must be returned. I therefore recommend that Messrs Korman, Jimmy, Vohor, Telukluk, Bangabiti, Batick, Brothy, Nako, Regenvanu and Tambisari are jointly and individually responsible in their personal capacities for the return of the houses to the Government (acting on behalf of the people of Vanuatu) by end of May 1998 or alternatively the balance value.

9.4 Likewise I also recommend that those other political secretaries and civil servants allocated the houses are individually responsible to return the houses by end of May 1998 or the balance value.

9.5 In the absence of return of the houses within the time stated above (end of May 1998) I recommend that the Attorney General immediately take Court action to have the houses returned to their rightful owner, the Vanuatu Government (on behalf of the people of Vanuatu) or to seek restitution (compensation).

RECOMMENDATION NO. 2 MR MAXIME CARLOT KORMAN NOT BE CONSIDERED FOR MINISTERIAL POST IN ANY FUTURE GOVERNMENT OR PLACED IN ANY POSITION WHERE PUBLIC ASSETS ARE AT STAKE.

9.5 Mr Korman’s misconduct started the whole affair when he presented a paper for the Sale of the Government houses and who they should be sold to. Mr Korman was the Prime Minister at the time and the leader of the Council of Ministers. He failed to seek legal advice before he presented his paper. He directed the Council of Ministers to approve and follow his improper and illegal instruction to sell the houses and following this decision came the instruction to VNPF to lend money to the 'chosen' people.

9.6 Like others involved, Mr Korman’s misconduct was worse because the sale of the houses was done by the Office of the Prime Minister under Mr Korman. The Office of the Prime Minister decided who should get a house and who should not. The Office of the Prime Minister has no legal power to sell any Government asset. There is no law in place in Vanuatu which empowers the Prime Minister to sell any Government asset. I therefore recommend that Mr Korman should not be considered for a ministerial post again in any future governments or placed in any position where public assets are at stake.

RECOMMENDATION NO. 3 MR PAUL TELUKLUK NOT BE CONSIDERED FOR MINISTERIAL POST IN ANY FUTURE GOVERNMENT OR PLACED IN ANY POSITION WHERE PUBLIC ASSETS ARE AT STAKE.

9.7 Mr Telukluk allowed these transactions to be processed through the Lands Department. He later learnt that what had been done did not follow the law. Despite this knowledge he took no steps to remedy the situation.

9.8 Accordingly, his conduct is almost as bad as that of Mr Korman. He should have refused to go along with the unlawful sale process but did not. I therefore recommend that Mr Telukluk should not be considered for a ministerial post again in any future governments or placed in any position where public assets are at stake.

9.9 He also signed transfers without making sure that -payments had been made by the applicants like for his director Roger Tary’s property.

RECOMMENDATION NO. 4 MR JACK KALLON NOT TO BE CONSIDERED FOR THE POSITION OF POLITICAL SECRETARY IN FUTURE GOVERNMENT OR TO A POST OF PUBLIC RESPONSIBILITY

9.9 Being the Secretary at the Prime Minister’s Office and the main man responsible for the sale, he also contributed to the illegal sale of the peoples’ assets by carrying out the decision of the Council of Ministers. I recommend that Mr Kallon should never be considered for the position of political secretary in future government or to a post of public responsibility.

RECOMMENDATION NO. 5 MR TARY NOT TO BE ACCEPTED AS DIRECTOR OF ANY GOVERNMENT DEPARTMENTS OR GOVERNMENT STATUTORY BODY.

9.10 The illegal decision of the Council of Ministers was further implemented by Mr Tary, former Director of Lands when he allowed his Department to process the lease documents for the government houses sold, including his own lease. He could have contacted the Attorney General’s Chambers to check the legality of the Council of Ministers’ decision.

9.11 His misconduct was one of the worst in that although he obtained a loan from National Bank of Vanuatu to purchase the house and has registered his lease for the house, he has not made any payment for the house he is in occupation. I recommend that
Mr Tary is not to be accepted as Director of any Government Department or Government Statutory Body.

RECOMMENDATION NO. 6 MR MANGAWAI TO FACE A PUBLIC SERVICE DISCIPLINARY HEARING WITHIN 30 DAYS (and Lands Department to make all laws available to its staff)

9.12 Mr Mangawai is directly responsible for all matters regarding the Sale of Government houses including recovering outstanding payments. The most important thing that
Mr Mangawai failed to do when the Sale of the houses was allocated to him was to check with the Attorney General Chambers for the legality of the decision of the Council of Ministers or even the advice of the attorney general in the process of the sale.

9.13 Mr Mangawai instead processed all lease documents for the Minister’s approval and they were submitted to the Land Records Office for registration. He, like his former Director Mr Tary, chose to follow the illegal decision of the Council of Ministers. He also contributed to the bad management of the government houses sold (the houses belong to the people of Vanuatu).

9.14 Mr Mangawai lied to the Ombudsman when he mentioned in his interview that the recovering of debts on sale of government houses was also the responsibility of the two Financial Officers of the Department Mrs Tensley and Mr Malvanu. He tried to put the blame on his two Junior Officers when he realised that he would be implicated in the report since he is directly responsible for the sale of the houses.

9.15 Mr Mangawai being a Senior Officer in the Department should have made sure that those officers under him had access to appropriate laws and regulations covering their various duties. It is shameful for Mr Mangawai to have been in the Department for about 8 years and once the Acting Director of Lands (Urban Section) and still not to even know there are Government Financial Regulations available. He has proved himself to be incapable in the position of Principal Lands officer. I therefore recommend that he face Public Service Commission disciplinary hearing within 30 days.

9.16 I further recommend that the Department of Lands established an office space to keep all relevant laws where the officers could have access to help them in their duties.

RECOMMENDATION NO. 7 MR OLSEN TO BE SUSPENDED BY THE PUBLIC SERVICE COMMISSION AND FACE A PUBLIC SERVICE DISCIPLINARY HEARING WITHIN 30 DAYS

9.17 Mr Olsen is responsible in producing the values of all Government lands which are very cheap. The Government continues to lose a lot of revenue due to his cheap valuations. Mr Olsen just does not take any initiative to approach his superiors to discuss the matter so that a better policy or law is put in place to allow Government lands be sold at reasonable prices.

9.18 He used his office and position to acquire a government house offered by Mr Korman. He has brought his office and the service into disrepute and also created a conflict of interest between his private interest and his public duty.

9.19 Mr Olsen grossly undervalued all government houses. He increased the land values in 1993 for the houses but did not do the same for 8 others which were allocated to some of the strongest supporters of the UMP Party. He did not produce any valid reasons for the above. He has made the people of Vanuatu to loose their revenue. He has contributed to the mismanagement of the people’s assets.

9.20 He also reduced Mrs Maria Kalsakau’s value of the house and land from 14.4 million Vatu to 9.9 million vatu without any legal basis. He has deprived the people of Vanuatu of 4.5 million Vatu. He could not justify this reduction. His action was to please a then UMP Party supporter and political appointee (Mrs Kalsakau). Mr Olsen is also a UMP Party supporters. I recommend that Mr Olsen be suspended by the Public Service Commission and be brought before the Commission for disciplinary action within 30 days.

RECOMMENDATION NO. 8: LANDS DEPARTMENT TO RECRUIT AND TRAIN STAFF AS PROPER AND QUALIFIED VALUERS

9.21 To address the problem arising through lack of qualified or trained staff I recommend that:

(a) A qualified officer in Land Management with experience in Valuation be recruited by the Public Service Commission to head the Valuation Office.

(b) The other officers in the Valuation Office to take up Valuation courses overseas with the help of the Government.

RECOMMENDATION NO. 9: MR TAMATA BE SUSPENDED BY THE PUBLIC SERVICE COMMISSION AND FACE A PUBLIC SERVICE DISCIPLINARY HEARING WITHIN 30 DAYS

9.22 Like the other officers Mr Tamata accepted the offer of a government house as a return for carrying out his duties regarding the sale of the houses. He has used his position and duties for his own personal gain.

9.23 Before registering all government house leases Mr Tamata should have checked with the Attorney General whether the sale was in accordance with the laws of Vanuatu. It was and is still his duty to ensure that any document to be registered by his office has been processed following a legal decision. He has also contributed to the mismanagement of the peoples’ assets. I therefore recommend that Mr Tamata be suspended, and be disciplined by the Public Service Commission within 30 days.

RECOMMENDATION NO. 10 MR ARTHUR BE SUSPENDED BY THE PUBLIC SERVICE COMMISSION AND FACE A PUBLIC SERVICE DISCIPLINARY HEARING WITHIN 30 DAYS

9.24 Mr Arthur also accepted Mr Korman’s offer of a house as a return for his duties he carried out concerning the sale. It had the appearance of a bribe for him and his colleagues to have accepted the offer. Before carrying out any survey work on the houses Mr Arthur should have checked the decision of the Council of Ministers with the Attorney General whether it was legal. He also contributed to the mismanagement of the peoples’ assets by following the illegal decision of the Council of Ministers. I recommend that Mr Arthur be suspended and be disciplined by the Public Service Commission within 30 days.

RECOMMENDATION NO. 11 MRS TENSLEY AND MR MALVANU TO OBTAIN COPIES OF GOVERNMENT FINANCIAL REGULATIONS WHICH ARE FREE OF CHARGE AT THE DEPARTMENT OF FINANCE TO HELP THEM RECOVER ALL DEBTS FOR LAND RENTS AND LAND PREMIUMS FOR OTHER GOVERNMENT LANDS

RECOMMENDATION NO. 12 THE LANDS DEPARTMENT AND THE FINANCE DEPARTMENT TO CHECK ALL PAYMENTS AND TO ENSURE THAT ACTION IS TAKEN IF FULL PAYMENTS HAVE NOT BEEN RECEIVED TO RECOVER THE PROPERTIES

RECOMMENDATION NO. 13 THE HOUSING SECTION TO CHECK THAT ALL OUTSTANDING RENTS ARE PAID TO THE VANUATU GOVERNMENT BY THOSE WHO ARE OCCUPYING THE HOUSES BUT HAVE NOT ACQUIRED THEM.

RECOMMENDATION NO. 14 THE MEMBERS OF THE COUNCIL OF MINISTERS HAVE BREACHED SERIOUSLY THE LEADERSHIP CODE AND SHOULD NOT BE CHOSEN FOR HIGH POSITIONS OF RESPONSIBILITY

9.25 The Members of the Council of Ministers took an illegal decision when they voted to go ahead with the project of selling the government houses in accordance with a preselected list of buyers which included them. They added to the illegality of their a serious breach of leadership code showing a very strong conflict of interest. They made a decision at a national level which granted them a cheap house and they therefore benefited directly from the use of their official power.

9.26 They have shown themselves not to be trustworthy and they deserve contempt for the discrimination against the deserving poor in order to reward those who are already well provided for including themselves and their friends. They failed to fulfil their duty as leaders to recognise and give awards to those who deserve or need them most.

9.27 If they were to grant any favours, why didn’t they give or sell cheap house to underprivileged groups such as youths and unemployed groups, women organisations such as shelters from domestic violence, orphanages and shelters for people with no domicile etc...

RECOMMENDATION NO. 15 THE POLICE AND PUBLIC PROSECUTOR TO LOOK INTO MR TARY’S CASE (Former Director of Lands) WHO TRANSFERRED THE GOVERNMENT PROPERTY TO HIMSELF WITHOUT PAYING FOR IT AND ASSESS IF IT CAN BE CONSIDERED AS A CRIMINAL CASE

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'.

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

'A' - Mr Korman’s paper tabled at the COM’s meeting regarding the sale of the houses.

'A1' - Letter from the acting secretary to the COM to Mr Korman explaining the Council’s decision on the sale.

'A2' - Letter signed by several Directors of Government Departments to Mr Korman regarding the sale.

'A3' - A Senior Public Servant’s application to purchase a Government house (not considered).

'D' - Table of values of lands only as compared to the NHC’s values for the same lands.

'E' - VNPF letter to Mrs Kalsakau regarding her loan which shows clearly the reduction of the value of her property (land and building).

'E1' - Department of Lands’ note on modification of Mrs Kalsakau’s value of property.

'F' - Mr Olsen’s letter to the Ombudsman as to why he did not increase several land values in 1993.

'J' - Mrs Marguerite Yakeula’s application (second) to the Prime Minister’s Office for a house.

^[1] Mr Tamata alleged that he lost the opportunity to purchase the house he had occupied for about fourteen years. He said that he had spent his personal earnings to maintain the house. Mr Tamata says that he informed the Prime Minister’s Office of his interest to keep the house. Mr Korman instead allocated the house to the niece of his brother in law,
Mrs Marguerite Yakeula, who works at the Department of Postal Services.

^[2] Refer to section 7 of this report for Mr Bongnaim’s clarification of the payment he paid so far for the house and the appropriate fees as imposed by different Offices.

Lessee	Land Title	1989 value (VT)	1993 Value (VT)	Private Valuation

Thompson Kawai*	11/OE24/025	547.500	547.500	2.737.500
Alfred Maliu*	11/OE24/026	488.500	488.500	2.442.500
Carlot Korman*	11/OE23/029	1.282.500	1.282.500	7.695.000
Fred Timakata	11/OE23/030	1.004.000	1.001.000	5.020.000
Willie Jimmy*	11/OE24/024	405.000	405.000	3.375.000
Serge Vohor*	11/OB33/025	416.000	416.000	2.080.000
Henry Crowby*	11/OB33/027	841.000	841.000	4.205.000
Iarris Naunun*	11/OB33/026	420.000	420.000	2.100.000

Name	Land Title
Ben Beru Daniel Ishmael Roslyne Tor Tensley Lulu Dick John Miller Irene Bongnaim Joel Kaltamat Aime Malere Andre Lesines Frederick Tau	11/OC31/035 11/OC31/044 11/OD33/038 11/OD33/039 11/OE22/029 11/OD22/066 11/OE21//019 11/OE31/043 11/OE24/035 11/OE22/023

Name	Land Title	Price of the property (VT)
Irene Bongnaim	11/OD22/066	1,972,800
André Lesines	11/OE24/035	2,025,000

Vanuatu Ombudsman's Reports

Improper Sale of Government Houses by the Office of the Prime Minister under Maxime Carlot Korman [1998] VUOM 7; 1998.07 (3 March 1998)