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MAJURO, Marshall Islands (November 17, 2000 – Marshall Islands Journal)---The Bank of New York and Ministry of Finance are at fault in the management of compact payments to Senator/Iroij Imata Kabua’s Bank of Guam loan, Kabua’s attorney David Lowe told the Journal this week.

"Imata Kabua is not negligent," he said. "If Bank of New York took the money out of the wrong pot, shorted the RMI, and didn’t notify the RMI until two years later, they’re the ones who are negligent."

Lowe was responding to an article in last week’s Journal that reported compact money being used to pay for Kabua’s private loan at Bank of Guam (BOG). Lowe said it was simply a matter of a portion of Kabua’s quarterly Kwajalein rental payments being "assigned" directly to BOG to pay his loan.

Lowe said that an agreement directed Bank of New York to debit Kabua’s regular Kwajalein rental payments, sending $45,000 per quarter directly to BOG to pay off his loan. BNY has been making the $45,000 quarterly payments, but according to Finance there has been no deduction from the quarterly payments Kabua receives.

"He (Kabua) never directed that ‘Compact’ money be used to pay his loan. It was like any other assignment of his Kwajalein payments."

Lowe called the Ministry of Finance incompetent, and said that if Finance claims it didn’t know about the direct assignment of Kwajalein payments to Bank of Guam until earlier this year, "they’re either stupid or lying." The agreement, signed in September 1998 by Kabua, his brother Iroij Mike Kabua, the Bank of New York, the Bank of Guam, Finance Minister Tony deBrum and attorney general Gerald Zackios, was provided to the Ministry of Finance in late 1998, he said.

"This was never a secret," he said. "It wasn’t like a private deal; that’s why we went to the attorney general." The agreement followed the same format as those used with the RMI bond payments that BNY handles, he said.

BNY receives Compact funds from the U.S. for the RMI and transmits them according to "assignments" from the Minister of Finance. In addition to Compact funds for RMI government use and bond debt payments, there are two separate accounts for Kwajalein – one for landowner payments and one for the Kwajalein trust fund.

Kabua voluntarily made a repayment of $35,000 last month and is prepared to pay back the entire amount paid by BNY to BOG (estimated by Lowe to be $225,000) if Finance can provide documentation that, in fact, these quarterly loan payments have not already been deducted from Kabua’s quarterly Kwajalein rental payments.

"We’ll pay the money back on a quarterly basis if Finance can provide us specific information," he said.

But, he added, so far it has failed to do so other than writing his client "an insulting and threatening" letter on October 4 demanding immediate payment of $384,000, and then never answering any of his letters.

"I responded to Acting Secretary Smith Michael’s letter on the same day and got no response," Lowe said. Later in October, "I wrote again sending a voluntary $35,000 payment and again got no response." He called Finance’s action "totally unprofessional."

Since then, he’s received information from assistant attorney general Moses Gago advising him of five $45,000 payments (total $225,000) that were made by BNY to BOG.

"Finance should be able to compute the data and show me that (Kabua) received full Kwajalein payments," he said.

Asked why Kabua didn’t notice that the $45,000 was not deducted from his quarterly payments, Lowe said that it’s "not so obvious" from the checks that are received from Finance because the amounts change each quarter. Last month’s payment is not identical to the payments from the past several Octobers, he indicated. Moreover, he said, Kabua has people who handle his finances, and that he doesn’t personally supervise each transaction.

Lowe said that after the agreement was signed in late 1998, it didn’t go into effect for two quarters as a result of mix-ups with the banks, so Kabua ended up making the payments himself for those two quarters. "After the first two quarterly payments, there were no further problems so why would he (Kabua) think there was any problem?"

The Marshall Islands Journal, Box 14, Majuro, Marshall Islands 96960 E-mail:  Subscriptions (weekly): 1 year US $87.00; international $213.00 (air mail).

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