State spent $257m on Pradoville 2 – audit report

-land should have been sold at $82.8m per acre, Jagdeo paid $5m

State funds amounting to $257 million were expended on the development of the Sparendaam housing project and conservatively, the value of land there should have been $82.8 million per acre but it was sold for far less, the forensic audit into controversial government holding company, NICIL, says.

Former President Bharrat Jagdeo had previously said that he paid $5 million per acre for land for his home at the development which has been dubbed Pradoville 2. According to a report recently completed by the State Assets Recovery Unit (SARU) the Pradoville 2 lands on the East Coast of Demerara were sold to former ministers and known friends and associates of the previous PPP/C regime.

“At the time of the sale, the lands were grossly undervalued and sold substantially lower than the market value for the land thereby depriving the state of its full benefits,” it said, while noting that the lands were sold for $114 per square foot. The ministers who were said to have benefited are Jennifer Westford, Priya Manickchand, Clement Rohee and Robert Persaud.

The National Industrial and Commer-cial Investments Ltd (NICIL) had facilitated the development and former Auditor General Anand Goolsarran who conducted the forensic audit into the entity, questioned how the price of approximately $1.5 million per lot was determined.

“Using a conservative estimate of $985 million for the 2009 market valuation of the land on which the Marriott Hotel has been constructed prior to infrastructure being undertaken on a similar size land, the total value of the Sparendaam project works out to $1.242 billion or $82.8 million per acre. This figure should have been used to compute the price per lot,” he said in the report obtained by Stabroek News.

NICIL has said that it is not in agreement with the principle used in estimating the value of the land by comparing a waterfront property with a residential property.

 

Waterfront

Pradoville 2 is next to the Atlantic Ocean. “Needless to mention, both are water-front properties,” the report observed.

According to the report, it is not clear how many lots are involved and their respective sizes; the basis under which the recipients were selected; how the price of approximately $1.5 million per lot was determined; and which entity – NICIL or the Central Housing and Planning Authority (CHPA) – received the proceeds from the sale of the plots.

“The evidence…suggests that the removal and relocation of the NCN transmission tower were done to facilitate the housing development of the area. Instead of accumulating all the costs associated with the Sparendaam Project, including the market value of the land, in a special account to be applied in arriving at the price to be charged per house lot, NICIL’s board and Cabinet were complicit in charging the related costs of $257.049 million to NCN in the form of equity investment, and to CH&PA in the form of receivable. The fact that several key Cabinet members are the beneficiaries of the house lots, renders it highly inappropriate for the very Cabinet to approve of the charging of the expenditure to the accounts of NCN and CH&PA,” the report says.

NICIL had indicated that it invested $220.3 million in the state TV and radio entity NCN and, according to the report, this was applied to the development of Pradoville 2.

In giving a timeline of events, the report said that at NICIL’s 17 August 2007 meeting, the Executive Director, who was Winston Brassington, informed the Board that there were 15 acres of land at Sparendaam that was good for sale. The Board agreed that NICIL would develop the area with high income house lots or town houses and condominiums, the report said.

Subsequently, at the 14 July 2009 Board meeting, the Minister of Finance, then Ashni Singh, stated that he agreed to have all sums being expended at Sparendaam to be treated as NICIL’s equity injection to NCN. At the said meeting, the Executive Director indicated that “we intend to transfer the land at Sparendaam to NICIL, which will be subdivided for allocation and construction,” the report said.

It pointed out that according to NICIL’s audited financial statements for 2009, amounts totalling $166.241 million were shown as having been expended on the cost of removal and relocation of the transmission tower from Sparendaam to La Parfaite Harmonie, West Bank Demerara. This amount was treated as an increase in NICIL’s equity investment in NCN from $36.183 million to $202.424 million.

The report said that in 2010, NICIL’s accounts recorded an additional capital injection of $29.465 million, increasing the equity investment in NCN of $231.889 million. “However, it was not until 29 April 2011 that the Board approved of the NCN transmission tower removal and relocation being charged to equity. Therefore, the decision to treat the expenditure as equity injection in NCN preceded the board decision,” the report said.

It noted that NICIL’s investment in NCN decreased to $220.329 million in 2012. However, it was not until 11 February 2015 that a share certificate was issued for an amount of $220.553 million.

 

Atlantic Construction

Further, the report said that on the 9 March 2010, Cabinet approved the award of a contract to Atlantic Construction in the sum of $13.797 million for Phase I of the laying of road infrastructure work at Plantation Sparendaam. Cabinet also approved of the vesting of the new development project in the CH&PA.

“At NICIL’s 12 March 2010 meeting, the Executive Director reported that amounts totalling $188 million were expended on the Sparendaam project of which VAT of $14 million was recoverable. He advised the Board that the former President had agreed verbally to the budget being increased from $135 million to $150 million but the overall cost was exceeded due to various factors. The

actual cost certified by a Chartered Accounting firm was $185.553 million,” the report said.

Jagdeo was president at the time.

The report revealed that on 4 June 2010, Cabinet approved of a contract in the sum of $7.739 million for the installation of water infrastructure at Plantation Sparendaam and for NICIL to do all acts to ensure its completion.

 

No part

In response, the report said, Brassington contended that NICIL had no part in the allocation of lots at Sparendaam, with the land initially owned by the State and then transferred to CH&PA per Cabinet’s decision. He also said that NICIL’s role was to manage initial infrastructure on behalf of CH&PA in parallel with the relocation of the NCN tower and to build the Dorcus Community Centre in exchange for a piece of land to create a Southern access way into Sparendaam (to be owned by CH&PA) based on tendered works and contracts. He also said that the total amount expended was treated as a receivable in NICIL’s books and attempts have been continuous to have CH&PA repay the outstanding sum.

However, Goolsarran said that he met with the Minister within the Ministry of Communities on September 10, 2015 and he confirmed that CH&PA had no involvement in the project. “This is notwithstanding Cabinet’s decision of 9 March 2010 to the vesting of the Sparendaam in CH&PA. I have also reviewed the vesting orders covering the period 2007 to 2014 and I have found no evidence of the Sparendaam land being vested in NICIL and subsequently to CH&PA,” Goolsarran said.

The report said that NICIL provided a detailed schedule of expenditure relating to road infrastructure works, the installation of water infrastructure, the building of the Dorcus Community Centre, and security costs, among others. “The total amount expended was $71.496 million. This amount was shown as receivable from CH&PA. It therefore means that State funds amounting to $257.049 million were expended on the development of the Sparendaam housing project. NICIL should have accumulated the expenditure to be applied to the cost per plot and hence recovered from the ultimate beneficiaries,” it said.

However, this was not done and the report slammed NICIL and Cabinet for their “highly inappropriate” actions.

The report said that NICIL offered several comments in relation to the observations made.

According to NICIL, the management of the Ogle Airport had approached Jagdeo regarding concerns about the NCN tower being on the flight path of aircraft utilizing the airport and a request was made for the transmission tower to be lowered and/or relocated. The entity also said that NCN had also made representation for the relocation of the tower for improved transmission, especially for the hinterland/

NICIL also argued that the relocation costs of the tower was properly treated as NICIL’s equity contribution to NCN and several engineers in the employ of CH&PA/Ministry of Housing & Water were actively involved in the project.

“Notwithstanding Cabinet’s decision for NICIL to vest the land in CH&PA, NICIL did not do any act, due to subsequent knowledge gained that CH&PA had sold the lots and completed the transfers to third parties,” NICIL said in its response.

According to Goolsarran, as it relates to the tower being in the flight path of aircraft operating out of Ogle Airport, there was no reference to this in any of NICIL’s board minutes nor in any of the Cabinet’s decisions in relation to the Sparendaam Project. “It is also not clear to whom NCN made representation for the relocation of the tower since the established procedure is for NCN to request funding via the National Budget to undertake any capital works,” the report said.

It recommended that the report be referred to the State Assets Recovery Unit with a view to recovering any State assets/properties that might have been improperly and illegally transferred to third parties. It also urged that criminal/disciplinary actions be instituted against all those responsible for other violations, including the failure to properly account for State resources under their control. The report had also recommended criminal and/or disciplinary action against all those responsible for the interception of state revenues in violation of the constitution and the spending of these sums.

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