THE INDEPENDENT STATE OF PAPUA NEW GUINEA
PUBLIC ACCOUNTS COMMITTEE
INTERIM FINDINGS
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
PUBLIC ACCOUNTS COMMITTEE
INTERIM FINDINGS
SALE AND EXPORT OF
THE SWAMP GHOST
AIRCRAFT AND WAR
SURPLUS MATERIALS
1. The Public Accounts Committee finds that the on all the evidence before it, the Contract between Aero Archaeology LLC and the PNG National Museum & Art Gallery is a Contract of Sale of a B17 aircraft known as the Swamp Ghost.
2. The effect of that contract is to pass title of the Swamp Ghost Aircraft to a foreign buyer. 100% of the State's ownership of this aircraft wreck has been sold by the PNG National Museum & Art Gallery.
3. The Public Accounts Committee finds that the PNG National Museum & Art Gallery has no power to sell the swamp Ghost Aircraft, or deal with War Surplus Materials.
4. The PNG National Museum & Art Gallery cannot enter Contracts to bind the State. It is a Corporation in its own right but is not an agent of or representative of the State – particularly in respect of the sale, salvage, removal or export of State-owned property.
5. The State of Papua New Guinea still owns the Swamp Ghost and no effective Contract of Sale, salvage, removal or export has been formed nor could the Museum do so.
6. Any purported contract between MARC and the PNG National Museum & Art Gallery to purchase and remove the Swamp Ghost Aircraft was illegal, unenforceable and invalid.
7. We also find that a previous attempt to export the aircraft was refused by the Government of the day.
8. The assignment of that contract form MARC to Aero Archaeology LLC may or may not have been valid, but certainly the Museum had no power to approve the assignment.
9. The assignment of the benefit of the Contract from MARC to Aero Archaeology Limited has not affected in any way the position of the State of Papua New Guinea.
10. It still owns the Swamp Ghost Aircraft and the PNG national Museum & Art Gallery have no power at all to deal with, sell, approve the removal or export or in any way to make any decision affecting the Swamp Ghost Aircraft without the appropriate delegation – which, so far as this Committee can discover, does not exist. Nor is it claimed by the Museum.
11. The Swamp ghost aircraft should be immediately seized by the State and protected and preserved until a decision can be made as to its future.
12. A full refund of all monies paid to the PNG national Museum & Art Gallery should be made to MARC and/or the lawyers representing Mr. Fred Hagen and/or Aero Archaeology Limited.
13. The property of the State can only be disposed or sold in accordance with the terms of the Public Finance (Management) Act and/or Financial Instructions promulgated thereon.
14. The solicitor General, in 1998, quite correctly pointed out this fact to the PNG national Museum & Art Gallery which, in its dealing with Aero Archaeology Limited, it completely ignored.
15. The solicitor General rightly advised the PNG National Museum & Art Gallery that a primary decision to sell or dispose of State property must be made, followed by a process of writing off after inspection by a Board of survey and, unless exempted, sale by Public Tender and placement of proceeds received in an approved Trust Account.
16. Certainly, for State property which the Museum itself described as "unique" and "priceless" the tender process is completely appropriate. Attempts have been made by the Acting Director of the PNG National Museum & Art Gallery to show that the Museum is exempt from the terms of the Public Finance (Management) Act and its requirements, but this Committee does not accept the justification or the reasoning advanced by the Museum.
17. This Committee has very carefully considered a large number of documents placed before this Committee dealing with the export of the Swamp Ghost Aircraft.
18. The committee has reached the view that, on all the evidence, there has been a concerted attempt to illegally obtain State property by virtually any representation, promise or undertaking which the parties deems it expedient to give it any particular time.
19. The export of this aircraft has been the subject of three submissions. Two were to the National Executive Council and one was a Briefing Paper to the Prime Minister. A further Briefing Paper to the Minister has been delivered to this Committee. Each of those documents is contradictory and, in some cases, self-contradictory. Whatever representation seemed to be capable of attracting political favour from a decision-maker or to obscure the facts, was given quite irrespective of the truth.
20. That course of conduct continued before the current Board to Trustees who, so far as we can ascertain, acted in good faith but under personal and quite improper duress when approving the sale and export – which they have no power to do in any event.
21. Many of those Statements originated from the individuals working for or on behalf of Aero Archaeology Limited, but many were also the product of the Deputy Director of the Museum and the Museum staff.
22. So far as this Committee can ascertain, the fact that the State property had been sold was never made known to the Minister, the Board of Trustees, the NEC or the Prime Minister. This failure is inexplicable.
23. The Board of Trustees of the Museum both past and current approved the actions f Management in selling the swamp Ghost and permitting its export. The trustees have no apparent power to do so.
24. This Committee has ascertained that the Board of Trustees were never told that the Contract was one of sale, never sighted the contract or the Agreement, knew nothing of the purchaser, were actively misled as to the intentions of the purchaser, were not told of an independent valuation, were told that there was no alternative tot eh export, were never told that the export of the aircraft had previously been refused were led to believe that the aircraft remained the property of the State and would either be returned to Papua New Guinea or would be under the control of the Government of Papua New Guinea and that they could dictate certain preconditions to the export and/or the terms upon which the purchaser would hold the aircraft.
25. The fact that the Board of Trustees was deliberately left in such ignorance by Management is a matter of very serious concern.
26. Further, the current Board of Trustees were threatened with personal litigation by the purchaser unless they agreed to approve the sale and export. That foreigners can affect the decision of the Board of Trustees in such a way is a matter of very great concern to this Committee. It shows contempt for the Law of Papua New Guinea and for a Board of Trustees of a scientific institution.
27. It has become apparent to the Committee that the museum failed even to comply with it sown Guidelines in agreeing to the sale, salvage and export of the Swamp Ghost Aircraft. We can find no inquiries of either MARC or Aero Archaeology LLC which begin to satisfy the requirements of the Guidelines.
28. The Museum failed to detect at least the following matters: -
• The Purchaser had never owned an aircraft;
• The purchaser had exported one aircraft from PNG without holding a permit or approval;
• The purchaser had used a third party as an agent to obtain aircraft from PNG;
• The Purchaser had no history of aircraft restoration; or
• The Purchaser had no facility or exhibition capability;
• The Purchaser had no ability to restore;
• The Purchaser had never restored an aircraft;
• The Purchaser had no history in the aviation industry;
• The purchaser had no apparent plans for the aircraft other than to obtain it;
• The Museum had no power to approve an assignment of the contract;
• The Museum had no power to act as an agent of the State or to sell State property;
• The Purchaser as a foreign enterprise, was not certified to do business in this country;
• The Purchaser had no salvage permit or authority from the Museum or anywhere else;
• The Purchaser actively misled the Museum and thereby the Minister, the NEC, the Prime Minister and this Committee into believing that the aircraft would be housed and restored at March Field Museum in California;
• No Police clearances or reference material was obtained by the Museum;
• The purchaser dealt directly with the Landowners in contravention of the War Surplus Act;
• No competent or coherent proposal for the aircraft was put to the Museum by the Purchaser;
• The proposals for the aircraft changed according to the person for office to which they were made;
• The Purchaser's co-shareholder and salvor of the aircraft was the individual who performed the "independent" valuation relied on by the PNG National Museum & Art Gallery when fixing a value to the Swamp Ghost;
• There was no transparency to the transaction;
• The Museum had no information at all on comparative sales or valuations nor did it seek any;
• The Museum ignored advice from the Solicitor General and failed to comply with the Public Finances (Management) Act and Financial Instructions;
• Legal advice was not given to or sought by the Trustees;
• The Museum had no power to deal with the purchaser at all and no power to enter any transactions;
• The Trustees had no power to consider or approve the transaction;
• No delegation had ever been given – nor was claimed by the Museum to empower it to sell State property – or even to approve salvage or removal;
• The Museum had acted ultra vires its own Act;
• The contract was illegal and unenforceable;
• Consideration was inadequate or non-existent;
• That 100% of the states ownership was sold;
• State approval for export of the swamp Ghost had already been refused for MARC – the original contracting party – a fact not made known to the Board of Trustees.
29. Had the Museum made even basic inquiries would have discovered that the Purchaser did not begin to satisfy the Museum Guidelines, was not a Museum or entity which had any capacity at all to restore or deal with such a valuable artifact.
30. Further, the Museum commissioned an independent valuation of the Swamp Ghost Aircraft. That valuation was prepared by Mr. Greinert – himself a salvager and the salvager used by the Purchaser of the Swamp Ghost Aircraft. As we have already said, he is a shareholder of Aero Archaeology Ltd.
31. Curiously, the valuation coincided with the amount paid by Aero Archaeology LLC. Further, the Agreement with Aero Archaeology Limited contains no consideration for the sale of the aircraft. Legal advice received by this Committee is that the Contract would fail for that reason alone.
32. Further, Mr. Greinert had a history of salvaging for with or on behalf of Mr. Fred Hagen quite irrespective of the fact that the state of Papua New Guinea owns all War Surplus Material which he was salvaging and exporting for HARS. HARS and/or Mr. Greinert appear to be acting as agents for wealthy collectors irrespective of the terms of their agreements with the Museum.
33. Further, the copy of the contract given to the Committee is undated. Title to the aircraft passes when the contract is executed but in the absence of any date of execution, title has not passed.
34. In summary, the actions of the Museum in selling the Swamp Ghost is unlawful. The Museum has been given ample opportunity to show the Committee how it has power to sell State property, but has failed to assist us. The purchaser has been given the same opportunity but has refused to assist the Committee.
35. The entire transaction was facilitated by worthless documentation and threats to the Trustees.
36. The Contract is disallowed. The Swamp Ghost was, is and should remain State property.
37. What happens to the aircraft is a matter for Government – not the Museum.
38. Ultimately it may be that this aircraft is to be sold by the State. That decision must be made by Government and activated in accordance with the Public Finance (Management) Act and Financial Instructions.
39. This is a significant historical artifact worth many millions of US Dollars.
40. If decision is made to sell and if all steps are taken under the Public Finances Management Act to write off and offer for sale, a Public Tender is a thoroughly appropriate method of fixing a valuation to the aircraft.
41. However, it is the recommendation of this Committee that the Independent State of Papua New Guinea never dispose of ownership of this aircraft to any degree – and certainly not to a private individual or collector.
SALVAGE AND EXPORT OF WAR SURPLUS MATERIALS:
42 The Swamp Ghost Aircraft is the only aircraft which, to the knowledge of this Committee has been "sold" by the Museum.
43. However, the Committee has identified approximately 82 other aircraft or parts of aircraft that have been salvaged and exported from Papua New Guinea with the full complicity of the PNG National Museum & Art Gallery.
44. Ownership of all that material remains with the State of Papua New Guinea. This Committee finds that there are 4 major salvagers that have been operating in Papua New Guinea with the assistance of the PNG National Museum & Art Gallery.
45. This Committee finds that he PNG National Museum & Art Gallery had now power at all to action or permit salvage, removal or export of War Surplus Materials Pursuant to the War Surplus Materials Act. There is no delegation given to the Museum and neither the Museum nor any other party could or would assist this Committee to identify any statutory head of power enabling the Museum to deal with aircraft wrecks and other War Surplus.
46. It is this committeeÕs tentative finding that the War Surplus Materials Act, while it is administered by the museum, still codifies the method by which the State permits the salvage, removal and export of War Surplus Materials.
47. That power is give to the Head of State acting on advice. As that term is used, we understand to mean the Governor General acting on the advice of the NEC.
48. This committee finds that there has been an ongoing international trade in War Surplus Material illegally obtained and exported from Papua New Guinea with the full connivance of the museum.
49. We find that two and possibly three of the salvors operating in this country have engaged in conduct which is unlawful and have dealt in State property by on selling it to their own profit and with no regard at all to the terms of their Memorandum of Agreement with the Museum (which is probably unenforceable and illegal) or the War Surplus Materials Act.
50. This committee has traced a very large number of aircraft into private hands, museums and collectors. All those materials are the property of the Independent State of Papua New Guinea.
51. Some of that material has been sold on the open market by salvagers and it is the intention of this committee to refer those transactions and the salvagers or their agents or the vendors of the War Surplus Materials to the Royal Papua New Guinea Constabulary, Foreign Police Forces and International Law Enforcement Agencies for full and complete investigation.
52. We will also intend to refer all management and officers of the PNG National Museum who have been engaged in facilitating this export of State property for investigation and prosecution – if any breech of the criminal law is detected.
53. It is the recommendation of this Committee that the Board of Trustees and Management of the Museum immediately obtain expert legal advice as to their position. All existing Memorandums of Agreement for the sale, export, removal or salvage of War Surplus Materials should immediately be suspended as illegal and unenforceable.
54. We are concerned at the recalcitrant attitude of Management of the National Museum. Trustees directives are ignored, illegal transactions are carried on and it appears to us that the Museum serves the interests of foreign salvors of dubious background and intentions over and above their charter – which is to protect the cultural heritage of the nation.
55. We can properly conclude that this institution is the worst and most incompetently run of any that has been before us. To compound the illegality that we have detected, the Management has acted in a devious and squalid manner before this Committee.
56. Yesterday the Management of the Museum made very serious allegations against a Member of this Committee – clearly in an attempt to compromise this Committee.
57. We had directed that all such material be produced to this Committee, but this information was deliberately held back.
58. This committee finds the allegations to be baseless and false. We will refer the Managers involved for full investigation and prosecution. We will also send a copy of these findings to the relevant Ministers with a recommendation that the Management of the Museum involved in this matter be removed immediately.
59. There should be no more sale, salvage, removal or export of War Surplus Material until the Government has had the opportunity to establish firm policy and to amend the legislation as required. We ask the board of Trustees to note this finding.
60. Further, to assist the remainder of this Inquiry, we strongly recommend that the Trustees engage an independent audit of all specimens, exhibits, art, collections in the Museums possession since Independence to establish where those things now are.
61. This Committee recommends that the Government of Papua New Guinea immediately elicit assistance from the Australian High Commission, the United States Government, the New Zealand Government, UNESCO, International Law Enforcement Agencies and domestic and Foreign Law Enforcement Agencies to trace each and every piece of War Surplus Material that has been exported from Papua New Guinea and reassert the ownership of the State in perpetuity.
62. It does appear to this Committee that salvagers of War Surplus Material from Papua New Guinea may have on sold material to buyers who purchased in good faith.
6.3 The Government of Papua New Guinea should, when reasserting its ownership of aircraft, or aircraft parts or any War Surplus, take into account the fact that Papua New Guinea cannot house, exhibit or maintain such material at the present time and that innocent buyers may have expended considerable money in restoring and exhibiting aircraft.
64. State ownership in this sense, may require long term arrangements with collectors or Museums to enable those entities to recoup their expense but always protecting the ownership of the State of Papua New Guinea of these war relics.
65. This Committee finds that the salvagers are not certified to carry out business under the Investment Promotion Act. Whether their activities constitute a breach of that Act is a matter for the IPA and a referral will be made in this regard.
66. Further, the Public Accounts Committee has sought assistance from the Office of the Attorney General and the Office of the Solicitor General to preserve the Swamp Ghost in Papua New Guinea until this Committee had completed its Inquiry. We received no assistance whatsoever.
67. This committee will refer the Acting Attorney General and the Acting Solicitor General to the Ombudsman, to the Department of Personnel Management and to the Papua New Guinea Law Society for full and complete investigation of this failure.
68. We extend 7 days to various parties to show caused why this committee should not make referrals or take certain enforcement steps. A fuller and more complete report will be provided to the Parliament by this Committee in the near future.
69. It is also the recommendation of this committee that henceforth all War Surplus Material should only be allowed to leave Papua New Guinea to pass into the hands of reputable, state-approved Museums capable of restoring and in circumstances where the ownership of the Independent state of Papua New Guinea remains completely protected for all time.
70. Neither the State nor the Museum should ever again sell o give State property to persons or entities of dubious background and uncertain intentions. At the very least recognition of and compliance with the Laws of Papua New Guinea should be insisted on and full and complete investigation of the foreign interest should be made.
71. It is the recommendation of this Committee that the PNG National Museum & Art Gallery immediately cease all and any dealings with foreign salvagers – or indeed any salvagers – until a political decision is made concerning the export of War Surplus.
72. We also recommend that the War Surplus Materials Act be immediately updated to effect full protection to this material again.
73. The only exception tot these comments is a Museum called Classic Jets Museum. That private institution has been extremely helpful to this Committee and appears to be an entity of good repute.
74. Finally, the degree of influence wielded by foreigners in the Museum is a matter of concern. Clearly the sale of war surplus is big business.
75. This Committee has heard extraordinary evidence of the conduct of foreign salvors including threats to a Board of Trustees, assault and misrepresentation.
76. We conclude that the sale of the Swamp Ghost was characterized by a willingness to make any representation or promise that seemed expedient at the time. We conclude that the characters involved in this transaction were prepared to say and do anything that was necessary to secure their prize.
77. That such blatant illegality could take place in a scientific institution is beyond our understanding. The Museum was described by a Trustee as a "national disgrace" and we agree.
78. We intend to delve much more deeply into the Museum in future hearings.
REFERRALS
The committee having considered the evidence and the power of referral makes the following reffals to the appropriate agencies for further investigation and possible prosecution of individuals or companies involved with or in the sale, removal and export of the Swamp Ghost aircraft.
At the expiry of 7 days the committee refers:
A full and complete Parliamentary Report will be made in the near future. All parties have 7 days to make any further submissions to this Committee.
This Inquiry is adjourned to a time and date to be notified.