Mismanagement of Vanuatu Livestock Development Ltd by the Formet Manager Selwyn Leodoro in 1992-1993 [1999] VUOM 11; 1999.11 (23 July 1999)

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MISMANAGEMENT OF THE VANUATU LIVESTOCK DEVELOPMENT LTD BY THE FORMER MANAGER, SELWYN LEODORO IN 1992 – 1993 AND ILLEGAL CONDUCT OF THE FORMER CHAIRMAN OF THE BOARD,
TOM KALORIB

PUBLIC REPORT ON THE MISMANAGEMENT OF THE VANUATU LIVESTOCK DEVELOPMENT LTD BY THE MANAGER, SELWYN LEODORO

'He that is faithful which is least is faithful also in much: and he that in unjust in the least is unjust also in much. If ye have not been faithful in that which is another man’s, who shall give you that which is your own...'

The farming enterprise known as Vanuatu Livestock Development Ltd was a fine establishment capable of the production of hundreds of saleable stock. However, our investigation has shown a series of unwise decisions, appointment of incompetent or indifferent people to positions of authority, and an overall failure to follow rules of good stewardship.

The result was that dishonesty was not exposed or dealt with appropriately, so that yet another of the assets of the people of Vanuatu was sacrificed.

Vanuatu Livestock Development (VLD), a Government owned company, was considered before and after independence to be a model farm. It was intended to breed improved stock of heifers and bulls to be supplied to farmers to improve their herd. The experiment produced quality cattle. This reflected years of careful planning and methodological work.

Our investigation shows that in the 19 months of Mr Leodoro’s management, this asset of the people of Vanuatu and all the work done previously was basically sacrificed following a series of unwise decisions, appointment of incompetent or indifferent people to positions of authority and an overall failure to follow rules of good stewardship.

The Ombudsman commenced an enquiry following a complaint from a Minister alleging defective administrative practices by the former Manager of the Vanuatu Livestock Development Limited (VLD), Selwyn Leodoro. The allegations also included the former Chairman of the Board of Directors for VLD, Mr Tom Kalorib and the former Minister of Agriculture and Livestock, the late Onneyn Tahi.

From 1538 heads in 1992, the stock fell to 524 heads in 1993. The expected stock was 1632 heads.

He got rid of 1214 heads in 19 months a record considering that he was advised to sell 600 heads

By the time Mr Leodoro was suspended, there was virtually no money in the bank, very few cattle left and the farm and its assets were in a dilapidated condition.

∑ When Mr Leodoro was appointed there was Vt 12,255.882 Vatu in the Bank after careful management of the former manager, the Australian citizen Me Edwin Black. Mr Leodoro used 11 million of that money, mainly in cash from the bank during his terms leaving only Vt1.259,418 left.

∑ Mr Leodoro was not able to give reasonable explanations to the Board or to the Ombudsman as no financial records were kept, and as cash was used. Mr Leodoro admitted burning the accounting records when he was suspended.

∑ Mr Leodoro caused serious damage to the VLD’s truck under the influence of alcohol (was convicted for being drunk and driving). He was never asked to pay for the damage.

∑ He lost Vt 1,260,000 Vatu in an unfair exchange of heifers against pigs which were later shipped to the Minister’s plantation, the late O Tahi, without payment and some were distributed to the staff.

∑ He entered an overvalued contract of Vt 8,300,0000 to repair the staff houses. The contract was not tendered. And VLD overpaid apparently VT2,900,000 according to a later study made by an adviser.

∑ He continued using the supermarket account of the Company for food even after he had been suspended.

∑ Mr Leodoro’s actions were in breach of his contract, illegal, blatantly unreasonable and are the main cause of the damage caused to that model farm

Our report recommends for all the parties involved not to be considered for public appointment especially Ms Tom Kalorip and Selwyn Leodoro and for the Ministries responsible and the Attorney General to consider what legal actions could be initiated to recover some of the monies lost by VLD and finally for the Police and Public Prosecutor to consider the allegations of misappropriation against Mr Leodoro.

1.1 The Constitution and the Ombudsman Act allow us to look into the conduct of any governmental body that is wholly or mainly supported out of public moneys of Vanuatu. This includes Vanuatu Livestock Development Limited (VLD) a government investment. We can also look into defective administrative practices, including the conduct of the former Manager for VLD, Selwyn Leodoro, and the former Chairman of the Board, Tom Kalorib in mismanaging VLD.

2.1 The purpose of this report is to provide an opportunity for you to respond to its contents and, if possible, to resolve outstanding issues before this Office issues a public report.

2.1 The scope of this investigation is to establish the facts about the mismanagement of VLD and to determine whether the conduct of Selwyn Leodoro and Tom Kalorib were reasonable and whether their administrative practices were defective.

2.1 This Office collects information and documents by informal request, summons, letter, interviews and research.

(1) For the purposes of Article 62 (1) of the Constitution, in addition to the functions of the Ombudsman specified therein, the Ombudsman may also -

(a) enquire into, either on complaint of a person or body referred to in Article 62 (1) (a) and (b) of the Constitution or on his own initiative, any conduct on the part of - ...

4.1 The Vanuatu Livestock Development Ltd (VLD) is a government owned investment. As the government is the only shareholder, the Minister of Agriculture and Livestock, on behalf of the government, appoints the Board of Directors.

4.2 The Minister for Agriculture and Livestock during the period under investigation was the late Mr Onneyn Tahi (Minister). The late Minister was Mr Leodoro’s brother-in-law.

4.3 On 5 May 1992, Selwyn Leodoro (Mr. Leodoro) applied for the position of Manager for VLD. See annexure '1'. Two applications were received by the Board, the other was from Mr Black, the then existing Manager. Mr. Leodoro had no demonstrable skills or qualifications in managing a livestock breeding property of this size. His only related experience was as a former political secretary in various Ministries including four (4) months with the Ministry of Agriculture and Livestock. Mr Black had the appropriate experience.

4.4 At a Board of Directors’ meeting of 20 May 1992, some of the members reluctantly appointed Mr Leodoro as a counterpart Manager to the Manager, Mr. Black. An extract from the Board meeting reads as follows:

'VLD Manager Post. The Board looked at the two applications and expressed, concern over the future well-being of VLD, however, following the Minister’s instructions, the Board appointed Selwyn Leodoro as counterpart Manager of the Vanuatu Livestock Development effective 21 May 1992. The Board further decided that the Board members will draw up quarterly work plans to assist the new Manager. These work plans will be ratified at the next Board'.

4.5 The following Directors were present at the meeting which appointed Mr Leodoro as counterpart Manager. Tom Kalorib (Chairman), Phillip Dovo, Charles Rogers and Franklyn Kere. See annexure '2'.

4.6 Two weeks later, at a Board meeting of 11 June 1992, Directors Tom Kalorib (Chairman), Thomas Bangalini and Phillip Dovo resolved to change Mr Leorodo’s previous appointment from counterpart Manager to Manager. Accordingly, a two-year contract was awarded to Mr Leodoro back-dated to 21 May 1992. Mr Black was dismissed.

4.7 On 11 June 1992, Mr. Leodoro signed a 'Contract of Employment' (see annexure '3'). The relevant sections of the contract relating to the Manager’s responsibilities is as follows:

During the Employment the Employee shall devote his full time and attention to, and shall use his best efforts in furtherance of the prosperity, development, reputation and business of the Company and shall not without written consent of the Board of Directors of the Company, engage directly or indirectly in any other business or occupation, and such consent may be subject to such conditions and restrictions as the Board of Directors shall deem fit.

The Employee shall perform such services and duties as may be notified to him from time to time by the Board of Directors of the Company and shall observe all lawful and reasonable orders, instructions, rules, regulations and directions given to him by the Board of Directors of the Company from time to time. Such
services shall include the management of all aspects of the property trading as Vanuatu Livestock Development Company including:

(b) Carry out other directives from the VLD Board regarding specific matters arising from time to time;

(d) Involvement in managing and training the company’s staff including hiring and firing;

4.8 The 1991 Financial Report for Vanuatu Livestock showed a closing stock count for cattle at one thousand four hundred and forty four (1444) heads at a value of Vt27,743,000.

4.9 Following normal company management programs and planning, and using the opening balance of one thousand four hundred and forty four (1444) heads, as at June 1992 the stock count per head of cattle should have been one thousand five hundred and thirty eight (1538) heads. By June 1993, following the company’s projections, the stock count should have been one thousand six hundred and thirty two (1632) heads.

4.10 On 5 November 1993, a management report was submitted to the Board with the results of a stock census that had been undertaken by the Livestock people. According to this report, there were only five hundred and twenty four (524) heads remaining. Cattle census results as follows:

Bull	Cow	Heifers	Veal (M)	Veal (F)	Steers	Total
69	279	21	73	54	28	524

4.11 From June 1992 to November 1993, cattle stock numbers at VLD declined from one thousand five hundred and thirty eight (1538) to five hundred and twenty four (524) heads. The total number of cattle depleted during the 18 months of
Mr Leodoro’s term as Manager was one thousand two hundred and fourteen (1214) heads.

4.12 The normal average annual sale of cattle from VLD was two hundred and eighty one (281) beasts. Therefore, the above figures (5.1) show an annual disposal of eight hundred and fifty seven (857) heads; more than three times the average figure. The sale of about one thousand two hundred and fourteen (1214) cattle would have been about Vt14,000,000 to Vt15,000,000.

4.13 At the 15 December 1992 Board meeting, the Board requested Mr Leodoro to undertake a stock count from 11 – 15 January 1993. See annexure '4'.

4.14 In a report submitted to the Board on 15 December 1992, Mr Leodoro estimated that the stock number of June 1992 was one thousand and thirty eight (1738) heads. He also reported that about two hundred and thirty seven (237) heads had been slaughtered between June and November 1992. There was a natural increase of four hundred and eighty (480) cows. Following these calculations, the stock balance therefore for December 1992 should be one thousand nine hundred and forty three (1943) heads.

4.15 According to Mr Leodoro’s report, abut 600 cows would be slaughtered producing an estimated income of Vt15,000,000 for VLD.

4.16 Given that the normal projections for the company reflects Mr Leodoro’s report to the Board (with some minor variations), the astonishing fact was, at the end of
Mr Leodoro’s term, none of the estimations in relation to stock numbers and income from the sale of the beasts were fulfilled.

4.17 There was no annual shareholders’ meeting during this period. There was also no Annual General Meeting contrary to section 132(1) of the Companies Act.

4.18 From 21 May 1992 to November 1993 (18 months period), only three Board meetings were held. One was held on 11 June 1992 and another on 15 December 1992.

4.20 On 29 May 1993, the former Chairman, Mr Kalorib without the knowledge and approval of the Board signed an authorisation with the former Minister, the late
Mr Tahi authorising Mr Leodoro to be the sole signatory for all VLD bank accounts. The text of letter to the bank is reproduced below:

Please refer to the above matter and find attached hereto the relevant resolutions authorising Mr. Selwyn Leodoro, General Manager of VLD to sign the Company’s bank documents.

4.21 The purported resolution attached to the letter was an invalid document, of a copy of Minutes of a purported Board meeting at which it was resolved that Mr Leodoro was to be the sole signatory for all the company’s bank accounts.

4.22 The resolution was invalid as the late Minister was not a Director but a shareholder. As such, he had no authority to act as a Director. The supposed meeting, therefore, was without a quorum as Mr Kalorib was the only member present. Clearly, Mr Kalorib acted without the approval of the Board. Minutes of the meeting were recorded as follows:

(1) Mr. Selwyn Leodoro, General Manager of VLD Ltd is authorised to Co-sign all bank documents belonging to the VLD Ltd;

(1) Mr. Selwyn Leodoro is authorised to sign all bank documents alone (single signature) for amounts not exceeding Vt200,000;

4.23 With the authorisation to operate the VLD bank accounts, Mr Leodoro withdrew more than Vt4,000,000. He withdrew the money without the knowledge and approval of the Board and he gave no explanation as to how the money was used.

4.24 Regarding the fast decline in stock numbers, there were no records at all to verify sales and no receipts were issued to verify whether full payment had been made for the sale of stock. The bank records, however, showed that Vt24,240,983 was deposited during the period investigated. In the absence of any verification, it may be presumed that some of that amount was from the sale of cattle.

4.26 Mr Leodoro never prepared any monthly returns to verify expenditure and sales during his term. There were no proper financial records kept.

4.27 From May to October 1993, Mr Leodoro operated the VLD account as his own. On 31 May 1992, VLD had the following balances in its two accounts:

By 11 November 1993, when the government terminated its contract with
Mr Leodoro, VLD had the following balances in its two accounts:

4.28 Total cash with the bank decreased by Vt10,996,464, from June 1992 to November 1993. In the same period, 'cash' cheques for Vt5,964,040 were issued. No verification for these 'cash' cheques was produced to explain where the money had gone to.

4.29 When Mr Leodoro was the sole signatory, 'cash' withdrawals totalled Vt4,452,771. See annexure '6'. Again, no records of expenditure was found. The Board gave no approval and often had no knowledge of these transactions.

4.30 Under Mr Leodoro’s mismanagement and while he was the sole signatory of the VLD account, analysis revealed that the number of 'cash' cheques issued increased from about two (2) to about sixteen (16) per month. For twenty two (22) days in August 1993, fifteen (15) 'cash' cheques totalling Vt768,050 were drawn. For twenty two (22) days in September 1993, seventeen (17) 'cash' cheques to the value of Vt1,170,000 were issued. This means Vt44,000 was drawn each working day apart from the cash cheques drawn for salaries and wages. Although some of the 'cash' withdrawals were for payments of the suppliers in the normal course of the company’s operations, they were not properly accounted for and many of these withdrawals were not accounted for at all.

4.31 Mr Leodoro operated the VLD accounts without the knowledge and approval of the Board. Some of the casino staff of the Club Vanuatu, testified that Mr Leodoro was a frequent visitor and user of their gambling facilities, even in working hours. Some VLD workers also testified that Mr Leodoro used to take them around Port Vila in the VLD vehicle, during office hours, to visit pubs and kava bars.

4.32 ON 21 October 1993, the Hon Willie Jimmy, former Minister for Finance wrote to the Managing Director of ANZ bank to immediately freeze the current VLD operational account and any savings and fixed deposit accounts until further notice.

4.32 The Board of Directors did not approve the renovation of the staff houses nor approve the contract with Mr Guillain to do the work. Proper tender procedures were not followed.

4.33 In June 1992, Mr Kalorib without the approval of the Board authorised the renovation of staff houses. The unauthorised contract cost VLD Vt8,317,655.

Maintenance work for:
1	Quote No 28	Director’s house	Vt1,296,720
2	Quote No 29	Deputy Director’s house	Vt1,444,360
3	Quote No 30	Shem’s house	Vt1,186,430
4	Quote No 31	Nasse’s house	Vt1,184,510
5	Quote No 32	Labourer’s quarters	Vt1,919,790
6	Quote No 33	Wash house	Vt 682,200
7	Quote No 34	Chief Mechanic’s house	Vt 548,145

4.35 On 3 July 1992, Vt4,000,300 was paid to Mr Guillain as part payment for the work.

4.36 On 23 July 1992, only one month after the submission of quotes, the final payment of VT4,317,955 was made.

4.37 On 7 June 1997, after Mr Leodoro’s termination, an independent assessment by the Department of Works was conducted to evaluate the real cost of the renovations that Mr X undertook. A copy of the report is annexed as annexure '7'.

4.38 According to the Public Works’ assessment, the total value of work done should have been about Vt5,350,000. The estimation was made with a 90% accuracy and it would be the value quoted for similar work to date. The difference between money paid to Mr X and the Public Works assessment showed that VLD was overcharged by Vt2,912,155.

4.39 There was no assessment done to verify real value for cost, or to ascertain, if there were any other cheaper contractors. Other property valuers have assessed and verified that VLD was overcharged by VT 2,912,155.

4.40 At a Board meeting of 15 December 1992, Mr Leodoro submitted his first ever report for the months of June to November 1992. The following was extracted from his report:

I decided that in order to install staff morale and confidence in me as their Manager, a number of decisions had to be taken. Firstly informed them that there would be no staff changes as long as they all behaved well and accepted me as their 'boss'. I also told them that I would not hesitate to sack anyone who acted in a manner detrimental to me as Manager of the Company. All staff obeyed except Nasse who continued to campaign against me. His appointment was terminated appropriately in September.

The second decision was to stop all deductions from staff salaries for housing, kerosene, electricity and water. This was a major factor in returning confidence in a local manager. My view is that staff salaries are already very low, ranging from Vt700/day to Vt600/day with one staff at Vt2000/day, (based on hire of bulldozers).

Another decision was to renovate and repaint staff housing including the Manager’s house at a cost of Vt8,000,000. Although this became a controversial issue, staff appreciated it and have thanked me for this work. Some have up to five (5) children in their families with half in schools, high schools and universities who are expected to join their parents for holidays. All together these decisions plus a good manager/staff relationship have all contributed to installing continuous confidence and initiative in all staff. The recruitment of a fulltime mechanic and another experienced handyman has also helped. The enormous success of staff at the Independence Charity races at Mele in July was in my view a result of all the above mentioned decisions. I intend to put a number of staff through some training to help them in their jobs wherever possible.'

4.41 In 1992, Mr Leodoro made a private deal with Mr Y, a plantation owner, to exchange seventy (70) VLD breeding heifers and one horse for seventy (70) pigs owned by Mr D. Govan.

4.43 The value of the seventy (70) breeding heifers and one horse was Vt1,260,000. The value of the seventy (70) pigs was Vt596,000. Again VLD lost Vt612,000.

4.44 In November 1993, just before Mr Leodoro’s suspension, the pigs were distributed amongst the late Minister, Mr Leodoro, Mr Kalorib and some members of the staff. Some were crated and shipped to the outer islands prior to Mr Leodoro’s dismissal. In line with Mr Leodoro’s actions of the time, the Board was never consulted about this distribution. VLD lost a further Vt596,000 in this deal.

4.45 In a statement made by Mr Govan under oath in our Office, he stated that it was Mr Leodoro who approached him to make the exchange. Mr Leodoro was anxious to get some pigs. Costs were not discussed. Mr Govan does not owe any money to VLD because of this exchange.

4.46 Statements were made by VLD staff that, the pigs were held in a special yard near Mr Leodoro’s house. The pigs were later crated and shipped to the outer islands prior to Mr Leodoro’s dismissal.

4.47 In October 1993, Mr Leodoro opened an account number 2006 with Au Bon Marché (Port Vila) under VLD’s name without the approval of the Board. He purchased goods to the value of Vt46,185 in October 1993.

4.48 Mr Leodoro was still using the account after his suspension on 5 November 1993. He bought goods with a price value of Vt33,217. The dockets operating the account showed that Mr Leodoro signed all transactions.

4.49 In October 1993, Mr Leodoro was involved in a car accident while driving a VLD vehicle. On 17 June 1994, he was convicted of driving under the influence of alcohol and careless driving.

4.50 At a Board meeting of 5 November 1993, the Board resolved to terminate Mr Leodoro’s contract. The relevant extract of the Minutes follows:

'Termination of Manager: Resolved to issue a letter of suspension immediately and instruct the previous Manager to return all property to VLD. Letter of termination to follow based on contract of appointment. Request a Police Guard to guard the property and physically to control the assets.

NOTED that Manager was instructed to attend the Board meeting and was advised of the importance of the meeting. Due to non-attendance at this important meeting the Board RESOLVED to prepare a formal notice of termination under his contract of employment (5,1(c)). Requested Stanley to prepare letter of termination and give to T Banga to sign and deliver.' See annexure '8'.

4.51 The following are either letters in full or extracts of letters written by various Board members and shareholders regarding Mr Leodoro’s mismanagement of VLD.

I apologize for not attending the Committee Meeting of the Board of Directors of Vanuatu Livestock Development Ltd, held on November 10th 1992, but I was out of the country at the time.

Since my return I have met with various Board members and there are a number of irregularities in the management and running of VLD that is causing me great worry and concern in my capacity as a legal director.

At the time of Mr. Selwyn Leodoro’s appointment as manager (following instruction to the Board by the Honorable Minister) I voiced my concern that Mr. Leodoro would need very careful control and supervision by the Board because of his complete lack of experience in commercial agriculture, and to that effect Mr. Leodoro’s contract contains a number of carefully defined clauses stating his relationship and responsibilities the Board of Directors in the hope of avoiding problems of mismanagement.

It has however become obvious that Mr. Leodoro, because he is a political appointee, does not consider himself responsible to the company directors. I am very worried that the assets of VLD are being blatantly squandered and that this national company is quickly approaching the point of bankruptcy.

As a company director, I am morally and legally bound to prevent this happening, but because I am a 'white foreigner' with no political connection or influence, I am in no position to prevent this occurring.

I therefore, with regret, must inform you that after my long association with the company, I have no option but to resign my position as a company director as from the above date.

I am writing to you in my capacity as shareholder or another government representative in the VLD beside yourself with grave concern over certain important issues which had been brought to our attention by the Director of Livestock (Mr. Thomas Banga) in his letter dated 22/12/92. The matter of concern is as follows:

Honourable Minister, again this Statutory Body comes under your Ministry and if what I pointed out above (106) is actually the situation of the Company (VLD) today, I strongly support the Director of Livestock recommendation to be implemented immediately without further delay. This is a project which was supposed to be self-financing and it is our duty to ensure that the objective of self-financing is achieved.

'It has been quite sometime that the VLD Board has met. This I consider too long given the state of affairs the VLD Ltd is in. My verbal attempts several times during the last few months to request you to organise/call a Board meeting met with no positive response.

The crucial stock counting statistics has not been presented to the Board, to verify its previous financial and budget estimate projections and their policy related decisions taken. As a Board member, I consider this very important and crucial for the proper and professional running/management of the VLD Ltd. I even heard that the minimum price of heifers of Vt15,000 (fifteen thousand vatu) as agreed and established by the Board, which incidentally may I remind you was taken for the best interests of the company, has not been adhered to, instead Vt10,000 (ten thousand vatu) were charged to numerous parties/persons.'

In 1992, a deal was concluded between VLD and Mr. D Govan for the exchange of 70 pigs. In addition, a horse was supplied to Mr. Govan by VLD. In June 1994 when the new Director took over, it was discovered that:

- all the pigs were missing from the Livestock inventory; and there were no available accounts indicating the revenue gained through the sale of 70 pigs.

Following an enquiry, it was discovered that the pigs had been sent to two different places:

- upon Mr. Onneyn Tahi’s orders, some of the pigs were sent to Pentecost, others were sent to Ambae; and upon Mr. Selwyn Leodoro’s order, some of the pigs were given to a third party and others were given to employees on the station.

In his January 1994 report, Mr. E Garae, the former VLD Manager, Mr. Leodoro mentioned a receipt of Vt596,000 for 70 pigs. Therefore, where is the balance: Vt1,210,000 – Vt596,000 = Vt614,000?

- either the supplies were free but were they authorised and under what criteria? Who gave the instruction?

- Or the supplies were supposed to be paid for but the money was not collected. In this case the debtors, Mr. Onneyn M Tahi and Mr. Selwyn Leodoro are jointly responsible;

- Or the supplies were paid for but the proceeds were not recorded as revenue for VLD. In this case, the former Manager, Mr. S Leodoro is responsible....'

4.52 Prior to these blatant unreasonable and unlawful incidents, VLD was considered a 'model' farm. For example, the original Charolais breed was crossbred with other breeds on an experimental basis and was proven successful. The experiment produced quality cattle. This reflected years of careful planning and methodological work.

4.53 In less than 2 years of Mr Leodoro’s management, VLD, a government-owned farm was driven to the edge of collapse: the cattle were either sold at extremely cheap prices or given away as 'bullucks blong la fete'. The farm has not recovered since.

The fences are either broken or down. All laneways and boundary fences are down. Animals have free access into nearby bushes and fences. The stockyard looks as if it has not been used for months. There is high need that fences and stockyards are mended or rebuild before a new programme is implemented.

According to Mr Leodoro, he applied for the post of Manager and was originally appointed as counterpart Manager by the first Board. He was later appointed as Manager by a second Board. The former Minister, the late Mr Tahi was his brother-in-law, and he believed that maybe the late Minister pushed for him to be made Manager, but he is not sure.

When asked about the unauthorised cash withdrawals of Vt4,452,171 he withdrew from the VLD bank account, he said that he did not remember the details. Most of the invoices were cheques for the payment of staff salary which amounted to about Vt200,000 and Vt300,000. He said everything was written in a cash book, including invoices and receipts. He said a lot of people went to the office and took things, including expatriates. He also burnt his own papers before leaving the office when the government suspended him.

Mr Leodoro said he asked the Chairman, Mr Kalorib to give him authorisation to operate the VLD accounts because he was having difficulty getting the Directors (authorised signatories) to sign. He suggested for Mr Kalorib to give him authorisation to operate the account up to a certain amount. Mr Kalorib agreed and authorised him to use up to Vt 200,000.

Regarding his exchange deal with Dominique Govan, Mr Leodoro said that when he first started as Manager, the staff told him that there was an overstock of cattle herd and was causing a lot of problems. He said the livestock people told him that the cattle were running around other farms and were creating fencing problems with its neighbours. Furthermore, at the first Board meeting, Thomas Banga (Director of Livestock) told him to find ways to get rid of a certain percentage of the cattle, about six hundred (600) heads very quickly to ease the pressure of overstocking. He notified the Board about the transaction after the exchange had been made and they subsequently gave their approval. He said Banga and Frankly Kere (Director) were present at that Board meeting and were taking minutes. He believed the value for the VLD cattle was about Vt10,000 to Vt15,000 per head. He agreed with our office’s estimation that the value for the seventy (70) heifers were Vt1,260,000. He said that at one time he gave meat away when people asked for some through the Ministry eg charitable organisations, deaths etc. He also gave away meat when some cattle died accidentally. To him, the pigs and cattle had the same value. He admitted that Govan could not afford to pay Vt1,260,000. He said the idea was to exchange, so he undervalued the seventy (70) heifers and the horse in order to reduce stock quickly. As for the pigs, they were taken to the farm because he wanted to experiment with a piggery. It did not work out as some of the Directors opposed the idea, they did not want to try something different. Eventually, it became too expensive to look after them (pigs), so he just gave them to some staff members. Others died of starvation. Some of the pigs went to Ambae, because just before he left, the late Mr Tahi told him that he (Minister) would be leaving the government. The late former Minister wanted him to send some pigs to Ambae. He trusted the late former Minister to pay but he did not make payments to him as he left shortly after. He cannot recall whether an invoice was made for this transaction.

Asked whether he had repaid the costs of the repairs to the vehicle he damaged, he said that he had never paid because he never got an invoice.

As for the depletion in stock, he stated that he does not remember. The livestock people do the count, all he remembered was the six hundred (600) figure that he was told to get rid of. He believed that he never went as far as five hundred (500); approximately two hundred (200) cows and two hundred (200) steers went to the abattoirs and about two hundred (200) were shipped to small holding farmer. He said that some cattle jumped the fence and went to neighbouring plantations. Others were killed by hunters who regularly hunted on the farm.

When asked about the VLD bank accounts that were reduced from a total cash asset of Vt12,255,882 to Vt1,259,418, he said that he does not remember the exact details of expenditure. All the transactions were written down. One of the biggest expenditures was the repair of staff houses which amounted to over Vt8,000,000. The government also used Vt2,000,000 to repay a loan made by VLD in 1982.

From the time Mr Leodoro became the sole signatory of the VLD accounts, 'cash' withdrawals totalling Vt4,452,772 were made. No details were recorded for the money. When asked about this, Mr Leodoro said that he cannot recall. He did write everything down. Also, most of the suppliers at the time wanted cash payments and not government cheques.

Mr Leodoro denied allegations that he spent VLD money at Club Vanuatu playing casino. He said that he did and still goes to the Club as he is a member. He never visited the Club during working hours but had gone there only for lunch.

Asked about the deal with Dominique Guillain, Mr Leodoro said that when he took over as Manager, the condition of staff quarters were very bad and the workers complained to him about this. He then made it as his first priority as Manager. In a meeting with just the former Chairman (Tom Kalorib) and the late former Minister, he raised his concerns regarding the staff houses. He mentioned that he was looking for somebody to do the work. A few days later, Mr Kalorib told him to hire Dominique Guillain to do the work. The work went ahead without the approval of the Board, as the they did not meet on a regular basis. The Board, however, approved it later. He did not know Guillain prior to this deal and did not advertise for tenders. He believed it was his responsibility under his contract to consult the Minister and the Chairman. He knew that the Ministry was located in Guillain’s building and that the late former Minister and Guillain were good friends. He denied allegations that he was paid for awarding the contract to Mr Guillain. He did not think that VLD was overcharged for the repairs. He thought the amount of Vt8,000,000 was reasonable as Mr Guillain had renovated twelve (12) houses including the Manager’s house, and a wash house. He admitted, however, that he does not have much experience in building.

As mentioned in my previous letter to you of 16/2/99, I am still pursuing legal action against the company and the government in the Supreme Court. This preludes me from responding fully to your Report.

The only response I would wish to offer at this stage is an unequivocal rebuttal to all your allegations.

The government breached my contract to dismiss me in 1993 on the same grounds and I do not see the merit in the repetition of these same allegations by the Ombudsman especially when these same allegations are under scrutiny in the courts.

I am therefore bound to reserve my detailed responses to your Report pending the outcome of the legal action before the Supreme Court.

He wrote that his appointment as a member of the Board was from the National United Pati. In May 1992, when he first attended the Board meeting as a member, Mr Leodoro had already been appointed as a counterpart Manager of VLD. Some of the members did not want Mr Leodoro to be made Manager, although the late former Minister had approved the appointment. Since then, his working relationship with Mr Leodoro and Mr Kalorib became very difficult. He cannot recall the times that the Board met except the meeting of 15 December 1992. He was surprised to learn at that meeting that Mr Leodoro and Mr Kalorib had approved the Vt8,000,000 repair of staff houses without the approval of the Board. At the said meeting, he had an argument with Mr Leodoro and Mr Kalorib about the unauthorised repairs and he told them that he was going to report the matter to the head office of the National United Pati. On 20 August 1992, he wrote a letter of complaint to the head office. After this incident, Mr Kalorib never informed him of any more Board meetings or advised him to attend. Despite his repeated correspondence to Mr Kalorib about this matter, the former Chairman only replied twice. He wrote to the Prime Minister and recommended for him to dissolve the Board so an investigation could be made. He tried to approach the late Mr Tahi, but his secretary, who was also the Chairman of the Board (Kalorib), would not permit him.

In June 1992, Mr Leodoro approached him and forced him to sign an undertaken open cheque of VLD. Mr Leodoro wanted to withdraw Vt500,000 as the Board had appointed him to go to Japan to promote VLD cattle. Mr Pakoa said he refused to sign. He told Mr Leodoro that he was not aware of any Board meetings as he never received a letter to attend and was not sure whether the Board had approved his (Mr Leodoro) trip.

Given the length of time (seven years ago), his recollections are not too clear. However, he recalled that on 20 May 1992, he attended his first Board meeting. It was made clear at this meeting by Mr Kalorib that Mr Leodoro was to be appointed as Manager of VLD. Some of the members disagreed, so they decided to appoint Mr Leodoro as counterpart Manager and that the Board will monitor his performance before any further decisions was to be made. He was not a party to the decision to appoint Mr Leodoro as Manager of VLD Ltd. He tried to help Mr Leodoro by writing up work plans to assist him (Mr Leodoro) in managing VLD but, the first work plan was never followed. No further Board meetings were called despite his numerous repeated verbal reminders to the Chairman. Finally, he resigned due to frustration arising from the fact that he could not do anything to help the farm.

Mr Franklyn Kere’s response to our Working Paper is reproduced verbatim below:

'I acknowledged receipt of your letter of 16 June re: the above captioned and the enclosed report.

There are a number of comments I would like to make in relation to the draft report.

I hope these further comments of clarification are helpful and will be incorporated in the final report.

He replied that he was not yet a Board member on 20 June 1992. At this Board meeting, Charles Rogers proposed his name to the Board. The meeting of 11 June 1992 was his first Board meeting. At the said meeting, Mr Kalorib as Chairman was pushing for Mr Black’s dismissal for he was considered a threat to the company. At this stage, he was not familiar with the situation but he later realised that he had been misled. He then suggested that as Mr Leodoro does not have the right or relevant qualifications and experience, Mr Leodoro must have an adviser to help him draw up a monthly work plan. He proposed for Dr Christian Meyer, a veterinarian by profession who was supposed to work with the Department of Agriculture, Livestock Service to be an adviser for Mr Leodoro. Unfortunately, Dr Meyer did not turn up. As a result of this, it was decided that the Livestock Service will have to come up with the plan. Upon receipt of a request from the Director of Agriculture, he drew up a work plan with the assistance of an adviser David Macfarlane. Mr Leodoro never followed the work plan. He did notify the Chairman, Mr Kalorib in writing about Mr Leodoro’s non-compliance with the work plan. Mr Bangalini said that he had no control over political interference at the time.

The Honourable Deputy Prime Minister, Mr Willie Jimmy Tapanga Rarua replied to our Working Paper as follows:

'It is now six years since I may have written to colleague Minister at that time, late Onneyn Tahi about the status of VLD. I have no further comments and correspondences on the above which could assist your office to investigate and whether the outcome of your investigation would do any better improvement to VLD today or the future. I doubt very much that VLD will survive in the next three months.

In response to our Working Paper, Mr Guillain stated that, constructors always have a different opinion of the costs of the work that they perform. He said that he gave his quotes to Mr Leodoro, and it was up to him to decide whether he wants his (Mr Guillain’s) workers to do the work or not. Mr Leodoro was free to look for other builders if he had thought that his quotes were too expensive.

∑ Stock number depleted from one thousand seven hundred and thirty eight (1738) to five hundred and twenty four (524).

∑ Mr Leodoro without the approval of the exchanged seventy (70) VLD breeding heifers and one horse for seventy (70) pigs owned by Mr Govan. VLD lost Vt1,856,000 as the monetary value of the whole deal.

∑ Mr Leodoro’s only report to the Board confirmed his blatantly unreasonable actions. Furthermore, his own statement highlighted his own incompetence.

∑ He furthermore breached repeatedly his contract terms and conditions in his refusal to be accountable and in not following the board’s instructions (monthly report, preparation of financial budget).

6.2 FINDING 2: There was a lack of accountability in the management of VLD by the Board of Directors (Tom Kalorib, Phillip Dovo, Charles Rogers, Franklyn Kere, Thomas Bangalini, Andrew Pakoa) and Selwyn Leodoro

There was a clear lack of accountability during Mr Leodoro’s term as Manager for VLD:

On 10 November 1993, all past books of accounts including cheque books, sales records and receipts were missing. Subsequent Managers never found the records. Some members of the staff testified that Mr Leodoro burnt some papers before he left VLD. Mr Leodoro himself admitted to burning some papers.

Mr Leodoro misappropriated Vt79,402 of VLD’s money when he purchased personal goods using VLD’s name with Au Bon Marche (Port Vila).

VLD funds quickly disappeared from its bank accounts during Mr Leodoro’s term. Total cash withdrawn by Leodoro since he was made the sole signatory of the VLD bank accounts without the knowledge and approval of the Board amounted to about Vt4,000,000. When Leodoro assumed his post in June 1992, VLD’s bank balance with its two account was Vt12,255,882. A month before he was suspended (October 1993) the VLD bank balance for both accounts was Vt1,259,418.

In October 1993, Mr Leodoro was involved in a car accident while driving a VLD vehicle under the influence of alcohol. He was accordingly convicted for this offence on 17 June 1994. He never repaid the cost of repairs incurred by VLD in this accident.

6.5 Finding 5: Tom Kalorib, former Chairman of the Board engaged in illegal, unjust and blatantly unreasonable conduct

VLD did not have any annual general meetings for 1992/93, and as such, the Chairman, Tom Kalorib violated section 132(1) of the Companies Act [CAP 191].

Without consulting or informing the Board, Mr Kalorib authorised the renovations of staff houses, which caused substantial financial loss to VLD.

Mr Kalorib prepared fraudulent documents authorising Mr Leodoro to sign the VLD accounts.

6.6 Finding 3: Conduct of the Board (Tom Kalorib, Phillip Dovo, Charles Rogers, Franklyn Kere, Thomas Bangalini and Andrew Pakoa), in appointing Selwyn Leodoro as Manager was based on irrelevant grounds and motives

The first Board, comprising of Tom Kalorib (Chairman), Phillip Dovo, Charles Rogers, Franklyn Kere and Andrew Pakoa, was wrong in their decision to appoint Mr Leodoro as counterpart Manager to Mr Black because they based their decision on irrelevant grounds and motives.

By giving in to political pressure, the second Board (Tom Kalorib, Thomas Bangalini and Phillip Dovo) acted unjustly, as they based their decision on irrelevant grounds and motives in dismissing Mr Black and appointing Mr Leodoro to the position of Manager. They totally ignored its primary role of safeguarding the interests of VLD especially those of the government and ultimately the people of Vanuatu.

The second Board’s decision in appointing Mr Leodoro as Manager for VLD was blatantly unreasonable. Mr Leodoro was not qualified academically to manage VLD. He also had no experience in management and had shown himself to be irresponsible and unaccountable.

The two Boards were well informed of Mr Leodoro’s incompetency in this field, and were therefore unreasonable in dismissing Mr Black when they should have kept him on to provide ongoing support to Mr Leodoro.

6.7 Finding 4: The second Board (Tom Kalorib, Thomas Bangalini and Phillip Dovo) was totally and blatantly unreasonable in dismissing Edwin Black as Manager of VLD

The second Board was very wrong in dismissing Edwin Black Australian citizen as Manager of VLD as this government-owned investment never recovered since Mr Leodoro mismanaged the company. In fact, government senior officials admitted to this Office, that VLD might be closed down in the near future.

The second Board was, therefore, totally negligent in dismissing Edwin Black, who had the qualifications and the experience to manage VLD, and appoint Mr Leodoro. They were irresponsible in sacrificing VLD, a company actually owned by the people of Vanuatu, because of political pressure.

6.8 Finding 5: No findings are made concerning the conduct of the former Minister, Mr Onneyn Tahi as he is deceased.

7.1 RECOMMENDATION NO 1: THE SHAREHOLDER AND BOARD OF DIRECTORS OF VLD SHOULD CONSIDER AND PURSUE ALL LEGAL ACTION AGAINST SELWYN LEODORO OR ANY OTHER PARTY INVOLVED (INCLUDING SUCCESSION OF LATE O. TAHI IN HIS PLANTATION ON AMBAE) TO RECOVER ALL THE MONEY MISAPPROPRIATED FROM VLD AND THE COST OF THE VLD CAR ACCIDENT MR LEODORO CAUSED WHILE DRIVING UNDER THE INFLUENCE OF ALCOHOL.

7.2 RECOMMENDATION NO 2: THE SHAREHOLDER AND BOARD OF DIRECTORS OF VLD SHOULD PURSUE LEGAL ACTION AGAINST SELWYN LEODORO TO REPAY VT1,200,000, THE MONETARY VALUE OF THE PIG EXCHANGE HE MADE WITH DOMINIQUE GOVAN.

7.3 RECOMMENDATION NO 3: SELWYN LEODORO MUST NOT BE APPOINTED TO ANY POSITION IN THE PUBLIC SECTOR.

7.4 RECOMMENDATION NO 4: IN FUTURE, THE SHAREHOLDER AND BOARD OF DIRECTORS OF VLD MUST ADMINISTER IMMEDIATE SEVERE DISCIPLINARY ACTIONS AGAINST ANY APPOINTED MANAGER THAT ACTS UNREASONABLE WITHOUT CONSULTATION WITH THE BOARD.

7.5 RECOMMENDATION NO 5: TOM KALORIB MUST NOT BE APPOINTED EITHER AS A MEMBER OF THE VLD BOARD OR AS A MEMBER OF ANY OTHER BOARD IN ANY COMPANY THAT THE GOVERNMENT HAS AN INTEREST IN OR IN ANY OTHER PUBLIC POSITION.

7.6 RECOMMENDATION NO 6: THE POLICE AND PUBLIC PROSECUTOR TO CONSIDER PROSECUTING SELWYN LEODORO UNDER SECTION 122(2) AND 125 OF THE PENAL CODE ACT, FOR MISAPPROPRIATION OF GOVERNMENT FUNDS OR AND DESTROYING PROPERTY AND (COMPANY BOOKS).

7.7 RECOMMENDATION NO 7: ALL PEOPLE APPOINTED AS BOARD MEMBERS ON PUBLIC BODIES OR TO REPRESENT THE VANUATU SHOULD BE GIVEN INFORMATION OR TRAINING TO FULLY UNDERSTAND THEIR RESPONSIBILITIES AND TO FULFIL THEM. (IF THE BOARD MEMBERS HAD USED THEIR POWERS, THE CHAIRMAN WOULD NEVER HAVE BEEN AUTHORISED TO TAKE OVER THE MANAGEMENT WITH THE MANAGER MR LEODORO AND THE LATE O. TAHI).

Vanuatu Ombudsman's Reports

Mismanagement of Vanuatu Livestock Development Ltd by the Formet Manager Selwyn Leodoro in 1992-1993 [1999] VUOM 11; 1999.11 (23 July 1999)