The Auditor General-led report into the explosive polar beer scam has concluded that fake documents were submitted to customs by both the broker and Fidelity Invest-ments Inc and charges were recommended against a top Fidelity official, a broker and 14 Customs employees from various departments who were complicit in the fraud.
It also concluded that it was polar beer that had been brought into the country and not soft drinks as had been claimed by some Customs employees. Furthermore, while a price of US$2.15 per case had been listed by Fidelity, an investigative team that travelled to Venezuela found that Fidelity had been sold the beer at US$4.40 per case. The report submitted to President Bharrat Jagdeo also made a number of recommendations to plug loopholes in the Guyana Revenue Auth-ority (GRA) and lamented that key cameras had not been functioning at a time when it would have been useful for the investigation. It also found that the software suite for the GRA had been manipulated. The payment of millions in duties in cash and the disappearance of key documents have also raised question marks. The polar beer fraud grabbed national attention in April last year, resulting in President Jagdeo initiating a task force to conduct an investigation. The report is expected to be released tomorrow.
But the report, seen by Stabroek News, also issued a call for a number of senior officials and other employees at the GRA to be re-instated to their positions since they were unaware of what was unfolding within the administration at the time. Specifically, the task force said, there was no concrete evidence to implicate Rohan Beekhoo, Deputy Commissioner of the Value Added Tax and Excise Department of GRA; Ramnarine Makardajh, Director of the Enforcement Section, CTA; Nityanand Narootandeo, Supervisor of the Entry Processing Unit; Royan Sattaur, Clerk 11 attached to the Import Verification Unit of VAT and John Tularam, Supervisor attached to VAT office, GRA.
It was stated that a warning letter should be issued to Beekhoo to be more vigilant in the execution of his duties in “view of the fact that the (risk) profiling system of imports appeared to have been breached during his tenure as Chairman”.
Critically though, the report pointed to the Total Revenue Integrated Processing System (TRIPS) stating that this was manipulated so that certain categories of goods and importers were not correctly flagged for examination, and when flagged for examination by the Valuation Unit they were not examined by the unit. It also lamented the lack of a functioning security camera at CTA, which is “essential because of the fact that the non-operation of the cameras made it impossible to determine who paid customs duties and taxes on behalf of Fidelity”.
While a string of serious disclosures was made in the report, stretching from customs declaration forms that had numerous discrepancies to data being tampered with after being inputed into GRA’s TRIPS system, the task force report also focused on a critical part of the investigations, which were the taxes that were allegedly evaded by Fidelity; customs duties totaling $321.5M were said to have been evaded during the scam. It was recommended that custom duties and taxes be calculated on the polar beer found at Fidelity and, any other fine as prescribed by the Customs Act and or any other relevant legislation against the importer [Fidelity].
The task force disclosed that Fidelity also submitted false documents during the investigations, and therefore recommended that the relevant charges be instituted against the importer for producing false documents to the task force with the intention of misleading them.
Based on other recommendations in the report some fourteen custom officers could end up before the courts facing criminal charges for their role in the fraud. The officers were interviewed by the task force and their stories later checked out as false since many claimed to have seen assorted aerated beverages in the containers cleared by Fidelity while the company insisted that it never imported any such beverages.
Ten containers, fifteen minute inspection
The task force report pointed to systems in place at the CTA, particularly its inspection policy before the implementation of TRIPS, highlighting the poor level of examinations that were carried out on containers. It said too, that even after TRIPS there were opportunities for tampering with the information already recorded in the system.
In the report it was stated that ten containers [said to contain 13,760 cases of assorted beverages] in relation to five customs declarations were examined by three custom officers in a total of fifteen minutes. In another instance, two containers [said to contain 2,752 cases of assorted beverages] were examined in eight minutes by the same number of custom officers. The report found that a similar number of containers holding a similar number of items were examined by an equal number of officers, but the process took longer.
But more importantly, the report found that customs officers who examined the Fidelity containers all claimed that they saw assorted aerated beverages but their declarations were different with respect to description [ size, colour and name]; the description of the package in which the beverages were imported, and the ‘modus operandi’ of the physical examination that were done. Additionally, none of officers sampled the beverages, which is “unlike normal practice”.
It was also pointed out that invoices attached to seventeen customs declarations produced by GRA were falsified through collusions by several individuals to declare that assorted aerated beverages and soda water were imported instead of polar beer and as a result, customs duties and taxes were evaded.
Numerous discrepancies were found on the some of the customs declarations, the report said, while official custom documents were reconstructed after they inputed into TRIPS. According to the report, a staff member used another’s username to access certain records within the TRIPS system.
There were also disclosures about the relevant valuation checks, which are required as part of the processing system at GRA, not being made for some of the Fidelity customs declaration forms; ten of the declaration forms that were examined were not sent for valuation checks.
Custom declarations
The task force perused 17 custom declarations (produced by GRA) made during the period July to December 2007, which revealed that Kong Inc. imported 48,160 cases of assorted beverages and 8, 700 cases of soda water in 40 containers, and according to the said declarations, the items were purchased from Refrescos San Jose C.A located in Venezuela.
But the report revealed that it was unable to verify the physical existence of Refrescos San Jose C.A based on the address obtained from invoices. The task force had travelled to Venezuela where it was discovered that the sole manufacturer of the Polar beer brand products in Venezuela is Cerveceria Polar CA in Caracas. Cerveceria exports directly through an off-shore company, Polar Trading Company Inc., which is a subsidiary of the Cerveceria.
Cerveceria told the task force that it has no relationship with San Jose CA, and that “it was every concerned that Refrescos San Jose and another company, Polar Beer and Beverages Co. Inc. are using their logo”. The company has two sister companies, that is, Polar Trading Company Inc. and Altimitos Polar Columbia. However, Cerveceria Polar C.A sells products to one company in any one country and in Guyana, that country is Fidelity. The company disclosed to the task force that said it has a relationship with Fidelity Investment Inc., which started in February 2007, though there is no signed agreement.
Shipping records in Venezuela showed that exports were done for Fidelity and not Kong Inc. though Fidelity had insisted that Kong imported the polar beer from Venezuela. Fidelity explained this process as stating that Cerveceria sold polar beer to Polar Group Inc. who sells to Polar Trading Co. Inc, who then sells to Fidelity Investments Inc., which is an offshore company, who in turns sells to Refrescos San Jose, C.A and Polar Beer and Beverage Co. Inc who then sells to Kong Inc. and Fidelity Investments Inc., respectively.
A certificate of registration was produced for Refrescos San Jose C.A by Fidelity Investment, which states that the company was registered in Saint Vincent and the Grenadines on July 31, 2008, but customs records showed that Kong Inc made purchases from the company in 2007. When confronted with this, a second certificate of registration was produced by Fidelity, which showed that the company was registered in July 2007. However, the task force’s report pointed out that the first invoice from the mysterious Refrescos was dated even before this – June 22, 2007. Said the report: “This clearly proves that (Fidelity or someone on its behalf) fabricated the invoices produced to GRA via customs declarations and the invoice produced to the task force”.
Further, the task force found that the exporter’s stamp, ‘Refrescos San Jose, C.A’, were all evident on the invoices produced by the importer, however it pointed out that the stamps were in a particular angle, adding that “it would be almost impossible for a person manually shipping a document, to do so at a particular angel every time”. Also, the invoices on ten customs declarations had signatures of the Export Manager of the Exporter which appeared to be different, although the same name was signed, the report stated.
Further recommendations
The task force has recommended that GRA document its policy on the use and protection of passwords, ensuring that passwords are not shared; implement policies that will assist to limit contact, for the transaction of business, between staff of the Entry Processing Unit, Assessment and Valuation Sections with Importers and Brokers.
It also called for GRA to ensure that the system for examination of containers caters for rotation, so as to facilitate the checking of containers for any particular importers at both wharfs and terminal and also by different sets of officers to assist in avoiding collusion of this nature in the future.
According to the report, TRIPS may have been compromised in that every senior personnel that comprise the Risk Profiling Committee were the same persons placed on authority to ‘police’ the system and ensure its smooth running. It was also recommended that GRA reorganize and streamline this unit to ensure that it is subject to supervision of the intelligent and risk profiling section.
The task force investigation covered the period January 1, 2007 to April 7, 2008. The team examined the records and documents of GRA, including Internal Revenue and Customs and Trade Administration, these include customs declaration forms and their attachments; import and export registers; lodgment registers; Data Input Officers’ registers and various computer printouts on the history of imports and exports.
An examination of the available records and documents of Fidelity Investments Inc./Kong Inc. was also done; records include stock books; cash expense vouchers and inventory valuation summaries. Additionally, there was a review of the systems of internal controls of GRA, including IR and CTA, to determine whether all controls were functional.
Background
The investigation was initiated at a special meeting convened by President Jagdeo on April 7, 2008 where he stated that there was a scheme to systematically defraud the Customs and Trade Administration of revenue and he wanted to get to the bottom of it.
On January 15, 2008 a team of customs officers had raided Fidelity and found in excess of 73,000 cases of polar beer for which no import documents could be produced.
It was then claimed by Fidelity that the broker had substituted invoices for polar beer with invoices for mixed flavours aerated beverages – the duty rate being vastly different for the two.
The Internal Affairs Department of the GRA then conducted its own investigation and arrived at the following conclusions on March 28, 2008:
The polar beer had been smuggled into the country;
Some of the beer was smuggled via trawlers and discharged at a Parika landing;
The rest of the beer was illegally brought in at the rear of containers which were declared to contain only aerated beverages.
The report said it was at this point that Fidelity’s Head Joshua Safeek went to president Jagdeo to relate his concerns and the President proceeded to set up the task force.
Difficulties were experienced by the task force in their work. They said that requests to the GRA for the submission of documents were not treated with urgency and officers were also reluctant to provide information. Several registers were not produced and an attempt to probe two other city businesses was stalled.
The report said that the aspect of its terms of reference dealing with the acquisition of the assets by customers officer is continuing.
In July, Safeek had accused the GRA of victimizing him over the shipment of beer.
The report was signed by Deodat Sharma, Auditor General (ag) and Head of the Task Force, Paul Wintz, Inspector Police and Abdool Rahim, Representative of the Ministry of Finance.
