State appeals High Court ruling favouring Sultans of the Seas in US$8.5 million fraud case

The state has appealed a High Court judgment overruling a Civil Court verdict ordering luxury yachting company Sultans of the Seas to pay Rf110.2 million (US$7.1 million) in fines and unpaid duties.

In September 2009, Maldives Custom Service filed a case at the Civil Court to recover US$8.5 million in fines and unpaid customs duties from Sultans of the Seas – a company associated with the family of Dhivehi Rayyithunge Party (DRP) Leader and Kendhoo MP Ahmed Thasmeen Ali – for allegedly defrauding customs to evade import duties for two luxury yachts.

At a press conference in June 2009, Director of Customs Abdul Rasheed Ibrahim revealed that Sultans evaded import duties for two Italian Azimut yachts, imported in December 2007 and March 2008.

“In the invoices, they said they purchased two used launches,” Rasheed explained, adding that an investigation by the customs internal audit discovered that Sultans had purchased two of Azimut’s latest models, which cost 12.3 million euros or Rf226 million (US$17.7 million).

However, the quoted price in the invoices and documents the company submitted to customs was Rf18 million (US$1.4 million).

While the Civil Court ruled in favour of customs in late 2009, the High Court overruled the verdict late last year.

According to local daily Haveeru, at the first Supreme Court hearing last Monday, State Attorney Ahmed Usham explained that the state decided to appeal the High Court ruling because the evidence was sufficient to establish fraud as documents submitted by Sultans claimed that the vessels were used when the two luxury speedboats were brand new.

The fraud was discovered when information was clarified through the Bank of Maldives Plc Ltd (BML), Usham added.

Sultan’s attorney Ibrahim Riza however argued that Sultans should not be held responsible for the actions of the former collector of customs and insisted that the Bank of Maldives documents did not clearly state that the vessels were new.

Adjourning the hearing, Justice Ali Hameed said a further hearing would only be held if the court wished to clarify certain matters after studying the appeal.

In May this year, former Principal Collector of Customs Ibrahim Shafiu, also ex-registrar of DRP until the 2008 presidential election, was charged with corruption for his role in the Sultans fraud case.

Shafiu had been living in Canada since former President Maumoon Abdul Gayoom’s election defeat and returned to the Maldives following the controversial transfer of power in February.

Shafiu was charged with abuse of authority for allegedly helping change details of the yachts through his influence over the valuation committee to decrease duty payable for the vessels. The former DRP registrar pleaded not guilty to the charges.

BML loans

Meanwhile in October 2011, the High Court upheld Civil Court verdicts ordering Mahandhoo Investments and Kabalifaru Investments – two resort businesses with close ties to DRP Leader Ahmed Thasmeen Ali and running mate of former President Gayoom in 2008 – to repay millions of dollars worth of loans to the Bank of Maldives.

DRP MP Mohamed Nashiz, brother of the DRP leader and managing director of Kabaalifaru, and DRP MP Ali Azim, a loan guarantor, were among the appellants at the High Court.

Both MPs had signed ‘joint and several guarantee and indemnity’ agreements for the loans issued in mid-2008.

In the first case involving Mahandhoo Investments, BML had issued a US$23.5 million demand loan, a US$103,200 bank guarantee and US$30,090 letter of credit on July 10, 2008.

The second case meanwhile involved a US$3.3 million loan issued to Kabaalifaru Investment and the appeal of a Civil Court verdict on September 30, 2009 ordering the company to settle the debt in the next 12 months.

Both verdict were however appealed at the High Court and remained stalled for almost two years before the rulings in October 2011.

Moreover, in December 2009, the Civil Court ordered Sultans of the Seas to pay over Rf654 million (US$50 million) in unpaid loans, fines and accumulated interest to the Bank of Maldives in the course of one year.

Ruling in favour of the bank, Judge Aisha Shujoon said the company was liable for loans of US$15.3 million, US$8.7 million and €12.5 million as well as US$500,000 in combined credit limit facilities as agreed upon in June 2008.

The judge ruled that records and documents presented to court proved that as of December 7, 2009, Sultans owes US$18 million on the first demand loan, US$10 million on the second and €14 million on the third.

In a BML audit report released in January 2009, Auditor General Ibrahim Naeem warned that defaults on bank loans issued to influential political players could jeopardise the entire financial system of the country.

Over 60 per cent of the US$633 million worth of loans issued in 2008 was granted to 12 parties, the report noted.

According to the report, US$45 million was issued to Sultans of the Seas and US$36 million to Fonnadhoo Tuna Products, two loans which comprised 13 per cent of the total loans issued in 2008.

The report noted that Fonaddhoo was owned by DRP Leader Thasmeen while the owners of Sultans of the Seas were closely associated with the former minority leader of parliament.

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