In talks with SCP Managing Director John Jonesse leading up to the possible purchase of the Ashika ferry, the Chief Executive Officer of the Ministry of Public Enterprise 'Inoke Vala, took what Jonesse advised him at face value.

But the CEO accepted a submission that the Government of Tonga should have ensured that due diligence was conducted prior to purchasing the vessel.

In giving evidence at the Royal Commission of Inquiry into the sinking of the Ashika on February 23, the CEO said he had a meeting with Jonesse on March 31, 2009 and Jonesse assured him that survey would done by Australian surveyors and that a full survey would be done of the vessel on the following week in Fiji.

On being questioned by Counsel Assisting Manuel Varitimos, the CEO confirmed to the inquiry that Jonesse projected that the cost of the survey would amount to $80,000.

"Did he say who would pay for this?" said the counsel.

The CEO said, no, and he on the other hand never asked Jonesse.

The CEO also confirmed that Jonesse submitted to him a financial analysis of the projected costs for the replacement vessel, which initially stood at $1.4 million and then dropped dramatically to the purchase price of FJ$600,000. He added the only investment analysis his officials did on their part was looking at the history of the Olovaha.

When the counsel then put to him that the investment analysis conducted by Public Enterprise was superficial; the CEO replied that it was only based on the performance of the Olovaha.

He then accepted the counsel's submission that Government should not have entered into contract to buy Ashika without the Procurement Committee's consideration.

Mechanical

The CEO told the inquiry that he had a meeting with Jonesse on April 16 at the Shipping Office on the purchase of the Ashika. He asserted that Jonesse advised him that the vessel was in good mechanical condition and that a survey was done.

He said funding was also discussed but Jonesse indicated no definite source at that time but he pointed out to possible aid funds and government funds from the Ministry of Finance.

The CEO said he was accompanied at this particular meeting by a consultant with the Ministry namely Bruce McQueen and confirmed that they also met with the former Minister of Transport.

He asserted to the inquiry that he raised the issue of due diligence with Karalus. The former Minister's response reflected what Jonesse had already advised them, said the CEO.

He then accepted submission that SCP should have conducted proper due diligence prior to its recommendation to Government to purchase the vessel and agreed that it was part of good governance to do so.

He confirmed he was aware that Government would buy the Ashika and accepted that Government should have conducted its own due diligence prior to purchase.

"If the matters were not done I suggest the vessel would not have been purchased nor left Fiji," said the counsel, and the CEO agreed. He accepted that as part of checks and balances Government had established the Procurement Committee.

"But you relied on information on Jonesse to ultimately deliver what was projected to be," said the counsel.

The CEO said yes.

Subsidy

He also confirmed that Shipping Corporation a Public Enterprise had not lodged any return on equity to Government although it received a subsidy of about $400,000 a year as a Public Enterprise.

He agreed with the counsel's submission that this was a negative return to government and confirmed he had only received one annual report for 2008 for the shipping company.