Now oil company’s dealings under scrutiny

Evan Wasuka





With the countdown on to the national elections, politics has been the number one source of news for politics-mad Solomon Islanders.
But in recent weeks the public attention has been caught up on the intriguing corporate drama at South Pacific Oil.
A drama that has relegated politics to the backburner.
A story with all the right ingredients for a Hollywood blockbuster—at the centre of the tale is the allegations of millions of dollars of unauthorised payments, blocked audit attempts and claims of a sexual assault.
Especially when the allegations took place within the confines of South Pacific Oil, a company 95 percent owned by the Solomon Islands National Provident Fund (SINPF) which is in turn owned by the workers of Solomon Islands through their NPF contributions.
Not to mention the presence of two well known central figures in the corporate drama—former politician and labour figure Joses Tuhanuku, now the chairman of South Pacific Oil Board of Directors and managing director of South Pacific Oil, Mike Hemmer.
The conflict between the two personalities has escalated beyond the company's boardroom and into the courts, the police and the media.
In the process, the going-ons at one of SINPF's most successful commercial ventures has been bared to the public.
In 2007, Shell Pacific wrapped up its fuel supplying business in Solomon Islands.
A new business venture South Pacific Oil took over these operations.
The new company is a joint venture between the Solomon Islands National Provident Fund and a little known fuel supplying operator GRP and Associates.
It is 95 percent owned by SINPF and five percent by GRP.
GRP because it had expertise in the industry was awarded the contract to manage the new business with one of GRP's owners Mike Hemmer,  appointed as the managing director of South Pacific Oil (SPO).
Despite some minor controversies over the share distribution, the arrangement seemed to be a match made in heaven with promising dividends all around for everyone.
GRP gained its $100,000 per month management fee, SINPF its US$1.8 million in dividend in 2008 - making South Pacific Oil the shining star in the SINPF investment portfolio.
All in all, the operation of South Pacific Oil led to a money generating business - with a cash flow of around $2 million running through South Pacific Oil’s coffers, every day.
With the worst of the global financial crisis over, 2010 was shaping up to be a great year for the company with SPO winning the contract to supply diesel to the Solomon Islands Electricity Authority (SIEA).
A major contract that would in effect power the country - as the diesel was for SIEA's electricity producing generators.
In 2010, business so far has been good for SPO, to date it has supplied twice as much fuel to customers than it did in all of 2009.
SPO was on a dream run until the company more or less self-combusted in June this year with the board of directors in direct conflict with the company's management following a series of events—including a sexual assault claim against the chair of the SPO board.
On one side is the former parliamentarian—and chairman Joses Tuhanuku who is championing a full internal investigation into the company's accounts.
On the other side is SPO's managing director - Hemmer—who says he has nothing to hide.
It is transpiring however that Hemmer does have issues with the board-appointed internal auditor—Sara Azeem.
Azeem, a Pakistani national, was hired by Hemmer in 2009 initially to work for SP Oil.  She later left the company after clashes with Hemmer.
Staying in-country, she shared some of the findings of alleged unauthorised payments made by Hemmer to GRP, with Tuhanuku in his capacity as the chair of the board.
Add to the mix is the sexual assault claim by 36-year-old Vanessa Hall, the expatriate human resources manager for SPO.
The alleged sexual assault occurred at the Heritage Park Hotel on May 22 following an official meeting, police's Sexual Assault Unit is investigating the complaint.
Following the complaint, Tuhanuku was asked to step down as chairman.
A move Tuhanuku says was aimed at sidelining him and the investigation into the company's accounts.
Tuhanuku has vehemently denied the allegations saying he has nothing to hide and is willing to corporate with the proper authorities.
For the local media, the sexual assault allegations have been the juiciest part to the story—but whether it is the starting point of the drama—that will depend on who you ask.
According to Tuhanuku, the sexual assault claims only came out after he raised questions over the company's accounts and certain million dollar payments made by Hemmer to GRP.
Tuhanuku says the timing of the sexual assault claims is suspicious as it only came about as he got close to the truth.
He says the claims were a "sad and desperate" attempt by Hemmer to disrupt the investigations.
But if you ask Hemmer, the sexual assault  was the starting point to the conflict.
He says everything at South Pacific Oil between the management and the board was going fine—with even Tuhanuku praising the efforts of the management team right up until the day of the assault.
But Hemmer says from May 22 the day of the alleged assault and complaint, things went down hill with Tuhanuku refusing to stand down in the face of the claims.
A standoff was inevitable—questions were raised over dubious payments SPO made to GRP.
Information of these payments came from the company's internal auditor Azeem.
Azeem told the Solomon Islands High Court that the financial accounts at SPO were a mess.
She said her boss Hemmer refused to listen to her and to justify the large payments made to GRP.
After months of frustration, Azeem said she walked out of the company and shared the information with chairman Tuhanuku.
Tuhanuku then moved to rally the support of the board to begin internal investigations into the company's accounts.
The standoff between the chairman and the managing director was reflected in the company's boardroom too with June's board meeting going unresolved for several weeks.
In the end, the board opted for a compromise of sorts and a three-man team was appointed to investigate the allegations against Tuhanuku.
It was also agreed that an internal investigation would take place into South Pacific Oil's account by Azeem.
That meeting took place on a Thursday and the very next day Hemmer stood down as the president of the Solomon Islands Chamber of Commerce.
He didn't state his reason for resigning only that it was in the best interest of the chamber as he alluded to an upcoming legal battle.
Throughout the weekend the media was flooded with rumours of the going-ons at South Pacific Oil and by Sunday evening, the Solomon Islands Broadcasting Corporation ran its first story of sexual harassment allegations against a nameless South Pacific Oil director by a nameless South Pacific Oil manager.
The very next day, the board appointed auditor Azeem and the company secretary GregThompson to audit the company’s books. But they were turned away when they turned up at South Pacific's Oil's corporate office to collect documents to begin their audit.
They were blocked at the door by the company security—upon instructions from Hemmer.
"I don't know why the managing director keeps saying they have done nothing wrong, yet he won’t open up the company's books to the auditor. Which doesn't look right," said Tuhanuku.
"If he believes there is nothing wrong, he should have opened the company's books a long time ago."
According to Hemmer, there was no problem with opening the company's books, his issue was with the board appointed auditor Azeem.
"We have a problem with this particular Azeem, she was an employee of our company and we were doing a big job that was going to be finished in June, but she walked off her job and resigned," said Hemmer.
"When she left the company, she was culturally insensitive and she was rude to many people. Her presence in the company appointed by the directors is meant to incite and cause trouble and it is hostile."
With access to the company's files blocked, the board went to the High Court to force Hemmer's hand and allow the auditors in.
In court, Azeem revealed concerns over a number of payments made between December 2009 and May 2010 to GRP.
Two or three of these payments were in the millions with the largest worth $2.4million, while seven or nine of these were in the vicinity of $100,000 to $700,000.
All were from South Pacific Oil to GRP.
Further, South Pacific Oil's chairman highlighted three lucrative contracts which he said were done with out the board's approval.
The first, a lease on GRP's fuel depot in Gizo, a lease on GRP's residential property at Tasahe in Honiara and the third a lease by SPO of a barge, the LC ALCOL, believed to be jointly owned by GRP & Associates Limited and John Beverly, a former director of the SINPF Board.
"These three business contracts were negotiated by the managers of the business. I didn't sign a contract with myself. I have a manager of housing and staffing, these sort of things," said Hemmer in response to the allegations.
"The housing project taking that for South Pacific Oil is an immediate saving, leasing the facility in Gizo, it immediately makes money for the company (South Pacific Oil), the third one the barge, the barge will allow us to get fuel to the rural areas at a cheaper rate...gee you don't want us to do that?"
Hemmer is standing by decisions made by him and his managers with little effort to refute an almost blatant conflict of interest.
"All three of those are not new—I didn't sign a contract with myself they're thoroughly transparent and the board knew about them.”
It's still early days yet and while the sexual assault story has been hitting the front pages, the exact details of the goings-on at SPO will take much longer to emerge.
Two issues stand out—the first is the allegation of millions of dollars of unauthorised payments and second, is the sexual assault claim.
In the meantime, an internal audit is being conducted into all financial conduct and transactions of SPO.
A board-appointed investigation is taking place into the alleged sexual assault while a police investigation of the same sexual assault complaint has also been launched.