“Collusion, reckless and total negligence”

The Chairman of Parliament’s Finance and Expenditure Committee, Papali’itele Niko Lee Hang, issued the following statement in relation to Faumuina’s response to the O.P.C report. It is published here in full:

“Gross mis-management, reckless spending, noncompliance with, and the absolute negligence of government’s procurement policy, tender process, Income Tax Act 1974, and collusion by S.L.C former Minister, C.E.O and others to defraud public funds have cost SLC millions of tala that could have been saved to assist government with its meagre financial resources to fund its annual budget.

The decision by the former Minister of Finance to resign was long overdue and was the most honourable deed for him to do given the multiple irregularities raised by the Chief Auditor in his reports for years ended 30 June 2008 and 30 June 2009.

Both reports were tabled in Parliament on 18th May 2010 and 30th April 2012 respectively in relation to S.L.C’s operations under Honourable Faumuina’s tenure as Minister for S.L.C.

The Officers of Parliament Select Committee thoroughly reviewed the Auditors’ reports and confirmed that corrupt and illegal practices were carried out repeatedly by the management under the control of the former Minister, despite recommendations from the Auditor to stop such practices as they were not in-compliance with government policies, especially the long-term use of a “middle man” also known as Seyleck Global Company.

The methods of payments in New Zealand dollars and US dollars for services including the procurement of assets by the said company were strongly criticised by the Chief Auditor as being too expensive for S.L.C to award to one company.

The 2008 Audit revealed that $3.5 million was paid to Seyleck Global and 2009 Audit revealed that $2,848,340 million tala was also spent for such services.

The Auditor also raised his concern regarding S.L.C’s non-compliance with Government’s procurement policy as per his quote “Significant procurements were made in contravention of Government policies on procurement.

One case totalling $202,000 relate to landscaping and nursery services procured without quotes from other suppliers.”

The response by the Former Minister in his Ministerial Statement never touched on this critical and damaging allegation involving millions of tala paid to one company despite being quoted by the Chief Auditor not in conformity with best practice to save SLC and Government some funds, millions, to assist with the much needed developments needed for the benefit of our people and our country.

I do believe that the use of foreign currency to settle invoices from the one supplier, also a locally registered company, has denied government from collecting possible revenue via V.A.G.S.T.

TAXES

The former Minister in his response to the O.P.C’s Report alluded that the agreement with the building contractor, who constructed the S.L.C headquarters does not include a clause/provision for withholding taxes.

This is not correct and very misleading. First of all, the Income, Tax 1974 section 95 on withholding tax states: “

(1) Subject to section 97, a professional services must withold tax from the gross amount of the fee at the rate of 10 per cent.

(2) In this section, a government entity means:

(a) The Government including a department, division or agency of the government,

(b) a company controlled by Government,

(c) a local or public authority. So not only because the former Minister and C.E.O are both unaware of this Act or out of mere negligence allowed the payment of witholding taxes to contractors despite being knowledgeable of the said Act. Moreover, I strongly disagree with the former Minister’s argument that there was no clause in the contractor’s agreement with S.L.C for withholding tax.

Unfortunately, perhaps both the former Minister and the C.E.O did not fully understand the provisions in the agreement where it states under the contract price:

“The contract is a lump sum contract and the total cost of this contract is two million and eight hundred thousand Samoan tala inclusive of

VAGST “AND ALL OTHER APPLICABLE TAXES BOTH LOCALLY AND OVERSEAS.”

The payment for services rendered including the 10 per cent withholding taxes to the contractor therefore not only violated the Income Tax 1974, but also the provisions in the agreement duly signed by SLC and the contractor.

Now that the former S.L.C Minister has resigned due to allegations by the Chief Auditor implicating him and the C.E.O for illegal practices, what is S.L.C’s Board of Director’s reaction as a disciplinary action towards the CEO for her gross mismanagement and reckless spending of S.L.C’s funds?

I strongly suggest to members of the Board of Directors to terminate the services of the C.E.O immediately.”