No Merit In Rabuka's Complaint Says Fiji Independent Commission Against Corruption

The Fiji Independent Commission Against Corruption has ruled that there is no merit in the complaint lodged by  Sitiveni Rabuka regarding the 2010 award of Rewa Dairy Co-operative Ltd (RCDC) consultancy contract to Aliz Pacific.

The Opposition Leader had alleged that the awarding of the contract for the restructuring of the ailing Cooperative was without a public tender and was an arbitrary act.

Mr Rabuka further alleged that the tender award was contrary to the requirements of the Finance Instructions under the Finance Management Act.

Most of the issues raised by Mr Rabuka were based on the 2010 Auditor General’s report.

In an eight-page report released yesterday,  FICAC deputy commissioner Rashmi Aslam outlined their findings.

Context of the restructure of the Rewa Dairy Cooperative Ltd

After facing serious financial mismanagement for decades, the Cooperative had invited  PricewaterhouseCoopers (PWC) in 2004 to conduct an audit on the financial affairs of the company.

Evidence revealed that the company was infested with many forms of corruption and needed urgent action to revive its financial stability and good governance.

The report highlighted: “Among the officials accused of corruption, was a Director of the Board for allegedly receiving a sum exceeding $50,000 from a supplier of the company. The Director was a Parliamentarian under the Soqosoqo ni Vakavulewa ni Taukei (SVT) Government and it is noteworthy that the Board had exonerated the Director/Politician without taking any legal action.”

The PWC audit report suggested the need to revamp the company structure and the industry.

“Therefore, it can be safely said that the restructure of the company was not a novel idea conceived in 2009 or 2010 but was an imperative task awaiting desperate and immediate action to revitalise its operations,” the FICAC report said.

Engagement of Aliz Pacific

Aliz Pacific is a local professional services firm specialising in providing expert business and accounting advice and innovation in business through growth strategy.

After a tender was published on February 20, 2009, in the Fiji Sun, the Co-operative Board awarded the tender to Aliz Pacific.

“This tender process by the RCDC Board was done independently on its own volition.”

No member of the Cabinet nor the Attorney-General had any say in this process when the Company decided to engage the services of Aliz Pacific in this initial stage. Therefore, any speculation that the engagement of Aliz Pacific was due to any ‘personal interest’ of any person outside of the RCDC Board has no merit and can be dismissed in limine.

“In the same vein, any aspersion as to the alleged lack of transparency in the manner in which the consulting firm was engaged from its inception is illogical and untenable,” the FICAC report said.

Aliz Pacific had proposed a five-year ‘Strategic Plan’ which included radical changes to the manner in which the company carried out its affairs. The report said that the Co-operative Board was also in discussion with the consulting firm prior to the Cabinet decision made on April 27, 2010.

Cabinet decision

There was no approval by Cabinet to award the consultancy services to Aliz Pacific.

The FICAC report said this was evident in the  Cabinet Memorandum dated 23 April 2010 and the subsequent Cabinet decision on 27 April 2010.

It highlighted the Cabinet decision made on 27 April 2010:

147. Rewa Co-operative Dairy Company Cabinet:

(i) Approved the restructure of Rewa Co-operative Dairy Company, as proposed in paragraph 3.1 of this Memorandum;

(ii) Approved the funding of $500,000 and utilisation, as outlined in paragraph 3.2 to 3.6 of this Memorandum;

(iii) Noted that this sum of $500,000 is to be sourced from the National Export.

Strategy Budget and/or virement of funds through existing budgetary allocations in the Ministry of Agriculture and Industry and Trade; and

(iv) Approved the registration of the two entities named Fiji Dairy Company Limited and Fiji Dairy Co-operative Company Limited.

The FICAC report summarised that Cabinet only committed to the following through its decision:

a.) That Cabinet approved the restructure of Rewa Co-operative Dairy Company (RCDC) in principle;

b.) That Cabinet, through its decision, had committed to providing the funding required to carry out the said restructure.

“According to the Cabinet decision clearly spelled out above, there was no Cabinet decision to provide the consultancy contract to any specific firm. As such, the involvement of Cabinet members as alleged in the complaint has no merit,” the report said.

Co-operative Special Board Meeting

After the Cabinet decision was made, a special Board meeting took place on May 17, 2010, to discuss the restructure of the company.

According to FICAC findings, the Board paper submitted by the chief executive officer at the time re-confirmed the fact that the involvement of the Cabinet was only limited to the approval of the restructure in principle.

“The approval of the restructure in principle and awarding of a consultancy contract to a firm were entirely different courses of action that required executions by different bodies at different times.”

The Board Paper emphasised that it was the prerogative of the RCDC Board as per Section 2.7.3. of the Financial Policies and

Guidelines of RCDC

“The same Board paper also noted that the Minister for Commerce, Public Enterprise and Attorney-General also advised the Board to be transparent and fair in the utilization of funds.

“Further, Aliz Pacific had also put a proposal to the Board of RCDC to make their presentations to the Board in that special

Board meeting which further shows that it was the RCDC Board in consultation with Aliz Pacific. “The analysis hitherto is sufficient to conclude that no member of the Cabinet, office of the Solicitor General or the Public Service Commission is responsible for the awarding of the consultancy service to Aliz Pacific as alleged in the complaint. There is no evidence of any abuse or any impropriety whatsoever against those named in the complaint,” the report said.

Auditor General’s Report 2010

The FICAC report noted that the primary assertion of the OAG’s report with regard to the matters alleged was that the “Government Procurement Procedures pertaining to the acquisition of services above $30,001 were breached”.

As a result, the OAG had recommended an investigation as to how the Ministry awarded the consultancy contract.

Information was obtained from a specific officer of the Ministry of Industry and Trade and from the Company Secretary of the Co-operative.

“It appears that these inquiries had not provided complete and certain answers to the essential questions and legal issues needed to be verified during the audit.”

The FICAC report said that the OAG had presumed that the Finance Instructions of 2010 under the Finance Management Act of 2004 were applicable to the fact in this issue.

“Firstly, the purported actions and decisions thereto by RCDC and any other stakeholders occurred between February 2009 and July 2010. The Finance Instruction 2010 came into operation on 1 December 2010. As such, the Finance Instructions 2010 has no application to the issue at hand and any reference to the Finance Instructions 2010 in the OAG’s report  was gross negligence.”

The FICAC report also highlighted that RCDC was a separate legal person registered under the Companies Ordinance and Co-operative Dairy Companies Act.

“The Board of RCDC was primarily responsible for any action to be taken with regard to its own structure. The Cabinet and the Government was involved in principle, as seen from the Cabinet decisions, to approve such restructure and to also ensure the financial commitment required by RCDC.”

FICAC during its inquiries noted that as a company, the Co-operative was not legally bound to comply with the Finance Instructions or Procurement Guidelines under the Finance Management Act.

The Co-operative was guided by its own internal Finance Policy

The FICAC report also made comparisons with existing statutory bodies established under specific laws such as the Fiji Revenue and Customs Service, Fiji Roads Authority, Fiji National Provident Fund and the Land Transport Authority are all governed by their own Financial Policies and manuals. The same applies for Government Commercial Companies or Co-operatives.

“In the circumstance, it is highly questionable as to how and why the AOG turned a blind eye on obvious facts at the time of the audit.”

The report also highlighted an individual who had provided the responses to the OAG’s inquiries.

“The response by the Principal Accounts Officer was vague and uncertain. The OAG should have conducted a detailed inquiry without relying on one single person’s vague response. It would not be fair to rely on such a response solely to form an opinion with regards to a complex issue such as this; that there was a breach of the Finance Instructions.

“In any event, our findings revealed that the Principal Accounts Office whom the OAG relied upon, was later charged and convicted for fraud related activities that were also reported in the same OAG’s report of 2010. As such, there were sufficient material before the Auditor General to ascertain and decide diligently whether the information given by this officer could be safely relied upon.

“Ironically, the officer was charged and convicted with “giving false information” relating to her official duties on financial matters alleged in the same OAG’s Report of 2010.”

The Commission said that it was unfortunate that the OAG failed to realise the inferior nature of the information relied upon when deciding on restructure consultancy of the Co-operative.

“Considering the circumstances, the statement or the response provided by the Principal Accounts Officer was unreliable as her credibility is seriously questionable.”

As such, the legal authority and responsibility to call for the tender remained with the Co-operative, the report said.

The Commission said that it had previously  observed similar types of inaccurate reporting by the OAG which affected proceedings in court of law.

“Due to these aforementioned reasons, it is our considered view that no further action or proceeding can be instituted based on the OAG’s report.

“The independent investigation reveals that no criminal offence against those persons named in the complaint.”

Before and after restructure

For the period reviewed,  the Rewa Co-operative Dairy Company Limited constantly recorded negative cash flows.

Despite a Fiji Development Bank loan in 2009 of over $5m, the company continued to struggle and failed to find its financial standing.

“The period of 2009 – 2010 was a very critical period for the company and there was an urgent need to make a decision as the company stood at the apparent brink of collapse.

“Undoubtedly the Board was well aware of this situation and needed to act with utmost urgency. This was the background in which, the discussions, proposals and planning of the restructure took place with the assistance of the Government.

“Without understanding the critical circumstances in which the restructure took place, making an entirely disproportionate remark based on a lethargic inquiry and misguided assumptions of law in the OAG’s report 2010 was unfortunate.”

The restructure resulted in the creation of two separate legal entities: Fiji Dairy Limited (FDL) and Fiji Co-operative Dairy Company Limited (FCDCL).

“FDL since its inception incurred losses and had negative cash flow but this was due to investment in assets.

“Later, from January 2013 - 30 June 2019 FDL had not incurred any loss and cashflow had not been an issue apart from the year ending on 30 June 2015, in which the company had invested and paid out dividends showing greater progress.”

The same has been recorded by FCDCL since January 1, 2012, to December 31, 2018.

They’ve never incurred a loss and negative cash flow.

“Due to the above findings, it can be safely said that the actions of the RCDC and the Government in safeguarding the public interest over the Dairy industry and the company are justifiable and lack any bad intention as speculated in the complaint,” the report said.

Edited by Naisa Koroi

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