Audit uncovers corruption in MNBC sales agent agreement with BIG

A special audit of the defunct Maldives National Broadcasting Corporation (MNBC) has uncovered corruption in a deal designating Business Image Group Pvt Ltd (BIG) the former state broadcaster’s exclusive sales agent with a 15 percent commission from the main income items.

The audit report (Dhivehi) made public on Thursday (April 17) revealed that an agreement was signed with BIG on March 7, 2010 to formulate a business plan and provide marketing consultancy.

In addition to making BIG the exclusive sales agent for a five-year period, MNBC agreed to pay the company a monthly fee of MVR25,000 (US$1,621) as well as 15 percent of all income generated through BIG.

Auditors found that the contract was awarded to BIG without a transparent and competitive bidding process.

While an announcement seeking a marketing consultant was made on January 3, 2010, the audit report noted that it made no mention of either an exclusive sales agent or a sales commission.

“Therefore, the bidding process was carried out in a way to facilitate undue benefit to a particular party,” the report stated.

The report further noted that MNBC did not share any documentation from the bidding and evaluation processes with the audit office.

In the absence of any documentation with the exception of the MNBC board’s decision to make BIG the exclusive sales agent, the report stated that auditors were unable to ascertain whether a cost-benefit analysis was carried out.

While MNBC’s income increased in 2010 and 2011, the report explained that there was no measure to evaluate BIG’s performance or assess the company’s contribution to the revenue growth.

MNBC was formed in January 2009 as a 100 percent government-owned corporation by the administration of former President Mohamed Nasheed.

The television and radio channels operated by the company were handed over to the Maldives Broadcasting Corporation (MBC) – created by an act of parliament in June 2010 – in the wake of the controversial transfer of presidential power on February, 7, 2012, during which the state broadcaster was stormed by mutinying police and soldiers.

The audit meanwhile revealed that as of August 2012 BIG was paid a total of MVR5.78 million (US$374,837) as sales commission.

Auditors were unable to verify from the available documentation – payment vouchers and invoices submitted by the company – that the commission was provided from additional income generated as a result of BIG’s work.

Moreover, BIG sought a further MVR6.7 million (US$439,040) in October 2012. The release of the funds was however halted on instruction from the Anti-Corruption Commission (ACC) pending the completion of an investigation.

Auditors concluded that BIG was not owed a commission from income generated from public announcements, SMS, my tones, advertisements, and airtime sales.

Based on the findings, Auditor General Niyaz Ibrahim recommended that the case should be investigated by the ACC and that action should be taken against the officials responsible for drawing up the agreement in a manner detrimental to the interests of MNBC.

Meanwhile, in March this year, three pro-government Malé City councillors alleged corruption in the awarding of the ‘Clean Green Malé’ project to BIG by the opposition Maldivian Democratic Party-majority (MDP) council. The allegations by the ruling Progressive Party of Maldives councillors were denied by those of the opposition party.

Other cases

The special audit also flagged four other cases of ostensibly corrupt practices at MNBC.

In January 2011, the Finance Ministry arranged a MVR47.8 million (US$3 million) loan from the State Bank of India to settle unpaid bills and develop an uplink system.

However, the uplink system project was halted after imported equipment was not paid for, auditors found. Of the US$3 million loan provided to MNBC, only US$127,000 was spent on the project for an advance payment and bank charges.

After paying an upfront fee, management fee, and interest payments, the report noted that the rest of the loan was used to pay salaries for MNBC staff and cover other recurrent expenditure.

As 85 percent of the loan was used for recurrent expenditures, the audit concluded that the purpose for which the loan was obtained was not served.

Moreover, as a result of MNBC’s failure to repay the loan in monthly installments at the end of the grace period in February 2012, the report noted that the State Bank of India liquidated the deposit kept at the bank by the Finance Ministry.

In another case, auditors found that MNBC provided MVR1.5 million to an individual in September 2011 to exchange for US$100,000.

While the individual was not licensed to exchange foreign currency, the state broadcaster has not received either the dollars or the rufiyaa as of the report’s publication.

As MNBC asked police to investigate the matter five months after the dollars were due, the audit office concluded that the corporation’s senior officials and board members were negligent and responsible for the loss.

The auditor general recommended an ACC investigation of the case and action against responsible officials.

In a third case highlighted in the report, auditors discovered that MNBC was owed MVR10 million (US$648,508) as of March 2012 for sales as well as services rendered.

As MNBC has since been dissolved, the report noted that no efforts were underway to recover the money owed.

Lastly, auditors found that the Finance Ministry provided MVR10 million to MNBC ahead of the 17th SAARC summit held in Addu City in November 2011 after the state broadcaster informed the ministry that it lacked funds in the budget to cover the summit.

In order to arrange the funds, the report revealed that the Finance Ministry decided to take MVR15 million (US$972,762) as dividends from the state-owned Kooddoo Fisheries Maldives Ltd.

A MVR10 million cheque sent to the ministry by Kooddoo was given to MNBC without depositing the funds in the public bank account as required by the Public Finance Act, the report revealed.


ACC, Civil Court orders Islamic Ministry to halt bidding process for Hajj groups

The Anti-Corruption Commission (ACC) has ordered the Ministry of Islamic Affairs to halt the bidding process for selecting Hajj Groups to accompany Maldivian pilgrims and to revise the criteria for awarding quotas.

Following an investigation into alleged corrupt practices, the ACC revealed in a press statement today that it identified nine issues with the regulations (Dhivehi) formulated by the ministry for evaluating bid proposals, which was published in the government gazette on February 12.

The ACC investigation was prompted by a complaint lodged at the commission alleging that the regulations were being used to unduly benefit certain parties.

The ACC decision came on the heels of a stay order (Dhivehi) issued by the Civil Court this morning ordering the ministry to halt the bidding process pending a ruling on the validity of the regulations.

The stay order or injunction was granted in a lawsuit filed by two Hajj groups – the Abatross and Minaa groups – contending that the bidding process was unfair.

Among the issues identified by the ACC was a new requirement for interested parties to submit bank statements – dating back six months – of the company’s management account and money depositing account.

Companies were also required to submit details of employees who would be accompanying pilgrims as well as documents proving their experience.

While 15 percent of marks were to be awarded for experience, the ACC noted that the regulations did not specify how experience would be measured or graded.

Moreover, while companies were required to submit details of ticket prices along with their proposal, the ACC noted that it would depend on the quota, which was to be decided by the ministry following evaluation of bids.

In addition, the commission found that there were no guidelines to evaluate the proposed price (45 percent of marks) and the quality of service (30 percent), whilst the ministry had not set a ceiling for the quoted price.

Based on its findings, the ACC ordered the ministry to revise the issues identified in its investigation report – shared with the ministry today – before resuming the bidding process.

Of the 800 pilgrim quota afforded to the Maldives by Saudi Arabia, 400 were reserved by the government’s Hajj Corporation while the rest were to be divided amongst companies chosen from the bidding process.

The proposals were to be submitted to the Islamic Ministry at 10:30am today.

The bidding process for Hajj groups was marred by controversy in 2013 as well. In May, the High Court overturned a Civil Court ruling in which the trial court ordered the Islamic Ministry to reevaluate several unsuccessful bids presented by local Hajj groups.


No corruption in GMR airport deal, concludes ACC

The Anti-Corruption Commission (ACC) has ruled out corruption in the awarding of a concession agreement in June 2010 to a consortium of Indian infrastructure giant GMR and Malaysia Airports Holdings Berhard (MAHB) to develop and manage the Ibrahim Nasir International Airport (INIA).

In a 61-page investigative report (Dhivehi) made public yesterday (June 17), the ACC concluded that the bidding process was conducted fairly by the World Bank’s International Finance Corporation (IFC) and that the GMR-MAHB consortium won the contract by proposing the highest net present value of the concession fee.

The ACC further concluded that the awarding of the contract did not contravene amendments brought to the Public Finance Act requiring parliamentary approval for such agreements.

The amendments were published in the government gazette after the concession agreement was signed, the ACC noted.

The concession agreement was signed on June 28, 2010, while the amendments were gazetted on December 13, 2010, following a Supreme Court ruling. The amendments were voted through for a second time in August 2010 following a presidential veto.

On the previous administration’s decision to replace the board of directors at the 100 percent government-owned Maldives Airports Company Ltd (MACL) – after they refused to sign the concession agreement claiming insufficient information – the ACC observed that there was “no legal obstacle” for the move.

The ACC report also concluded that the government would benefit more from privatising the airport.

“Considering the situation (2008, 2009 and 2010) when the decision was made to privatise the Male’ International Airport,” the ACC’s calculations showed that MACL would make a profit of about US$254 million in 25 years if the airport was operated by the government-owned company.

Conversely, the government would receive about US$534 million in the same period from the GMR consortium if the airport was privatised, the ACC found.

The privatisation of the airport by the ousted Maldivian Democratic Party (MDP) government in June 2010 was strongly condemned by opposition parties on nationalistic grounds.

The Dhivehi Rayyithunge Party (DRP), Peoples Alliance (PA), Dhivehi Qaumee Party (DQP) and Jumhooree Party (JP) signed an agreement to work against the privatisation process and launched a media offensive alleging “massive corruption” in the awarding of the contract.

The ACC report this week meanwhile followed a special audit conducted by the Auditor General’s Office with the assistance of a British consultant concerning the airport privatisation deal.

The AG’s report stated that evidence to back allegations of “improper interference” during the technical bidding process “is not conclusive on this point” and deferred the matter to the ACC.

The AG’s report also noted that the IFC’s terms of reference involved “securing the best deal for the government in terms of the concession fee paid to the government and MACL, and did not consider impacts on the Maldivian economy.”

Government stance

In November 2012, the current government – made up of a coalition of parties opposed to the MDP government’s privatisation policy – declared the concession agreement with the GMR-led consortium “void ab initio” (invalid from the outset) and abruptly terminated the contract.

In April this year, the Attorney General’s Office confirmed that arbitration proceedings resulting from the contract cancellation would begin by mid-2014.

Responding to the ACC’s findings yesterday, the government insisted that the report would have no impact on its legal position to declare the GMR concession agreement void, contending that President Dr Mohamed Waheed’s decision had nothing to do with corruption allegations levelled by “some people”.

President’s Office Media Secretary Masood Imad told Minivan News that the contract was declared void from the beginning due to the negative impact on state finances in 2012.

“Back before the government took back control of the airport from GMR, the reason we gave was that the deal was bleeding the country’s economy. We were paying GMR to keep them here,” he explained.

Masood said that despite “speculation from some people” concerning corruption by the former administration in signing the deal, the present government was not responsible for filing a case with the ACC.

He added that the government’s concerns over the deal had been in relation to the imposition of a US$25 Airport Development Charge (ADC) by GMR that was blocked by the Civil Court in 2011 after the then-opposition DQP filed a case on the matter.

The DQP, now part of President Waheed’s coalition government, attempted to block payment of the charge on the grounds that it was effectively a tax not approved by parliament.

In response, the MDP government agreed to deduct the ADC from the concession fees payable, while GMR later offered to exempt Maldives nationals from paying the ADC as it moved to appeal the verdict.

However, former President Mohamed Nasheed resigned under controversial circumstances on February 7, 2012 amidst a violent mutiny by elements of the police and military before the Civil Court verdict was appealed at the High Court.

Consequently, in the first quarter of 2012, Dr Waheed’s government received US$525,355 of an expected US$8.7 million, after the deduction of the ADC. That was followed by a US$1.5 million bill for the second quarter, after the ADC payable eclipsed the revenue due the government.


J Hotels and Resorts to sue government

J Hotels and Resorts intends to sue the government “at length” over the Cabinet’s decision to terminate the contract for Laamu Gan Asseyri Project, which was awarded in October.

Company chairman and former ruling party MP Abdulla Jabir said no explanation for the termination was given, and claimed it was not the first time that the Cabinet had retracted a decision.  He said he had “strong suspicions” of corrupt dealings.

“There are ruling party members who decided that they want the project, so they forced the President to terminate my contract through the Cabinet. The Cabinet is unfit to operate, it is just playing games on its high chair in the Maldives,” Jabir said.

The project was won via bidding and awarded on October 12 of this year. It includes a 50-year lease of 25 hectares for the development of hotels and 79 guest houses containing a total of 1,500 beds. Restaurants, spas and sports facilities were also included in the project plan.

Originally, a joint venture company was to be created with the government, which would earn a five percent share, and J Hotels and Resorts. State Minister for Tourism Thoyyib Mohamed was previously reported saying the government preferred a private party to develop and manage the whole project, but the ministry had a ‘Plan B’ to lease out separate components of the project to different parties.

According to the government gazette the Cabinet decided to terminate the contract on November 29, and has lately decided to re-open the bidding process.

Minister of Tourism Mariyam Zulfa was unavailable for comment, however Permanent Secretary Ahmed Solih said the ministry had sent its reply to J Hotels and emphasised that the issue now lies between the Ministry and the company.

Jabir warned that the Cabinet’s decision was one of several factors that was causing a dip in investor confidence.

“These are expensive games, for the investors and for the Maldivian people,” he said. “The government is losing credibility doing this. I am disappointed that the Maldivian government is dishonoring its agreement.”

According to Jabir, the contract between J Hotels and the Ministry of Tourism was valid under Maldivian contract law.

“We have incurred losses of income and opportunity, and our lawyer is assessing those losses now,” Jabir said, reiterating that the company plans to sue the government.

He further claims that a contract cannot be terminated unilaterally, as the Cabinet has done, and that the government cannot accept bids for a project which is the active subject of a lawsuit.

Jabir was unable to provide further details regarding losses incurred.

Last week, the Cabinet instructed the Attorney General’s Office to monitor allegations of corruption made against the government, and file defamation lawsuits where such allegations were proven unfounded.

The Cabinet’s request follows growing concern that some such allegations are being made for political purposes. Meanwhile, the acrobatics of local politics could have a detrimental effect on foreign investment.

At the same time, the government has been tasked with improving its latest ratings in Transparency International’s 2011 Corruption Perception Index (CPI), which were less than favorable.