Gayyoom Vs Yameen about Maldives Asset Recovery STO Singapore

Maldives Asset Recovery
STO Singapore
Draft Report
Private and Confidential - in anticipation of legal proceedings
Last updated 16 September 2010
1 Introduction 1
2 History of the Republic of the Maldives 1
3 STO Maldives (Singapore) Pte Limited - Background 2
4 STO plc Audit 3
5 Key Persons within STO and STO Singapore 3
6 Initial Forensic Examination 5
7 Further Forensic Examination 7
8 Mocom/Myanmar 11
9 Commission paid to Mr Rashid 14
10 Companies trading with STO Singapore 2002 – 2006 15
11 Next Steps 17
Contents
Grant Thornton Draft Audit Report 2010 – STO Singapore
1 Introduction
1.1 Grant Thornton UK LLP were requested to undertake an asset tracing and
investigation exercise via an engagement letter dated 23 March 2010, subsequently
amended on 8 July 2010, on behalf of the Government of the Republic of the
Maldives ("the government") with regards to a number of individuals.
1.2 In addition, we were requested to investigate the assets of the former president Mr
Maumoon Abdul Gayoom ("Gayoom"), his family members, and connected parties
following the findings of the Auditor General's Audit reports in 2007 and 2008 that
government funds and national institutions were being used for personal benefit.
1.3 During our investigation in the Maldives, we were provided with three hard-drives
from the Presidents Commission, which investigates allegations of corruption and
misappropriation of assets. These hard-drives contained copy images of the harddrives
in the STO Singapore office as at 2009.
1.4 Allegations of skimming from oil trades were provided. We were informed that
although the hard-drives had been imaged, that no further investigation had taken
place into the allegations, due to various reasons of which lack of resources and
technical knowledge.
1.5 This report outlines the investigation process that Grant Thornton UK LLP
undertook, and our findings to date.
2 History of the Republic of the Maldives
2.1 In order to understand the political set up of the Maldives, I set out briefly below
the political history of the Maldives in order to provide some background knowledge
of the Maldives during the period when Gayoom was in power.
2.2 The country’s current political system was established in November 1968 when it
was proclaimed The Republic of Maldives Islands. It was renamed The Republic of
Maldives in April 1969.
2.3 The Maldives’ first President, Amir Nasir, remained in office until November 1978,
when Gayoom, who was at the time the Minister of Transport, assumed the
presidency. President Nasir abolished the role of Prime Minister in 1975 leaving
only the Presidency.
2.4 Mr Gayoom was elected with 92.96% of the votes as the new President of the
Maldives. He was last re-elected to a sixth five-year term in October 2003 with
90.28% of the vote; he was the sole candidate, having been chosen by the Majlis.
2.5 The People’s Majlis, (the Parliament), consists of 50 members of whom eight
members are appointed by the President, two members are elected from the
capital, Malé, and two members from each of the 20 Atoll constituencies.
2.6 The speaker of the Majlis - who is not a member - is appointed by the President. A
deputy speaker is also appointed by the President from among the members. These
appointments gave the President considerable power to influence the conduct of
the Parliament.
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2.7 Although the Maldives did not have a party system, a 1998 constitution gave citizens
the right to contest the vote for the presidency in parliament. Before then it had
been a criminal offence to offer oneself as a candidate.
2.8 During his Presidency, Gayoom was also the Defence Minister, Finance Minister and
Chief Justice of Maldives (among others), but following international pressure and
media attention stepped down from these additional positions in 2004.
2.9 The October 2008 Maldivian presidential election was the first presidential election
Maumoon Abdul Gayoom allowed to be contested. Standing as the DRP candidate,
Gayoom lost in the election's second round, in which he received 45.75% of the vote
against 54.25% for his opponents, President-elect Nasheed succeeded Gayoom as
President on November 11, 2008.
2.10 According to an Amnesty International report, in 2003 "there were severe
restrictions on freedom of the press, and political parties were unable to function."
Their report introduction stated that "This report provides information on arbitrary
detention of government critics and their continued imprisonment before and after
convictions in grossly unfair trials. It also highlights a pattern of torture and illtreatment,
and serious flaws in the criminal justice system. In the past decade,
dozens of people - including politicians, journalists and others protesting
government policies - have been detained arbitrarily in defiance of their
fundamental rights to freedom of expression and assembly. Several prisoners of
conscience have been tried and convicted by the Criminal Court without having
access to a lawyer, or to an independent and impartial appeal mechanism. Their
cases highlight the failure of the government to address fundamental flaws in the
criminal justice system resulting in arbitrary detention, grossly unfair trials and long
term imprisonment of government critics." (Source: Amnesty International)
3 STO Maldives (Singapore) Pte Limited - Background
3.1 STO Maldives (Singapore) Pte Limited ("STO Singapore") is a subsidiary of State
Trading Organization Plc ("STO") a state owned organisation.
3.2 The State Trading Organisation Public Limited Company (STO) was established in
1964 and its main task is importing and trading goods. The government currently
owns 92.29% and 7.71% is held by the general public
3.3 The STO specialises in the import of staple foods, fuel, lubricants and construction
materials. Its main aim is to supply these goods at a reasonable price to the public.
The majority of the STO's activities is the supply and sale of petroleum and aviation
fuel.
3.4 STO Singapore was set up in 1997 in order to purchase diesel and related products
on behalf of the Maldives, but progressed to include the sale of these products to
other countries.
3.5 The majority of its sales were to STO in Male, and to Myanmar with the exception of
2002 where the majority of sales revenue came from Malaysia. This is shown in the
Appendix XXX. We were only able to obtain information from 2002 to 2008, as
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Grant Thornton Draft Audit Report 2010 – STO Singapore
there were no accounting data back up files prior to 2002, and paper
documentation was sparse.
4 STO plc Audit
4.1 During the audit planning for 2007, comments were made under "Entity risk fears"
regarding STO plc.
· That "STO revenue is in all most all the years just the same as its cost of sales
leading to very low profit margin. in financial year 2006 there has been a decrease
of approximately 87% of the net profit compared to financial year 2005.
· Similarly Maldives National Oil Company is operating under a very low profit
margin. In 2006 profit margin has declined by approximately 67% compared to
2005.
· The main risk assocated in the entity is segregation of duties at the top level.
· Transfer of money within the organisation".
· It was also mentioned in the audit approach that Mr Maniku "was also the
Chairman of STO Maldives Singapore, Maldives National Oil Company, Fuel Supply
Maldives, Allied Insurance Company, so there might be related party transaction
between these subsidiares. Therefore control risk is very high."
5 Key Persons within STO and STO Singapore
5.1 The following individuals were directly appointed by Gayoom and held significant
strategic and influential positions within the organisation.
Abdulla Yameen
5.2 Abdulla Yameen is the younger half brother of Gayoom and was given the Chair of
the STO position and the Trade Ministry in 1990. Mr Yameen was also the Minister
of Tourism and of Civil Aviation.
5.3 Abdulla Yameen stepped down from the position of STO Chairman in 2005.
5.4 However evidence found within STO Singapore (Exhibit XXX - source STO Singapore
Hard-drive, copied in 2009) of debit notes being created from STO Singapore to STO,
for payments made on account of Mr Yameeen during 2007/2008.
5.5 On further examination, we were informed that these debit notes were created as a
result of receiving funds from Mr Yameen deposited to the STO head office, which
were then transferred to STO Singapore's bank accounts.
5.6 This corresponded with a document received from STO Head Office confirming the
payments were deposited by Yameen into STO's bank accounts via cheque.
5.7 In conversation with Mr Muneez, the Managing Director of STO Singapore, this was
to provide monies for the living expenses of his son and daughter, both studying in
Singapore. Their living expenses were distributed by Mr Muneez.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
5.8 Two issues arise in the above process;
a) Why Mr Muneez was tasked with the responsibility over many years of the
distribution of funds to Yameens family when no apparent consideration
appeared to be given to Muneez for this.
b) That despite stepping down from his role as Chairman in 2005, he was still
using nationally owned institutions (STO) and their company bank accounts
to transfer personal funds to members of his family up until late September
2008.
5.9 It would be highly unusual for a person no longer connected to the company of
which he used to be Chairman to use company bank accounts for personal
use/money transfers.
5.10 It should be noted that this continued up until very shortly before the elections took
place that resulted in a change in government, removing his brother Gayoom from
the Presidency.
5.11 As Chairman, Yameen should have been aware of the strategic risks and
opportunities being presented to STO and would have needed to provide his
guidance. He would have been aware of the oil trading as the Singapore arm would
not have been incorporated without his approval.
5.12 From copy letters translated from Dhevi, Mr Yameen has previously requested
Gayoom to sign letters, drafted by Yameen, to foreign leaders/ministers with
regards to oil production and sale.
5.13 This further corroborates our view that Mr Yameen was aware of and would have
been involved in the oil strategy that took place within STO and STO Singapore, not
just through his position as Chairman but through his various visits to Singapore and
his use of the STO Singapore bank accounts for personal use, and his relationship
with Muneez, the Managing Director of STO Singapore.
Mohamed Maniku
5.14 Mohamed Maniku was made Managing Director of STO in 1993 and served until
2008 until he was appointed as an Ambassador to Washington.
5.15 Mr Maniku was also a director on the Bank of Maldives Board, due to his position
within the STO, and this remained throughout his tenure. This is referred to in a
separate report.
5.16 Due to this longevity as MD of STO it could be concluded that he had significant
influence within the organization.
5.17 We have reviewed various purchase invoices regarding Mr Maniku's visits to
Malaysia and Myanmar from the STO Singapore office, which clearly indicates that
Mr Maniku was acutely involved in the STO Singapore oil strategy involving
Myanmar and other third parties.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
6 Initial Forensic Examination
6.1 Our initial investigation centred on the hard-drives received from the Presidents
Commission. We completed a search on the files obtained within the hard-drives
and picked out documents of interest.
6.2 During the searches we discovered various documents that required further
investigation, these are broadly categorised into the following:
· Mocom/Myanmar sales
· Unusual Debit Notes/Payments
· Unusual contracts of sale
6.3 We also reviewed the STO Financial Statements for 2001 to 2009.
6.4 The STO was audited by PWC in Male until 2003. For 2004 onwards it was audited
by KPMG based in Sri Lanka, which for the first time in STO received a qualification
in the audit with the following opinion:
6.5 "A company incorporated in Singapore by the name of Mocom Trading Pte Ltd in
2004 has not been disclosed under Note No. 30 to the Financial Statements. There
was no evidence available with regard to approval of the incorporation. Further we
are unable to establish the volume and the nature of the company with the group."
6.6 In 2005, KPMG further qualified the audit with the following opinion:
6.7 A company incorporated in Singapore by the name of Mocom Trading Pte Ltd in
2004 has not been disclosed under Note No. 33 to the Financial Statements. There
was no evidence available with regard to approval of the incorporation and we are
unable to establish the volume and the nature of the transactions of company with
the group. However, the name of the company has been struck off on 20th April
2006".
6.8 Further to the above, Grant Thornton staff travelled to STO Singapore office on 14
July 2010 for two days to obtain initial documentation and to review the accounting
files.
6.9 This was not a perfect process as STO Singapore's files are poorly organised and not
in any clear order. There were 5 small bays of files for approximately 13 years of
accounting records, sale contracts, purchase invoices, bank statements, oil trading
information etc.
6.10 At the office copies of sales invoices, letters of credit and bank statements were
obtained for 2004, as it appeared to have the most available documentation and the
KPMG audit first identified Mocom in 2004.
6.11 Work continued on the review of the sales invoices, and of the STO Singapore
Financial Statements.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
6.12 A general review of the Financial Statements from 2001 to 2009 can be found in
Appendix XXX.
6.13 This review shows that revenue increased dramatically from 2001 to 2002, after
which sales hovered around the SD$100million mark until 2005. From 2006
onwards, sales decreased significantly and revenue in 2009 dropped to SD$17million
its lowest to date.
6.14 A review of the sales invoices in 2004 showed that for each trade sale to Myanmar
Petrochemical Enterprise, there were two sales invoices, one from STO Singapore
and one from Mocom Trading Pte Ltd.
6.15 This was an anomaly as all other sales from STO Singapore to the following
companies STO Plc, Sirus Marine PTE Ltd, Petroleum Nasional Berhad, and Prestige
Marine Services PTE Ltd only had the one sales invoice on STO Singapore letterhead.
6.16 The sum total of all the Mocom invoices to Myanmar Petrochemical Enterprises was
$45,751,423, whereas the sum total of the invoices raised by STO Singapore to
Myanmar Petrochemical Enterprises was $51,423,523. A difference of $5,672,500.
6.17 Further, for both invoices, the invoice number and the quantity was the same,
however the unit price per barrel of oil, and therefore the total gross amounts were
different.
6.18 The invoices issued by each of the companies bear striking similarity to each other,
in everything but the price per barrel. The price per barrel is usually somewhere in
the region of US$5 per barrel higher in the STO invoices than the Mocom invoices
and there was no obvious explanation for this. See Appendix XXX.
6.19 In addition, Mocom and STO Singapore invoices suggested that they are trading
from different addresses, but they carry the same contact numbers.
6.20 Bank statements for STO were reviewed for the period 2004 in an attempt to
reconcile any differences. It was discovered that monies were received in an
account with the United Overseas Bank Ltd ("UOB") for the sales to Myanmar, and
could be identified via the invoice numbers which were stated on the bank
statements.
6.21 The amounts received ($27,588,887) did not exactly match the invoices raised by
STO or Mocom, however they were closer to the amounts raised by Mocom then
STO.
6.22 On UOB receiving the monies, cheques were written out to transfer these monies
out of UOB. We traced $3.245m being paid to STO Singapores' Standard Chartered
Account.
6.23 Bearing in mind that there appeared to be no obvious sizeable debt write offs, there
was no apparent logic for the disparity in values between the two sets of invoices.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
6.24 We considered the view whether it could be a simple commission calculation with
the basis being the STO invoice value. i.e. the invoices were being used to solely
back this up and nobody seeking to agree the trades back to the sales ledger?
However it is clear from discussions with Muneez and Ravi (the office accountant
since 2002) and through reviewing the ledgers during the second visit to the offices
that this was not the case.
6.25 We researched the company who had audited the accounts for STO Singapore, and
found that the company looked as if it was a sole practitioner.
6.26 Given the above and the fact that the financial statements were audited by small
perhaps one person firm, it was agreed that further forensic examination of the
accounts was required in order to understand what figures represented the sales
and which value (STO or Mocom) was shown in the financial statements.
7 Further Forensic Examination
7.1 Our strategy was to focus on the oil trades (sales and purchases), tracing through
the invoices to the revenue stated values for 2004, to complete the initial
examination, and to then review the sales and purchases for other years.
7.2 STO Singapore appear to have purchased fuel from Shell Eastern, the Singapore
Petroleum Company and Petronas, and then sold it to STO, its parent company, or
to third parties. Occasionally sales were made for shipping of items on behalf of a
government organisation, such as the Office of Election Commission.
7.3 In order to ascertain whether all purchases of fuel were delivered and sold to either
STO or other third parties, work included comparing
· the purchases of fuel shown in STO Singapore's purchase ledger with:
a) purchase invoices; and
b) sales shown in STO Singapore's sales ledger.
7.4 As part of this process, we compared the purchase invoices with bills of lading and
other documentation such as manifests in order to ascertain where the fuel had
been delivered.
7.5 As referred to above, this was not a perfect process as STO Singapore's files are
poorly organised. The folders containing bills of lading etc were difficult to locate
and we could not find all of the material we had expected to find.
Sales
7.6 We reviewed the sales invoices for 2004, which as per Appendix XXX showed 78
sales transactions for the year.
7.7 Of these transactions 75% were to Myanmar or to Myawaddy Trading Pte Ltd, also
based in Myanmar.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
7.8 On three of the STO/Mocom Invoices the debtor was stated as being Myawaddy
Trading Pte Ltd, which was different to the debtor ledger in the accounts. These are
highlighted yellow.
7.9 All of the transactions were relating Myanmar/Myawaddy were for marine diesel
oil. Of the remaining transactions, the next largest debtor was STO plc, buying
SD$25million of fuel products.
7.10 The sales invoices themselves showed the following information:
· Customer
· Invoice date and number
· Bill of Lading date
· BL number
· Where the shipment was from and its port of discharge
· The vessel used to transport the products
· The letter of credit number
· Description of goods
· Quantity sold
· Unit price
· Sale price
7.11 Appendix XXX shows a summary of the sales transactions that took place in 2004.
7.12 To reconcile the sales invoices back to the purchases made, we reviewed the
documentation supporting the transaction, including the bills of lading, insurance
documents and purchase invoices.
7.13 In addition we used IDEA software to link specific purchases of oil with the sales,
therefore confirming the basis of the transactions.
Bills of Lading
7.14 Bills of Lading for each shipment of oil should show to whom the shipment had been
consigned and the corresponding port of discharge. They are created by the
supplier from which the fuel product was purchased.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
7.15 The consignees shown on Bills of Lading where Myanmar has been invoiced for
supply are summarised in the following table.
7.16 Although the Bills of Lading did not define the consignee in the period from January
2004 to March 2004, notes within the Bill of Lading made it clear that the goods
were being supplied to Myanmar and the port of discharge was shown as Yangon, a
port in Myanmar.
7.17 However, from April 2004, all of the fuel invoiced to Myanmar is reflected in Bills of
Lading where the consignee is shown, as either STO or STO Singapore. These
shipments appear to have been discharged in the Maldives instead of Yangon as per
the sales invoices.
7.18 Exhibit XXX shows the various documents that support the sale transaction. It can
be seen in this example that the bill of lading port of discharge is different to the
sales invoice.
7.19 It should be noted that the Bills of Lading are signed by the ship's master and should
therefore be highly indicative of where the cargo had been delivered.
7.20 In many instances, we have located fax messages which tend to correspond with the
information shown on the Bills of Lading. See, for example the fax dated 10 January
2005 attached to Exhibit 3. This stated that the port of loading was to be Singapore,
the consignee was to be STO and that the Maldives was to be the Port of Discharge.
7.21 Although we don't have a Bill of Lading for this delivery, we have a "manifest"
completed by Shell which corresponds with the fax. The manifest included in Exhibit
3 states that the port of discharge was to have been the Maldives.
7.22 The fax was addressed to Shell Eastern and was produced by Gemyl Aung.
7.23 In other examples, the corresponding fax was sent by Gemyl Jamal (for example, the
fax within Exhibit 23). The signatures for Gemyl Aung and Gemyl Jamal appear to be
the same.
7.24 To further corroborate the above, insurance documents were reviewed in relation
to oil shipments. Evidence was found to show that the insurance documents for the
same transactions stated that the oil was loaded at Singapore and discharged in the
© 2010 Grant Thornton UK LLP. All rights reserved.
Period Consignee Notes
27/1/04 - 7/3/04 to order of These Bills of Lading are endorsed:
"Notify:
Myanmar Petrochemical Enterprise
Myanmar Investment and Commercial Bank"
21/3/04 - 27/3/04 Myanmar
8/4/04 - 13/6/05 STO or STO
Singapore
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Grant Thornton Draft Audit Report 2010 – STO Singapore
Maldives, again contradicting the sales invoices which had stated that they were
being discharged in Yangon. (Exhibit XXX).
7.25 Of the 33 sales invoices directly to Myanmar Petco in 2004, 20 of those shipments
appeared to have been discharged in Maldives, and not Yangon. The total sum of
these invoices for 2004 is approximately US$30million dollars, equivalent to 653,475
barrels of oil.
7.26 We understand that Gemyl Aung/Jamal was STO Singapore's General Manager, but
no longer works for STO Singapore.
7.27 We requested to see Mr Jamal. Mr Muneez called Mr Jamal and requested that we
meet. During the phonecall, Mr Jamal was heard to say that he is "not liable" for
STO Singapore. We were unable to ascertain what the statement referred to. He
refused to come to the office, we understand however, that he remains based in
Singapore and we have been provided with a contact number for him by Mr
Muneez.
7.28 On occasion, we have located two types of Bills of Lading which tend to show a
different port of discharge. For example, a Bill of Lading contained within Exhibit 3
indicates that this shipment was to have been delivered to Yangon Port in Myanmar
and the cargo consigned to Myanmar. However, these Bills of Lading have been
completed by a cargo agency, Raysun Shipping Lines and are not signed by the ship's
master.
7.29 We have discussed sales to Myanmar in more detail in section XXX However, it
seems possible that shipments invoiced to Myanmar may have been delivered to a
third party.
7.30 Further information is currently being sought regarding shipments invoiced to
Myanmar in order to ascertain where the ships delivered their cargo.
Purchases
c) STO Singapore appears to have purchased fuel from Shell Eastern, the Singapore
Petroleum Company and Petronas.
7.31 Although the content of purchase invoices varies slightly from one supplier to
another, these tend to show:
· the product type
· numbers of barrels
· the name of the vessel used to transport the fuel
· the loading date.
7.32 As part of this process, we compared the purchase invoices with bills of lading and
other documentation such as manifests in order to ascertain where the fuel had
been delivered.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
7.33 There were payments made to Sinotex Shipping & Trading Co Ltd that differed from
all other purchases in the nature of their transactions. This is set out below.
Suppliers - Sinotex Shipping & Trading Co Ltd
7.34 A number of payments were made to Sinotex Shipping & Trading Co Ltd which were
in round figures.
7.35 These were different to the standard freight purchases, whereby it appeared that
payment is normally given for actual shipping costs were bought on the basis that
the same oil was being delivered and sold to a third party.
7.36 It therefore appeared unusual to discover that payments were made on a regular
basis for the oil.
7.37 Company information shows that the company is a Thai company. Its managing
director is Mr Maung Aung Aung Lwin.
7.38 The company is a majority shareholder of a Myanmese company which also appears
in the purchase ledger; Trade Sea Company Ltd.
Suppliers - Trade Sea Company Ltd
7.39 Trade Sea Company Ltd is located in Yangon, Myanmar and was incorporated in
2002.
7.40 Senior Personnel as per its company records are Kyaw Kyaw Lin and Aaron Lwin.
7.41 It's majority shareholder is Sinetox Shipping & Trading Co Ltd.
8 Mocom/Myanmar
8.1 Mr Muneez, an STO Singapore director has advised us that Mocom was a large
corporation based in Malaysia; Mocom Corporation Sdn Bhd, and that one of its
directors is a Mr Kamal Bin Rashid.
8.2 We have confirmed that Mr Rashid was a director of Mocom Corporate Sdn Bhd, as
was Mr Raja Abdul Rashid Bin Raja Badiozaman, and Bilal Bin Rashid @ Maung Myo
Myint Lwin (deceased).
8.3 Mocom Trading Pte Ltd was incorporated on 4 February 2004, company registration
number 200402297N. Authorised capital was 1,000,000, Issued and paid up
ordinary shares were 4.
8.4 Shareholders were registered as:
· Kamal Bin Rashid@myint Lwin. 14, Jalan BJ/1 Taman Bukit Jaya Bukit
Antarabangsa, 68000 Ampang Malaysia, Nationality Myanmar;
· Raja Abdul Rahsid Bin Raja Badiozaman, 64 Taman Bukit Ampang Jalan Bukit
Belacan 68000 Malaysia, Nationality Malaysia;
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· Fathimah Ashan, G Nagin Koimalaa Higun Male, Maldives; and
· Sana Mansoor, MA Manas Nikagas Higun Male Maldives
8.5 Directors were registered as:
· Kamal Bin Rashid
· Raja Abdul Rashid Bin Raja Badiozaman
· Fathimah Ashan
· Sana Mansoor
· Ahmed Muneez
8.6 A review of the audited financial statements for the financial year ended 30
September 2004 shows a loss of RM 156,988, and in 2003 a loss of RM186,109. Its
principal activites are described as trading in car spare parts, accessories and diesel.
8.7 In discussions with Mr Muneez he explained that Mocom Trading Pte Limited
(Mocom Singapore) was set up as a joint venture between Mocom and STO
Singapore in order to sell oil to Myanmar.
8.8 We were informed that Mocom Corporation had the rights to sell oil to Myanmar
through a tender process, along with three other companies, Daewoo, Petrocom
and Hyundai. Daewoo shortly withdrew from selling oil to Myanmar in 2004.
8.9 STO Singapore wished to sell oil to Myanmar, however as Mocom had the contract,
it was agreed that STO Singapore and Mocom would form a joint venture, known as
Mocom Trading Pte Ltd, incorporated in Singapore.
8.10 We were also informed that STO Singapore wished to have a joint venture set up
with Mocom, as it was concerned that during the process of buying and shipping the
oil to Myanmar, that the letter of credit could be revoked by Mocom Corporation
thereby leaving a financial loss to STO.
8.11 However, letters of credit by their very nature are irrevocable and cannot be
cancelled without the beneficiary agreeing. The following information regarding
letters of credit was found on Wikipedia:
8.12 "Letters of credit can also be source of payment for a transaction, meaning that
redeeming the letter of credit will pay an exporter. Letters of credit are used
primarily in international trade transactions of significant value, for deals between a
supplier in one country and a customer in another. The parties to a letter of credit
are usually a beneficiary who is to receive the money, the issuing bank of whom the
applicant is a client, and the advising bank of whom the beneficiary is a client.
Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled
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Grant Thornton Draft Audit Report 2010 – STO Singapore
without prior agreement of the beneficiary, the issuing bank and the confirming
bank, if any".
8.13 Therefore our view is that this claim is not a valid reason for creating a joint venture
company.
8.14 An example of a contract over April to July 2005 setting out the relationship
between Mocom Singapore and STO Singapore is attached as Exhibit XXX. In
summary, the contract explained that:
· STO Singapore was to supply Mocom Singapore with diesel;
· As Mocom Singapore held the contract to supply the Union of Myanmar that
Mocom Singapore were therefore entitled to a "commission payment" being
approximately 40% of the profits made;
· It was confirmed that commission should be paid direct to a Singaporean
bank account, which was a USD account in Mr Rashid's sole name with United
Overseas Bank, Singapore.
8.15 Attached to the contract was the commission invoice from Mocom Singapore for
the period April to December 2005. Therefore in the ledger, it appears that the
commission is being paid to Mocom Singapore, but in fact is paid to Mr Rashid
personally.
8.16 Throughout the above, it remains very unclear to us what STO Singapore's role in
the process had been, given that Mocom already had the contract to sell oil to
Myanmar. It would have been more profitable for Mocom to set up a trading arm in
Singapore and purchased the fuel itself , benefiting from all related profits.
8.17 STO Singapore and Mocom Singapore each generated sales invoices addressed to
Myanmar for each delivery showing the quantity of barrels delivered and the unit
price. The content of the invoices are alike, except for the price per barrel.
8.18 We understand from Mr Muneez that the unit price shown on the Mocom
Singapore invoices reflect the values supported by Letters of Credit. Our work
suggests that, generally, the unit prices shown on the STO Singapore invoices were
higher than those shown on the Mocom Singapore invoices.
8.19 We understand from Mr Muneez that, in order to settle the STO Singapore invoices
(ie the difference), Myanmar paid round sum amounts by cheque to "top up" the
account.
8.20 However, this is not documented and Mr Muneez explained that this process
involved making contact with the Myanmar government in order to seek payment.
8.21 We were also informed that at the year end, the debtor ledger was "squared off" in
order to balance the books. However it is unclear if the topped up amounts were
paid in round sum figures (approximately $100,000 at a time) how the accounts
were easily reconcilable and why they were paid in such sums.
© 2010 Grant Thornton UK LLP. All rights reserved. 13
Grant Thornton Draft Audit Report 2010 – STO Singapore
9 Commission paid to Mr Rashid
9.1 Commission paid to Mr Rashid from 2001 to 2006 which were the last commission
amounts paid were as follows:
Kamal Rashid Commission Payments
Singapore Dollar
2002 2003 2004 2005 2006
Commission
572,8
02
203,
820
124,2
43
44,4
27
52,
309
Myanmar Sales
(UMEH/MPE)
50,544,
144
67,613,
975
87,000,
418
66,309,
324
14,685,
230
PL International Pte Ltd
1,112,
011
S H N G Trading
606,4
18
Kanbawza International
Pte Ltd
2,329,
184
Golden Aaron Pte Ltd
1,197,
646
Total Sales to Myanmar
55,789,
403
67,613,
975
87,000,
418
66,309,
324
14,685,
230
Commission as % of Sales 1.03% 0.30% 0.14% 0.07% 0.36%
Total sales 294,123,621 86,100,402 115,725,144 105,170,183 56,530,328
% of total sales 19% 79% 75% 63% 26%
9.2 What is interesting to note from the above is the decrease in commission paid to Mr
Rashid from 2002 to 2006, despite the sales increasing significantly over the same
period.
9.3 Commission was paid to Mr Rashid in relation to four other companies above,
however no sales appeared for these companies from 2003. These companies are
discussed in section XXX
9.4 Initially it may be considered that the decrease was due to a change in the working
relationship, i.e. commission was a direct consequence of sales introduced by Mr
Rashid in 2001 and 2002, but that due to a new agreement to create a joint venture,
that the commission structure changed.
9.5 However, as per the contract, commission was still to be paid to Mr Rashid as a
result of the Myanmar sales albeit they now were invoiced through Mocom.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
9.6 It is unclear why STO Singapore paid commission to Mr Rashid and on what basis.
9.7 Mr Rashid is confirmed as director of Mocom Corporation Pte Ltd.
9.8 Exhibit XXX shows that Mr Rashid was previously Myanmese, and changed
nationality in 2009 to Malaysian. His name is stated as Kamal Bin Rashid @ Myint
Lwin Oo.
9.9 We believe that Myint Lwin Oo may be his Myanmese name.
9.10 Another company officer on the same document also changes nationality from
Myanmese to Singapore in 2009.
10 Companies trading with STO Singapore 2002 – 2006
Kanbawza International Pte Ltd
10.1 We were unable to source this company in Singapore and believe that it is part of
the Kanbawza Group based in Myanmar.
10.2 Further information is required to confirm the above, however the Kanbawza Group
is owned by Aung Ko Win.
10.3 Aung Ko Win, also known as Saya Kyaung, is a longtime associate of the junta's No 2,
Vice Snr-Gen Maung Aye. He also owns a soccer club, Kanbawza FC and Kanbawza
Bank. Aung Thaung's son Pyi Aung is married to Maung Aye's daughter Nandar Aye.
10.4 Sales were registered in 2002 only.
PL International Pte Ltd
10.5 PL International Ltd appears to be a Singaporean company
10.6 It's website states that "Metro PL International Private Limited was incorporated in
Singapore in 2002 as a general commodities wholesale trading company. We have
since grown and evolved into an international oil and gas trading company".
10.7 The website is very limited and has only four pages of information with brief text.
10.8 Information is being sought as to the ultimate interested party for this company.
Sales were registered in 2002 only
S H NG Trading Pte Ltd
10.9 According to information sourced from PI International Ltd, the company had been
inactive for over 7 years as no accounts had been filed.
10.10 Research into the ownership of S H NG Trading Pte Ltd appeared to show that the
company is owned by Ms Cecila NG.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
10.11 Ms Cecilia NG is the wife of a Myanmar national, Mr Tun Myint Naing, also known as
Steven Law. The US Treasury Department's Office of Foreign Assets Control (OFAC)
has accused Steven Law of being part of a drug empire which his father, Mr Lo Hsing
Han — dubbed the "Godfather of Heroin" by OFAC — had set up in the early 1970s.
10.12 According to OFAC Mr Tun is also one of the wealthiest individuals in Myanmar. Mr
Tun is also suggested to be linked with the Myanmar's Junta leaders. (Exhibit XXX)
10.13 Ms Ng (and Mr Law) and the company have been blacklisted by US sanctions for
having ties with Myanmar. (Exhibit XXX)
10.14 Sales were registered in 2002 only.
Golden Aaron Pte Ltd
10.15 Golden Aaron Pte Ltd is also owned by Ms Cecilia Ng and is also blacklisted by OFAC.
(Exhibit XXX)
The Union of Myanmar Economic Holdings Ltd (UMEH)
10.16 Sales were made to the above named company in 2002.
10.17 In July 2003 it was targeted by OFAC and written into the Burmese Freedom and
Democracy Act 2003 (US) as one of the companies for which it was now illegal for
US companies and citizens to trade with.
Myawaddy Trading Ltd
10.18 Myawaddy Trading Ltd is a subsidiary of the The Union of Myanmar Economic
Holdings Ltd.
10.19 The company is blacklisted under OFAC and it is illegal for the US or US citizens to
trade with the company.
10.20 Three of the sales invoices in 2004 were Myawaddy Trading Ltd, however appeared
in the accounts ledger as being sold to Myanmar Petrochemical Enterprise.
10.21 This adds further to the assumption that UMEH changed its name to Myanmar
Petrochemical Enterprise Ltd, discussed below.
Myanmar Petrochemical Enterprise (Myanmar Petco)
10.22 Myanmar Petrochemical Enterprise is the main buyer of oil according to the sales
documentation from STO Singapore for 2003 to 2005, and still accounted for 26% of
sales in 2006, the final year of trading with the company.
10.23 Information is being sought as to the ultimate interested party for this company.
10.24 However it should be noted that the following companies, all with very similar
sounding names have been added to OFAC's SDN list:
· MYANMAR GEM ENTERPRISE (a.k.a. MGE; a.k.a. MYANMAR GEM
ENTERPRISE)
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Grant Thornton Draft Audit Report 2010 – STO Singapore
· MYANMAR PEARL ENTERPRISE (a.k.a. MPE; a.k.a. MYANMAR PEARL
ENTERPRISE)
· MYANMAR TIMBER ENTERPRISE (a.k.a. MTE; a.k.a. MYANMAR TIMBER
ENTERPRISE)
10.25 It would be reasonable to assume that the Union of Myanmar Petco effectively was
a change of name for the Union of Myanmar Economic Holdings Ltd and that sales
continued albeit under a different name to the same interested parties.
10.26 The company's managing director is Col Kyaw Shen. The company according to
company records is a state owned company responsible to the Ministry of Energy.
10.27 The Minister of Energy is Brigadier General Lun Thi. According to a number of
sources including the Canadian and US government websites Brigadier-General Lun
Thi, born July 18, 1940 has been the Minister of Energy since December 20, 1997.
10.28 All oil sales contracts have to be negotiated directly with the Ministry of Energy.
Vietnam
10.29 We have also located one shipment which, according to the corresponding purchase
invoice received from the Singapore Petroleum Company Ltd, was delivered to
Vietnam. This contradicts the corresponding STO Singapore sales invoice which was
addressed to STO.
10.30 The supporting documentation we have collected is included within Exhibit 27 and
this refers to the delivery of 2,977.563 metric tonnes of HSFO 180 CST, which was
invoiced to STO at a cost of US$881,730.84.
11 Next Steps
11.1 At the current position in time it appears that a number of oil sales made to
Myanmar were not shipped to the port of discharge as per the sales invoices, but
rather to the Maldvies.
11.2 This leads to possible theories, of which will need to be further investigated mainly
concerning the concept of shipping fraud through the diversion of chartered vessels
and where the oil cargo was delivered to after reaching the Maldives.
11.3 If the oil delivered to the Maldives was sold on the black market. This may have
created a "super-profit" being the difference between the sale amount and the
amount sold on the market. Following which an investigation would need to be
undertaken to confirm if the sale proceeds were then returned to Myanmar to cover
the original sales "cost" and the additional profit split between individuals.
11.4 Further research on the oil trade has shown that there have been numerous
allegations and prosecutions for the smuggling and selling of oil on the black market,
of which one means is through the diversion of oil tankers to destinations other
than that shown on the original sales invoices.
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Grant Thornton Draft Audit Report 2010 – STO Singapore
11.5 The International Maritime Organisation estimates that 80,000 barrels of oil a day
go missing through theft, diverting of oil lines and through fraud in shipping, helped
by corrupt government officials and businessmen.
11.6 We should consider undertaking the following:
11.7 Confirm basis for round figure payments to the following:
· Glencore
· Capt Shahid
11.8 for which there are no invoices but requests from STO to pay from STO Singapore
accounts.
11.9 Ascertain where the tankers delivering fuel invoiced to Myanmar travelled to.
National research are looking into this, but we may wish to consider:
11.10 Obtain information from the ports authority in the Maldives re shipments delivered
there
11.11 Obtain information from the ships' owners to establish where the ships travelled to
and confirm ownership of the vessels. We hope to find out from Lloyds Shipping
Register who owns the ships.
11.12 Ascertain where the shipment apparently delivered to Vietnam was delivered.
11.13 Obtain copies of the cheques/paying in slips used to settle debts between STO
Singapore and Myanmar. We should consider obtaining copies of the cheques from
Standard Chartered to determine where cheques used to pay STO Singapore by
Myanmar in were obtained from.
11.14 Consider disclosure order for individuals mentioned in the report from Singapore
Monetary Authority.
11.15 Consider and analyse any breaches of UN sanctions in the trading of oil with
Myanmar and any criminal consequences for individuals who commit the same.
© 2010 Grant Thornton UK LLP. All rights reserved. 18