What Is $800 Million Oil Scam?

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On 17 October last year, British Prime Minister David Cameron received an interesting letter, faxed to his office at 10 Downing Street. It came from none other than Asia’s longest-ruling autocrat, Maumoon Abdul Gayoom, who had been deposed in late 2008 after he lost the Maldives’ first-ever democratic election – to a man who had led a five-year-long democracy movement and had been jailed at least a dozen times by Gayoom’s regime. In his letter, Gayoom, who ruled the Maldives with an iron-fist for 30 years, alleged that his successor, President Mohamed Nasheed, was intimidating him; he appealed for help from Prime Minister Cameron, urging him to put pressure on President Nasheed following ‘the escalation of attempts to harass and intimidate me and my family’. Gayoom also categorically stated that he has ‘retired’ from politics. ‘As you probably know,’ he wrote, ‘I retired from politics earlier this year and have since been dedicating my time to the development of a not-for-profit charitable foundation that I established earlier this year in my name: The Maumoon Foundation.’

Just four months after writing that letter, Gayoom made a significant u-turn in January, plunging back into direct politics. With an eye on then-upcoming local-council elections – the country’s first ever, held in early February – he began to campaign as the ‘honorary leader’ of the party over which he had once presided, the opposition Dhivehi Rayyithunge Party (DRP). But even before he started to campaign, President Nasheed warned him that doing so would not be a ‘wise’ move.

Why would Gayoom be trying to make a comeback in the current context? It is just two and a half years since democracy triumphed over his regime, and this is a time when dictators and autocrats are being chased out across the Arab world. The answer lies in a confidential report that was submitted to the President’s Office by a UK-based finance consultancy called Grant Thornton, in September 2010. The previous March, President Nasheed had requested Grant Thornton to begin an investigation to trace alleged ‘hidden’ assets of Gayoom, his family members and associates. This followed on public allegations by the auditor-general, in 2008, that Gayoom had used government funds and national institutions for personal benefit during his years in power.

The Singapore police too began an official criminal investigation into money laundering by Gayoom and his family members; today, the amounts being discussed range from USD 700 to 800 million. The Grant Thornton investigation was carried out mostly in Singapore, and the report, when it came out in September, was not just a serious indictment of Gayoom’s family members – primarily his young half-brother, Abdulla Yameen – but also a fascinating exploration of how autocracies often fall back on blood brother dictatorships to do business. In this case, that ‘brother’ was Burma. Meanwhile, Gayoom’s sudden foray back into politics seems to be with the specific intention of strengthening his own position in order to be able to more effectively deal with the revelations about the extent to which corruption took place during his decades in power.

Ghost ships

‘We had a whiff of it for some time, but we had no idea about the scale of the con job,’ a minister in President Nasheed’s cabinet, on condition of anonymity, told this reporter in Male, in the aftermath of the Grant Thornton report. ‘The scale, as we know now, is mind-boggling. What is now becoming clear is that “ghost ships” regularly left Singapore in the name of delivering oil to the Maldives – but never arrived here.’ He continued: ‘We are a tiny nation, and our oil consumption is very small. But the State Trading Organisation (Singapore) used to buy oil in bulk … and sell it either on the black market or to Myanmar.’

The State Trading Organisation (Singapore) was set up in 1997 as a subsidiary of the State Trading Organisation. The latter, run and largely owned by the Maldivian state, was established in 1964 with the sole aim of keeping the prices of essential commodities at a stable rate for citizens of the atolls, mainly by importing and trading food staples, fuel, lubricants and construction materials. Today, the majority of the STO’s activities, where the government currently owns around 92.3 percent, constitute the supply and sale of petroleum and aviation fuel. STO Singapore’s mandate was initially limited to purchasing diesel and related products on behalf of the Maldives, mostly sourcing from companies such as Shell Eastern, the Singapore Petroleum Company and Petronas, the Malaysian-state run firm. But soon STO Singapore was authorised to sell these products to other countries, particularly Burma. The majority of its sales thus went to either Male or Rangoon, with the exception of 2002, when the majority of revenue came from Malaysia, through forged invoices.

When the Grant Thornton investigators landed in the Maldives late last year, they were provided with three hard drives from the President’s Commission, a body set up by Nasheed’s government to investigate allegations of corruption and misappropriation of assets under the previous regime. These were copies of hard drives from the STO Singapore office as of 2009. Though allegations of skimming from oil trades had been made in the past, the investigators were clearly told that no further investigation had taken place into the allegations, due to lack of resources, and investigative skills in the Maldives. ‘What followed was an intense probe, mainly in Singapore and the Maldives,’ says Ibrahim Hussain Zaki, special envoy to President Nasheed. ‘They found corruption on a scale which is unprecedented in the Maldives.’

Letters found on the hard drives, written in Dhivehi, clearly indicate that Gayoom’s half-brother, Yameen, had on multiple occasions requested Gayoom to sign letters, evidently drafted by him, to foreign leaders and ministers with regards to oil production and sale. In particular, the Grant Thornton report implicates both Gayoom and Yameen in direct connivance with two Burmese officials – the Burmese energy minister, Brigadier-General Lun Thi, and a longtime associate of the junta’s number two, Aung Ko Win, also known as Saya Kyaung. The list could have been far longer, however. Grant Thornton says that its investigators were only able to obtain information from 2002 to 2008 from the three hard drives, as there were no accounting-related back-up files prior to 2002 and paper documentation was sparse.

The scope for theft within the international petroleum market is large. The International Maritime Organisation states that 80,000 barrels of oil a day go missing around the world through theft, diverting of oil lines and through fraud in shipping, helped along by corrupt government officials and businessmen. According to sources in the Singapore police, their criminal investigation has already confirmed ‘shipping fraud through the diversion of chartered vessels where the oil cargo intended for the Maldives was sold on the black market creating a super-profit for many years.’ Grant Thornton’s report adds, ‘Further research on the oil trade has shown that there have been numerous allegations and prosecutions for the smuggling and selling of oil on the black market, of which one means is through the diversion of oil tankers to destinations other than that shown on the original sales invoices.’

Yameen & Maniku

The kingpin behind the extended scam appears to have been Abdulla Yameen. Not only was he Gayoom’s half-brother and a former minister of tourism and civil aviation, but in 1990 he was made trade minister and chair of the STO. Yameen stepped down from his position with the STO in 2005, but debit notes found within STO Singapore show payments made on his account in 2007 and 2008.

Yameen is said to have been aided throughout by Ahmed Muneez, the managing director of STO Singapore. According to the Grant Thornton investigators, the debit notes were created as a result of funds from Yameen being deposited with the STO head office, which were then transferred to STO Singapore’s bank accounts. Muneez claimed that this was to help support the living expenses of Yameen’s son and daughter, both of whom were studying in Singapore at the time. (The Singapore police are currently trying to discern why Muneez was tasked with distributing these funds over the years.) This arrangement seems to have continued up until very shortly before the 2008 elections. A senior bureaucrat in the President’s Office in Male, on condition of anonymity, confirmed that it would be ‘highly unusual for a person no longer connected to the company of which he used to be chairman to use company bank accounts for personal use.’

Another key figure in the oil-for-Burma scam appears to be Mohamed Maniku, who became managing director of the STO in 1993 and served until 2008, when he was appointed ambassador to the US, a post he held until recently. Due to his position within the STO, Maniku was also a director on the Bank of Maldives Board, where he remained throughout his tenure. Due to his long stewardship of the STO, says a bureaucrat working closely with Grant Thornton, it would appear that Maniku had significant influence within the organisation. ‘We have reviewed various purchase invoices regarding Mr Maniku’s visits to Malaysia and Myanmar from the STO Singapore office, which clearly indicates that he was acutely involved in the STO Singapore oil strategy involving Myanmar and other third parties,’ he said.

Over the course of two weeks in 1998, Maniku made two official trips to Burma, aimed at seeking ‘profitable international ventures’. During the first trip, he is thought to have signed a lubricant deal with the Malaysia-based Stephen Hansford company; during the second, he was accompanying Yameen. According to the state-run New Light of Myanmar newspaper, the two stayed for three days in mid-May that year, meeting with the Myanmar Import Export services and agreeing to purchase parboiled rice. Maniku has also been under the scanner due to several purchase invoices from visits to Malaysia and Burma from the STO Singapore office. These clearly indicated that Maniku was actively involved in the suspicious STO Singapore oil strategy involving Burma.

Mocom moneymaking

On the ground, this ‘strategy’ seems to have been taken forward by a front company, incorporated in Singapore, called Mocom Trading. ‘The real deal was carried out through Mocom – it was the money-siphoning carrier,’ says a Singapore police officer, on condition of anonymity. Mocom Trading was set up in February 2004 as a joint venture between a large Malaysian corporation, Mocom Corporation, and STO Singapore, in order to sell oil to Burma. Ahmed Muneez sat on the board of directors. He later told Grant Thornton investigators and the Singapore police that while Mocom Corporation had the right to sell oil to Burma through a tender process, later it decided to go in on a joint venture with STO Singapore to form Mocom Trading.

Clearly, it would have been more profitable for Mocom to set up a trading arm in Singapore and purchased the fuel itself, benefiting from all related profits,’ points out a Finance Ministry bureaucrat in Male. As the Grant Thornton audit had observed, ‘It remains very unclear to us what STO Singapore’s role in the process had been, given that Mocom already had the contract to sell oil to Myanmar.’

According to this agreement, STO Singapore was to supply Mocom Singapore with diesel. But since the latter held the original contract to supply oil to Burma, the company was entitled to a ‘commission payment’ – incredibly, of nearly 40 percent of the profits. Interestingly, this commission was to be paid to a Singaporean bank account. Thus, while the company’s ledger would make it appear that the commission was being paid to Mocom Singapore, it was really going directly into the personal account of one Kamal bin Rashid, the main shareholder in Mocom Trading. Other shareholders included a Malaysian (Raja Abdul Rahsid Bin Raja Badiozaman) and two Maldivians (Fathimah Ashan and Sana Mansoor); further, Muneez was inducted along with the shareholders in the board of directors.

Publicly, the name Mocom Trading first figured in a finance report by KPMG, Sri Lanka, which took over auditing the STO in 2004 and immediately raised a red flag over its operations. At the time, KPMG noted that its investigators could find no evidence of official approval for the incorporation of any entity called Mocom. The auditors warned that they were ‘unable to establish the volume and the nature of the company with the group’. In 2005, KPMG qualified this assessment, noting that ‘the name of the company has been struck off’ STO’s records as of April 2006.

Investigation now shows that Mocom Trading leads directly to Brigadier-General Lun Thi of the Burmese junta, energy minister since 1997. Brig-Gen Lun Thi heads Myanmar Petrochemical Enterprise (Myanmar Petco), which according to sales documentation appears to have been the main buyer of STO Singapore oil between 2003 and 2005. As of 2006, it still accounted for 26 percent of sales, the final year of trading with the company. In Burma, all contracts for oil sales have to be negotiated directly with the Energy Ministry.

In July 2010, when Grant Thornton investigators travelled to Singapore to search the STO Singapore office, they found its reporting system in disarray – ‘obviously to camouflage the illegal oil sales’, in the judgement of the auditors. Documents collected at the time showed immediate anomalies. For instance, revenue increased dramatically from 2001 to 2002, after which sales hovered around USD 78 million until 2005. But from 2006 onwards, sales decreased significantly and revenue in 2009 dropped to USD 13.3 million, its lowest to date. A review of the sales invoices in 2004 showed that, for each trade sale to Myanmar Petrochemical Enterprise, two sales invoices had been created, one from STO Singapore and one from Mocom Trading. This quickly raised suspicions, given that all other sales from STO Singapore had generated only a single sales invoice.

For each delivery, STO Singapore and Mocom Singapore appear to have each generated sales invoices addressed to Burma, showing number of barrels delivered and unit price. Except for the price per barrel, the contents of the invoices were identical. ‘Generally, the unit prices shown on the STO Singapore invoices were higher than those shown on the Mocom Singapore invoices,’ wrote the investigators.

We understand from Mr Muneez that, in order to settle the STO Singapore invoices (ie, the difference), Myanmar paid round sum amounts by cheque to ‘top up’ the account. However, this is not documented and Mr Muneez explained that this process involved making contact with the Myanmar government in order to seek payment. We were also informed that at the year end, the debtor ledger was ‘squared off’ in order to balance the books. However, it is unclear if the topped up amounts were paid in round sum figures (approximately $100,000 at a time), how the accounts were easily reconcilable and why they were paid in such sums.

The sum total of all the Mocom invoices to Myanmar Petrochemical Enterprises was USD 45.8 million, whereas the sum total of the invoices raised by STO Singapore to Myanmar Petrochemical Enterprises was USD 51.4 million. This leaves a difference – and a potential profit for whoever was cooking the books – of nearly USD 5.7 million.

Super-profit

Yameen and Muneez appear to have devised a strategy that they imagined would fool even investigators. However, ‘They forgot that one small glitch can blow the lid off a perfect con job,’ says Ibrahim Zaki, referring to the fact that the previous administration had left behind a trove of files on official hard drives. Added Mohamed Zuhair, President Nasheed’s spokesperson, ‘We have details of how the previous dictatorship has emptied out the coffers of our country. And believe me, this is just the tip of the iceberg.’

For instance, when Grant Thornton investigators reviewed bank statements for the STO for 2004, they discovered that funds received in an account with the United Overseas Bank – some USD 27.6 million for the sales to Burma – did not match the invoices offered by either the STO or Mocom, though they were closer to the latter. Further, once the money came into the United Overseas Bank accounts, these funds were immediately transferred again, with some going back to an account owned by STO Singapore.

During their review of material seized at the STO Singapore office, investigators located faxes that have typically corroborated bills of lading from shipping companies that actually transported the oil. A fax dated 10 January 2005 recorded that a consignment for the STO was to be picked up in Singapore and discharged in the Maldives – in stark contrast to the sales invoices, which said that the shipments were going to Rangoon. According to Grant Thornton, of the 33 sales invoices directly to Myanmar Petco in 2004, 20 of those shipments appeared to have been discharged in Maldives, and not Yangon.

Investigators say this clearly points to a massive shipping fraud through the diversion of chartered vessels and selling of oil cargo on the black market – rerouting oil tankers to destinations other than that shown on the original sales invoices, thus creating a ‘super-profit’. Even if one were to sell a litre of oil with a profit of just a few rupees, millions of barrels add up very quickly; the estimates here are that USD 3-5 million profit was being made every month. The total sum of these invoices for 2004 was approximately USD 30 million dollars, equivalent to more than 653,000 barrels of oil.

As the Grant Thornton report makes clear at the very outset, the permission letters given to Yameen over the years are a clear indicator that Gayoom was involved. But little has been forthcoming from the central figures, with both Gayoom and Yameen having tried hard in recent months to wash their hands of the matter. In one interview on local television in the Maldives, in February, Yameen said, ‘Perhaps [Nasheed’s] government is afraid that with my supposed Myanmar military links, I might bring over weapons from that country and overthrow this government. But I have to say that those military officials in the Burmese government are ones I have never met. I don’t even know them.’

Speaking to the English-language news portal Minivan News, Yameen acknowledged using the STO to send funds to his children in Singapore during his time as chairman, but denied allegations that he continued to do so after he stepped down from his post. ‘After I left, I did not do it,’ he said. ‘In fact, I did not do it three to four years before leaving the STO. I used telegraphic transfer.’ Yameen also admitted to the STO’s oil trades, but said there was nothing amiss: ‘It could have been – Myanmar, Vietnam. The STO is an entrepreneurial trade organisation. It trades [commodities such as] oil, cement, sugar, rice to places in need. It’s perfectly legitimate.’

Gayoom has likewise rubbished the allegations, saying that he had ‘no connections with the STO when I was the president and after that.’ That claim has been challenged by the Presidential Commission, however, which asserts that top-level officials of the former regime were involved in fraudulent oil deals, in collaboration ‘with international parties’. In a statement released in February, the Commission said, ‘Investigations done as of now reveal that some top-level officials of the former administration were involved in these deals, which had been made between more than one country.’

Muddied politics

On the streets of Male, the corruption allegations have come as no surprise. ‘We were waiting for this day. We knew all along that something had to be there – finally it has come out,’ said Fareed Shafeeq, a student, in February. Adds a businessman, Shiham (unwilling to give his full name), ‘If there was ever a great time to prosecute people who have looted the country, it is now, and the state must waste no time in doing so. My main worry, though, is that if the opposition-controlled Parliament can seemingly get rid of an honest auditor-general, who dared to first raise issue of corruption of the dictator and his regime, would an apparently opposition-leaning judiciary be able to serve justice?’

And therein can be found the dilemma of President Nasheed’s government. His Maldivian Democratic party (MDP) does not enjoy a majority in Parliament, a situation that has slowed his efforts at passing major reform measures. The opposition has even managed to throw out several members of Nasheed’s cabinet, including the influential foreign and defence ministers, with help from a relatively compliant Supreme Court. Indeed, with most current judges having been handpicked by Gayoom during his reign, the judiciary is today hardly an independent institution.

His own supporters want him to act against Gayoom, but President Nasheed seems to be worried that if he cracks the whip too hard, democracy will be maligned. For now, President Nasheed is backing the Presidential Commission’s findings – to a point. ‘A number of wrongs have been done in the past,’ he told this reporter during a visit to India in late February. ‘But that does not mean that we will go after the previous regime with a vengeance. That will result in the same vicious cycle that has always happened in Maldives historically.’ This brief response sums up both the achievements and the challenges of President Nasheed’s term in office. Since he was sworn in during late 2008, the president has allowed Gayoom to stay on in the Maldives, in stark contrast to earlier power transitions in the atolls, when ousted leaders typically fled, were banished or were persecuted.

The Nasheed administration is nonetheless taking heart from the fact that Gayoom’s recent conduct, since he began campaigning for the local-council elections, has come under fierce criticism from within his own party, the DRP. The story of corruption under his regime has given his image a massive beating, with even former allies now openly criticising the longtime autocrat of nepotism. That was unthinkable even a few months back. Since January, Gayoom has been attempting to upstage the party’s current leader, Ahmed Thasmeen Ali. This culminated in a 12-page letter, written on 10 March, in which he accused Thasmeen of ‘dictatorial’ tendencies. Using the religious and nationalist arguments that are the tools of so many demagogues, he said that this letter was meant to ‘protect the Islamic faith of the Maldivian people and the sovereignty of the Maldives’.

The DRP immediately issued a statement, noting, ‘This party does not believe that the leader should follow the instructions of a specific person in such a way that it contradicts with the spirit of the charter.’ Gayoom’s interference in the running of the party was clearly not welcome. DRP MP Rozaina Adam told the media that, according to the party’s rules, Gayoom’s position as ‘honorary leader’ did not give him a say in running the organisation. ‘The political leader of the party is Thasmeen – he is the one who is legally responsible for the actions of the party,’ Rozaina said. ‘It is the DRP council that votes on a course of action, not former President Gayoom.’ Gayoom retaliated with an announcement that he would no longer be backing Thasmeen as his preferred candidate to stand for the party during the country’s next presidential election, slated for 2013.

When he jumped back into politics in January, Gayoom was seen as a unifier in the conflict-ridden DRP. But within a few days, he started siding with certain leaders, among them Umar Naseer, a former DRP deputy leader who had been expelled from the party on disciplinary grounds in December. Now, rumours are flying that members in the Gayoom faction, including several MPs, are thinking about forming a new party – a grouping that would have Gayoom at its helm, looking to challenge Nasheed in the 2013 presidential elections.

Within a few months, Gayoom has already heavily muddied Maldivian politics on all sides, all as a means to protect himself from the fallout of the oil-for-Burma scam. But his political comeback is likely to be marred by the investigation into the hidden assets of his family and associates. The foreign bank accounts connected to the deal are now being traced, and the Male government expects the Singapore police to take their criminal investigation to a logical conclusion. The hunt now is on for all the Mocom bank accounts.

[The story was first published in Himal Southasian- the first long format magazine on South India]

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