Energy think-thank, Institute for Energy Policies Research (INSTEPR) has questioned the unwarranted delay in the investigation and prosecution of officials involved in the US$36 million electric meters procurement fraud in 2016.
A statement issued by Executive Director of INSTERR, Mr Kwadwo Poku said their checks at the ECG revealed that all relevant documents regarding the “fraudulent transaction” have been submitted to the Economic and Organised Crime Office (EOCO) and National Security since 2017.
However, the two state investigative bodies are yet to prosecute the culprits involved.
In 2016, L & R Investment and Trading Company, incorporated in China, entered into a contract with government to supply the meters to ECG.
The then Ministry of Power, now Ministry of Energy, through the Ministry of Finance made a payment of US$36 million to L & R Investment and Trading Company Limited out of total contract value of US$39,999,566.44.
The contract was to be executed within a period of 26 weeks and an advanced payment of US$12 million was made to L & R Investments plus a Letter of Credit (LC) of US$24 million.
However, 2020 Auditor-General’s report on state-owned institutions revealed that the meters, which were procured at a huge cost to the state, were abandoned because they were not usable.
Long delay
Now the Executive Director of INSTEPR, Mr Kwadwo Poku is questioning, “Why has it taken four years for the State Security Agencies in investigating this transaction? Who are the people behind L & R Investment and Trading Company in Ghana? The initial USD$12 million was paid to First Grace Limited. Who are the people behind this company? Why is the management of Capital Bank Limited not being prosecuted for the illegal discounting of the Letter of Credit?”.
He added that “We do not want to draw any conclusion since this matter is still under investigation, but I am sure every Ghanaian will agree with me that we need some answers and accountability now from our leaders on this fraudulent transaction. There is no way this transaction was done by the average Joe on the street.”
Kroll’s concerns
In fact, a confidential letter by Kroll dated 30th August 2019, which was signed by its Managing Director, Benedict Hamilton and addressed to then ECOCO Executive Director, COP Frank Adu-Poku (rted) also questioned the manner in which the deal was being probed.
The letter was also copied to Secretary to the President, Jubilee House; the Vice President, then Senior Minister Yaw Osafo-Maafo, Chief of Staff, Attorney General and Ministry of Justice; National Security, National Security Secretariat; Advisor to the Executive Director, EOCO; Chairman of the Board, Electricity Company of Ghana; Member of the Board, Electricity Company of Ghana.
Kroll is a corporate investigations and risk consulting firm, contracted by government to investigate various transactions under the Mahama administration.
The risk consulting firm has audited a number of deals including the “LITHOvit agro-chemicals supplied by Seidu Agongo to COCOBOD for USD106,541,589.82 which is now the subject of a case in the High Court”.
In the letter, Kroll said, “We write to you in reference to the report submitted to you on 13 August 2019 by the team at EOCO assigned to the ongoing investigation into the contract between ECG and L&R.
We have reviewed the document and are concerned about the apparent lack of action taken to investigate the key points we set out in the case docket handed to your team. We also have reservations about how the interview process has been handled.
The body of the document is a summary of interview testimony for some, but not all, key individuals. While we would not expect the report to include the full transcripts of these interviews, the excerpts provided do not contain the kind of information we would have anticipated given what we know about the individuals in question. Specifically, the content of the summaries provided for Samuel Adu-Yeboah and Fitzgerald Odonkor do not address issues that were central to the case as set out in our docket submitted to EOCO.
Although we understand it is EOCO’s prerogative to conduct these interviews without our involvement, we would have expected, given our knowledge of the case, to assist in the process of selecting interviewees and helping prepare your team for the interviews themselves. This is certainly the case for those subjects whom we have yet to interview and for whom we have outstanding financial data to review. This data could, for example, have influenced the approach and direction of interviews with potentially adverse interviewees, such as Adu-Yeboah and Odonkor.
Interviewing these subjects before we have had the opportunity to complete our review of relevant data and compile evidence to support allegations of wrongdoing, could compromise the investigation and the viability of asset recovery.
The report omits several key points that we consider of critical importance to the case against those responsible.
1. No reference is made to former Deputy Minister of Finance, Cassiel Forson, his role in the alleged fraud, his misleading of parliament and his connections to First Grace Limited, L&R’s local representatives, and Timios Company Limited, First Grace’s “sister company”, through family members and former housemates;
2. There is no mention of Adu-Yeboah’s links to the NDC or his role in Mahama’s 2016 election campaign. The report also fails to mention the ties between Adu-Yeboah’s company, First Grace, and Timios. This is despite EOCO having interviewed Adu-Yeboah;
3. There is no mention of the circumstances of Capital Bank’s appointment as the managing institution for the $40m received from the Eurobond Account, which included the establishment of the Letter of Credit and the associated collateral arrangements made for the advance payment of $12m.
This is despite EOCO having interviewed both Benjamin Larbi and Odonkor;
4. There is no mention of L&R’s role in the establishment of the Letter of Credit, such as L&R’s Kojo Sho’s delivery and approval of the terms of the Letter of Credit and details of transactions made in relation to the Letter of Credit;
5. There is no mention of Terkper’s role as both Minister of Finance and Supervising Minister of Power and there is no reference to his involvement in diverting the financing of the contract from CAL Bank, which had received parliamentary approval, to the Eurobonds Proceeds Account; and
6. There is no mention of funds identified for recovery or the freezing of funds made in anticipation of recovery.
Beyond the omission of these points, the report’s characterization of L&R’s performance of the contract appears selective. The report includes partial information on contract conditions met by L&R, such as the completion of a satisfactory pilot programme; however, the report does not include the items that failed to satisfy the contract terms, such as payments being made and shipments dispatched prior to the completion of the pilot programme, the failure to provide a Factory Acceptance Test, and the superficial and insubstantial nature of the report provided after ECG’s due diligence visit to China, which took place after the contract was signed
The report makes no reference to the transactions at the heart of the case against those responsible, and there is no mention of any steps taken to independently verify the financial analysis we undertook that underpin some of the allegations in our docket, such as First Grace’s use of a GHS 38m payment from the Energy Commission as collateral for the advance payment made to L&R.
There is also no recognition of the significance of the corporate ties between key individuals; for example, the links between First Grace and Timios, which include shared signatory rights exercised by corporate officers on documents of both companies, and that directors and shareholders of each company are codirectors of other corporate entities.
We thank you for your expedient attention and action”.
Background
In September 2016, the Ministry of Power wrote to the Managing Director of ECG, informing him of an US$80 million financing secured by the Government for the procurement of electric Meters.
The letter stated that local Ghanaian companies will be given US$40 million and Messrs. L & R Investments and Trading Company whose local representatives are Messrs. First Grace Limited, be given USD $40 million.
The Ministry’s letter instructed the managing director of ECG to initiate a discussion with the said suppliers with the view of entering into a contract for the supply of these electric meters.
The Ministry also asked for immediate response to their letter to facilitate cabinet and Parliamentary approval.
The Management of ECG on their part upon receipt of the Ministry’s letter engaged Messrs. L & R Investments and Six local Ghanaian companies.
After ECG had and evaluated the proposal from L & R Investment, a pre-contract meeting was held in October 2016 between the technical team of ECG and the Managing Director, in the name of Mr. Tao Wenhui for L & R Investment.
At this meeting, the Scope of Supply, Technical Classification, Due Diligence, Pilot Studies, Factory Acceptance Tests (FAT) and Training of ECG metering Staff were discussed and agreed upon.
According to the Executive Director of INSTEPR, Mr Kwadwo Poku, the two key conditions before the supply of the meters after signing the contract were the Pilot study to assess the meters for 2 months and the Factory Acceptance Tests (FAT).
“The contract was signed and L & R was given an initial payment of US$12 million, however, the meters that were to be provided as samples (200 electric meters) for the Pilot studies were not sent to ECG and the agreed travel of three representatives from ECG to undertake the Factory Acceptance Tests in China before the manufacturing of the said meters did not take place.
“Without any of these conditions being met, the management of ECG was sent shipping documents for containers of meters at Tema Port.”
According to him, ECG informed L & R Investment that they cannot accept the containers because they have not followed the process agreed to per their contract.
“After months of back and forth with L & R Investments, the containers of Meters were cleared from the Tema port to stop the accrual of demurrage. The meters in the containers were not the specification as per the supply contract,” he stated.
Mr Kwadwo Poku disclosed that INSTEPR was told the contract was terminated in 2017 after legal consultations on the non-performance by L & R investment but the company after months of not conforming to the agreed conditions of the contract, discounted the $24 million Letter of Credit (LC) given to them under the contract.
“We have sighted documents that state on 16th of August 2017 at a time when Capital Bank Limited had ceased to be a bank under the laws of Bank of Ghana, Capital Bank discounted the LC and made a payment of USD $22.5 million to L & R Investment,” he added.
The Institute, he said, contacted officials of ECG to ascertain further and better particulars on the transaction but were informed all documents relating to the deal are with EOCO and National Security and that further checks indicate they have been investigating since 2017.
