The Edition

Latest

Cemented in graft – a breakdown of one of MRDC’s biggest scandals

Fathmath Shaahunaz
14 December 2017, MVT 16:15
MRDC employees pictured paving roads with asphalt in HDh Kulhudhuffushi. PHOTO/MRDC
Fathmath Shaahunaz
14 December 2017, MVT 16:15

In the web of corruption exposés surrounding several state institutions of the Maldives, graft allegations against government corporations have become the norm as opposed to blows. One such firm besieged by skullduggery, as exposed by investigations of the Anti-Corruption Commission (ACC), is the state-run manufacturing company Maldives Road Development Corporation (MRDC).

Tasked with major projects such as construction of roads, futsal fields and ports across the archipelago, MRDC is a key corporation in realizing the government’s vision for infrastructural development. However the company has been rained upon by a string of shocking corruption accusations. This report takes an in-depth look into one of the biggest.

A deal sealed with cement

On December 25, 2014, MRDC struck an agreement with a local company, Raise Crown Production Pvt Ltd, to supply 5,000 metric tonnes of cement to the former for nearly MVR 10 million. While the contract signed Raise Crown on as MRDC’s supplier for one year, it stipulated that the 5,000 tonnes of cement must be delivered within 20 days of the agreement. The payment would be settled only upon delivery, it added.

An expatriate worker carries cement bricks to a construction site. PHOTO/MIHAARU

However, later on it surfaced that Raise Crown had delivered the cement long after the agreed date. Despite the contract violation, MRDC had extended the deadline for the company and even made an advanced payment exceeding the original cost of MVR 10 million.

When this issue surfaced, the Criminal Court had ordered MRDC to refrain from using any of the cement supplied by Raise Crown, which MRDC violated. Mihaaru has received copies of the transactions between MRDC and Raise Crown, along with the court order, police documents and ACC’s counsel.

Windfall for Raise Crown

When MRDC first opened bids for the cement supply on October 29, 2014, Raise Crown and Nalahiya Trading Pvt Ltd were the only companies to lobby proposals.

Raise Crown had proposed a rate of MVR 97.84 per cement bag in its original bid. However, in a letter later sent to MRDC, Raise Crown had promised the more attractive rate of MVR 94.89 per bag compared to the market price of MVR 110, which would give MRDC a profit of MVR 12 per bag. However, after the contract was awarded, Raise Crown did not follow through with its promise in the letter.

MRDC’s decision to pick Raise Crown came as a “shock” to Nalahiya. In a letter to MRDC, Nalahiya expressed surprise over MRDC’s rejection of the company’s technical bid on November 25, and requested an explanation. Records do not show whether MRDC responded to Nalahiya.

MRDC’s agreement with Raise Crown stated that the cement must be supplied at the rate of MVR 94.89, which would amount to MVR 9.4 million sans Goods and Services Tax (GST) for 5,000 tonnes of cement.

The contract was signed by MRDC’s then managing director Ibrahim Nazeem, then chairman Mohamed Riyaz, director Mohamed Ali Didi and company secretary Aishath Shara Abdul Rahman. Out of the four, Riyaz had soon after resigned from his post as chairman.

Though the agreement called for Raise Crown to deliver 5,000 tonnes of cement within 20 days, and MVR 10 million was paid in advance, the supply did not arrive even after six months.

Raise Crown informed MRDC on two counts that the cement delivery was being delayed. In its first letter on February 26, 2015, Raise Crown claimed that sea ports were closed for the Chinese New Year. The company estimated that the shipment would leave the port in Vietnam on February 28 and dock at Thilafushi island in Kaafu atoll on March 15. The letter added that the shipment would arrive at MRDC’s site in Thilafushi on March 22.

However, on the day of the promised delivery, Raise Crown sent another letter to MRDC requesting an extension for the deadline. The company had claimed that loading the shipment at Vietnam’s port got delayed due to heavy traffic.

Raise Crown’s new estimates were that the boat would depart from Vietnam on March 31, arrive in the Maldives on April 23, and deliver the cement to MRDC’s site in Thilafushi on April 30. Raise Crown apologized for the delays and requested MRDC to “settle matters”.

The court order

Aerial view of Maldives Ports Limited (MPL)'s commercial harbour in capital Male. FILE PHOTO/MIHAARU

On August 24, 2015, the Criminal Court issued a court order forbidding MRDC to carry out any cement supply transactions with Raise Crown. Accordingly, the police requested MRDC’s then MD Nazeem to provide details on how much of the cement MRDC had used by then and the amount still remaining. Police also demanded copies of the transaction documents.

The court order also laid a serious allegation against Raise Crown. The company had acquired the 5,000 tonnes of cement from Power Trade of Malaysia. Raise Crown was to hand over the shipment’s original bill of lading to Apollo Holdings, the local agent that imported the cement. However, the court order stated that Raise Crown had sold the shipment to MRDC without going through Apollo first.

Contract renewal U-turn

The one-year agreement between MRDC and Raise Crown allowed the prospect of extending the contract for a maximum period of four years, but on a specific condition – there should have been no problems between the two parties throughout the duration of the first contract.

With the agreement’s expiry on the horizon, Raise Crown had sought a renewal. However, MRDC’s Board of Directors decided on May 9, 2016, that Raise Crown’s performance until then had been lackluster and, thus, renewing the contract was not in their best interests. The board had concluded to seek a new cement supplier.

Former MRDC head Ibrahim Nazeem (L) pictured signing an agreement with the housing ministry.

However, another meeting held May 30, 2016 saw the Director’s Board take a U-turn on their first decision. MRDC’s legal team had stated that there were no disputes between the corporation and Raise Crown, and advised the board to go for another agreement with Raise Crown. The board decided to go with the legal team’s counsel.

The new contract with Raise Crown featured additional points in its clauses:

Raise Crown must offer floating interest rates to MRDC

Raise Crown must offer cement rates lower than the market price

Create a committee to monitor market price fluctuations, with representatives from both companies

MRDC may turn to another supplier at its discretion should Raise Crown be delayed in delivery

Financial losses

An MRDC board meeting held August 10, 2016 brought to light that the agreement with Raise Crown was resulting in continuous losses to the corporation.

An assessment report on MRDC’s transactions with Raise Crown was submitted at the meeting, which detailed MRDC’s cement purchases from Raise Crown. The report noted that transferring cement shipments to MRDC’s production site puts an additional cost of MVR 16 per cement bag, while over 1,000 bags were recorded as having hardened cement. According to the report, the total expenditures raised the cost of cement bags from MVR 111 each to MVR 115 by the time they were delivered to the production site.

Construction workers at a site in Hulhumale. PHOTO/MIHAARU

The report highlighted that transferring cement bags, which cost MVR 94 each, from Thilafushi to capital Male raises their price to MVR 115 each. Meanwhile, the market price of cement was lower at MVR 111 per bag, while Nalahiya offered a rate of MVR 103. A board member also revealed that MRDC representatives had met with State Trading Organisation (STO), which offered to deliver cement to MRDC’s production site at a minimum rate of MVR 90 per bag.

The board had then decided to seek a legal opinion regarding MRDC’s agreement with Raise Crown. It remains unclear how the proceedings went.

When the public had first caught wind of MRDC’s scandal, the then managing director, Ibrahim Nazeem, was fired while the ACC had sought to prosecute him. However, the Prosecutor General’s Office had stated that Nazeem was not the only one involved in the corruption, and returned the case.

The ACC recently revealed that it ordered MRDC last month to recover the money it lost due to its agreement with Raise Crown. However, MRDC is yet to respond to ACC’s order.

MRDC’s questionable deal with Raise Crown is one of many graft cases involving state institutions and government companies. A common reflex as soon as such scandals surface is to sack the head of the disgraced company, but one must keep in mind that it is certainly not the solution. The weeds of corruption must be dug out at the roots, while taking care to uphold another cause; a priority that appears to be neglected in most cases – the quick recovery of “lost” state funds, which is a right of the people.

MORE ON ANTI CORRUPTION COMMISSION