Media Release: Government covers up attempt to scam Petroleum Fund

Media Release

Dili, 24 October 2010

Government covers up attempt to scam Petroleum Fund

A foiled attempt to scam US$1.2 billion from Timor-Leste's petroleum fund illustrates the risks involved in the Gusmao government's efforts to relax the fund's investment guidelines, FRETILIN MP and party Vice President Arsenio Bano warned today.

Mr Bano said legislation introduced by the former FRETILIN government and unanimously approved by all parties in Parliament in July 2005, provided sufficient safeguards, rules, checks and balances to foil the attempt by a Singaporean company to scam the fund in September 2009.

“The company put an investment proposal to the de facto Finance Minister Emilia Pires, that was obviously highly questionable but that she thought it was good enough to pass on to the fund's investment advisory board," Mr Bano said.

The board unanimously rejected the proposal and urged Ms Pires to follow normal investment guidelines.

"Despite this, Ms Pires was given a green light by the Council of Ministers last week, on 20 October 2010, to present new investment guidelines to make the fund more 'profitable', including in private equities and in real estate. We are concerned that changing these relaxation of the investment rules will allow similar risky investments as the one proposed in this instance."

"Currently petroleum funds can only be invested in safe, Treasury-guaranteed bonds. But Ms Pires proposes to allow up half the fund to be invested in the stock market, other private equities, real estate and other high-risk fast buck schemes. Are scams like this one acceptable to her? Our people are entitled to know what this de facto government intends to do with their money."

Local NGO Lao Hamutuk has published the results of their research into the September 2009 proposal by Asian Champ Investments Ltd ("ACI") represented by Datuk Edward Ong, the President of Sutera Harbor, the company behind Pelican Paradise's proposed "five-star hotel" project in Tacitolu, Timor-Leste.

Lao Hamutuk reported that ACI asked Ms Pires to "deposit $1.2 billion in cash from the Petroleum Fund into ACI's ‘blocked’ account at Hong Kong & Shanghai Banking Corporation. They said they would pay 7.5% interest in advance and return the money in a year. ACI told the Minister to make a decision within 15 days, and she asked the Petroleum Fund's Investment Advisory Board (IAB - a group of advisers appointed by the Minister of Finance under the Petroleum Fund Law) for advice. The IAB unanimously sent a memo http://www.laohamutuk.org/Oil/PetFund/ACI/IABAsianChampSep09En.pdf which was only released a year later, recommending against ACI's proposal and urging that normal investment processes be followed, which do not include investments in cash."

Mr Bano said FRETILIN questioned Minister Pires in parliament on 27 September 2010 but she avoided the issue. The following day, FRETILIN formally requested the government to provide MPs with copies of the minister's letter to the IAB, ACI's proposal, and the Banking and Payments Authority (the country's quasi central bank in development) report to the Minister on the company ACI Ltd. Again the minister ignored the issue and has not provided any public responses despite nearly a month having lapsed.

"We have grown to expect this level of arrogance, lack of accountability and lack of transparency by this de facto Finance Minister. We strongly suspect she is covering something up. Given the seriousness of this matter, it cannot be left in the dark, especially given her intentions to relax the investment guidelines for our people's petroleum fund. Our people have a right to know exactly what role, if any, she and other members of her government played in this attempted scam," Bano added.

Lao Hamutuk also complained about the lack of cooperation from the minister and some of her agencies, saying, "In November 2009, La'o Hamutuk learned about this attempt to scam the Petroleum Fund, and researched ACI, which may or may not exist. Our repeated requests for information from the Banking and Payments Authority (BPA), IAB and Ministry of Finance were declined or ignored. The Ministry asked us to delay publishing, which we did, although their promised information never came."

Mr Bano said the FRETILIN-drafted petroleum fund law is "based on the utmost transparency and full disclosure, not secrecy. We demand these documents be made public so that all Timorese can access them to know how their fund is being managed, and how this de facto minister proposes to invest their money in the future. The government is now moving to change these rules, adding more risk to the investment of our fund."


Mr Bano said a much publicized proposal for a five star hotel and golf course on the outskirts of Dili, Pelican Paradise, promoted by Datuk Edward Ong of Sutera Harbor, has inexplicably stalled after much initial fanfare.

"The Timor-Leste government even allocated US$11 million in the 2009 budget to build a water recreation park next to the proposed hotel and golf course, which has not gone ahead either.

"They say, there was no link between the hotel and the ACI proposal, but we cannot be sure until we have seen all the documents. There must be full transparency on this matter. The future transparent and prudent management of our fund is at risk right now because of the government's proposed changes."

Link to the Lao Hamutuk full report:
http://www.laohamutuk.org/Oil/PetFund/ACI/10AsianChampInvestment.htm

For further information please contact Arsenio Bano on +670 741 9505 or fretilin.media@gmail.com