Public report on the breach of the Leadership Code and misuse of Cyclone Betsy account by the Former Prime Minister of Vanuatu, Mr. Maxime Carlot Korman – February 26, 1998 - Emalus Campus



Public report on the breach of the Leadership Code and misuse of Cyclone Betsy account by the Former Prime Minister of Vanuatu, Mr. Maxime Carlot Korman – February 26, 1998

98-06

During January 1992, Cyclone Betsy caused extensive damage and destruction in Vanuatu.  The international community responded with donations which were deposited in a Government account handled by the Ministry of Finance.  Donations came from Britain, China, the United States and, Australia, among others.  In February, Prime Minister Korman opened a separate account (the Cyclone Betsy account) at the Banque d’Hawaii (Vanuatu) Ltd.  He was the sole signatory of the account.  The First Secretary of the Prime Minister, Gerald Leymang was given a power of attorney over the account.  The account was set up in breach of the Public Finance Act which requires the signature of two accounting officers.  Neither Mr. Korman nor Father Leymang were accounting officers and the account only required one signature.

The beneficiary of the first deposit was designated as the “Committee for the Cyclone Betsy relief.”  This donation which formed the basis of the deposit was made by either the French Government or the Municipality of Paris (the Ombudsman was denied information which would clarify this).  During 1992, approximately 3 million vatu was deposited into the account from this source.  The Cyclone Betsy account remained open and active until at least February 1998.  Money was moved between the Cyclone Betsy account and Mr. Korman’s personal bank account.  Money was deposited into the account from a variety of sources including cash deposits, foreign currency and Mascot Holdings Inc.  Mr. Korman’s dealings with the Mascot Holdings Inc. account included soliciting deposits “for my election” from numerous Trade Commissioners, Special Representatives and Honorary Consuls, with threats that their nominations as Vanuatu Government Representatives would be cancelled in the event of non payment.

During the years, 1992 to 1997 approximately 67 million vatu was deposited into the Cyclone Betsy account. The Prime Minister’s Office maintained no records of payments made from the account.  The Ombudsman’s investigation revealed that 256 payments varying between 15,000 and 80,000 vatu were made from the account two days before the November 30 election.  This, together with other evidence relating the Mascot account and a lack of response from Mr. Korman to the allegation, resulted in an inference by the Ombudsman that Mr. Korman was using money to induce voters to vote for him.  This activity is contrary to the Representation of the People Act.   Money from the Cyclone Betsy account was also paid to transport UMP party delegates to and from a party congress in 1996.

The investigation also disclosed receipt of money by Mr. Korman far in excess of his salary as Prime Minister.  For instance, during 1995, over 39 million vatu was deposited into his personal account in addition to his salary as Prime Minister.

The Ombudsman found that Mr. Korman committed gross misconduct and was in breach of the Leadership Code in various respects, in connection with the Cyclone Betsy account, including the transfer of funds from it to his personal account.  He was also found to be in breach of the Public Finance Act and the Financial Regulations.
Recommendations

·       That the Public Prosecutor and/or the police investigate the payments made by Mr. Korman presented to the bank in the period around the 1995 elections with a view to possible criminal charges.

·       That Mr. Korman close the Cyclone Betsy account and hand over the remaining funds to the Vanuatu Government.

·       That Mr. Korman hand over accounts of Mascot Holdings Ltd in Singapore and Malaysia to the Vanuatu Government for auditing.

·       That Mr. Korman refund the Vanuatu Government for all funds from the Cyclone Betsy account that were used by himself.

·       That Mr. Korman should not be appointed Prime Minister or any other Minister and that he not occupy any position involving public money.

·       That Parliament pass a bill enforcing the principles of the Leadership Code.

·       That Parliament enact legislation requiring disclosure and regulating political donations to political parties.

·       That the Auditor General conduct a full investigation into Cyclone Betsy account.

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Written by Edward R. Hill
UNDP Governance and Accountability Project
January, 2001
Van/97/001
© Ombudsman of Vanuatu
Published here by University of the South Pacific, School of Law Web Site - www.vanuatu.usp.ac.fj






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