N6874

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

CR (FC) NO 17 OF 2014

BETWEEN:
THE STATE

AND:
PHILLIP KIKALA

Salika, DCJ:  Wabag / Waigani
2017: 01, 02, 03. 22, 23, 24 March
19 May

CRIMINAL LAW – PRACTICE AND PROCEDURES – misappropriation of funds – Government funds – District Support Improvement Programme (DSIP) Funds – JDP & BPC decision to award contracts to company owned by the Chairman JDP & BPC – funds deposited into Chairman’s personnel company – whether accused acted dishonestly – whether  accused applied money to his own use and use of others.

Cases cited

Kindi Lawi v The State (1987) PNGLR 183
The State v Gabriel Ramoi (1993) PNGLR 390
The State v Francis Laumadava (1994) PNGLR 291
The State v Jimmy Liriope (1990) N916

Counsel

Ms H Roalakona, for the State
Mr O Yallon, for the Accused

VERDICT ON CHARGES

19th May, 2017

1.	SALIKA DCJ: INTRODUCTION: The accused is charged with the following 4 counts of misappropriation:

Count 1:	

Phillip Kikala of Aiaka Village, Lagaip, Enga Province stands charged that he between the 1st day of March 2012 and the 31st day of March 2012 at Port Moresby and Enga Province in Papua New Guinea dishonestly applied to his own use and to the use of others the sum of Seven Hundred and Ninety Thousand Kina (K790,000), the property of the Independent State of Papua New Guinea.

Count 2:

The said Phillip Kikala of Aiaka Village, Lagaip, Enga Province stands charged that he between the 1st day of March 2012 and the 31st day of March 2012 at Port Moresby and Enga Province in Papua New Guinea dishonestly applied to his own use and to the use of others the sum of Eighty Thousand Kina (K80,000) the property of the Independent State of Papua New Guinea

Count 3:

The said Phillip Kikala of Aiaka Village, Lagaip, Enga Province stands charged that he between the 1st day of April 2012 and the 30th day of April 2012 at Port Moresby and Enga Province in Papua New Guinea dishonestly applied to his own use and to the use of others the sum of One Hundred and Twenty Eight Thousand Kina (K128,000), the property of the Independent State of Papua New Guinea

Count 4:

The said Phillip Kikala of Aiaka Village, Lagaip, Enga Province stands charged that he between the 1st day of May 2012 and the 30th day of May 2012 at Port Moresby and Enga Province in Papua New Guinea dishonestly applied to his own use and to the use of others the sum of One Hundred and Nine Thousand Kina (K109,000), the property of the Independent State of Papua New Guinea

The Brief Allegations

2.	The following are the brief allegations relied on by the State.
Between the year 2007 and 2012 the accused, was the sitting Member of Parliament for the Lagaip-Porgera Open Seat, Enga Province. As the MP for the District he was also the Chairman of the Joint District Planning and Budget Priorities Committee (JDP&BPC).

On 19 January 2011, the accused registered a company with the Investment Promotion Authority under the name West Rural Industries Limited.  On 6 May 2011 he opened the company account with the Bank South Pacific (BSP) under account name West Rural Industries Limited Account Number 103380431 for which he was the sole signatory.

On 18 July 2011 there was a purported JDP& BPC meeting.  The Chairman informed the committee members that there was a K1,000,000 DSG (District Support Improvement Grant) for the District for the year 2010 and 2011 which had not been used.  The JDP and BPC resolved to spend the grants and resolved that West Rural Industries Limited be a recipient of some of the funding.
On 25 February 2012 Lagaip-Porgera JDP & BPC purportedly convened a special meeting No 2 of 2012 and it was at this meeting that the JDP & BPC members agreed that West Rural Industries Limited would take over the contract of Building Pyrethrum and Potato processing staff houses for an allocated amount of K500, 000. This purported meeting was never convened as members of the JDP & BPC committee did not attend.

In late February 2012, various documents were submitted by the accused to the Department of Rural Development and Implementation to justify the release of funding. These documents included:

1.	Lagaip-Porgera JDP& BPC meeting minutes and resolutions;
2.	Tender Documents;
3.	Letters drafted by Philip Kikala.							

It was upon the written instructions of the accused that the funds should be paid to the West Rural Industries Limited and not the District Treasury Account as was the normal process.

On 2 March 2012, cheque number 14553 was raised by the Department of Implementation and Rural Development (DI&RD) and paid to West Rural Industries Ltd for the sum of K790, 000 being for payment for staff houses for the food processing plant. The cheque was deposited into the account of West Rural Industries on 6 March 2012. No acquittals were received for this fund and no projects done. The monies were paid from the Districts DSIP funds.

On 21 March 2012 cheque number 14734 was paid to West Rural Industries Ltd for the sum of K80, 000 for construction work on a chicken house project. This cheque was deposited on 22 March 2012 into West Rural Industries bank account. This payment was also from the District DSIP funds.

On 19 April 2012, another cheque in the sum of K128, 000 was paid again to West Rural Industries Ltd by cheque number 14886. This payment was for project management fees. This payment was paid from the Districts Discretionary Grants.

On 8 May 2012, a cheque for the sum of K109, 100 for technical and consultation services was paid to West Rural Industries Ltd. This payment was deposited into the bank account of West Rural Industries on 24 May 2012.  The payments were made from the Districts Discretionary Grants. None of these funds were ever acquitted and no projects done.

It was alleged that when the cheques were paid to the accused’s company account on those four different occasions; that is a sum of K790, 000; K80, 000; K128, 000 and K109, 100 for housing projects; chicken house project and for consultation and project management fees; the accused did not use the monies for the intended purpose rather diverted and dishonestly applied the monies to his own use and the use of others thus contravening section 383A (1) (2) of the Criminal Code Act.

Issue

3.	The issue is whether the accused dishonestly applied to his own use and to the use of others the monies which belonged to the State.

Onus of Proof

4.	The law is that the State has the onus of proof to prove each of the charges beyond reasonable doubt.

Evidence

Documentary 

5.	A good part of the evidence was documentary and were tendered by consent.  The following documentary evidence was tendered.

(i)	Exhibit A – Cheque for the amount of K790,000.00
(ii)	Exhibit B – FF3 and FF4
(iii)	Exhibit C – Cheque for the amount of K80,000.00
(iv)	Exhibit D – Witness Statement of Mark Ravu
(v)	Exhibit E – FF3 and FF4 for cheque No 14734
(vi)	Exhibit F – Cheque for the amount of K128,000.00
(vii)	Exhibit G – FF3 and FF4 for cheque No 14886
(viii)	Exhibit H – Copy of Cheque for K109,100.00
(ix)	Exhibit I – Statement of Paul Sai’i.
(x)	Exhibit J – FF3 and FF4 for cheque No 14940.
(xi)	Exhibit K – Copy of cheque No 14940.
(xii)	Exhibit L – Statement of Langin Andale
(xiii)	Exhibit M – Meeting minutes of Grand Review Evaluation Meeting
(xiv)	Exhibit N – Is the prior inconsistent statement of George Poiyo.
(xv)	Exhibit O – Is the statement of Kamean Andreas
(xvi)	Exhibit P – Is the documents formulating the Search Warrant.
(xvii)	Exhibit Q – is the Bank documents obtained from the Bank of South Pacific

Oral
Paul Sai’i

6.     His evidence is:-

(i)	He is the current Acting Secretary of the Office of Implementation and Rural Development.  

(ii)	The process of payments are done through established guidelines through his office.

(iii)	Upon receipt of the JDP and BPC Meeting Minutes and Resolutions, it goes to a committee in the department who screen the documents from the JDP and BPC and then it goes in for approval.

(iv)	Confirmed receipt of the JDP & BPC meeting No 2 of 2012 minutes, the tender documents and letters from Mr Kikala and the resolutions were signed by the Chairman of the JDP & BPC who is the open Member of Parliament for that District.

(v)	The technical team from Department of Implementation and Rural Development screens the documents and thereafter it goes to this witness for approval.  It is also within his discretion to pay direct to a contractor.  In this case he used his discretion to pay the funds to West Rural Industries Ltd because Mr Kikala had written saying that if the funds were deposited into the District Treasury they would be misused by the District and Provincial public servants and therefore asked for the funds to be paid to West Rural Industries Ltd and thereafter the cheques were paid in favour of that company.

(vi)	The acquittal process is based on guidelines and they rely heavily on the District Administrator and the District Treasurer.

(vii)	He also relies heavily on his assistant Regional Managers.

(viii)	Gave an account of what actually happens through the process of payments to the districts.

Mark Ravu

7.      Mark Ravu’s evidence is that:

(i)	This witness is a former employee of Department of Rural Development and Implementation and was the former Manager Accounts.  

(ii)	The witness in his oral evidence stated that in his employment as the Accounts Manager, it is his duty to countersign and approve claims and thereafter check the availability of funds before approving payments.

(iii)	He confirmed in his statement that he did issue payments to Phillip Kikala for K780,000.00 on the 06th March 2012, K80,000.00 on the 21st March 2012, K128,000.00 on the 19th April 2012 and K109,100.00 on the 08th May 2012.  These payments were admitted by the accused and marked as Exhibits.

(iv)	He further stated that it was the responsibility of the District Administrator to acquit funds but since then he has never received any acquittals from the District Administrator and or the District Treasurer.

Langin Andale

8.     This witness evidence is that:-
(i)	This witness is employed as the Project Manager for the Highlands Region for the Department of Implementation and Rural Development.
(ii)	In his oral evidence he states that his responsibility is for the overseeing of the planning, co-ordination, administration and all the managing and development in the highlands 2 region which comprises of Southern Highlands, Western Highlands, Enga and Hela Provinces.
(iii)	He explained that the committee screens the documents from the JBD & BPC before it is satisfied and paid.  He further stated that there was no inspection done as those projects as it was on the eve of election and there was no funding to carry out a project implementation report.
(iv)	He further stated that it was not a responsibility of a member to provide acquittals but that was the responsibility of the District Administrator and District Treasurer who are to provide acquittals for every payment made.
(v)	He received K40,000.00 from Accused for Bride Price.

George Poio

9.      George Poio’s evidence is that:-

(i)	He is the current District Administrator for the Lagaip Porgera District.
(ii)	Does not recall giving the first page of his statement to the police.
(iii)	Stated that he did not know of payments made to the West Rural Industries Ltd.  He stated that he only signs cheques from the Laiagam District and does not know of any other cheques paid out.
(iv)	He was not aware of any payments made to West Rural Industries Ltd or Phillip Kikala.

Kamen Andreas

10.     Kamen Andreas evidence is that:-

(i)	He is the policeman involved in investigating, arresting and charging of the Defendant.
(ii)	The defendant opened a bank account under his company name West Rural Industries Ltd and was the sole signatory to that company account.
(iii)	He stated that there were many projects done in Laiagam.
(iv)	As to those projects, he was informed during his investigation that those projects were done between 2008 and 2011.
(v)	Confirms that he saw the establishment of the Pyrethrum project and the staff houses and other buildings but could not establish if those buildings were all staff houses.

Defence Case

11.      The defence called the accused as its only witness.  His evidence was:-

(i)	That he had received all the cheque payments from the Department of Implementation and Rural Development.
(ii)	That the funds were to pay for the project management fees, consultants fees and labour payments for persons involved in the construction of the Chicken Factory, Bank, Commercial Centre and the Pyrethrum Factory.
(iii)	Further part of the K1,107,100 was used for the construction of the staff houses for the chicken projects and the chicken processing plant.  The construction of the three (3x) three bedroom houses and a self contained house was completed over a five months period from March to August 2012.
(iv)	That the projects approved for implementation were the K790,000.00 for  the staff houses for the food processing plant and that the staff houses were built,
(v)	That he had to also make payments for contractual obligations, settling in and out allowances and airline tickets for the contractors back to their countries.
(vi)	The K80,000.00 was for the construction of chicken house project, which were built, the K128,000.00 was for the chicken house project, staff houses, the K109,000.100 was paid for consultation and management fees.
(vii)	That he had sold his piece of land to make room for the establishment of a Bank and that the Bank is now existing but incomplete.
(viii)	That the funds were solicited and used for those purposes.  
(ix)	That the year 2012 was an election year and he and his Administration needed to deliver those projects before he went for elections.

Production of Search Warrant

12.      When the trial was in progress the States police witness Kamen Andreas gave evidence.  He was asked to produce the search warrant which he used to obtain documents in relation to this case from the Bank South Pacific.  He could not produce the search warrant then but said he could later in the course of the trial or later.  The State case closed after that with a request to re-open when the search warrant was found and the defence went into evidence after its no case submission was dismissed.  After this the defence called its one and only witness, the accused.  After the accused gave evidence the matter was adjourned by consent to Waigani and again by consent for the State’s police witness to find the search warrant and have it tendered into evidence and for the defence to have an opportunity to cross examine the witness. All these was done by consent and the prosecution re-opened in Waigani for that purpose only.

Elements of Charge

13.      The Elements of the charge of misappropriation are:-

(i)	A person
(ii)	On a date
(iii)	At a place
(iv)	Dishonestly apply to his own use or to the use of another 
(v)	Property belonging to another

14.      Those elements of the charge must be proven beyond reasonable doubt by the State or the prosecution.

15.     Elements (i), (ii), (iii) and (v) are not in dispute.  The accused admitted he on a date and place did receive the various cheques from the Office of Rural Development and Implementation (ORDI).  The cheques were from ORDI and therefore the State and written out to “West Rural Industries Limited” a company owned by the accused who was the sole signatory to the company’s bank account number 1003380431.  The accused admitted he went personally to the Office of Rural Development and Implementation obtained the four cheques the subject of the charges all written out to “West Rural Industries Limited’.

Dishonestly apply

16.      Dishonesty is what goes on in the mind of the accused before, during and after the monies were obtained.  The accused’s state of mind during this times, that is before, during and after the money came into his possession, is a question of fact for the court to consider and determine.  All the relevant evidence, direct and circumstantial is to be considered by the court to make finding as to whether or not the accused had the dishonest intention in getting the money (see The State v Gabriel Ramoi (1993) PNGLR 390, Kindi Lawi v The State (1987) PNGLR 183.

17.      The evidence of Mark Ravu is that he was the Accounts Manager to the  ORDI.  He said he issued payments to Phillip Kikala for the amount of K790,000.00 on 6 March 2012, K80,000.00 on 21 March 2012, K128,000.00 on 19 April 2012 and K109,100.00 on 8th May 2012.  There is no dispute by Mr Kikala on these facts. The State alleged that Mr Kikala never acquitted these funds.  Mr Kikala said acquittal of funds was the responsibility of the District Administrator and not him.  The District Administrator said he was not aware of those payments made to Mr Kikala’s company and that those transactions were done outside the normal procurement processes. He said he only acquitted funds which came through his office. These payments did not come through the Lagaip Porgera District Administration.  There is no dispute about that.

18.      These payments were done according to a purported meeting resolution of the Joint District Planning and Budget Priorities Committee (JBP & BPC) held on 18 July 2011.  Mr Kikala’s evidence was that because he gave his own piece of land to the District for projects, he was to be reimbursed for that and that the JDP & BPC resolved that the payment be paid to his private company account.  It was upon that understanding that JDP and BPC resolution that the monies were paid to West Rural Industries Limited.  At the meeting the accused informed the JDP and BPC that there were District Support Grants (DSG) for the Lagaip Porgera in the amount of K1,000,000.00 to be used.

19.      On 25 February 2012, the Lagaip Porgera JDP and BPC is said to have had a special meeting No 2 of 2012 which it resolved that West Rural Industries would take over the contract to build the Pyrethrum and Potato processing staff houses.

20.      In February 2012, Mr Kikala submitted the JDP & BPC with tender documents and letters from and signed by Mr Kikala.  The request for funds was purportedly authorised by the JDP and BPC of which he was the Chairman.  The Department of Rural Development and Implementation received the documents and approved payments for the amounts to the accused’s company.  These payments in cheques were made in favour of his company and deposited into his company account.  There is no dispute on this.

21.      Evidence from Kamean Andreas is that when he visited the project sites in 2013 the projects had been completed in 2008 to 2011 and that there were no new projects in 2012 in the subject areas.  Evidence from witness Langip Andale and the accused was that this was election year.  I also take judicial notice of the fact that PNG National Elections are held every 5 years and that indeed 2012 was the year of the last elections and that this year (after 5 years) is another election year.  Mr Kikala was the sitting member from mid 2007 up to mid 2012.  It was therefore not possible and not advisable to start any new projects.  The fact that this was an election year is important because candidates look for money at this time to run their election campaign.

22.      In his evidence Mr Kikala said K790,000 was for staff houses for the food processing plant and that staff houses were built.  He said he also had contractual obligations to settle and airline tickets for contractors to take them back to their countries.

23.      He said the K80,000.00 was for the construction of the chicken houses which were built and that the K109,100.00 was for consultation and management fees but he does not say who those consultants and managers were or are.

24.      Mr Kikala after the case was reopened said he had over K570,000 of his own company money in that company account before the State monies of K1,107,100 were deposited.  He said K250,000 was paid to the Agro Projects Consultant and that K462,000 was withdrawn to buy materials from Mt Hagen, Lae and Wabag to build the projects, the chicken house, the chicken factory, the pyrethrum factory and a Bank and Commercial centre.  He was unable to produce receipts and invoices from hardware shops in Mt Hagen, Lae or Wabag.  Those would have been easy to find if he acquitted the funds.

25.      To build these projects would take time.  Election was coming in the next 2 or 3 months.  On 2nd March 2012, the K790,000 was  raised and on 6 March 2012 it was deposited into the West Rural Industries Ltd account.  There were no acquittals for the amount of money.  The K80,000 was deposited into West Rural Industries Ltd account on 22 March 2012.  Again no acquittals were done for this amount. On 19 April 2012 K128,000 was deposited into the West Rural Industries Account.  Again no acquittals were done for this amount.  On 24 May 2012, the K109,100.00 was paid into West Rural Industries Ltd account.  Again no acquittals were done for that amount.

26.      Mr Kikala was not re-elected and so by July and August he had finished being a Member of Parliament.  Serious questions arise as to whether those projects were completed between 2008 and 2011 or whether those projects were completed in 2012 when the new Member of Parliament was in office.

27.      When Mr Kikala was asked why there were no acquittals, his answer was that it was not his responsibility but those of his District officers.  However, the evidence is that the District Officers were unaware of these payments from the Department of Rural Development and Implementation to Mr Kikala’s company.  The District Officers only acquitted funds that came through the District Treasury.  These funds to Mr Kikala’s company never made it to the District Treasury.  Therefore the District Officers were in no position and power to acquit the funds that went direct from Department of Rural Development and Implementation to Mr Kikala’s company.  Mr Kikala therefore had the duty and the obligation to acquit the public funds.  He failed.  He now cannot blame the District Officers.

28.      There were no new building at the site which was visited by the investigating policeman.  According to the Police Investigation, the buildings Mr Kikala said were built were built with funds from the District before these new funds were released.  This means that this was a case of double dipping in that funds were requested for projects which had already been funded and completed.  The second lot of funding therefore went to something else and not what they were purportedly released for.

29.     Considering all the evidence both direct and circumstantial, I am satisfied beyond reasonable doubt that the project buildings that Mr Kikala is referring to were built in the years 2008 and 2011 and that there was no new project in 2012 on the eve of election.  I accept the evidence of the policeman Andreas Kamen that he did not see any new buildings when he visited the project area in 2013.

30.      Why direct government funding to a private company owned by Mr Kikala and not put the funds in the District Treasury is in my opinion deliberately orchestrated so that Mr Kikala  could access the funds and not be held accountable for how the funds were used.  Mr Kikala would have had a conflict of interest in the matter for all funds to go to his company.  In my view he had a serious conflict of interest situation in the matter. 

31.      Applying the objective test Mr Kikala’s conduct in my opinion in those circumstances was dishonest.  The ordinary standard of decency of a reasonable and honest man would be that to award a contract to yourself and have government funds deposited into ones private company account is not honest or to award a contract to yourself and your company is wrong.  (see The State v Francis Laumadava (1994) PNGLR 291).

32.      Similarly applying the subjective test to Mr Kikala’s conduct, when the court looks into the mind of Mr Kikala and given his work experience, educational level, his intelligence, maturity and his standing, he would have known that awarding a contract to oneself and then having the contract funds deposited into one’s own company account was wrong (see The State v Francis Laumadava (supra) and The State v Jimmy Liriope (1990) N916).   That is what Mr Kikala did in this case.

33.      In my respectful view the application and the request for the funds and the cheques to be written out in favour of his own company were deliberately orchestrated by Mr Kikala to be used for purposes other than for the purpose he had applied and obtained the funds for.  To me with respect, that was glaringly dishonest.  All the ingredients of dishonesty are present in this case because of how the funds were applied for and where the funds were deposited.  Moreover, no acquittals were done to account for the money and when funds were applied for on the eve of elections.

34.      Accordingly, I am satisfied beyond reasonable doubt that Mr Kikala’s actions, prior to, during and after the obtaining of the funds were dishonest for reasons I have explained above.

35.     All other elements of the charge having been admitted and not disputed, I am therefore satisfied beyond reasonable doubt of the guilt of the accused in relation to all the four counts he is charged with.

Ordered accordingly.
________________________________________________________
Public Prosecutor:  Lawyer for the State	
Yallon Lawyers:  Lawyer for the Accused