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Joint report to PNG Police Commissioner and PNG Ombudsman regarding Clinton Foundation Frauds in Papua New Guinea

ombudspng@ombudsman.gov.pg

Dear Commissioner and Ombudsman,

UNLAWFUL INCORPORATION OF "CLINTON FOUNDATION HIV/AIDS INITIATIVE - PNG Inc" 

I refer to my correspondence with the Australian Government's Department of Foreign Affairs and Trade

CALL FOR ENQUIRY

INTO 

The AusAID and Clinton Foundation HIV/AIDS Initiative: Papua New Guinea

including a referral to

Royal Papua New Guinea Constabulary

of a serious offence

involving a public official

Link Here

This summary to my report to the Australian Government is presented here as background information to the specific offences I report in this submission.

Summary

In February 2006 Foreign Minister Alexander Downer signed an MOU with Clinton that if read up shows an Australian Government preparedness to spend up to $25M in matched spending with the Clinton Foundation in HIV/Aids aid work in China, Vietnam and Papua New Guinea over 4 years.

The Papua New Guinea funding agreement was signed in July with the Clinton Foundation.  In August the Australian Government made a call for tenders or expressions of interest in the work already contracted to the Clinton Foundation.

The due date for tenders was 3 October 2006.  By then the Clinton Foundation's sham incorporated entity in PNG was already 3 months old.

The post contract evaluation report, commissioned at a cost of $100,000 is damning of the contract and performance.

There is no statement of project goal or purpose, thus no indicators at that level, no clear Program Area objectives (with indicators) and no targets. 

A Funding Agreement was signed in July 2006 between the government of Australia and CHAI. This outlined the terms and conditions of the arrangement between AusAID and CHAI for the implementation of CHAI in PNG. This agreement states that “the parties agree to monitor the Program against the Program Milestones and evaluate it against the Program Outcomes.” The defining document against which this occurs is the Program Workplan 2006- 2009. As noted above there is no stated objective/outcome in this document (or any documents subsequent to this) for the whole project (and associated indicators). Outcomes or objectives for each of the AoC are not articulated (thus no indicators provided). It is therefore impossible for this part of the agreement to be adhered to.

Now compare the $100K audit with the PR spin from Julie Bishop's Department to me yesterday.

The funding agreement for the PNG Clinton Foundation agreement 2006-2010 had specified outcomes, deliverables, budgets and conditions including the supply of audited Financial Statements. Australian Government funding was delivered as per the agreed schedule and milestones met under the terms of the agreement.

Who's responsible now?

On 30 September 2015 General the Honourable Sir Peter Cosgrove AK MC, Governor General of the Commonwealth of Australia made an Administrative Arrangements Order pursuant to Section II of the Constitution.  Part 9 of the order sets out the matters dealt with by The Department of Foreign Affairs and Trade, including

  • relations and communications with overseas governments; and,
  • international development co-operation; and,
  • international development and aid 

On 19 July 2016 Julie Bishop took the prescribed oath and was commissioned to be the Minister for Foreign Affairs.

Circumstances

On 22 August 2016 I became aware of a sham financial arrangement involving the unlawful incorporation of a fictional association called "Clinton Foundation HIV/Aids Initiative Inc" by authority of the Regulator of Companies in PNG.  The sham was incorporated on false information supplied by Ms Ruby SHANG.  The Australian Government appears to have paid $15M to the benefit of the fraudulent sham entity.  I had for some time been concerned with the statement DFAT gave me in March stating DFAT considered the project unexceptional, when the Evaluation Report DFAT commissioned at a cost of almost $100K was the polar opposite of DFAT's advice.

On Sunday 4 September I wrote to officers of Minister Bishop's department to ask, among other things if it had lodged a report with the Royal Papua New Guinea Constabulary regarding the offences disclosed in my correspondence. I sought an answer by 7 September 2016.   It apparently has not.

 

The Apparent Offences in PNG

The illegal incorporation of the Clinton HIV/Aids Initiative in Papua New Guinea

INTRODUCTION

In PNG/Australia the lowest level scrutiny in the creation of a corporate personality is afforded to Incorporated Associations.
 
PNG's Incorporated Associations Act 1966 sets out the requirements applying to PNG in 2006.
 
The act typically provides for the incorporation of local sporting clubs, children's football associations and similar organisations.
 
One of the attractions to fraudsters is that incorporated associations are not obliged to file financial returns.  Rather they are required to keep books which may be inspected but seldom are.
 
In PNG the Regulator (defined in the Act) may incorporate an association if satisfied that the person seeking incorporation is authorised by resolution of the committee of the unincorporated association to make application.
 
Secondly one month must elapse from advertisement of intention to apply for incorporation.
 
Thirdly the association's proposed rules/objects must be submitted and publicly displayed.
 
The Clinton CHAI met none of these requirements.
 
It was incorporated within days of application.
 
The incorporation was ultra vires from the Regulator - but I sense some coercion or fraudulent representations leading to that unlawful exercise of power.
 
Clearly further investigation is required.

BACKGROUND

When Bill Clinton signed the MOU with the Australian Government on 22 February 2006 he said a few words to the crowd of business people who'd gathered at the Lowy Institute to mark the occasion.

PRESIDENT CLINTON: Thank you very much. Well, Foreign Minister, I can't wait for your memoirs to come out. Thanks Margaret (JACKSON, chair of the Asia Pacific Business Coalition on HIV/AIDS), thank you. I'd also like to thank the Director General of AusAID, Bruce Davis and the people who run our Clinton Foundation HIV/AIDS initiative, Ira Magaziner who conceived and organised the whole thing, and Ruby Shang who represents us here in Asia.

Ruby Shang was the President of the Caterpillar earthmoving dealership in Vietnam, Vtrac.  Her husband Anthony Salzman - or as he prefers to be known Mr Vietnam - is a US citizen.

Salzman had some dealings with Clinton in "opening up" the Vietnamese economy.  At one stage he was apparently worth quite a bit until he and Caterpillar had a falling out.   In 2011 Caterpillar sued himover a failed dealership agreement, claiming Salzman still owed Caterpillar $12M for equipment he'd purchased.   

Screen Shot 2016-08-22 at 2.57.24 pm

His wife Ruby was everywhere for Clinton.   China, Vietnam, Singapore, PNG and Australia with a range of impressive Clinton Foundation job titles, ranging from advisor to director of the board in climate change, health and the Clinton Global Initiative.

Maybe Ruby had too much on her plate with the Clinton Foundation to find the time to sell graders and backhoes.

Screen Shot 2016-08-22 at 3.02.55 pm

Ruby would feature prominently in Clinton's plans for New Guinea.

First a little background.

At the UN World Summit in September 2005, then Prime Minister John Howard announced plans to double Australia's aid program by 2010 to $4 billion.

There was big money available from the Australian Government in 2006 and it seemed to have difficulty in spending it well.  A review of Australia's aid effectiveness noted:

“Non–state donors are increasingly influencing international aid behaviour as their share of total aid flows to developing countries increases … the ratio of almost one private dollar for every two dollars of official aid is significantly higher than a decade ago when the ratio was closer to one to five.” 

Not only have well–known NGOs such as World Vision and Oxfam grown, but completely new non–government donors have also emerged such as the Bill and Melinda Gates and Clinton Foundations. These have brought with them new resources and ways of doing business, including more attention to results. 

Downer's remarks at the MOU signing give some sense of the government's thinking:

I would like to talk briefly now about what the Government is currently doing to reverse the spread of HIV/AIDS. Eighteen months ago, I announced a significant increase in Australia's contribution to the fight against HIV/AIDS in the region: through the aid program, the Australian Government is committing $600 million in assistance to HIV/AIDS activities in the decade to 2010: most of this support is directed to activities in the Asia Pacific by way of bilateral assistance. Clearly, the Australian Government is already investing heavily in the battle against HIV. But if we are to deepen and strengthen the Australian response, we must look for new opportunities and partnerships to build on what has been achieved. Our partnership with the Clinton Foundation will build on the Foundation's impressive track record to provide practical assistance with procurement, supply chains and health system strengthening.

It's not clear whether Downer knew this at the time - but the Clinton Foundation was already accessing our $600M, particularly in Papua New Guinea.

On 29 October, 2005, the Clinton Foundation HIV/Aids Initiative Inc signed a Memorandum of Understanding with the PNG Government.

We don't (yet) have a copy of that 2005 agreement, however we do have a copy of an MoU superseding it in 2011.

What's clear is that by October 2005, Papua New Guinea already had access to the Clinton negotiated prices for HIV and related drugs and Australian aid money was funding those purchases.

Screen Shot 2016-08-22 at 3.41.54 pmScreen Shot 2016-08-22 at 3.42.58 pmScreen Shot 2016-08-22 at 3.43.24 pm

THE CLINTON FOUNDATION WAS ALREADY REPORTING ITS EXPANSION INTO ASIA BEFORE THE AUSTRALIAN AGREEMENT

Screen Shot 2016-08-22 at 4.11.59 pmClinton made much of his 2005 agreement with PNG in the Clinton Foundation 2005 Annual Report.

The Clinton Foundation HIV/AIDS Initiative (CHAI) greatly expanded the scale, intensity, geographic, and programmatic scope of its global efforts in the fight against HIV/AIDS in 2005. By year’s end, the Initiative had increased the number of people accessing AIDS treatment drugs under CHAI’s agreements by nearly 300%, from 61,000 on treatment at the end of 2004 to over 240,000 on treatment by the end of 2005. CHAI also increased the number of partner countries and members of the Procurement Consortium who can purchase AIDS medicines and diagnostic equipment at CHAI’s reduced prices to 55.

DRAMATICALLY EXPANDING TREATMENT

Working in close partnership with governments, other non-governmental organizations, and the private sector, CHAI strives to make treatment for HIV/AIDS more affordable and to implement large-scale integrated care, treatment, and prevention programs that are helping to turn the tide of the pandemic. CHAI’s efforts to increase access to HIV/AIDS care and treatment led to dramatic geographic and programmatic expansion in 2005. By the end of 2005, the number of people accessing antiretroviral medicines (ARVs) purchased under CHAI agreements increased fourfold from the end of 2004. Over the course of the year, CHAI entered into partnerships with the governments of Cambodia, Vietnam, Papua New Guinea, and Ukraine to assist in the implementation of large-scale HIV/AIDS care, treatment, and prevention programs.

ENDS

So if Clinton was already committed by an MOU to "assisting the government of Papua New Guinea in the implementation of large-scale HIV/Aids care, treatment and prevention programs", what did Australia or the people of PNG stand to gain out of the 22 February 2006 MOU with Australia?

That's a good question.

For the first six months after the MOU was signed nothing happened.  No money flowed from Australia to the CHAI under the terms of the agreement.  The PNG Department of Health continued buying HIV drugs under the CHAI agreement and life went on its way.

In July 2009 an Independent Completion Report (an independent review) of funding to the Clinton HIV/Aids Initiative in PNG conducted an extensive field and desktop review of the program.

It described the history:

In February 2006, the Australian Government and the CHAI signed a Memorandum of Understanding. Under the agreement, the Australian Government through AusAID is to provide funding up to $25 million over four years, complemented by funding from the Clinton HIV/AIDS Initiative.

Under the MOU, AusAID agreed to fund CHAI to work with public health authorities in three countries including Papua New Guinea to scale-up treatment and care for people living with HIV and AIDS. The other countries were Vietnam and China, with an option to extend the initiative to other countries. Indonesia is the fourth country to be included.

In PNG, AusAID is supporting the CHAI to improve access to HIV and AIDS treatment. Total agreed funding is $11,080,000 for the period August 2006-2009.The goal of the CHAI in PNG is to work with the National Department of Health (NDoH) to improve clinical, laboratory and management capacity in Papua New Guinea to enable an expansion of access to antiretroviral treatment for HIV positive people.

The commencement date for funding of August 2006 is significant.

ULTRA VIRES INCORPORATION OF THE CLINTON FOUNDATION HIV/AIDS INITIATIVE INC

All foreign corporations are required to register with the PNG corporate regulator prior to doing business in PNG.

There is no record of the Clinton Foundation registering as a foreign corporation in PNG.

Screen Shot 2016-08-22 at 6.07.02 pm

On 21 August, 2006 Ruby SHANG gave notice to the PNG companies regulator that she intended to apply for the incorporation of a PNG domiciled association called the William J. Clinton Foundation HIV/Aids Initiative - PNG.

Intent_To_Apply_For_Incorporation_Of_Association 21-Aug-2006 09:34:25

Screen Shot 2016-08-22 at 6.09.41 pm

On 23 August 2006 Ruby Shang attended on the PNG companies regulator with an unsworn statutory declaration form and a clipping from the newspaper advertising her intention to apply under Section 2 of the Incorporated Associations Act for the incorporation of the CHAI Association PNG Inc.

Application_For_The_Incorporation_Of_An_Association 23-Aug-2006 11:35:21

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From the date of the advertisement, one month must elapse before the Regulator is empowered to incorporate the Association.

One of the matters the Regulator must consider is whether or not the Association's rules/objects meet the requirements of the Act.

SCHEDULE 1 – Matters to be Provided for in the Rules of an Association.

Sec. 16.

1.  The name of the association.

2.  The objects and purposes of the association.

3.  The qualifications (if any) for membership of the association.

4.  The donations or subscriptions (if any) to be made or paid by members of the association.

5.  The names, constitution, membership and powers of the general committee, board of management or other governing authority of the association (in this item referred to as “the committee”) and–

(a) the election or appointment of members of the committee; and

(b) the terms of office of members of the committee; and

(c) the grounds on which, or reasons for which the office of a member of the committee becomes vacant; and

(d) the filling of casual vacancies occurring on the committee; and

(e) the quorum and procedure at meetings of the committee; and

(f) the quorum and procedure at meetings of sub-committees appointed by the committee.

6.  The quorum and procedure at general meetings of members of the association and of sub-committees appointed by any such meeting or constituted or established under the rules of the association.

7.  The time within which, and the manner in which, notices of meetings and notices of motion are to be given, published or circulated.

8.  The sources from which the funds of the association are to be or may be derived.

9.  The manner in which the funds of the association are to be managed and, in particular, the mode of drawing and signing cheques, drafts, bills of exchange, promissory notes and other documents for and on behalf of the association.

10.  The intervals between general meetings of members of the association, the manner of calling general and special meetings and the requisite notices of meetings of the association.

11.  Whether the accounts of the association are to be audited annually or more frequently, the manner of appointing and removing auditors and the powers and duties of auditors.

12.  The manner of altering and rescinding the rules and of making additional rules.

13.  Provision for the custody and use of the seal of the association.

14.  The manner in which the objects or purposes of the association may be altered.

15.  The form, custody and use of the common seal of the association.

16.  The custody of books, documents and securities of the association.

At 8.38AM on 24 August 2006 Ruby Shang delivered to the Regulator this copy of the Clinton Foundation's articles of association from Arkansas in 1997.   They bear no relationship to the requirements of the PNG Incorporated Associations Act.

Constitution_For_An_Association 24-Aug-2006 08:38:01

Download Clinton Foundation Constitution

At 10:03AM on 24 August 2006 the Clinton Foundation HIV/Aids Initiative - PNG Inc was unlawfully incorporated.

As3 24-Aug-2006 10:03:41

PNG's Incorporated Associations Act 1966 is explicit.   There is no lawful means to incorporate an association without a meeting of the committee to authorise the application and there must be Rules in accordance with the Act - as well as a one month waiting period after the notice of intention to incorporate is advertised.

 

SPECIFIC OFFENCES

The Registrar

The Registrar acted unlawfully as a public official in incorporating the Clinton Foundation HIV/Aids Initiative - PNG Inc in that

It did not meet any of the prescribed qualifications for incorporation set out in the Act

“the prescribed qualifications for incorporation” in relation to an association, means–

(a) that the association–

(i) is formed; or

(ii) is being formed; or

(iii) is operating,

for the purpose of–

(iv) providing recreation or amusement; or

(v) promoting commerce, industry, art, science, religion, charity, pension or superannuation schemes or other objects useful to the community; and

(b) that the association will apply its profits (if any) or other income in promoting its objects; and

(c) that the association will prohibit the payment of any dividend or payment in the nature of a dividend to its members;

 

He incorporated the entity beyond his powers by granting the incorporation within hours rather than the mandatory 30 day waiting period set out in the Act.

He incorporated the entity without any evidence that the Association existed, or that the Association had a Committee to authorise the Applicant to make the application.

He incorporated the entity without any Rules or Objects at all being presented or filed.

 

Ms Ruby Shang of 'America'

Ms Shang and others associated with the Clinton Foundation might reasonably be suspected of involvement in a combination that led to influence, pressure or some inducement that caused the PNG Regulator to act as he did in the unlawful incorporation of the Association.

At every step of Ms Shang's representations to the Regulator in writing, fraud, dishonesty and misleading or deceptive conduct is present.

There was no existing association to form a committee to authorise her to make the application.

The Association was not formed for the purposes set out in the prescribed qualifications for incorporation in the Act.

While specific offences are disclosed in both Shang and the Regulator's conduct, it would appear that the beneficiaries to the course of conduct in PNG may include persons associated with the Clinton Foundation in the United States of America.

The Royal Papua New Guinea Constabulary may examine whether the conduct suggests a conspiracy to achieve the unlawful purposes associated with this unlawfully incorporated entity.

Yours sincerely,

 

Michael P. Smith

 

 

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