GOVERNOR SEEKING TO SIPHON FUNDING AWAY FROM SELF FUNDED

C O N F I D E N T I A L KOLONIA 000018


E.O. 12958: DECL: 2/10/2019
TAGS: PGOV PREL ECON FM
SUBJECT: GOVERNOR SEEKING TO SIPHON FUNDING AWAY FROM SELF FUNDED
PORT FACILITIES

REF: 1/27/09 E-MAIL WEMHOENER-CUITECJ TO NEVILLEPW
CLASSIFIED BY: DOUGLASSWD, CHARGE DE AFFAIRS, EMBASSY KOLONIA,
DOS.
REASON: 1.4 (b),(d)



1. (C) SUMMARY: Pohnpei Port Authority (PPA) General Manager
Iehsi complained to Ambassador Hughes on January 23 that Pohnpei
Governor Ehsa is seeking to divert needed funds away from the
PPA. Iehsi alleges that proposed funding changes will undermine
the Port Authority's ability to meet international safety and
security standards, but will support Ehsa's political agenda.
END SUMMARY.

Proposed Change to Funding Legislation
--------------


2. (U) On January 13 Pohnpei Governor John Ehsa forwarded to
Pohnpei Port Authority (PPA) General Manager Ieske K. Iehsi a
letter which contained a proposed amendment to the "Pohnpei Code
relating to the financial matters of the Pohnpei Port
Authority." The amendment would change one phrase in the
existing funding bill. Currently the PPA deposits all revenue
into an account it uses for its own operations. The new
language would limit annual deposits to $500,000 with all funds
in excess of that limit going to the Pohnpei general fund.
Iehsi added that the Port Authority annual income is
approximately $2.5 million.

Current Port Funds
--------------


3. (SBU) During a January 23 meeting with Ambassador Hughes,
Iehsi stated that under his leadership the PPA is entirely self
funded. He then stressed that the PPA needs the funds it earns
to meet international seaport and airport standards. After a
recent inspection of the port facilities, Pohnpei failed to meet
minimum standards in a limited number of categories. Although
not discussing specifics, Iehsi stated the PPA was able to
immediately invest in repairs and was able to bring the port
back up to international standards because it had access to its
own funds. Iehsi contends that to meet the safety standards in
the sea port alone costs approximately $1 million annually.


4. (SBU) Iehsi further explained that a seven member board
appointed him to his current position during the previous
Governor's tenure. After taking office, he claims, one of his
first tasks was improving financial practices within the Port
Authority. During the process he fired one person for fraud.
He also discovered outstanding debts owed to the Port Authority.
For example, shipping agent Timakio Ehsa, brother of the
governor, owes the Port Authority in excess of $1 million.

Funding Dispute
--------------


5. (C) Iehsi informed the Ambassador that he was fairly
confident the new funding bill would pass. Iehsi claimed that
Governor Ehsa would likely find support within Pohnpei's State
Legislature because moving revenue in excess of $500,000 from
Port Authority control to Pohnpei's general fund would give the
legislators approximately $2 million in discretionary funds. As
of February 9, the bill had not left committee and public
hearings on the proposed bill are expected. The State
Legislature has not yet set a timeline to review the bill.
Meanwhile, Iehsi continues to lobby legislators to refuse the
bill.


6. (C) Iehsi contends that the primary factor influencing the
Governor's decision to submit the bill is his attempt to support
Timakio. The PPA, under Iehsi's leadership, sued Timakio in
civil court twice seeking payment of the million dollar debt.
PPA won both cases, but Timakio has not yet paid any of the
debt. PPA is currently considering means to pursue Timakio
within the criminal courts. Iehsi alleges that the Governor has
taken a number of steps to try to prevent the possible arrest of
Timakio. (Note: According the Iehsi, the Governor inserted
himself in a private land dispute issue in August 2008 in an
attempt to end an agreement between the State and National
Governments permitting the national government to use Pohnpei's
jail to house criminals convicted in the federal courts. The
National Government does not have its own jail. The dispute was
later settled and the prison agreement continues. End Note.)
To exert additional political pressure, the Governor has
replaced members of the seven member board tasked with
appointing the PPA General Manager with political allies.


Comment
--------------


7. (C) In the short-term, the apparent ongoing personal dispute
between Iehsi and the Governor should not affect port
operations. If the state government passes the proposed
legislation, however, it is not clear how the PPA will fund its
basic operating costs, including mandatory safety and security
measures. Until the case against Timakio Ehsa is settled and
either John Ehsa or Iehsi leave their current positions, Post
expects political tensions between the management of PPA and the
Governor's Office to continue. End Comment.


HUGHES