STATEMENT FROM OPPOSITION LEADER, HON. PATRICK PRUAITCH CMG MP
9 JULY 2019
The Opposition welcomes the Ombudsman Commission’s Final Report dated December 2018, on the Alleged Improper Borrowing of A$1.2 Billion from the Union Bank of Switzerland, committed by the then Prime Minister Peter O’Neill and his government in March 2014. The report was tabled in Parliament.
Leader of the Opposition, Hon. Patrick Pruaitch said, “I am fully aware of the powers of the Ombudsman Commission, as vested in it by the Constitution, and in particular the Commission’s powers to undertake its ‘Own Initiative Investigation’ under Section 219 of the Constitution and Section 13 of the Organic Law on the Ombudsman Commission, especially related to matters of significant public interest or importance, but more importantly on this occasion a matter that has caused the State to commit the people of Papua New Guinea to an intolerable debt burden, as well as erode and strip significant PNG LNG project value and benefits to the detriment of the people and the country.”
The Ombudsman Commission’s Final Report noted that the UBS loan was wholly driven and facilitated by Prime Minister Peter O’Neill in March 2014, enabling and luring an unsuspecting PNG Government to acquire an entirely new parcel of 149.39 million shares in the Australian Stock Exchange listed company, Oil Search Limited, in March 2014 for AU$1.2 billion.
Mr. Pruaitch said, “As the Treasurer in the Somare Government and Chairman of the Ministerial Economic Committee that secured the PNG LNG Project and the PNG Government’s direct participating interest in the LNG project in late 2009 and early 2010, I concur with the Ombudsman Commission’s assessment that there were two very distinct transactions:
- The IPIC Exchangeable Bond transaction in 2009 that enabled the acquisition of a direct 19.6% participating interest (or equity interest) in the PNG LNG Project for the PNG Government and,
- The UBS loan transaction to purchase a completely new, standalone parcel of 149.39 million Oil Search shares at a transaction cost of AU$1.2 billion in March 2014.
“I am aggrieved that the Honorable Member for Ialibu-Pangia, Peter O’Neill, continues to fuel misinformation and fake news in the public domain with his suggestions that there are links between IPIC transaction and UBS Loan. There are none, as clearly articulated in the chronological sequence provided in the Ombudsman Commissions Final Report, its findings, and recommendations. The Commission said the Oil Search share purchase transaction involved improper and unlawful dealings”, said Mr. Pruaitch.
“I am disturbed that a former Prime Minister would continue to peddle the nonsense that the UBS loan was in the best interest of PNG when in fact we have absolutely zero shareholding in Oil Search today, with zero benefits accruing to the people of PNG from that very expensive and speculative share purchase exercise.
“Sadly, we are slugged with the O’Neill OSL UBS legacy of a considerable debt burden, not to mention the opportunity costs of that A$1.2 billion purchase price consideration which is detrimental to very many needy Papua New Guineans. The deal was almost unilaterally stitched-up by Peter O’Neill and his band of cohorts, with the aid of conflicted corporations, legal advisors and financial advisors and a very conflicted UBS AG Bank of Australia, as is asserted by the report.
“The Ombudsman Commission must be commended for its efforts and persistence, under challenging circumstances, for its careful deliberations on this matter of great public importance.
“As the political and corruption watchdog, the Ombudsman Commission has done well to progressed this investigation and concluded with a final report incorporating its findings and recommendations against those entrusted with the authority to do good for the collective benefit of the people of Papua New Guinea.
“Undoubtedly the commission has, without fear or favor, exposed certain failings of the O’Neill Government over its own internal governance processes that need to be rectified with corrective measures put forth for the new government of Prime Minister James Marape to implement.
Mr. Pruaitch also said, “I would like to inform the people of Papua New Guinea that the Somare Government, through a deliberate government policy decision, had always intended to trade-up its indirect interest in Oil Search for direct project equity in the PNG LNG Project.
“The structure of the IPIC deal certainly points to the fact that the PNG Government in 2009 would merely leverage its shareholding in 196.6 million OSH shares, which equated to a 17.6% shareholding in Oil Search Limited, in exchange for a direct project participating interest in the PNG LNG Project.
“I would like to state that at all times during the multiple series of PNG LNG Project transactions as the then Treasurer and Chairman of the Economic Committee representing the PNG Government, we exercised all necessary duty of care and diligence.
Mr. Pruaitch said, “It is not true, as suggested by Peter O’Neill, ‘that the PNG Government in 2009 was firmly committed to a buyback option as I had never sanctioned such a proposition.
“In fact, the Ombudsman makes it abundantly clear that there were two very distinct transactions:
- IPIC in 2009 which provided the funds to acquire the 19.6% direct equity in the PNG LNG project, and
- UBS loan to purchase totally new shares in Oil Search in March 2014 that has in effect bought us nothing! And it is for this reason that the Ombudsman Commission, as the political watchdog, has progressed this substantive investigation.
The PNG Government shareholding in Oil Search, and its subsequent disposal of its interest in Oil Search in 2009 through to 2014 under the IPIC transaction was never sacrosanct. It was a definitive Somare Government Policy at the time, and I stand ready to testify at any Leadership Tribunal and Royal Commission to this fact, said Mr. Pruaitch.
“However, in the public interest I must air the caution, that the Leadership Tribunal and the Function of the Ombudsman Commission by operation of Constitutional Law cannot be undermined by the executive government through its insistence to establish and institute a Royal Commission of Inquiry into the UBS loan fiasco.
“Finally, I wish to reiterate the assertions of the Ombudsman Commission that the improper new borrowing from UBS to acquire a totally new parcel of Oil Search shares is not tethered to any part of the PNG LNG transaction(s). The findings of impropriety under the UBS loan Oil Search share purchase arrangements give rise to a series of recommendations referring particularly the then Prime Minister, Peter O’Neill to a Leadership Tribunal investigation for improper conduct under the Leadership code.”