Finance Minister's "eternal regret" [1]
Thursday, February 18, 2010 - 10:45. Updated on Tuesday, April 29, 2014 - 16:42.
The Minister of Finance and Public Enterprise Hon 'Otenifi 'Afu'alo Matoto bluntly told the Royal Commission of Inquiry into the sinking of the Ashika that he was misled by the former Minister of Transport Paul Karalus.
In evidence yesterday, February 17, the Minister asserted that Karalus verbally assured him that the Ashika was well maintained and seaworthy and was better than the former ferry, MV Olovaha.
The Minister in his evidence on February 17 provided to the inquiry an affidavit dated December 2009 where he said, "it was to my eternal regret that I took the former Minister's word that due diligence had been carried out."
He continued to state that he would not have endorsed the transaction had he known for an instant that no survey documents had been supplied by the Fiji Ministry and that no survey was conducted of the vessel by the Ministry of Transport or any independent surveyor to establish its seaworthiness, and that Mr Jonesse had signed Mr Shaw's name to the report said to be provided by him.
He asserted that he was only aware of these matters after evidence had been heard about that before the Commission.
Co-signed
On being questioned by the Counsel Assisting Manuel Varitimos the Minister confirmed co-signing with Karalus a Memorandum of a submission to Cabinet proposing to purchase a replacement vessel for the Olovaha dated April 20, 2009.
This resulted in a Cabinet decision dated April 23, 2009, which directed that the former Minister assisted, by Attorney General and Minister of Justice at the time were to proceed with arrangements for the Ashika. The urgency of the matter necessary deposits were to be done with the Minister of Finance and he was authorised to endorse it.
The Minister in evidence confirmed that Karalus told him that he needed his support in the submission to Cabinet and that a suitable vessel had been identified.
The Minister said he was concerned with the age of the replacement vessel and queried this, but he was told by Karalus that it was well maintained and was better than the Olovaha. "And it was on that basis that I co signed it," said the Minister.
He confirmed that the conversations took place prior to signing the submission to cabinet on April 20, 2009. Karalus had already signed the document before giving it to him to sign on the morning of April 20 at the Minister's office.
"Did you read the document? asked the counsel, and the Minister said yes.
"Is it correct to state that you relied on the former Minister's words that due diligence was done?" asked the counsel.
The Minister reaffirmed that he relied on what Karalus had told him. and said that if he was not told what he was told by Karalus he would not have endorsed the submission to Cabinet nor signed it.
He agreed with the counsel's submission that Karalus was the Minister of Transport and his Ministry would know of the condition of the vessel and that he had technical staff skilled to do this. 'Afu'alo asserted that he concentrated on the financial aspects.
Regret
"You placed your trust and confidence that the former Minister provided you with accurate technical information that the vessel was seaworthy?' said the counsel, and the Minister said yes.
He agreed that if he knew the vessel was not well maintained as told to him by Karalus he would not have signed the submission and Karalus probably would have known that.
The Minister then asserted that he found out later that what he was told by the former Transport Minister was not so, in relation to the claim that the vessel was well maintained. He accepted that he now regretted taking his word for it that due diligence was conducted.
Misled
"Do you agree that the evidence has established that the former Minister of Transport misled you into signing the Cabinet submission?" the counsel asked.
The Minister agreed and confirmed that he had nothing to do with the preparation of the Memorandum dated April 20, 2009 and that Karalus prepared and provided it to him. The Minister said he did not receive any other advice prior to the purchase of the vessel.
He also confirmed that he was relying on advice of a December 2008 survey, which was also provided by Karalus, claimed to have been issued by the Fiji Marine Board.
The inquiry, however, was told that the survey was unsigned, had no letterhead or date and no author. The Minister confirmed that he saw this document on April 20.
"If you look at the Survey Certificate you see there is a huge gap and it is incomplete," said the counsel.
The Minister said he did not tell at the time.
The counsel put to the Minister that if, in truth, he had carefully assessed the document, it would have been evident that the survey was not issued by the Fiji Marine Board.
But the Minister said he had never seen such a document to know.
"Could I suggest that Karalus told you that this survey was issued by the Fiji Marine Board and that you did not carefully analyse it because you trusted him? said the counsel, and the Minister agreed.
Major acquisition
The Minister also accepted the submission that this was a major acquisition by Government that required proper due diligence and valuation of the vessel was needed. He also accepted that as a part of good governance the Shipping Corporation Board and Company Secretary recommending purchase of the vessel should have conducted their own due diligence.
He accepted that due diligence included an independent survey, an evaluation of that survey, ensuring the vessel was properly maintained and appropriate for Tonga and to verify documents.
The Minister also asserted from his experience in banking and finance he was well versed with the importance of obtaining an independent survey.
The Minister also agreed that Government on its part needed to ensure that an independent survey was, in fact, done on the vessel and accepted that the Board of SCP was independent of Government and that SCP had a duty under law to operate in due care and similarly Government also had a duty.
SCP Board
The counsel put to him that Government had separate duties of that of SCP Board, and the Minister agreed.
And he also agreed that for SCP to act responsibly it should have conducted it own due diligence and that Government should have done the same to determine the condition of the vessel before deciding to buy it or not.
"Do you accept or reject the SCP Company Secretary Lord Dalgety's evidence where he suggested that it was Government's responsibility to conduct due diligence?" said the counsel.
The Minister replied that the SCP should have conducted their own but he accepted that both should have ensured that due diligence was done to ensure that the vessel was well-maintained.
Cabinet
In his affidavit the minister stated that the Shipping Corporation of Polynesia Limited is fully owned by the Government of Tonga, and run by an independent board of directors appointed by government. The SCP has reporting requirements to the Ministry of Public Enterprises and the government has a general duty of oversight. The government-owned entity is subject to a policy that it should return 10% on its equity to the government as a dividend on an annual basis but it had never done so.
He said that at the Cabinet meeting 23 April 2009 when the joint memorandum of 20 April 2009 was discussed it was accepted by the Cabinet acting on the advice of the consultants to the Ministry of Public Enterprises that the better financial operation was to purchase a replacement vessel rather than continue to maintain the MV Olovaha.
"The Prime Minister wanted to know if the replacement vessel could be purchased with aid funds. He was of the view that the government should only resort to using its own funds if aid money was not available. He also emphasized that all due diligence had to be carried out before any vessel was purchased."
He said that Cabinet memorandum NO. 300 which records the decision directing the former Minister of Transport assisted by the Attorney General and Minister for Justice "to proceed with the arrangements to do with MV Princess Ashika" did not specifically refer to the completion of due diligence.
"It does make reference to the 'arrangements to do with MV Princess Ashika'. It was accordingly assumed that the normal procedures such as completion of due diligence and approval by the Government Procurement Committee would be followed," he stated.