Dissecting the task force report on the Fidelity/Customs fraud

By Analyst

Well the report is finally in!  On December 19, 2008, some nine months after the investigation commenced, the task force mandated to investigate claims that Fidelity Investments Inc had with the assistance of officers of the Customs and Trade Administration (CTA) defrauded the government of millions of dollars in revenue,  handed its report to President Bharrat Jagdeo.

The members of the task force were commendably thorough in their investigations.  In particular, the task force seems to have put considerable effort into understanding the procedures in place at the GRA: sifting through documents; doggedly following a paper trail and even travelling to Venezuela and investigating amidst (foreign language difficulties), the authenticity of documents tendered by Fidelity.  Through its diligence, the task force assembled a cogent body of evidence implicating the importer and a number of officers in this massive fraud.

Notwithstanding the sterling effort on the part of the task force, it failed to achieve that which the President had set the nation up to expect, namely to prove the malfeasance of persons in high places with the chips subsequently falling where they may.  President Jagdeo may have inadvertently shot himself in the foot when he declared, on May 9, – in response to charges of GRA involvement in the investigation – that the Commissioner-General was the only GRA member of staff on the investigating team. Whether he understood it or not, Mr Jagdeo would have sent an unmistakeable message in that statement to all and sundry (and to the investigating team in particular) that the Commissioner-General was up front absolved of any responsibility whatsoever for the state of affairs in the agency that he runs. The Auditor-General issued a low-key statement the following day that essentially contradicted the President, and said that the Commissioner-General was instead “facilitating” the investigation in various ways. The task force would eventually – in its report – obliquely accuse the Commissioner-General of frustrating rather than facilitating the investigation.

While we cannot fault the task force for ascertaining most of the relevant facts, we are disappointed in the number of shortcomings, some of which were perhaps understandable considering the limitations of the members of the task force itself and the difficult circumstances in which it functioned.

The first shortcoming that we take issue with is the failure of the task force to “range wide and to dig deep” as was promised by the President. In this regard, the task force said that it was inadequately constituted to investigate the amassing of personal wealth by GRA officials. With respect to ranging wide, the task force reported that it attempted to investigate other importers fingered in the scam but complained of obstruction of its inquiry. Specifically, the task force reported several incidents where requests for documents, information and cooperation from the GRA were effectively stymied by the Commissioner-General’s insistence on bureaucratic procedures.

Another drawback was the seeming double standard in the recommendations for action against various officers. In the cases of officers found culpable in the fraud, the task force recommended “appropriate disciplinary action” or “criminal charges” essentially leaving the sanctions to the discretion of the GRA (in the case of departmental disciplinary action) and to the courts (with respect to criminal action).  On the other hand, in the case of high-ranking officers found to be grossly negligent, the task force recommended reinstatement and issuance of warning letters. In essence instead of leaving it to the GRA to determine “appropriate disciplinary action” similar to the case of the lower ranking officers, the task force recommendations rule out dismissal, and further would limit the sanction to a written warning – a veritable slap on the wrist which must have those senior officers laughing all the way to the bank (no pun intended).  Make no mistake, we believe that with respect to the higher echelons of the GRA, the amazing coincidence of incompetents and incompetence would strain the credulity of the most gullible of observers.

Another flaw evident from the report is the seemingly tenuous understanding on the part of the task force not only the legal limits of its mandate, but more importantly of the fundamental tenets of justice and due process. In particular, perhaps with the enthusiasm generated by the evidence that they had gathered, the members of the task force overreached themselves and in addition to recommending that charges be laid, declared a number of the suspects “guilty” of various offences under the Police Act and the Audit Act – a privilege reserved for the judicial authorities.  A much more egregious indiscretion however was the inference that was drawn based on the refusal of one of the CTA officers to attend interviews with the task force unaccompanied by legal counsel. The task force had the temerity to suggest, that insistence on legal counsel was no less than an indication of complicity. It seems as though the extremely cogent body of evidence implicating the particular officer emboldened the task force to make this egregious attack on the principles of legal representation and truly raises the question despite their otherwise good legwork, whether the individual members of the task force were fit and proper holders of the offices they occupy and is a truly frightful indication of the attitudes and beliefs of wielders of power in our society.

The question of fitness for office brings us to the seemingly invisible elephant in  the room as far as the Fidelity Report is concerned. The report of the task force contains a resounding though un-stated indictment of the stewardship of the GRA.  As in the case of their decidedly guarded criticism of the head of the GRA with respect to cooperation with the investigation, given the President’s explicit confidence in the Commissioner-General, the members of the task force were perhaps understandably muted and oblique in their criticism of the latter leaving it up to the President to “read between the lines” as it were.

The first indictment of management is the failure of the security cameras.  Having noted that the cameras were not functioning reportedly because of interference with the operation of the TRIPS system, the task force observed that as “at the time of the report the cameras were still not functioning”.  This is truly incredible. The task force’s report was tendered on December 19, 2008.  TRIPS has been up and running from January 1, 2007 and if we assume that the cameras had to be turned off because of this interference at that time, it means that the GRA was nearly two years and still counting without finding a solution to the incompatibility.

This is management sloth and incompetence at their worst.  We should also not forget that in the infamous Customs House robbery of 2005, the security cameras at C&TA proved utterly useless in identifying the perpetrators and indeed on the ignominious collapse of the case some three years later, Stabroek News expressed in an editorial opinion on March 31 2008, that “Footage from a Guyana Revenue Authority surveillance camera was circulated to the media showing very grainy and useless images.”  The previous signal failure of the cameras was no doubt on the minds of members of the task force who very cautiously concluded that the cameras “may have assisted” (instead of would have) in identifying the person who paid duties and taxes on behalf of Fidelity.

The second count of the indictment of GRA management was the truly stunning finding that the TRIPS system was breached and “manipulated” not by some sophisticated and high-tech hacking methods as we could expect, but by improper assignment of duties and privileges to GRA officers who proceeded to abuse the credulity of their benefactors.
The task force found that one of the officers involved was given access (to the TRIPS system) “which she did not require in order to execute her duties”.  This obviously begs the questions as the competence of the person(s) who authorised her levels of access, and whether there were other officers in the GRA who were authorised to have unnecessary access or indeed whether there were cases where access was not authorised at all.

The task force found further that “the broker and the importer were made aware that Fidelity Investment Inc had been profiled under a high risk category” and that “Fidelity Investment was henceforth advised to do importation under another sister company, Kong Inc.”  The task force essentially said that someone on the Risk Profiling Committee breached the confidentiality of the process. It pointed to management responsibility in this breach when it found that “…Senior personnel that comprise the Risk Profiling Committee were the same persons placed in authority to ‘police’ the system”[sic].  We feel that this is the most significant finding of the entire report since it points to a clear dereliction on the part of the management of the GRA.

In the final analysis, the report of the task force once again, like so many of its kind, failed to net the “big fish” and in so failing, it fell far short of delivering the results that the nation had come to expect in the light of the President’s brimstone and fire predictions in April 2008.  If nothing else, however, the report exposes the extremely serious management shortcomings at the GRA.  How could so many senior managers be conveniently negligent in this one case? If they were truly incompetent, then how were they consistently selected and placed in critical positions? How can it take in excess of two years to solve system incompatibility issues? What rationale is used in authorising access to the TRIPS system? How could basic segregation of duties be ignored in the constitution of the Risk Profiling Committee? The TRIPS system cost the treasury in the area of $1 billion and it is a national scandal that its effectiveness has been compromised by the same sort of negligence and incompetence that seems to afflict the state sector at large.  Enquiring into the stewardship of the GRA was perhaps beyond the mandate of the task force. However such an inquiry must be made. Perhaps the Economic Services Committee of the House is the best entity. At least this time there would be no confusion as to whether anyone from the GRA forms part of the investigating team.

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