Former auditor general Anand Goolsarran has exposed a raft of breaches of the law by the government through the National Industrial and Commercial Investments Limited (NICIL) and said there should be a judicial review of the entity’s operations should government continue to defend its action and not take remedial measures.
“The governance arrangements [between NICIL and government] are far from satisfactory, given the domination influence of the Minister of Finance: (a) as the Minister responsible for NICIL: (b) as the Chairman of NICIL; and (c) as the Government of Guyana’s designated representative of NICIL as a State-owned company,” Goolsarran said in his concluding remarks at the end of a two-part article looking at NICIL, the first of which appeared last week Monday, and concluded yesterday.
He said that a Management Co-operation Agreement dated December 31, 2001 was entered into between the Privatisation Unit, NICIL and the Government. “This agreement provides for the Privatisation Unit to be the exclusive manager of NICIL, and the collecting and accounting of privatization proceeds, rents, dividends and other income of the combined entity are to be done in the name of NICIL. Expenses of the combined entity are also to be regarded as costs of NICIL. Mr Winston Brassington, who was Head of the Privatisation Unit at the time, became the Executive Director of NICIL. In his 2002 report, Mr Brassington stated that the agreement paved the way for, among others, the fulfilment of financial statutory obligations which NICIL had previously failed to [do],” Goolsarran wrote.
Approached yesterday evening for a comment, Brassington said he had no comment to make.
Goolsarran said according to its 2002 consolidated annual report, NICIL acquired the following state-owned entities for zero consideration: NEOCOL (100%), GNPL (99.6%), GNSL (100%), GNNL (90%), GUYOIL (100%), Property Holdings (73.19%), BIDCO (100%), and GPC (100%). This is in addition to the acquisition of 20% shareholding in GT&T and investments in GNCB Trust (10%), OMAI (5%) and Guyana Stores (3%). “It was the first time that NICIL considered itself a holding company and proceeded to prepare consolidated financial statements involving itself and the above state-owned/controlled entities,” he said.
Goolsarran noted that the Minister of Finance, on behalf of the government, is responsible for the appointment of the chairman and members of NICIL’s Board. “However, according to NICIL’s 2005 consolidated annual report, the Minister himself was the Chairman while the other members were Dr R Luncheon (Head of the Presidential Secretariat), Dr A Singh (Director of Budget), Mr G Da Silva (Head of Go-Invest) and Mr W. Brassington (Executive Director of NICIL). From a governance standpoint, it is indeed inappropriate for the Minister to appoint himself as the chair of NICIL’s Board since in effect, he is reporting to himself on matters relating to NICIL,” he said.
He noted that a similar observation can be made in respect of the Management Co-operation Agreement to which he made earlier reference. “Here again we find the dominating influence of the Minister in that: (a) the Privatisation Unit was part of the Ministry of Finance with reporting relationship to the Minister; (b) the Chairman of the NICIL’s Board is the Minister; and (c) the government designated representative on all matters relating to NICIL is the Minister. In effect, the Minister has signed the Management Co-operation agreement with himself!” he said.
Goolsarran said that a closer examination of the Management Co-operation Agreement revealed that the Privatisation Unit was not a “company, co-operative society or body corporate” but rather a unit within the Ministry of Finance, “notwithstanding the claim contained in NICIL’s consolidated annual reports that it was a semi-autonomous organ of the Ministry of Finance.” He said that it is therefore illegal for NICIL to enter into an agreement with the Privatisation Unit to take over the latter’s operations “as this would be a breach of the primary objectives of NICIL as contained in its incorporation documents.”
He said that the agreement breached Article 216 of the Constitution when the operations of the Privatisation Unit were merged with those of NICIL “since the former was responsible for collecting privatization proceeds, rents, dividends and other income belonging to the state and paying them over to the Consolidated Fund.”
Goolsarran wrote that the Constitution only permits retention of revenues in some other fund established by an Act of Parliament and only to extent of defraying expenses of the concerned body. He said that NICIL was not established by any specific Act of Parliament. Rather, it was incorporated under the Companies Act, which is an Act to regulate generally the formation of companies as well as their operations.
“The Management Co-operation Agreement therefore cannot override the requirements of the Constitution. It could be viewed as a classic case of not only siphoning off state revenues and passing them over to NICIL but also using such revenues at the discretion of the directors of the company in complete disregard for the authority of Parliament to approve of public expenditure. This has serious implications for the Marriott Hotel Project of which NICIL is an active financier,” Goolsarran said.
“The Agreement is highly irregular since neither the Companies Act nor the Public Corporations Act permits a merger of a company with a unit of a government department,” he said.
Goolsarran said that since 2002, NICIL considered itself a holding company with a number of state-owned or controlled entities being declared its subsidiaries, with government’s interest transferred to it for zero consideration. “As a result, dividends received from these entities ceased to flow into the Consolidated Fund but instead into the coffers of NICIL,” he said.
He noted that there are no audited accounts beyond 2005 for NICIL as a group as well as for NICIL as an individual entity beyond 2001. “This is an offence under the Companies Act, and for which the directors are liable,” he said.
“The Minister has misapplied the provisions of the Public Corporations Act in vesting billions of dollars of state assets in NICIL’s name; in selling them to third parties; and in allowing NICIL to retain the proceeds,” he said.
