‘Just an accusation’ - Principals dodge involvement as second logistics company paid over $50m is identified
Published:Sunday | March 8, 2020 | 12:40 AMLivern Barrett - Senior Staff Reporter
The start-up firm ItzShipd24/7 has been outed as the entity identified in a recent Caribbean Maritime University (CMU) audit as ‘Logistic Company 2’, which obtained contracts valued at over $50 million under questionable circumstances and in breach of the Government’s procurement rules.
According to the audit report and records obtained by The Sunday Gleaner, the company raked in just over $55 million from two contracts with CMU, months after it was incorporated on November 16, 2017.
The report is now the subject of a high-level criminal investigation.
This is the second logistics company fingered in corruption allegations at the scandal-hit institution.
Stephen Stoddart and Renee Grant, the two persons listed as the principals of ItzShipd24/7, both declined a request by The Sunday Gleaner to discuss the findings of the audit, conducted by the Auditor General Department (AuGD).
“I guess after everything is said and done, that’s when we will actually have something to say. An accusation is just that, an accusation until it is proven otherwise,” Grant said, before indicating that she was driving and was “not comfortable driving and talking on the phone”.
Pressed as to when she would be available for an interview, Grant said “I have no idea; I would not be able to say”.
“I don’t understand why it is that you are calling me to clarify anything,” she protested.
Stoddart was more evasive, even declining to confirm that he was a director of ItzShipd24/7. When asked to clarify his company’s dealings with CMU, Stoddart, the firm’s managing director, said ItzShipd24/7 imports items for lots of customers, “I am not sure who is who”.
“As I said to you, sir, I’m not sure about that and I am heading into a meeting. Have a good day, sir,” he added, before hanging up his mobile phone.
DISTURBING FINDINGS
The audit report contains a number of disturbing findings about how ‘Logistics Company 2’ was engaged by CMU for two contracts.
In the first case, the report revealed that around June 2018, CMU paid ‘Logistic Company 2’ a total of $45.28 million for the importation of sandwich panels that were purchased through another logistics company for the construction of a $701-million classroom block at its main campus in east Kingston.
The Pamela Monroe Ellis-led AuGD found that the payment comprised $12.39 million for shipping costs, clearance and delivery of the sandwich panels, while $33 million was for demurrage charges, or the penalty incurred for keeping the shipping containers longer than the agreed time.
“This resulted from CMU’s inability to provide the Jamaica Customs Agency with the requisite documentation to facilitate the customs clearance process, as the shipment was split from the factory, but only one invoice was sent instead of corresponding invoices for the split,” the report stated.
Shipping lines typically charge around US$100 for each day a container is outstanding, one industry insider revealed. The insider, however, declined to comment on the $33 million figure, explaining that the number of containers and days they were out are factors to consider.
The AuGD noted, also, that the demurrage could have been avoided “had CMU utilised a shipper-own container arrangement” and with “proper monitoring and oversight of the shipping process”.
But worse yet, the audit found that ‘Logistic Company 2’ was engaged “without any evidence of the competitive bidding process and formal contract detailing the terms and conditions of the logistics service”.
“Further, there was no evidence of due diligence or cost-benefit analysis to justify why ‘Logistic Company 2’ was engaged rather than undertaking the exercise itself, considering its expertise in logistics and expressed limited resources,” it noted.
The AuGD said CMU explained that while it is a logistics training institution, it does not handle its own logistics services for the clearing of goods.
GOVERNANCE ISSUES
The auditors found, in the second case, that CMU paid ‘Logistic Company 2’ just under $10.6 million for the supply of computer equipment, which included 15 laptops, two tablets and other items.
But for the AuGD, the engagement of ‘Logistic Company 2’ was fraught with a number of governance issues. “Review of the NCC [National Contracts Commission] listing revealed that the company was not registered with NCC to supply computers,” the report noted.
“Also, CMU could not indicate how the company was selected, in a context where the company was not selected on a competitive basis.”
Further, the auditors disclosed that they were “unable to determine the expertise and capability of the logistics contractor to deliver the computers”, and that they found no evidence that warranty conditions were provided, as there was no formal contract in place to govern the terms and conditions of the purchase.
The report cited one instance where it suggested that CMU may have overpaid ‘Logistic Company 2’ by $231,900 for a software suite.
“Despite having access to the enterprise version of a software suite, CMU purchased three individual licenses from a third party (Logistic Company 2) at cost of $256,900 per annum, while our checks revealed that the software provider sold the licences at an approximate cost of US$60 each (or a total of $25,000), reflecting a difference of $231,900,” the report said.
“It is our view that CMU did not obtain the most economical value as a result of the purchase through a logistics company instead of the software provider.”
NO JUSTIFICATION
A review of the payments to ‘Logistic Company 2’ for the electronic items showed that on March 6, 2018, CMU paid $498,764 each for three Dell XPS 15-inch touchscreen laptop computers before forking out $539,744 for an Apple MacBook Pro six months later, on September 13, 2018.
“We noted that the logistics company only presented a sales receipt that listed the item, without any identifying marks, such as serial number or the original invoices from the manufacturer or approved supplier,” the auditors noted.
“Further, review of CMU’s inventory records showed no evidence that the fixed assets were delivered, included in inventories and assigned to CMU staff. As a result, we were unable to identify four laptops valued at $2.16 million.”
The report indicated that despite the lack of proper supporting documents, the purchases were certified and approved by CMU’s management, “including attesting that the goods were received in good condition”.
The AuGD noted, also, that CMU exceeded the spending limit for computers set by the finance ministry “by a cumulative $1,107,902 and up to $146,744 in a single instance”.
The agency said it found that the university did not advertise the procurement opportunity for nine laptops above the US$3,000 threshold, in breach of the government procurement guidelines.
“CMU presented no justification for purchasing laptops at a cost above US$3,000, and the acquisitions were approved by the president, without any input from the Procurement Committee,” the audit report stated.