(P)NDC ‘Kalabule Divestiture’ Of State Assets Revisited (2)

…Excerpts Of 2006 Auditor-General’s Report On How Mrs. Rawlings & Her Company (Caridem) ‘Looted’ GIHOC Nsawam Cannery Company & Cheated Govt. Of 21 Billion Old Cedis!

SOURCE: NEW CRUSADING GUIDE

SUPPLEMENTARY REPORT ON INVESTIGATION INTO FINANCIAL AND PROCEDURAL IMPROPRIETIES IN THE DIVESTITURE OF NSAWAM CANNERY LIMITED TO CARIDEM DEVELOPMENT COMPANY LIMITED, JANUARY 20, 2006 (1)

*MANDATE:
In pursuance of Article 187(2) of the 1992 Constitution and Section 11 of the Audit Service Act 2000 (Act 584), I have conducted investigation into the divestiture of Nsawam Cannery Limited. The investigation covered the Divestiture Implementation Committee (DIC) procedures, financial transactions and payment procedures.

*BRIEF PROFILE OF NSAWAM CANNERY LIMITED:
Nsawam Cannery Limited was GIHOC Cannery Company Limited, Nsawam Division, a defunct State Owned Enterprise of which Government of Ghana (GoG) was the sole shareholder. The company was established in 1965 and became operational in 1968. it specialized in the canning of local fresh fruits and vegetables, and the production of alcoholic and non-alcoholic beverages. Alcoholic beverages produced included Bramsco Schnapps, Aperitif Wine, Napoleon Brandy and Communion Wine. It also produced non-alcoholic beverages such as orange squash, orange syrup, mixed fruit syrup and limejuice cordial. It also had exotic products including canned tropical snails. Nsawam Cannery was put up for divestiture in 1994.

*SCOPE OF THE INVESTIGATION:
My investigation covered the review of the profiles of Nsawam Cannery Limited and Caridem. I also reviewed the documents on the divestiture of the cannery submitted by DIC. I requested for and received from Ecobank Ghana Limited information on the facility that was granted to Caridem from the Trade and Investment Programme (TIP) Funds.

I also had interaction with the auditors and lawyers of Caridem. They are:
? Kweisie and Partners
(Chartered Accountants)

? Vanderpuye Law Consult
(Legal Practitioners and Notary Public)

? Hayibor, Djarbeng & Co.
(Barristers and Solicitors, Notaries Public)

I issued a report on 31 March 2004 with my recommendations. Copies of the report were sent to Caridem Development Company Limited, through the lawyers, Messrs Hayibor, Djarbeng & Co. An Executive Summary of the report is enclosed in this Supplementary Report as Appendix A.

*THE NEED FOR SUPPLEMENTARY REPORT:
A further review of records and files that were made available to me required that I conduct further investigations into the divesture of Gihoc Nsawam Cannery to Caridem.

*SCRUTINY OF THE DIC OFFER LETTER AND CARIDEM ACCEPTANCE OFFER:
A careful scrutiny of the DIC offer letter dated January 16, 1995 and signed by Mr. E.A. Agbodo, Executive Secretary, (Appendix 1) and the Caridem acceptance letter dated 20th January 1995 and signed by Ms. G. Okaiteye, General Manager, (Appendix 2) showed that Caridem varied the terms of the offer sent by DIC.

Caridem requested that the terms of the offer should be reconsidered. Below are the original DIC offer and the varied terms by Caridem.

Terms as per DIC offer Varied terms by Caridem
a. 10% non-refundable commitment fee of ¢278,984,600 shall be received by the Secretariat together with your letter of acceptance not latter than Tuesday, January 31, 1995. That the 10% non-refundable commitment fee of ¢278,984,600.00 be paid not later than 28th February 1995. This request is due to the late receipt of your letter of offer.
b. 50% of the purchase price i.e ¢1,394,923,000 shall be paid to the Secretariat upon the execution of Sale and Purchase Agreement detailing out the terms of this offer which shall not be later than Friday. March 3, 1995. the property would be then handed over to you. That the 50% purchase consideration shall be paid six months after signing the Purchase Agreement.
c. 20% of the purchase price i.e ¢557,969,200 shall be paid to the Secretariat within (6) six months after the date of execution of the Sale and Purchase Agreement. 20% of the purchase price to be paid within 12 months from the date of signing the Purchase Agreement.
d. The final payment of 20% of the purchase price of ¢557,969,200 shall be paid to the Secretariat within 12 (twelve) months after the date of execution of the Sale and Purchase Agreement. The final payment of 20% to be paid within 18 months from the date of signing the Purchase Agreement.
e. The deferred payments would attract interest at the Treasury Bill rate. Caridem did not comment on the term (e), probably indicating that it was acceptable to them.







*ACCEPTANCE AND PAYMENT OF NON-REFUNDABLE COMMITMENT FEE:

? I FOUND THAT CARIDEM DID NOT ACCEPT THE OFFER AND ITS TERMS AS REQUESTED.

? CARIDEM DID NOT SEND THE NON-REFUNDABLE COMMITMENT FEE PAYMENT WITH THE ACCEPTANCE LETTER.
? A thorough review of the records and documents at DIC, indeed, shows that the ¢274,984,600 which they (Directors of Caridem), claimed that they paid was never paid. The amount of ¢274,984,600 which they claimed was paid was short of the ¢278,984,600 (10% of ¢2,789,846,000 purchase price).

In my view DIC should have withdrawn the offer. However, this was not done.

A minute by Mr. E.A. Agbodo on the Caridem Acceptance letter marked “urgent” (Appendix 2) stated that:
Helen
“Please respond indicating that time extension for payment of commitment fee can be granted. The other changes required in time for payment of purchase consideration mean a counter offer which would have to be referred to the DIC for approval.”
“And initiated as EAA and dated 23/1/95”.

*SCHEDULE OF PAYMENTS:
A schedule of payments submitted to me by DIC (Appendix 3) shows that Caridem did not keep to the payment terms of the offer, and so as at 31 December 2000 had seemingly paid a total of ¢1,469,069,600 leaving an outstanding balance of ¢1,319,930,400. This balance was without the accrued interest.

DIC AND CARIDEM DELIBERATELY CONCEALED THE INTEREST ACCRUED AND STATED THAT THE BALANCE OUTSTANDING AS AT 31 DECEMBER 2000 WAS ¢1,320,776,400.

*COMPUTATION OF INTEREST PAYABLE ON OUTSTANDING BALANCE:
After my discussions with the officials of DIC they conceded that interest payments were ignored by both DIC and Caridem. Upon my request DIC computed the total interest payable by Caridem (Appendix 4).

As at 31 December 2000 Caridem owed ¢7,941,298,87097. ON 14 APRIL 2004 WHEN CARIDEM ISSUED A WRIT AGAINST DIC AND THE ATTORNEY-GENERAL CLAIMING, AMONG OTHER THINGS, THE RETURN OF GIHOC NSAWAM CANNERY TO THEM, CARIDEM OWED ¢16,637,281,192.69 (Appendix 4 second sheet last entry).

*FAILURE TO PAY THE NON-REFUNDABLE COMMITMENT FEE OF ¢274,984,600 AND TWO OTHER AMOUNTS:
A careful examination of the records made available to me by DIC showed that the non-refundable commitment fee of ¢274,984,600 which Caridem claimed that they paid on 2/1/1995 and two subsequent other amounts, ¢10 million and ¢190 million claimed to have been paid on 23/6/1995 respectively could not be found in the books or records of DIC. I could not trace any cheque numbers or receipt numbers indicating that the three amounts were paid. My conclusion is that they were not paid.

THEREFORE THE AMOUNT OWED BY CARIDEM AS AT 31 DECEMBER 2000 WAS ¢8,416,283,470,97, BEING ¢7,941,298,870.97 PLUS ¢274,984,600.00 PLUS ¢10,000,000.00 AND ¢190,000,000.00.

*ISSUE OF TEMPORARY RECEIPT FOR ¢274,984.600:
A letter number DIC/1/1/01 dated April 25, 1995 and addressed to the Managing Director of Caridem, Accra, showed that official receipt was not issued for the ¢274,984,600 which Caridem claim they paid. This letter (Appendix 50 is quoted in full here.

OUR REF: DIC/1/1/01

The Managing Director April 25, 1995
Caridem
Accra

Dear Sir,

DIVESTITURE OF NSAWAM CANNERY

This is to officially acknowledge receipt of a cheque in the amount of ¢274,984,600 received on February 1, 1995 from Caridem a temporary receipt, No. 0997 was issued.

The amount represents the 10% non-refundable commitment fee for the purchase of Nsawam Cannery.

Yours faithfully,


E.A. AGBODO
EXECUTIVE SECRETARY

*FALSE REPRESENTATION BY MR. E.A. AGBODO:
In the course of my investigation I found in DIC file, a letter No. DIC/1/1/039 dated February 2, 1995 and signed by Mr. E.A. Agbodo. It was addressed to the General Manager, GIHOC Nsawam Cannery, Nsawam, for the attention of Mr. Enuson (Appendix 6).

THE LETTER STATED THAT CARIDEM HAD FULFILLED THE TERMS OF THE AGREEMENT. THIS WAS NOT TRUE. MR. E.A. AGBODO WROTE THE LETTER TO FRAUDULENTLY ASSIST CARIDEM TO TAKEOVER NSAWAM CANNERY AND THUS CAUSING SUBSTANTIAL FINANCIAL LOSS TO THE GOVERNMENT OF GHANA.

INDEED AS AT FEBRUARY 2, 1995 CARIDEM HAD NOT MADE ANY PAYMENT AT ALL TO DIC. THIS IS CONFIRMED BY DIC PAYMENTS SCHEDULE (APPENDIX 3) THAT WAS SUBMITTED TO ME.

*DIC OFFICIAL RECEIPT NUMBER 0002216 AND 0002814
A careful study of two official receipts issued by DIC to Caridem showed that Caridem issued cheques, fraudulently to deceive DIC, to cover two or more debts. On receipt number 0002216 dated 30-1-97 (Appendix 7), cheque number 756098 for ¢35,500,000.00 was issued in payment for “GNTC Supermarket Dansoman, GNTC Bakeries & Nsawam Bakeries” without indicating the amount of each payment. Also receipt number 0002814 dated 9-7-1995 (Appendix 8) for cash payment of ¢15,000,000, it was just stated on the face of the receipt ¢10,000,000 and ¢5,000,000 for Nsawam Cannery and GNTC Bakery.

*DRAFT SALE AND PURCHASE AGREEMENT:
I found in the DIC file a draft sale and purchase agreement with the date 27/3/95 typed on the top left hand corner (Appendix 9). The terms in the draft SPA were similar to the terms contained in the DIC offer letter of January 16, 1995. Also there was a covering letter reference number DIC/1/1/039 dated March 27, 1995, signed by Helen Obeng, for Executive Secretary and addressed to the Managing Director of Caridem (Appendix 10).

The General Manager of Caridem, Ms. G. Okaiteye, signed a letter dated 25/8/95 referring to the draft SPA that was sent by DIC to Caridem. The letter indicated that the “draft agreement submitted for our study and comments”, we have appointed Mr. John Okraku, Upgrade – Accra, our Financial Consultant to submit our comments and proposals to you for study.” (Appendix 11).

I did not find any record or document to indicate that Mr. John Okraku returned the draft SPA to DIC with comments and proposals.

On 31 August 1995 DIC sent a letter reference number DIC/1/1/ and signed by Helen Obeng. Part of the letter stated that the “Sales Agreement between Caridem and the DIC/Government was to have been executed on April 18, 1995. We would appreciate it if steps are taken to ensure that your comments are received as soon as possible to enable the sale to be concluded.” (Appendix 12).

IN SPITE OF ALL THESE OVERWHELMING EVIDENCE THAT CARIDEM HAD NOT FULFILLED THE TERMS OF THE DIVESTITURE AGREEMENT, MR. E.A. AGBODO CONTENDED THAT CARIDEM HAD FULFILLED THE TERMS OF THE AGREEMENT, AND ALLOWED CARIDEM TO TAKE OVER THE GIHOC NSAWAM CANNERY.

Consequently, on April 30, 1995 in a letter reference DIC/1/1/039 and signed by Helen Obeng, DIC informed Mr. S.K. Ennuson, General Manager of GIHOC Nsawam Cannery & Co. Ltd. to take appropriate actions in “handing over the Assets to the Investor on Friday may 12, 1995”. (Appendix 13).

Caridem, in turn, in a letter dated 11th May, 1995 wrote to their Financial Consultant to takeover the company. (Appendix 14).


*ANOTHER SALE AND PURCHASE AGREEMENT:
In the course of the investigation I found another Asset Sale and Purchase Agreement dated 5th October, 2000. (Appendix 15). It was signed by the chairman of DIC, Mr. Kwame Peprah, former Minister of Finance, and Nana Konadu Agyemang-Rawlings, President of 31st December Women’s Movement. The document was witnessed by Messrs E.A. Agbodo and S. Emmanuel Vanderpuye.

I OBSERVED FROM THE SPA THAT MR. KWAME PEPRAH, NANA KONADU AGYEMANG-RAWLINGS AND MR. E.A. AGBODO HAD FALSIFIED THE OUTSTANDING BALANCE OF ¢7,941,298,870,97 OWED BY CARIDEM AS AT 31ST DECEMBER 2000, AND INSERTED IN ITS PLACE A LOWER FIGURE OF ¢1,320,776,440 IN THE SALE AND PURCHASE AGREEMENT, WITH THE INTENT TO DECEIVE THE GOVERNMENT OF GHANA.

I also found a memorandum from Vivienne Gadzekpo, on DIC memo paper dated 18/10/1999, to the Executive Secretary on the subject “GIHOC Cannery Nsawam.” (Appendix 16).

The memo stated, in an earlier request from the Executive Secretary, that “it is virtually impossible to draft a Sale and Purchase Agreement based on the offer letter dated March 27, 1995. This is because the entire amount is long overdue rendering the terms redundant.”

*MEETING WITH SOME STAFF OF DIC:
On 30 May 2005 I visited DIC offices and had a meeting with the following top management staff, Nana Akuffo (Finance and Administration), Mr. Walter Awuku (Consultant, Monitoring and Evaluation) and Mrs. Yaa Gyarkobo (Legal Department0.

The purpose of the meeting was to seek clarification on some discrepancies in the payments claimed to have been made by Caridem and request for cheque numbers and receipt numbers.

*CONCLUSION:
MY CONCLUSION BASED ON THE RECEIPTS, STATEMENTS OF PAYMENTS AND THE SALE AND PURCHASE AGREEMENT THAT WAS SIGNED ON 5 OCTOBER 2000, WAS THAT THE DIRECTORS OF CARIDEM AND THE COMPANY, TOGETHER WITH MR. E.A. AGBODO, MR. KWAME PEPRAH AND NANA KONADU AGYEMANG-RAWLINGS ACTED TOGETHER TO FRAUDULENTLY CAUSE THE GOVERNMENT OF GHANA TO MAKE SUBSTANTIAL FINANCIAL LOSS. I THEREFORE REFERRED THE MATTER TO THE DIRECTOR OF CID, GHANA POLICE SERVICE FOR FURTHER INVESTIGATION.

*RECOMMENDATIONS:
• The Director/CID should conduct further investigation into the matter.
(Director/CID has already been informed)

• Caridem should take steps to settle its indebtedness of ¢21,147,145,136.45 as at 31 December 2005 to DIC. (Appendix 17).
This is without prejudice to any legal action that may be taken by the Attorney-General.


EDWARD DUA AGYEMAN
AUDITOR-GENERAL
January 20, 2006