Kuri, The State v [1994] PNGLR 371 (9 September 1994)

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CRIMINAL LAW - Misappropriation - Criminal Code s 383A - Provincial government minister - Use of a discretionary vote - Mismanagement of public monies amounting to criminal misappropriation.

The accused, the Minister of Finance in the Western Highlands Provincial Government, was charged with two counts of misappropriation, contrary to s 383A of the Criminal Code. It was alleged that he dishonestly applied to his own use K2,000 on 24 November 1992, and K2,431.62 on 2 December 1992.

1. There must be a finding of dishonesty for an offence under s 383A Criminal Code. This relates to the state of mind of the person who does the act of misappropriation. Whether the accused has a particular dishonest state of mind in relation to the application of the property is a question of fact for the trial judge to consider, according to the ordinary standard of reasonable and honest people: Lawi v The State [1987] PNGLR 183 followed.

2. Misappropriation by a leader is regarded very seriously by the people of Papua New Guinea and considered by the courts in determining sentence.

3. Where the misappropriated money was given to constituents and not used for the personal use of the accused, a sentencing option alternative to imprisonment is available; in this case, a fine.

WOODS J: The accused, Napilye Kuri, is charged with two counts of misappropriation contrary to Criminal Code s 383A. They both relate to applications and dealings with monies from certain funds available to ministers and members of the Provincial Assembly. At the time, the accused was the Minister for Finance in the Western Highlands Provincial Government. The matters occurred in 1992, before the Provincial Government was suspended.

The first count is that on 24 November 1992 he dishonestly applied to his own use the sum of K2,000, the property of the State.

The second count is that on 2 December 1992 he dishonestly applied to his own use the sum of K2,431.62, the property of the State.

On the first count, the evidence is that a Jack Karali, who holds the position of Assistant Secretary in the Department of the Western Highlands, went to the accused and requested some financial help from him as a friend. Apparently, Mr Karali was going on a holiday overseas at the time. The accused did not help him before he went on the holiday, but after he returned, the accused gave him a cheque for K2,000 as the result of some application to the Western Highlands Economic Development Fund Committee. There is a suggestion that Mr Karali had applied to the Fund for assistance for the development of a chicken project. Mr Karali cashed the cheque. After cashing it he was approached by the accused and another person whose claim was stated to be in the same cheque. So Mr Karali handed over K1,000 to the other person, a Mr Kopa Mara. There is evidence of a statement to the police in which Mr Karali seemed to say that the request for financial assistance was to help with his holiday overseas in Singapore, but after he came back, the accused gave him the cheque and asked him to cash it and give K1,000 back to him, which he did. In the statement, Mr Karali says that he did not apply for a grant, but the money was given to him as a friend and was not related to any specific project.

There are minutes of the Economic Development Fund Committee meeting held on 26 October 1992, which note an application by Jack Karali for K2,000 for a building. The accused, in his evidence, states that the application by Jack Karali was for money for the building for a chicken project, although in the same breath he suggests that the original request was as a friend to help him on his trip to Singapore. But when he came back and repeated a request, he wanted it from the Economic Development Fund, and the accused got the grant for him. However, when the cheque was being cashed, the accused admitted that the cheque was to cover a number of applications. He said it was normal policy to raise one cheque for different applications and then distribute the money. The accused did not really answer the obvious question that, as the committee had approved the whole amount of the applicant Jack Karali, how could it be properly acquitted if it went to different persons? And how could there be a record of payments which differed from the official grant approval? The accused continuously referred to the minister's discretion to apply the funds where it would assist the most people. He gave no explanation for the absence of any formal application from either Mr Karali or Mr Mara other than the suggestion they would have asked him orally, as they were village people who could not write.

It is clear from the end of all the evidence and from the contradictions between the accused and Mr Karali that Mr Karali had originally made a request to help him go to Singapore on a holiday. Then the accused arranged for an approval for Mr Karali when he got back from his trip for a grant for a chicken project, without any formal application being made. I notice that in the minutes of the meeting that Mr Karali's application is worded for a building, not a poultry project, as were many others. Then at the end of it all, the accused's friend who had just got back from a holiday in Singapore was given some money without having formally applied for it, and the cheque was used to give some money to another friend of the accused who was not the subject of any application to the fund committee. There has been no evidence of any progressive project reports, as required under the guidelines for the Western Highlands Economic Development Fund.

This all sounds like a very casual and dishonest way of looking after monies meant to be used for the benefit of people who wish to honestly start some economic project and have insufficient funds themselves to start up. Is this just gross financial mismanagement, or is it criminal misappropriation? There is a fund set up by the government for the purpose of economic development, and there are strict guidelines. And we have two people making vague requests for financial assistance without any proper proposals prepared or submitted. And then we have the accused, as Minister for Finance, arranging for a grant and, in some unregulated discretion, arranging for the cheque to be issued and being present at the cashing and handing out of the proceeds of the cheque to two people.

The second count starts with a person called Mark Kamjua making a written request to the accused as Finance Minister for financial help in paying off a housing loan. Mr Kamjua was a bank officer with the Papua New Guinea Banking Corp in Mount Hagen. Then the letter of request is altered by the accused, and Mr Kamjua's name is crossed out and another name put in its place, namely Mark Kaulas. There is other evidence to confirm that the original request for the money was to help with the applicant's housing. In due course, a cheque was issued in favour of Mark Kaulas for K2,431.62. However, to get it cashed, the accused had to go along to the bank with Mark Kaulas to help identify him so that the cheque could be cashed. There is a note on the back of the cheque from the accused. When the cheque was cashed, the monies had to be shared between four people, as the accused stated this was an exercise of his discretion to ensure the money went to the most deserving people. He referred to the fact that four other people had applied for money from the fund, but without written applications, and this cheque was, unknown even to Mr Kaulas, to be available for four people altogether. The money was then distributed in the presence of the accused. What happened here is, again, highly irregular. It is not just a minor matter of bad administration of money but a serious discrepancy in the handling of monies belonging to the people of this country. It is as if people just wander up to the accused, as minister, and ask for some money, without any proper proposals setting out the proper cost and viability of any project. And the money is then obtained under one name for a specific purpose, and the name is then changed for another, but for the same purpose, but then given to others for other purposes. And then there is no evidence of any progressive reports on the application of those funds. It must be noted here that this grant came from what was called the Grants and Subsidies Fund, which was an appropriation for members to use to give grants to anyone who asked for them, without any guidelines.

The people are entitled to expect the exercise of responsibility by persons delegated or voted in to handle the nation's money. Special funds available for members and ministers to assist people in their electorates is still public monies, to be used for the benefit of the country and the people, and must still be applied wisely and through appropriate guidelines. The manner in which the accused here used what he called his ministerial discretion to change recipients of money from whom had applied or to arrange for grants to personal friends can be none other than questionable management of the nation's resources.

There have been many cases of misappropriation charges being laid, but at the end of all the evidence the court has found only bad financial management. One example is the case State v Kaman [1993] PNGLR 488, which was about the application of monies from the Western Highlands Grants and Subsidies Appropriation, the subject of one of the charges here. I was satisfied that the whole scheme showed very poor administration of government money and, on the facts of that case, I found that the application of a sum of K5,000 was not necessarily criminal misappropriation. In that case, it appeared that the monies were used to purchase certain building materials which were then distributed to various church organisations. My comments in that case suggested that there was a fine line between gross mismanagement and misappropriation; however, features of the case before me now take the gross mismanagement further. Firstly, it is not just the Grants and Subsidies Fund but it is also the Economic Development Fund, where there is a clearly laid out set of guidelines which, on the evidence, were not followed. There did not seem to have been a proper application made by Mr Karali, the purpose for the application of funds was changed, there is no evidence of any follow-up reports to the committee on the use of the funds, and the money was also split between two people, yet the fund clearly needed records to ensure that, according to the guidelines, a recipient did not receive a further grant within the following three years.

Even with the monies from the Grants and Subsidies Fund, we have the deliberate falsification of the original application by the changing of the name of the applicant, yet the subject matter stayed the same even though the matter was peculiarly only referable to the original applicant, namely, a loan over a house at Section 41 Lot 108. Whilst the pretence of the application being for a housing matter was continued, as per the letter of 19 October 1992, when the cheque was cashed, with the personal assistance of the accused, the money was spread around to friends or constituents of the accused with stories of chicken projects. These all clearly could suggest to any normal person that the minister was using these funds to give money to his friends for any reason or even no reason.

One of the necessary elements to prove a charge of misappropriation under s 383A is that there must be a finding of dishonesty. This was carefully considered in the case Lawi v The State [1987] PNGLR 183. The Supreme Court held that, as the word "dishonestly" in the section only relates to the state of mind of the person who does the act which amounts to misappropriation, whether the accused has a particular state of mind in relation to the application of property which is dishonest is a question of fact for the trial judge to consider on all of the facts of the case before him and according to the ordinary standards of reasonable and honest people. I am satisfied that a number of factors in this case, which include the changing of the name of the person on the application, the pretence of the applications being for certain purposes but then being used for other purposes, the giving out of money in cash form to persons other than the original applicants, could lead a reasonable and honest person to consider that there has been dishonesty in the way these funds have been obtained and applied. The facts surrounding these two grants and cheques are such that it is open to me, and I am so satisfied, that there was dishonesty involved.

The people of Papua New Guinea are entitled to expect some responsibility with the administration and spending of government resources and money. Public accountability of public monies demands proper appropriations and control of such monies. Public or government funds are not personal accounts which those in control should have the right and power to dip into when they wish to ensure their support or help their friends. If people in control or leadership create schemes for such an indiscriminate use of public monies, they are leaving themselves open to such charges as this one, misappropriation for their own ends, to help their friends, rather than the proper management for the people as a whole and the nation.

The counts here are that the accused dishonestly applied the money to his own use. I have already referred to the fact that he seemed to be using his position to give money to his friends. There is reference in the evidence to recipients saying they were friends of the accused and had asked him as a friend. I find, and any jury would be entitled to find, that the use of his position as minister to obtain these grants and to distribute the monies at his discretion to these recipients was to his own use, namely to his own use to give money to friends and supporters.

I am satisfied on the evidence that the counts of misappropriation have been proved, and I find the accused, Napilye Kuri, guilty of two counts of misappropriation contrary to section 383A of the Criminal Code.

Napili Kuri, I have found you guilty on two counts of misappropriation of monies belonging to the State. This offence by leaders like yourself is regarded very seriously by the people of Papua New Guinea and the courts, and the people say that if you misappropriate government money you should go to jail. Just like when a boy steals a packet of biscuits from a trade store and often has to go to jail. However, on the evidence in this case, it is clear that you did not use the money for yourself personally, for example, to go on a holiday or to buy property or things, but what you did was distribute the money to members of your electorate, namely, your constituents who came to you with requests for help. In your evidence, you say you thought you had a discretion to give money to your constituents out of these two government funds; in other words, there was a system which allowed you to do this. However, I have found that you have abused the system and not applied the monies in the form and manner they were required to be applied. There was a suggestion at one stage in the evidence that you complained that the public servants did not stop you doing this sort of thing. For example, they signed the vouchers and they issued the cheques. However, it is likely they were probably too frightened for their jobs. You were the minister, and you insisted that you had this discretion and you thought these funds were at the absolute discretion of yourself and the other members. As I said in the judgment on conviction, you were in a situation where the government has set up funds without proper controls and where guidelines were not followed, and it was very easy for you and, perhaps, other people to go too far and mismanage these funds. In this case, I have found that you did go too far.

However, I distinguish this case from other cases where leaders like yourself have been found guilty of misappropriation. For example, in the cases of Kindi Lawi, Roy Yaki, Wellington Belawa and Elijah Titus, the misuse of money was clearly for the personal benefit of those accused. They used the money to put into their own bank accounts and to help purchase property, like houses etc. However, in this case before me today, it is suggested that you thought you were doing what the system allowed, and it is quite clear in the evidence of this case that there was no deliberate deception in presenting the evidence of this case. You were saying that you had the discretion of doing what you wanted, and that is what you did. I have found that that attitude to government money is not correct, and because of all the changes in names and applications of the money from the original applicants, this did amount to such gross mismanagement and dishonesty as to be criminal misappropriation.

I feel that because you were using this money to give to your constituents and friends instead of using it directly personally for yourself, perhaps I can give the option of an alternative to imprisonment. Also, I note that last year in Wewak a number of provincial politicians were also convicted of similar offences and were given suspended sentences on the basis that they repaid the money.

I don't think that in this type of situation it is simply a matter of repaying the money, namely, the sum of K4,431 involved. Whilst I realise that this money was distributed amongst your constituents, in reality the money was disposed of by you for your own purposes. You were the person who had complete control over these monies, so it is not just a matter of repaying these monies to the State. I must consider a form of punishment which covers the misuse of these monies, plus a punishment for the criminal mismanagement of government money. I am, therefore, going to consider a fine which will make up for the amount misused plus extra for a form of punishment, and I note that there are situations in the law that if you cheat or deceive the authorities, for example, in tax situations, as well as having to pay the money which was the subject of the deceit or fraud, you may be fined an equivalent amount as the penalty. So in this case now it is not simply a matter of a fine for the amount of the money lost, but a fine to cover that plus a punishment.

I fine you K7,000 and, in default of paying that fine you will be imprisoned for two years. Normally, the Court would expect the fine to be paid immediately. However, I am satisfied that you are a prominent person from your area, so I am quite prepared to give some time to pay. I, therefore, order that you have till 30 September 1994. If the fine is not paid by 30 September 1994, a warrant will be issued for your imprisonment for two years.

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Papua New Guinea Law Reports

Kuri, The State v [1994] PNGLR 371 (9 September 1994)

PNG Law Reports 1994