Chinese aid funded  $1 million bribe to former PNG leader, Somare

 Jun 3, 2018

Chinese aid money was used to fund an alleged $1 million bribe to the then prime minister of Papua New Guinea, Sir Michael Somare, as part of Beijing's push to exert greater influence in the Pacific.

Fairfax Media has confirmed the bribery was uncovered by PNG authorities and later confirmed by Singaporean anti-corruption investigators. Details of the payment to Mr Somare are contained in Singaporean court documents released late last year. They show the bribe was part of a $4.7 million slush fund established by Chinese phone company ZTE in 2010 to ensure it was awarded a contract in PNG.

The bribes were paid out of a $US35 million concessional loan from the Export-Import Bank of China and support claims Beijing's aid money has been used to corrupt and control small nations in the region.

Sir Michael Somare, former prime minister of Papua New Guinea, in 2011.  Nic Walker

A former PNG official aware of the alleged bribery said it appeared to form part of an "expansionist" drive by Beijing across developing nations in the region and which, over the past 18 months, has ramped up under Chinese leader Xi Jinping's Belt and Road Initiative.

China's rapid push into the Pacific over the past decade has alarmed many in Canberra and forced the federal government to refocus on the region in recent years, including stepping up aid funding.

As it cuts broader development assistance, the Turnbull government has moved back into the financing of infrastructure, including an undersea internet cable to PNG, as it seeks to counter Beijing's growing influence.

Mr Somare has disputed the corruption allegations, but it is understood efforts by PNG anti-corruption investigators to comprehensively investigate the former prime minister stalled due to political pressure and the disbanding in 2016 of the PNG's integrity watchdog, Taskforce Sweep. However, Singaporean officials used leads gathered in PNG to launch a money laundering prosecution that led to multiple convictions of key players in the corruption scheme, while identifying but not charging Mr Somare as the most powerful beneficiary of the dirty funds.

That ZTE was used to channel bribes to the highest levels of the PNG government will further complicate efforts by the phone company to unwind a crippling ban by the Trump Administration as part of its trade war with Beijing.

ZTE, which is in the running for two major contracts in Australia, was central to the money laundering conspiracy that saw two people jailed in Singapore.

ZTE is asking the Trump Administration to loosen sanctions against it. MANU FERNANDEZ

The Singapore judgment, which was only made public late last year, also provides further evidence of institutionalised bribery within ZTE, and adds to earlier reporting by Fairfax Media which has linked the company to corruption in 18 countries and allegations it was established partly as a front for Chinese military intelligence.

The Singaporean judgment catalogues how money was routed by ZTE through the British Virgin Islands and then to Singapore for the payments.

The court heard how ZTE's representative in PNG, Stephen Li Weiming, "initiated discussions" with Mr Somare over the matter of "commissions".

"The agreement was that no one should take more than [the] PM and [his] son combined," said one of the defendants, Thomas Doehrman, an American who is currently serving a five-year and 10-month jail term for his part in the money laundering conspiracy.

The court found $US784,000 ($1.03 million) was transferred to the personal Standard Chartered bank account of Mr Somare in Singapore by ZTE. The payments were made between August and September 2010.

"The money to be paid to [the] PM [of] PNG was a form of gift to him by ZTE Corporation so that the operations of the contract would be smooth," Mr Doehrman told the court.

"Part of the monies would be used to pay PNG officials in the course of their dealings with ZTE Corporation."

The court heard the slush fund was established to ensure ZTE won the $US36 million contract to provide telecommunications services for an education project across the highlands of PNG.

When the charges against him surfaced in 2016, Mr Somare said at no time during his political career had he received bribes or inducements.

"At first glance these charges say otherwise. Therefore, during the next few days, I will consult with my family and legal counsel and consider how to address this matter," he said.

Mr Somare, known as the founding father of PNG, served as Prime Minister three times since independence in 1975. Most recently he led the country for a nine year period until 2011 before being defeated by current Prime Minister Peter O'Neill at the 2012 election.

Australia's Minister for International Development, Concetta Fierravanti-Wells, criticised China's aid program in January, saying it often resulted in "white elephant" projects.

"You've got the Pacific full of these useless buildings which nobody maintains, which are basically white elephants," she said.

Mr Somare could not be reached for comment.