The Australian arm of UBS should be banned from doing business in Papua New Guinea for ten years and former prime minister Peter O’Neill should be prosecuted over their roles in a loan that resulted in a huge loss to the country, current prime minister James Marape has said.
A former government led by O’Neill obtained the AUD$1.3bn loan from global investment bank UBS in 2014, in order to acquire a 10.1% share interest in oil and gas exploration company Oil Search Limited. However the price of Oil Search shares soon plunged, with PNG’s shares later sold at a loss.
Speaking to parliament on Wednesday after the conclusion of a commission of inquiry into the loan, Marape said the deal had cost the state “in excess of AUD$340m” as well as “lost opportunities” such as the establishment of a sovereign wealth fund and “diversion of revenues” from PNG’s LNG exports project.
“The UBS loan had no satisfactory justification or rationale, there was failure to follow processes, apart from a huge fee of AUD$28m,” Marape said. “UBS also overcharged AUD$175m which should be repaid.”
He also said the commission’s final report recommended that lawyers engaged by the state from the Australian branch of Norton Rose Fulbright did not give “proper advice” and that the unit should be banned from doing business in the country for five years.
Mr O’Neill “knew the submission was complex and lengthy” but did not give the rest of the cabinet “advance notice or opportunity to debate the submission”, he added.
Marape, who took over as prime minister from O’Neill in 2019 and initiated the commission’s inquiry, was serving as finance minister when the deal was struck.
O’Neill said he “fully accepted the recommendations from the inquiry into the deal” and would “subject himself for further investigations.”
“I am very happy to defend myself whether at ICAC [Independent Commission Against Corruption] or at the courts. So I have no issues with that, I am responsible to the people of Papua New Guinea. I am responsible as a mandated leader.”
“The inquiry into the UBS deal was the most expensive of all inquiries at 30 million kina [11 million AUD] and very highly politicized,” he added.
A UBS spokesperson said the company disagreed with the statements made by Marape in parliament and “strongly disputes assertions that it overcharged PNG”.
The bank had been appointed to act for PNG to obtain the loan “following a competitive tender process” and the government “received advice from a number of experienced independent Australian and Papua New Guinean legal and financial advisors throughout the transaction”, the spokesperson said.
“UBS maintains its dealings with PNG were appropriate and transparent. The transaction was entered into by PNG under the relevant legislation and properly ratified by PNG Parliament in 2014 in accordance with the Constitution,” the spokesperson said, adding that the bank’s net revenue from the deal was less than AUD$50m.
“UBS provided a detailed account of the transaction to the Commission via two comprehensive statements (August 2021 and March 2022) and other supporting documentation,” the spokesperson said.
“UBS believes that its responses, including its critique of the Brattle analysis and conclusions, were not appropriately considered by Counsel Assisting the Commission.”
A Norton Rose spokesperson declined to comment.
