"PIO Publicizes Governor David's Demand for Board Chair, Anna Mendiola to Resign"

June 13, 2007

The Kaselehlie Press

Anna Mendiola was, on the day we interviewed her, confident and poised other than the slight jangle of nerves that most people face when a reporter is sitting across from them. You'd never know from her demeanor that Governor Johnny David's Public Information Officer was at the Governor's request, that week, running press releases on Pohnpei State Radio V6AH publicly calling for her resignation as the Board Chair of the Pohnpei Utility Corporation, a position she has held for nearly 8 years and to which Governor David appointed her.

Anna Mendiola is the CEO of the FSM Development Bank and already has a good deal to do in that position. On the day we visited her she was pouring over the thick book of FSM Development Bank loan policies trying to get them updated before her own board meeting. The PUC Board position brings her the small sum of twenty dollars per Board meeting.

She said that Governor David requested her to resign or face the possibility of being publicly fired because he felt that they could not work together. She said the rift stems from two irreconcilable differences between the two.

Governor David wanted the PUC Board to rescind the 90-10 policy in which a customer buying cash power who has a past due amount owing on their account will have 90% of their purchase applied to their arrears and 10% applied to the purchase of cash power. The 90-10 policy was to be in effect for 90 days. The board has compromised and as of Friday, June 1 they changed the policy to 75-25. Governor David told the Board he wanted them to return to the 50- 50 policy to ease the pain of collections for customers.

Anna said, "What about the 80% of our customers that have paid their bills? They have a reasonable right to expect that services will continue." She said that if PUC can't collect payments on their receivables they will not be able to purchase fuel under the new Mobil Oil of Micronesia, Inc. policies. Service will be interrupted for all customers, even the ones that have paid their bills if they cannot collect the cash required to purchase fuel for the generators.

An analysis of 8 years of audited financial statements all of which are available on the FSM Public Auditors website shows clearly that if customers had paid their bills when they were due, PUC would have had the cash they needed and would have been able to put back a small reserve in each of those 8 years.

According to Mendiola, the well publicized problem with the audit is the other main reason that Governor David wants her to step down.

According to Annes Lebehn, Pohnpei State Auditor, PUC made a request of the legislature for a loan of $1 million to get them through the cash shortage problem. He said that as a result of that request, Governor David instructed his office to conduct a "Cash Flow Audit".

Lebehn said that the normal process for an audit conducted by his office is to have an entrance conference with management. He was told by PUC's legal council on his arrival that he had advised management not to cooperate with the audit. Lebehn said that he had no choice but to subpoena records from PUC as he is allowed by law to do. The subpoena was countered by PUC with a request for a Temporary Restraining Order (TRO) pending a lawsuit against the State. The TRO motion has not yet been heard by the courts but the action itself keeps PSA's office from obtaining the records it needs in order to conduct the audit they have been instructed to carry out.

Lebehn said that they already do audits on Pohnpei Transportation Authority, Economic Development Authority, and Municipal Governments among others. He said that they conducted PUC's audit in 2000. He didn't see anything in the law that bars them from conducting an audit of the Utility.

Mendiola said that PUC had already made arrangements with Deloite and Touche to conduct an independent audit and that the audit has already been in process for a few weeks. They have 30 days after the completion of that audit to submit it to the Governor's office. PUC's legal council said that the Constitution calls for the PSA to conduct an audit of every government agency every two years but it did not specify how the audit was to be conducted. He said that the law that established PUC, Title 5.1-108 did specify how PUC's audits were conducted. He said that the law does not supersede the Constitution but instead more clearly specifies how its requirements are to be met. He said that law requires PUC audits to be conducted by a registered Certified

Public Accountant or an independent licensed accountant. He said that office of the Pohnpei State Auditor meets neither of those requirements Mendiola said that one of the problems with the choice of auditor besides the law requiring an independent audit is an ongoing dispute with Lebehn himself over outstanding bills that might appear to give Lebehn a personal motivation to conduct an improper audit. She said that she was not accusing him but the possibility could exist.

At the heart of that disagreement is an outstanding utility bill that Mr. Lebehn has told PUC he does not owe on the building that now contains 2020.COM, which is operated by Truk Trading Company. He told them that he had an agreement with TTC to assume those bills and that agreement was part of the lease arrangement on the building. TTC management says that they are not aware of any such agreement but that they would check with legal council.

Mendiola said that the State suggested that they could have the office conduct the audit without the director but that PUC still felt it was an improper solution due to their lack of a CPA on staff. She said that there was yet another problem in that Lebehn had already made some public comments on the audit on V6AH before he ever arrived at the office for the entrance conference at PUC. She felt that fact had tainted his office's ability to conduct an unbiased audit.

Lebehn said that he had not personally said anything to the radio station nor had he personally given them a press release. He said that

Governor David asked him during a staff meeting how he was progressing on the audit. Nothing at that point in time had been done on the audit. In response to questions he said that he used information from previous audits conducted by Deloite and Touche that were already public record. He said that the Governor's Public Information Officer developed a press release from the information and released it to the radio station without his knowledge.

PUC's legal counsel said that if the PSA auditor's office wanted to conduct an audit after Delloite and Touche had completed theirs it would probably not present a problem.

She said that Governor David claims that the board didn't authorize the law suit and motion for TRO and the move by legal counselor was therefore illegal. In response, Mendiola said that legal counsel acted independently in the expeditious manner that was required to protect PUC under the circumstances as he is required to do. The board later met and sanctioned the actions of Legal Counsel which, she said, is not an unusual practice.

Law suits were, at press time still pending on both sides of the issue of the audit. Anna Mendiola, though she said she felt like just giving up had not done so at press time though Governor David was still requesting her to do so.