Peprah In "Hot Soup" Again

A Daily Guide, a private newspaper said its scouts chanced upon an audit report dated February 24,2003 and signed by the Auditor-General, Mr Edward Du Agyeman. The report is copied to the office of the president, the Attorney General and Minister of Justice, the Hon Senior Minister, Minister of Finance and the Minister of Defence.

The report raised a number of questions, on the purchase and how laid-down parliamentary regulations were flouted, and how the Bank of Ghana [BOG], the Auditor-General and other arms of government, were ignored in sales Agreement of the Gulf Stream Jet GIII aircraft and its acquisition. Transfer from Peacekeeping Accounts.

According to the Audit report, it observe that total transfer of US$2,450,000 was made between September, 1998 and April 1999 from the Ghana Armed Forces [GMA] peacekeeping dollar accounts in New York toward the acquisition of the aircraft, Gulf Stream GIII with serial No. SN 493, as a result of directives issued by the Ministry of Finance.

“In connection with the above, we noted that in April 1999, two transfers of US$14,500,000 and US$1,500,000 making a total of US$16,000,000 were made by the Treasury, Ghana Mission to the UN, New York from GMA (Ghana Armed Forces) peacekeeping account No. 033-1-241232 in favour of HSBC Investment Bank plc, Project and Export Finance Account, reference Gallen Ltd,” noted the Auditor-General. <>The report observed that the transfers were based on fix instructions given by the Controller and Accountant-General in his letters No. A6006/SF.11/Vol. 2 of 23rd and 29th April, 1999 addressed to the Treasury Officer.

The Auditor-General’s Report stated, “Our review disclosed that the Controller and Account-General attached letter No. MOF/PSFI/GEN/72 of 22nd April, 1999 addressed to him by the Minister for Finance and copied to the Director, Foreign Operations Department, Bank of Ghana to support the telex instructions he issued to the Treasury Officer for the transfer to be effected. The text of the letter issued by the Minister for Finance in his letter to the Controller and Accountant-General was as follows:

“The Hong Kong Shanghai Banking Corporation (HSBC) of the UK, has agreed to provide to the Government of Ghana budgetary support for the 1999 financial year. To enable us to receive this support, we are required to set up an account with HSBC and transfer thereinto an amount to securitise the support.

According, you will recall that upon our request, you transferred the sums of $250,000 and $1.250,800. You are hereby further requested to transfer the sum of $14,500,000 and $1,500,000 to the account, the details of which are as follows:

Bank: Bank of America NT & SA, New York;
Account Name: Midland Bank Plc
Account No. 6550261045
Reference: Gallen Limited.

The amount should be charged to Acc. No. 370-000-000-410-000 (Adjustment to Investments Cost). By copy of this letter, the Director, Foreign Operations Department of the Bank of Ghana is being requested to effect the necessary transfer.

Sgd Kwame Peprah
Minister for Finance.”

The Auditor-General’s report indicate that the, “Investigations could not find a trace of any budgetary support from HSBC to the Ghana government in 1999 financial year as claimed by the former minister.”

Dollar Account Charge Agreement

One aspect which also puzzled the Auditor was the fact that where as the minister was at one stage authorizing the Bank of Ghana, to effect payment on behalf of the Ghana government, he was at another instance, signing a dollar Account Charge Agreement to authorize use of Ghana’s Peacekeeping dollar account with the UN as security for payment of a loan obtained from the HSBC to pay for the aircraft.

The said agreement reads: “This agreement was signed between the Republic of Ghana as Assignor and Gallen Ltd as Assignance to provide for an interest bearing Dollar Account to be opened in the name of the Assignor (Ghana Government) with the Account Bank (Midland Bank, now HSBC) and designated FC 883 Ministry of Finance, Republic of Ghana” with account number 37980228 as a condition for the execution of the lease agreement.

An amount of $14,5000,000 was put into this account out of the $16,000,000 transferred from the GMA Peacekeeping account in April 1999.

Assignment Agreement
Subsequently, another agreement was signed between the Midland Bank Plc now HSBC with Gallen Ltd.

The agreement provided for the payment of a loan up to $14,354,200 to be gien to Gallen Ltd, by Midland Bank for the purpose of the Lease Agreement involving the Agreement arrangements covering the Gulf Stream Jet.

This agreement, the Auditor-General’s report says “was supported with two schedules prepared by Gallen Ltd and endorsed by the Minister for Finance (Kwame Peprah). The schedules deal with notice and acknowledgement of lease agreement, notice and acknowledgement of account charge (dollar deposit account No. 37980220 with Midland Bank all dated April 22, 1999.

“The agreement says the Assignor (Gallen Ltd.) by the assignment between Gallen Ltd and Midland Bank, has assigned to the Assignee (midland bank) absolutely all rights, title, interest in and to, inter alia, the collateral which includes the dollar account charge.

Instead of allowing the laws of Ghana to govern the agreement, the paper says the lease agreement indicates that the laws of England and Wales would govern the agreement in the event of a dispute.

Section 2.1 of the lease agreement headed Representation and Warranties, specified amongst other that; “the lease is required, amongst other things, to attest to the owner (Gallen Ltd) that
a) The lease (Ghana Government) has the necessary authority to enter into, execute, deliver and perform its obligations under the lessee document;
b) The execution and delivery of the performance of its obligations under, and compliance by the lessee with provisions of, the Lessee documents will not (I) conflict with, or result in any breach of the term of, or constitute a default under, any agreement or is which the lessee is a party or is subject or by which any of its property is bound, or (ii) contravene or conflict with any provision of the lessees constitution of any other Applicable law or judgment, or permit to which the lessee is subject .

The lease was for a period of five years. In addition to that the Government of Ghana, was expected to pay annually $10,000as Administration to HSBC for four (4) years from the 2 anniversary of the agreement that is beginning from April 2000.

The loan Agreement involved Gallen ltd as Borrower and Midland Bank as the designated bank to provide a loan up to US$14.354,200 to cover the purchase of one Gulf stream GIII model aircraft with serial number s/n 493 and registration mark G540.

The agreement was to be supported by three (3) schedules, namely a certified true copy of the Bill of sale including the legal opinion of the Attorney-General of the lessee (Ghana Government) and Fugar and company in relation to the law of Ghana These were not compiled with, says, Audit –Generals Report. However according to the Report, four (4) separate Warrantly Bills of sale were issued, all of them on April 30 .1999 to reflect changes in ownership of the aircraft .

In this request, according to the Auditor-General s Report it observed certain inconsistencies in terms of the chronological order and sequence of transactions concerning change in ownership of the aircraft.

In connection with the above, we observe d that even though the aircraft sales Agreement between Transiar Trade Switzerland and the Republic of Ghana was dated February 4 1999,indicating ownership of the jet Transair Switzerland on this date, warrantly bills of sale issued after this date indicated ownership by either Johnson and Johnson, Gulfstream Aerospace Corporation and Transair, USA.

That’s not all, for some unexplained reasons instead of allowing HSBC to service the cost of the aircraft to Transair, the then Ministry of Finance and the HSBC agreed to set up a third party company known as Gallen, registered in the Cayman Island with five (5) directors.

This was the company brought in as the lessee, which will service the payment on the cost of the Aircraft to HSBC also paid Transair Trade of Switzerland for the cost of the aircraft.

While this arrangement was on according to the Auditor-Generals report, several other arrangement were made which technically changed ownership of the Aircraft to about (4), different companies all in one day thus making the sales and acquisition transaction very complex.