Auditor General Calls For Liquidation Of MTDC

The auditor general has called for the liquidation and abolishment of public tourism firm the Maldives Tourism Development Corporation (MTDC), saying in a report submitted to parliament that it is “controlled” by the Villa group of companies and Champa company.

The report finds Villa, which is owned by Republican Party presidential candidate and former finance minister Gasim Ibrahim, holds “not less than 27 per cent of shares” and Champa – assumed to refer to Champa Brothers – five per cent, despite MTDC being set up for the redistribution of tourism wealth.

Villa had bought the shares through proxies, and has deposited over Rf 8,851,590 (US $691,530) in dividends into Villa’s bank accounts.

Attorney general Azima Shukoor on Sunday told Minivan News a criminal prosecution would be launched for corporate fraud over illicit share trading in MTDC.

Republican Party spokesperson Dr. Hussein Rasheed Hassan said the government was “finding things to attack [Gasim] personally to stop the support and respect the party is getting.”

Liquidate

Auditor General Ibrahim Naeem has called for an immediate freeze on trading of MTDC shares, liquidation of the company and a criminal prosecution.

“We recommend this because the two bodies control the company to the extent it cannot be considered a public company,” the report says.

Transfer of shares from proxies to Villa and Champa is still “incomplete and ongoing,” according to the report, and liquidation is necessary because “selling the shares from the two bodies that control the shares cannot free the company from their hands.”

“Expansion and strengthening of the financial market can be achieved by not giving the opportunity for such crimes,” the report says.

Proxies

It is “evident” Villa used 1,986 proxies to buy shares, and then transferred shares using stockbroker Aariya Securities to 79 people “who are all employees and family of Villa,” the report finds.

Proxies are used because individuals can directly buy only 100 shares from MTDC, but if purchasing on the stock market, they can own up to 2,500 shares.

Seven cheques amounting to Rf 22,653,200 (US $ 1,768,375) from the Villa Trading Group were deposited into MTDC’s bank account at the Bank of Maldives to buy shares for 2270 people.

Payment vouchers and copies of cheques obtained by the auditor general show the dividends of 39 shareholders, amounting to Rf 8,851,590 (US $ 691,530), were then deposited directly into Villa bank accounts.

“This shows they [proxies] are not the actual owners of the shares, but Villa,” the report says. Further evidence cited says the stock certificates of proxies were collected from MTDC by four individuals working for Villa.

The report also says Villa controls MTDC’s board of directors. “Villa controlled a 53.21 per cent majority of the Annual General Meeting through proxies…Because of this, excluding the four directors appointed by the state, the four directors elected by the public are elected and controlled by Villa,” the report concludes.

The board had in July decided to pay a record dividend of Rf90 (US $7.03) per share, though finance regulator the Capital Markets Development Authority recommended a dividend on actual profits of just Rf4.21 (US $0.33) per share.

Political?

The government’s Dhivehi Raiyyithunge Party lost no time in releasing a press statement saying, “There is opportunity to say that because Gasim bought shares using proxies, and transferred 90 per cent of the profits of those shares for his own personal gain, the work that he does for the benefit of the people is actually for his own benefit.”

And the Republican Party condemned the report as politically motivated.

Dr Hussein Rasheed said, “The government will do things to reduce the support we have…[Gasim] has done nothing against the law that he will be unable to defend.”

Social Liberal Party presidential candidate Ibrahim Ismail (Ibra) said that when MTDC was founded in 2006, when Gasim was finance minister, “I put in a resolution to the Majlis [parliament] and I called for MTDC to be stopped, because I believed all this was going to happen.”

“I think it was people like Azima, at the time, who argued against this and voted it down,” Ibra said. “[But] at that time Gasim was in the DRP, and now he is out of it.”

Share Buying

The report finds Champa bought the shares in cash, rather than with cheques, but as an individual working for Champa collected the stock certificates of over 288 people, Champa now controls “not less than five per cent of shares.”

The 288 shares were then transferred to seven family members. The company referred to as Champa is believed to refer to Champa Brothers, owned by Mohamed Moosa, rather than the separate Champa group of companies, headed by MTDC chairperson “Champa” Hussein Afeef.

Ahmed Shiyam Mohamed, vice-president of the government’s Dhivehi Rayyithunge Party (DRP) and owner of Sun Travel and Tours, “has also bought MTDC shares for some people, his long term employees,” the report says.

However, the report appears to defend Shiyam, saying he had told the AG shares had “not been transferred to his relatives and had not been brought under his control…This office has not noticed these shares have been transferred, but work to locate those shares is ongoing.”

Fraud?

Azima told Minivan News “We have received a very constructive report from the auditor general… We will move towards taking action on the criminal aspects.”

However, she said Maldivian law on corporate crime and fraud was “a bit weak” and said this was the “first case, as far as I can remember” involving corporate crime in the Maldives.

Meanwhile, a legal expert who wished to remain anonymous said, “Corporate fraud is not stated or defined in [Maldivian] law. Fraud under the penal code is defined as deception for personal gain creating a loss for the other.”

Because shares were bought with the consent of proxies, it may be difficult to try Villa in courts for fraud, he said. “They must prove where corporate fraud is illegal. People can be prosecuted only if they violate a published law.”

Article 61 of the constitution states no person can be subjected to any punishment except under regulations backed by a law which defines the criminal offence.

Related news:
Auditor General wants to prosecute people involved in MTDC fraud