Audit exposes Brassington’s scam in state assets sales
An Audit into the operations of Property Holdings Inc. (PHI) has revealed an unhealthy practice where the entity would award properties to the second and third highest bidders. This is usually the case when the first and second
PHI former Director, Winston Brassington
highest bidder withdrew.
PHI used to be controlled by Winston Brassington who was also Director/Chairman for about 13 other companies.
Auditor Charles Sugrim has “strongly recommended” that PHI cease this sort of practice that was condoned under Brassington.
Surgrim reported, “PHI did not consider re-tendering of properties when the highest bidder withdrew. In some cases there were prior bids for the same property at a higher price.”
The auditor pointed to an instance where the difference in price between the highest bidder and the second highest bidder was $146M. The highest bidder withdrew, and the property was offered to the second highest bidder.
The boards of PHI and the National Industrial and Commercial Investment Limited (NICIL) approved the sale of a Water Street property to J P Santos & Co Ltd for the amount of $215M after Laparkan’s withdrawal of its $361M. The proceeds were split between PHI and Guyana National Shipping Corporation (GNSC) in a ratio of 65:35. This was because the building was owned by PHI and the land owned by GNSC.
Surgrim pointed out that “on the withdrawal of the bid from the highest bidder, there was no attempt by the boards of PHI or NICIL to re-tender for the property.”
The auditor pointed to another instance where a property was offered to the third highest bidder when the first and second highest bidders withdrew their bids. The difference between the highest bid and sale price was $61 million. Also, the tendered bid price was reduced in the final sale price. The property in question was the zinc bond which Sugrim pointed out is very prominent on Water Street.
Sugrim reported that in 2003, after the bids were opened, the highest bidder Hoon Sookraj withdrew
Bharrat Jagdeo
his bid stating that his bid was on the incorrect property. Sookraj did not state which property he was bidding on. Subsequently, the second highest bidder, Savitrie Seodat withdrew her bid “without giving any reason.”
PHI then decided to offer the property to the third highest bidder, Malcolm Panday, for the bid price of $135M.
Panday then wrote the Privatization Unit requesting a reduction of the bid price. He stated that the land size was 11,413 ft2 and not 14,659 ft2 as per schedule one of the agreement of sale and purchase.
However, Sugrim noted that the agreement of sale and purchase to which Panday referenced has no measurement of the said property.
It was reported that the reference made by Panday on the measurement of the property may have originated through correspondences with PHI.
The Privatization Unit then wrote the then President Bharrat Jagdeo informing him of the incorrect information of measurement on the tender document. The Unit recommended that the offer price be $105M. The amended sale price was approved by the PHI and the PU boards.
Cabinet then approved the amended price of $105 M.
Sugrim reported, “There was an excess of the difference between the final selling price and the valuation price of $24M.”
The auditor recommended that “this practice cease immediately.” Sugrim said that in future, if the highest bidder pulls out, the property should be retendered to the public.
He said, “PHI (has to) exercise more caution in offering the property to the second highest bidder.”
Sugrim said that in such cases management can also choose to readvertise the property stating a minimum acceptable offer price.
Management’s response
PHI management responded that the decision to select the second highest bidder did not and does not rest with PHI but with Cabinet on advice of the Privatization Board.
Ashni Singh
It was also noted that there were “instances where the second highest bidder is still significantly higher than the conducted valuation.”
Management also responded that there is no guarantee that on readvertising the value of either the highest or second highest bid will be achieved.
It said that such a “strict application” (returning) does not take into consideration the tradeoffs. PHI said that bidders are less likely to participate in a second round of tendering. The company said that in some cases, prices were negotiated upwards.
Further, PHI said, “The concept of the tender is to ensure transparency and the last effective standing tenderer is still transparent after the other bidders have withdrawn. Reasons for withdrawal could be a belief that there was overbidding or a belief that the value of the property is less or that the bid was simply speculative.”
Management also said that “much depends on the facts of the matter; the members of the Privatization Board were a mix of private and public persons. As long as the valuation is less, then this is sufficient reason to proceed with the transaction. Transparency is still preserved. From experience, the market price is the highest price a willing buyer will pay.
“Until the offer is the subject of a contract and the bidder is obligated to complete the transaction (via a deposit or a bid bond or blacklisting), a bid alone is not sufficient to confirm that this is the market price. In rare cases, a bid bond was used, to ensure that only serious bidders were in the market. This however, adds to the cost of tendering and some persons may not submit a bid.
