NPP In $1 Billion "419" Scam

....Parliament Being Conned Into Giving Hasty Approval!

Elsewhere in this paper, we have published a Memorandum to Parliament on an intended Agreement between the NPP Government and a so-called International Finance Consortium (IFC) for a loan of US$350 million being the first of a 3-tranch loan facility of US$1 billion that the NPP Government claims to have secured for infrastructure and developmental projects in Ghana. Also published is the Loan Agreement itself, referred to in the Agreement as the Final Project Agreement (FPA).

An examination and analysis of the proposed loan agreement reveals it as being as bogus and as fraudulent as any of the "419" scams that Nigerian fraudsters have been perpetrating on unsuspecting Ghanaian businessmen for some time. How the NPP Government could have been sucked in by such an Agreement, to the extent that a special team Senior Minister, J. H. Mensah, Finance Minister, Yaw Osafo-Maafo and Bank of Ghana Governor, Dr Paul Acquah, was flown to Washington D.C. specially to negotiate the "deal", and to the extent that the "deal" has been given Cabinet approval, is what beats our imagination. Indeed, the NPP Government is in such haste to go along with the "deal" that the Memorandum on it was sent to Parliament on the same day as Cabinet gave its approval, that is, June 26, 2002. We wish to warn the NPP Government that if this deal goes through, it will be worse than the Savundra Scandal of the Nkrumah era, or Afla-Addo's corruption "hydroponics" defense of the early 1960s, or Ako Adjei's "Spirit of Zebus" episode during the infamous Tawiah Adamafio treason trial of 1963.

Our investigations have revealed that dozens of such spurious offers used to land on the desks of NDC Ministers when they were in office, but they, with their experience, contacts and acumen, routinely ignored or rejected them. The NPP Government, unfortunately, seems so naive in the murky world of international finance that they are routinely taken in by these fraudsters. Last year, for example, ex-Works and Housing Minister, Kwamena Bartels, almost committed the government in similar manner when he successfully navigated a Memorandum through Cabinet to Parliament for a so-called US$140 million loan from a questionable US Company for the provision of affordable housing in Ghana.

It took the intervention of the IMF for the motion for the approval of that loan to be furtively withdrawn from Parliament in order to save the Government from embarrassment. Now what is wrong with the present Agreement? First, the lender is allegedly the "International Finance Consortium" or IFC, initials carefully chosen to make it appear to the untutored as the "IFC" or "International Finance Corporation" of the World Bank.

This IFC, however, has no relationship with the World Bank . Second, documents in possession of the "Ghana Palaver" reveal that the Address given by the so-called "IFC", 123 Pleasant Avenue, Upper Saddle River, NJ07458/USA, Tel. (201) 934.3300 Fax (201) 327.8861, is actually the Address of CHEMAC Inc., alleged representatives of the so-called "IFC". In their original dealings with the NPP Government officials, the so-called "IFC" gave their Address as: "INTERNATIONAL FINANCE CONSORTIUM (IFC) IFC-Global Development Co. Ltd. c/o UBS (Bahamas) Ltd. UBS House, East Bay Street, Nassau, Bahamas. Again, it will be noticed how the fraudsters had cleverly chosen the well-known initials, "UBS", which is immediately recognized for what they are universally known for, "Union Bank of Switzerland", which in this case they are not.

The swapping of the Addresses in the Memorandum to Parliament of course, also conceals the fact that this is a Company actually incorporated and registered in the Bahamas and not in New Jersey, USA. Third, according to the agreement, this so-called "IFC", "in co-operation with the United Nations and International Companies — will obtain and provide funding for the implementation and for satisfaction of Borrower's requirements" (paragraph 2.1.3). In all our experience, we have never heard of the United Nations teaming-up with a private financing company to raise funding for national infrastructure projects.

In any case, the Secretary-General of the United Nations is the Ghanaian, Kofi Annan. Has the NPP Government confirmed from him that the UN has any such arrangement with the so-called "IFC"? Fourth, repayment of the total investment capital of US$350 million, repayable over 25 years at an annual interest rate of 2.5 per cent, is to commence after three years of contracting the loan (paragraph 2.3).

When interest rates in the USA are hovering around 5-6 per cent, at what rate of interest is the so-called "IFC" going to raise the funds for them to be able to lend to the NPP Government at the rate of 2.5 per cent? There is no time frame for the implementation of any of the projects, yet there is a 3-year time frame for the commencement of the payment of the loan, which means we may have to begin repayment of the loan even before any of the projects is completed or even commences at all.

Fifth, for a period of eight weeks during which the plans and project viability are under examination, the NPP Government undertakes not to discuss with any other person or organization or company, possible funding for those same projects (paragraph 3.2). Sixth, even though under paragraph 1 of the Agreement, the "Borrower" is the Government of Ghana, paragraphs 5.7 and 5.8 nevertheless state that the "Borrower" shall secure from the Government (that is, the Government shall secure from itself), acceptable insurance cover and also that provision is to be made by the "Borrower" and authority of the Government (that is, provision is to be made by the government and authority of the Government), before the release of the first trench of funds, to ensure the re-transfer of project related funds and possible shared corporate dividends.

Documents in possession of the "Ghana Palaver" reveal that this Agreement was prepared for another transaction with another entity that has been modified to make it fit into a dealing with a sovereign country, as is the case in most of these scams, and in this case, the fitting is most unsuitable and most uncomfortable. Additionally, and more ominously, Paragraph 5.8 is saying that any foreign funds mobilized for the project need not come to Ghana; and worse still, dividends that have not even yet been earned can also be freely re-transferred. At this stage, we doubt whether the experienced civil servants of the Ministry of Finance and the Attorney-General's Department who are over-familiar with these kinds of scams actually saw and vetted this Agreement before it was submitted to Cabinet. But the worst is yet to come. The Companies to be formed under the Agreement will not pay corporate income tax for the first ten years.

Thereafter, irrespective of the prevalent corporate income tax rate at the time, the Companies will pay only 5 per cent corporate income tax for the subsequent 10 years. After that, and for the remainder of their existence in Ghana, the Companies will only pay 10 per cent corporate income tax. Never since the VALCO Agreements of the early 1960s have any such freezing of corporate income tax been negotiated by any Government of Ghana. The current corporate income tax in Ghana is 32.5 per cent. Paragraph 7 is the real catch in the whole Agreement.

The Government of Ghana is required to issue an Unconditional Sovereign Government Guarantee (emphasis ours) for the entire loan term in favor of the so-called IFC. While the Government of Ghana unconditionally guarantees to repay the loan, there is no similar "back to back" guarantee whatsoever from the so-called "IFC". Since the Ghana Government guarantee will be given to the "IFC" up-front, what recourse does the Ghana Government have if the "IFC" discounts the guarantee, takes the monies and fails to transfer any monies to Ghana? None whatsoever! Since the Agreement is silent on where the loans are to be raised from, all that is going to happen is that the "IFC" is going to "trade" in the Government of Ghana's sovereign guarantee, in the expectation that it will "find buyers".

But if the NPP Government will so easily issue such a sovereign guarantee, why does the Government not go on the international finance market itself to look for such a loan with its own guarantee? And are we being told, as seems to be the case from the last paragraph of the Minister of Finance's Memorandum to Parliament that the Bank of Ghana has agreed to issue such a guarantee? Is that what the so-called IMF whiz-kid Governor of the Bank of Ghana was brought to do?

Will he speak out on this issue now? Have the IMF/World Bank resident representatives scrutinized the terms of this Agreement and satisfied themselves that they are above board and meet all their rules and regulations? Of even greater significance, and this is where the "419" scam rears its ugly head, is that under paragraph 8.1, "a one-time loan transaction fee of 3.5 per cent of the total loan amount will be deducted from the first trench of funds". This works out to a cool $12.5 million, which in effect is non-refundable. If for any reason the so-called IFC is unable to obtain any more funding after the first trench, all it is required to do under paragraph 7 is to return the Sovereign Government Guarantee "without cost, unused and unconditionally to the Government within ten (10) working days from the due date of the first trench of funds". Of course, the US$12.5 million stays with the IFC.

Who gets to share that booty with the IFC is a matter of conjecture. Indeed, contrary to both the Constitution and the Loans Act, what the Finance Minister has submitted to Parliament is not the Loan Agreement but the Project Agreement on which he has super-imposed the title "Loan Agreement". "Ghana Palaver" has in its possession the original Final Project Agreement dated October 11, 2001, and signed by Horst Schneider, President & CEO CHEMAC Inc., for the IFC which the Minister of Finance has used in his attempt to perpetrate this fraud on Parliament and the people of Ghana.

This Agreement is a scam, and somebody somewhere is out to dupe Ghana. President Kufuor and the NDC Minority in Parliament must watch out, for this Agreement is not at all in the interest of Ghana. The SFO must take this up as a challenge. We will be ready to assist them with the evidence at our disposal.