-size of hotel was reduced, green energy certification abandoned
Controversial government holding company NICIL’s investment in the Marriott Hotel is US$41.6 million, above the US$36 million publicly stated by NICIL’s Executive Director Winston Brassington, according to the forensic audit into the entity’s operations which also says that state agencies such as the Guyana Forestry Commission (GFC) violated the law by transferring funds to NICIL.
“NICIL’s financing of the construction of the hotel during the period 2010-2013 was $5.371 billion, comprising $800 million share capital, $3.316 billion (equivalent to US$15.5 million) in interest-free loan and $1.255 billion in advances. As at 7 July 2015, NICIL’s advances increased to $4.521 billion, giving a total funding of $8.637 billion, equivalent to US$41.682 million,” the report done by former long-serving Auditor General Anand Goolsarran says.
In March, Brassington, the head of the National Industrial and Commercial Investments Limited (NICIL), told reporters during a tour of the hotel that NICIL had injected an additional US$16 million into the Marriott Hotel having already invested US$20M to jumpstart the project. He had said that once the legal challenges are concluded, the money would be reimbursed.
Brassington had repeatedly emphasised that the funds are “not derived from taxes” and the money is from proceeds from the sale of properties owned by NICIL or dividends from NICIL investments.
However, according to the forensic audit report, for the period 2007 to 2012 amounts totalling $7.320 billion were transferred from various government agencies to NICIL to effect payment for works undertaken on behalf of the government. Among these was sums for the Marriott Hotel.
The GFC transferred $300 million, the Guyana National Cooperative Bank (GNCB) transferred $1 billion and the Guyana Water Inc transferred $353 million to NICIL for the hotel.
“NICIL as well as the above agencies ought to have been aware of the requirement for all public expenditure to be sanctioned by Parliament through the National Budget, as provided for by Article 217(3) of the Constitution,” the report said. Article 217(3) states that “No moneys shall be withdrawn from any public fund other than the Consolidated Fund unless the issue of those moneys has been authorised by or under an Act of Parliament.”
Goolsarran pointed out that the financial resources of agencies such as the Guyana Geology and Mines Commission (GGMC) and the GFC constitute public funds, and neither the GGMC Act, the GFC Act nor any other Act permits the transfer of funds to any other entity.
“This cross-transfer of funds among State institutions to meet public expenditure undermines authority of Parliament to approve such expenditure. In addition, since the expenditure was not included in the National Estimates, it was not reflected in the Public accounts of Guyana, thereby resulting in a significant under-reporting of expenditure,” he pointed out.
“NICIL and the above entities were therefore complicit in the violation of Article 217(3) of the Constitution and cannot escape culpability, notwithstanding that the Cabinet and/or the Prime Minister sanctioned these arrangements. Indeed, neither the Cabinet nor the Prime Minister is exempt from liability for the failure to adhere to this fundamental constitutional requirement on public financial management,” the report declared.
In relation to the $1.653 billion received from three agencies for the Marriott Hotel, payments of $652 million were made. The $1 billion received from the GNCB was not expended and remained in the books of NICIL as of 31 December 2014 as a liability. “It is not clear why, after two years, the funds were not returned to the Bank. NICIL commented that the amount has since been returned to the Bank,” the report said.
The report highlighted the questionable decisions made in relation to the selection of contractors for various aspects of the projects.
It pointed out that in 2004, the Government and New York-registered Adam Development and Urbahn Associates (ADUA) signed a Memorandum of Understanding (MOU) for the establishment of a “world class hotel, casino and entertainment complex.” The project, to be named “Scarlett on the Atlantic,” was to be erected on approximately 15 acres of land situated in Kingston, Georgetown and owned in part by Government and the Georgetown City Council.
According to the report, Brassington said that “following the developer’s difficulties in or around 2008/early 2009, the GOG (Cabinet) made the decision to take control of the project and restructure it in its present format as a Public-Private-Partnership (PPP) and publicly advertised for this.”
However, on 6 October 2009, Cabinet approved of the Government of Guyana entering into a design and branding contract with ADUA in the sum of US$2.1 million, with the permissible exemption of all taxes as provided for in law. There was, however, no public advertisement for the works to be undertaken. Brassington said that the firm was selected based on its previous interest in the project, the report said.
“In effect, ADUA was asked to repackage and submit its own proposal at a cost of US$2.1M,” the report asserted. It noted that ADUA was paid $264 million followed by $151 million then $8.4 million from the funds from other state agencies.
Other payments from the money transferred from the other state agencies to NICIL include $169 million to Courtney Benn Contracting Services, $3.4 million to E&A consultants as an advance on the soil boring of the Luckhoo pool area, $1.2 million to Wesley Booker representing an advance on the clearing of the Luckhoo pool, $53 million to GWI, and $14.7 million for “other.”
GWI had transferred $353 million to NICIL for the Marriott project to rehabilitate the sewerage system and the $53 million that NICIL paid to the entity related to payment for the relocation of a well.
The report recalled that in May 2008, the preparation of the site of the Marriott Hotel commenced with the re-routing of the Georgetown Sewerage System at a cost of US$2.7 million, and the dismantling of the Luckhoo Swimming Pool and the Food and Drugs Department building. The contract was initially awarded to Courtney Benn Contracting Services whose contract was terminated and who was replaced by ADUA to complete the works.
The report said that as regards the selection of the contractor for the construction of the Marriott Hotel, of the 23 local and foreign firms that applied for prequalification, seven firms were shortlisted. It was noted that several reputable international firms were not shortlisted.
The report said that according to NICIL, only two firms submitted bids. China’s Shanghai Construction Group (SCG) was rated the lower evaluated tenderer with a bid price of US$65 million, some US$24 million higher than the estimated cost of US$41 million. NICIL indicated that SCG’s bid was considerably lower than the other bidder.
NICIL also indicated that both bidders were requested to submit alternative designs with a view to reducing their bid prices without compromising on the standards for a Marriott-type hotel, the report said. “However, Section 41 of the Procurement Act states that there shall be no negotiation between the procuring entity and any of the bidders. In the absence of its own procurement rules, NICIL should have been guided by this requirement,” it pointed out.
NICIL has not identified the other bidder. “Up to the time of reporting, despite being reminded to do so, NICIL was yet to submit information as to who the other bidder was and what was the bid price, including his revised bid and other related information. In the absence of this information, the basis of the award of the contract to SCG International could not be properly determined,” the report said.
However, it said, NICIL further indicated that SCG’s revised tender was considerably lower than that of the other bidder. The report, however, pointed out that the size of the hotel was reduced from 274,032 square feet to 190,467 square, a 31% reduction in size. Leadership in Energy & Environmental Design (LEED) certification was excluded as well as other costs estimated at US$1.5 million. LEED certification had been meant to be a major part of the hotel venture.
On 16 November 2011, Atlantic Hotel Inc (AHI) – the special purpose company set up for the Marriott Hotel – represented by Brassington, entered into a contract with SCG for the design and construction of the hotel in the sum of US$50.918 million, a 22% reduction in price. It noted that this was a mere 12 days before the 28 November 2011 elections.
“It is not normal practice for major contracts, such as that for the construction of the Marriott Hotel, to be awarded so close to national elections, for obvious reasons. In addition, there was no approval from NICIL’s board nor from Cabinet at the time the contract was entered into. It was not until 27 September 2012, some eleven months later, that such approval was granted, with a retroactive effective date of 30 September 2011,” the report said.
It highlighted that in early July 2010, news reports surfaced in Trinidad of SCG International being investigated in relation to the award of contracts totalling TT$2 billion relating to the Urban Development Corporation of Trinidad and Tobago (UDECOTT) without any form of tendering, in addition to several other government contracts. The police had raided SCG’s office and seized documents relating to UDECOTT. “NICIL commented that it was not aware that SCG was convicted for wrong-doing and that it could not disqualify the contractor on the basis of allegations,” the report said.
“The selection of the Engineering Supervision Consultant also raises questions about integrity of NICIL’s internal assessments of tenders,” it pointed out. The report said that the selected firm, M.A. Angeliades Inc. was charged with underpaying 300 workers it had employed at nearly one dozen New York substation construction projects. It was also disqualified from participating in the projects of the School Construction Authority until July 2015.
On 30 June 2010, the firm’s head, M. A. Angeliades, pleaded guilty of felony and falsification of business records and he and his daughter were to have resigned from their positions in the firm which was to have been monitored by an independent private sector Inspector General through September 2013. Despite this, the contract between M. A. Angeliades Inc. and AHI was executed on 6 August 2012 and was signed in person by Angeliades, the report said.
In response, AHI provided as evidence, a letter dated 30 March 2011 from the lawyers of M. A. Angeliades Inc. indicating that the case was dismissed and there were no pending litigation. However, the letter made it clear that the period referred to was to 31 December 2009, and that the case was People v. M.A. Angeliades Inc., Ind. No. 2686/2009, the report said.
“Suffice it to state that the charges against the company were set aside after a non-prosecution agreement was filed in the court, requiring the company to compensate the workers who were underpaid, failing which the criminal charges would be restored,” the report said.
It pointed out that once of the questions comprising the evaluation criteria was: “Has your organisation’s license ever been revoked in said jurisdiction or trade category?”
“However, this part of the evaluation worksheet was left blank for both bidders. This raises the pertinent question as to whether the omission was an oversight or a deliberate act. AHI commented that the information was not filled in because M.A. Angeliades Inc. did not have a revocation of licence,” it said.
Among others, the report has recommended that criminal and/or disciplinary actions be instituted against all those responsible for violating Article 217 of the Constitution by causing expenditure to be incurred out of State resources without parliamentary approval.