Tag: special audit

Adeeb denies corruption allegations as MDP calls for prosecution

Tourism Minister Ahmed Adeeb has denied allegations of corruption in a special audit report of the Maldives Marketing and Public Relations Company (MMPRC) while the opposition has called on the prosecutor general to press charges.

The report (Dhivehi) – made public on Thursday (October 30) – implicated Adeeb in corrupt transactions worth US$6 million between the MMPRC and the Maldives Ports Limited (MPL) and the Maldives Tourism Development Corporation (MTDC).

The MMPRC obtained MVR77 million (US$5 million) from MPL to be paid back in dollars and US$1 million from MTDC as a loan, which was immediately transferred to two companies – Millenium Capital Management Pvt Ltd and Montillion International Private Ltd, both with ties to Adeeb.

Speaking at a press conference at private broadcaster DhiTV’s studio last night (October 31), Adeeb insisted that the MVR77 million was not a financial loss to the state, noting that US$3 million has been repaid to MPL with the remainder due in December.

“Under my [tenure] as tourism ministry, in order to avoid state companies going into the dollar black market, I have obtained dollars for the state from one state company to another, the tourism industry, and various private parties,” Adeeb said.

Adeeb claimed to have arranged for local businessmen to purchase treasury bills worth MVR800 to 900 million as of October 2013 to ease the government’s cash flow problems.

The agreement between MMPRC and MPL was approved by the respective boards of the state-owned enterprises, the ruling Progressive of Party of Maldives’ (PPM) deputy leader stressed.

The MVR77 million from MPL was not embezzled or misappropriated, he insisted, claiming that the government routinely converts rufiyaa into dollars through private parties.

On the allegation that the tourism ministry awarded an italian-owned company an island for resort development to pay back US$2.25million of the US$6million MMPRC owed to MPL and MTDC, Adeeb claimed that Dhaalu Maagau was used as a picnic island by PPM MP Ahmed Nazim’s friends.

The former deputy speaker of parliament had repeatedly sought to secure the island, Adeeb said, dismissing the allegation that the Italian paid the lease rent for the island through Adeeb’s father’s Montillion company.

Adeeb also pledged to release his financial statement to the media on Sunday (November 2) and denied failing to declare assets.

According to the audit report, Adeeb has failed to declare assets as stipulated by Article 138 of the Constitution since he was appointed tourism minister in 2012.

Counter-allegations

When the US$6 million corruption scandal first surfaced in May, Adeeb told Minivan News that the “defamation attempt” was linked to his refusal to support certain individuals for speaker and deputy speaker of the 18th People’s Majlis.

Minivan News understands MP Ahmed Nazim was involved in leaking documents related to the case to online news outlet CNM, which first broke the story of the Anti-Corruption Commission (ACC) investigating the transactions.

Nazim’s passport was withheld last week, but he left the country on the date the court order was issued.

In May, Adeeb confirmed to Minivan News that two repayment cheques dated May 10 and 15 bounced due to insufficient funds.

The MTDC’s US$1 million had been reimbursed, Adeeb said, while MPL had been paid one-third of the owed amount in dollars. The remaining two thirds are due in June, he added.

At last night’s press briefing, Adeeb alleged “extraordinary ties” between Nazim and Auditor General Niyaz Ibrahim.

Following his refusal to support Nazim for the deputy speaker’s post, Adeeb said Nazim threatened to put out audit reports implicating him as well as family members in corrupt dealings.

Moreover, the auditor general’s office neither sought a statement from him nor posed any questions regarding the transactions, Adeeb said.

“I am most saddened that professionals, specialised people, are brought in between our political rivalry in the political arena,” he said.

“Unconstitutional”

The opposition Maldivian Democratic Party (MDP) meanwhile released a press statement yesterday condemning the government’s “unconstitutional” and “unlawful” attempts to replace the auditor general before the end of his seven-year term.

Last week, parliament passed amendments to the Audit Act requiring the president to reappoint an auditor general within 30 days of ratifying the amendments.

President Abdulla Yameen ratified the amendments on Thursday.

The MDP contended that the auditor general could only be removed from office through the process specified in the Constitution, which was “(a) on the ground of misconduct, incapacity or incompetence; and (b) a finding to that effect by a committee of the People’s Majlis, pursuant to article (a) and upon the approval of such finding by the People’s Majlis by a majority of those present and voting, calling for the Auditor General’s removal from office”.

The attempt to remove the auditor general shows the level of corruption in the current administration, the press release stated, adding that the government was undermining independent institutions.

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GMR holds to US$1.4 billion compensation figure

GMR is sticking to the US$1.4 billion compensation claim for the abrupt termination by the Maldivian government in December 2012 of a concession agreement to develop the Ibrahim Nasir International Airport (INIA).

“The forceful takeover of the airport by Maldives government amounts to repudiation of a valid contract and therefore damages, including loss of future profit has to paid. Thus, GMR’s claim is $1.4 billion,” Indian media reported the Bangalore-based infrastructure giant as saying in a statement on Friday (April 25).

GMR noted that the Maldivian government had acknowledged for the first time that the company was owed compensation.

Prior to departing for Singapore on Thursday, President Abdulla Yameen told the press that the government would have to pay compensation to GMR upon conclusion of the arbitration process currently underway.

Asked if he was confident the outcome of the arbitration would be favourable for the Maldives, Yameen said: “The reality we have to accept is that a government with full sovereign powers made an agreement with a foreign party and leased [the airport]. This is a government, and what preceded this was a government as well. So believe we have to pay them some kind of financial compensation. “

He added that the government’s objective in the arbitration hearings was to lower the compensation amount.

If the judges on the arbitration panel accept the government’s arguments for nationalisation or expropriation, Yameen said the compensation owed to GMR could be smaller.

“We’re going to have to provide compensation in any case,” he conceded.

The US$1.4 billion sought by GMR for “wrongful termination” exceeds the annual state budget whilst the national debt is expected to rise to MVR31 billion (US$2 billion) this year.

Earlier this month, Yameen had said that the out-of-court settlement sought by GMR was too high, and that he would now await the outcome of the arbitration proceedings, which could take up to another two months.

Despite the pending arbitration decision, expansion and development of INIA was among the five mega-projects for which the government was seeking investors at the Maldives Investment Forum held in Singapore’s Marina Bay Sands yesterday.

President Yameen also met officials of the Beijing Urban Construction Group yesterday, who “expressed their interest in engaging in the infrastructure development of the [INIA],” according to the President’s Office.

Void ab initio

In December 2012, the administration of former President Dr Mohamed Waheed voided the 25-year concession agreement with the GMR-led consortium.

The US$511 million contract awarded by his predecessor former President Mohamed Nasheed – following a bidding process overseen by the World Bank’s International Finance Corporation (IFC) – was the largest foreign direct investment in the country’s history.

Waheed’s government – of which President Yameen’s Progressive Party of Maldives was a coalition partner – declared the contract ‘void ab initio’ – invalid from the outset – and gave the company seven days to leave the country.

After GMR received a stay order for the eviction from the Singapore High Court, the government successfully appealed the injunction at the Singapore Supreme Court.

Chief Justice Sundaresh Menon declared that “the Maldives government has the power to do what it wants, including expropriating the airport.”

At a press conference in the wake of the airport takeover, Finance Minister Abdulla Jihad – who retained his post under the new administration – said that the Maldives would pay whatever compensation was required “however difficult” while Attorney General Azima Shukoor expressed hope that the compensation would be lower than anticipated.

A special audit conducted by the Auditor General’s Office in early 2013 found that as of October 31, 2012, GMR Male’ International Airport (GMIAL) had completed 25 percent of the refurbishments and upgrades to INIA planned for the end of 2014, and had been invoiced by its contractor for US$69 million.

“Significant progress had been made in some areas – for example, 87 percent of the material for land reclamation had been dredged,” the report (English) stated.

“In the meantime, all work on the ground on the improvement to the airport has ceased. Sensitive elements of the new structures that had been planned by [GMR] are incomplete and exposed to the weather and at risk of damage – possibly closing off the option of re-using these elements to reduce the cost of any future development of the airport,” the report concluded.

After examining the bidding process, the audit report stated that evidence to back allegations of “improper interference” during technical bidding process “is not conclusive on this point”, and deferred the matter to the Anti-Corruption Commission (ACC), which ruled out corruption in June 2013.

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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.

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Audit of GMR airport deal to be completed in February

Auditor General Niyaz Ibrahim has said that a special audit of the awarding of a concession agreement to develop, manage and operate Ibrahim Nasir International Airport (INIA) to a consortium of Indian infrastructure giant GMR and Malaysian Airports Holding Berhad (MAHB) is currently underway and will be completed in February 2013.

Niyaz told state broadcaster Television Maldives (TVM) yesterday (November 5) that an experienced British auditor was expected to join the team conducting the audit during the first week of December.

“We have completed a large portion of [the audit] with a special team dedicated to it,” Niyaz said. “We have been able to collect almost all the documentation we need and have reviewed them.”

He added that the audit of the bidding process has been completed. “After that, we will carry out a study of the contract and different analyses,” he said.

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