Two customs employees implicated in the multi-million polar beer scam with Fidelity Investments flouted procedures and bypassed key checks in the system without raising any red flags, but a few suspect records and testimony from an employee helped unravel the scheme.
The Auditor General-led report into allegations of corruption within the revenue body, which is expected to be tabled in Parliament today, found evidence of signatures being changed even after documents had been inputted into the Total Revenue Integrated Processing System (TRIPS) at the Customs and Trade Administration (CTA). It also pointed to invoices that had been reproduced and were carrying identical numbers because “someone forgot to change the numbers”. After examination of the documents for 17 shipments which were under scrutiny, the investigating team found that the importer should have paid $321M in duties and taxes as opposed to the $32M that was paid.
A customs employee when grilled during the investigations was forthright with the team by pointing out that the signatures on some of the documents that had been personally handled by the employee were changed; underlining loopholes in the systems that allowed employees to tamper with official records that have been entered into the TRIPS.
When questioned in relation to five customs declaration forms for Fidelity that raised suspicions, the employee confirmed inputting the forms into TRIPS, but observed that the handwriting on four of the forms had been substituted. The task force concluded that the forms had been reconstructed after being inputted into the system.
Customs declarations are forwarded for valuation checks on the basis of being, ‘flagged’ automatically by TRIPS, and the seventeen customs declarations for the importation of 40 containers by Kong Inc., a sister company of Fidelity Investments were all flagged by TRIPS for valuation checks, but no such checks were ever done.
In the report, it is stated, that Employee A signed the customs declarations forms without any valuation checks being done. This is contrary to procedures since customs regulations stipulate that forms which are forwarded for the valuation checks must be signed by the officer carrying out the checks. But, the report noted that records at customs show that Employee B was logged in as having done the valuation checks though Employee B’s signature never appears on the forms, as required by the procedure for the officer carrying out the valuation checks.
Employee B when interviewed by the task force admitted not carrying out the necessary valuation checks on seven of the forms. But Employee B alleged that Employee A used the TRIPS password assigned to Employee B and logged into the system to do the valuation checks.
The task force found no record of an authorization given to Employee A to use Employee B’s password, however, the group discovered that users of TRIPS are required to change their passwords at least once every month, and since the customs declarations in question were processed during July to December 2007. i.e. within a six-month period, Employee B would have had to change the password assigned at least six times to access TRIPS.
Employee A also signed sixteen of the seventeen invoices attached to the customs declarations forms, but the report pointed out that the same invoice number appeared on two of the forms for the importation of three containers for Kong Inc.
The invoice numbers were identical except for the container numbers and weight, which the report said, would infer that the original invoice may have been duplicated or someone reproduced the original invoice and forgot to change the invoice number.
According to the report, Employee A, who is one of the few persons who were fully trained in the TRIPS and is au fait with the entire system, was given certain access to the system which was not required in the execution of duties assigned to that post, and as such, Employee A capitalized on the knowledge and manipulated the system using the superior access.
The task force said it made several attempts to interview Employee A but the individual refused to be interviewed without legal counsel present. The team concluded that this is an indication that Employee A may be withholding information knowing it might be of an implicative nature. It was also pointed out that they were unable to check all entries processed by Employee A since the individual’s lodgment register was not presented to the task force. Also, the report concluded that Employee A clearly acted in a manner that would infer criminal intent.
Further, the team said that Employee A and Employee B colluded with others to process seventeen customs declarations for the importation of 40 containers by Kong Inc. knowing that the customs declarations were false.
In keeping with procedures at the Customs and Trade Administration (CTA), the customs declarations form after it is prepared, is lodged at the lodgment window at Customs House where the receiving clerk ensures that the Forms C-72 has been properly prepared and proceeds to stamp it with a ‘received’ stamp and dated. The declaration form is then entered in a register and given a number in chronological order beginning from 1 each month. The declaration form is then taken to the Supervisor of the Data Input Section of the Entry Processing Unit (EPU) for input into TRIPS.
TRIPS entails a series of procedures, but if the customs declaration is flagged for another section, the document is forwarded either to Valuation; Classification; Enforcement or Document Check. Documents flagged for Valuation are intensely scrutinized based on the procedure in place.
Substantively, the Auditor General-led report has concluded that fake documents were submitted to customs by both the broker and Fidelity Investments Inc and charges were recommended against a top Fidelity official, a broker and 14 Customs employees from various departments who were complicit in the fraud.
The report submitted to President Bharrat Jagdeo also made a number of recommendations to plug loopholes in the Guyana Revenue Authority (GRA) and lamented that key cameras had not been functioning at a time when it would have been useful for the investigation. It also found that the software suite for the GRA had been manipulated. The payment of millions in duties in cash and the disappearance of key documents have also raised question marks. The polar beer fraud grabbed national attention in April last year, resulting in President Bharrat Jagdeo setting up a task force to conduct an investigation.
But the report, seen by Stabroek News, also issued a call for a number of senior officials and other employees at the GRA to be reinstated to their positions since they were unaware of what was unfolding within the administration at the time.
The report was signed by Deodat Sharma, Auditor General (ag) and Head of the Task Force; Paul Wintz, Inspector of Police and Abdool Rahim, Representative of the Ministry of Finance.