Former General Manager named in an internal WSC compliance report
NASSAU, BAHAMAS — A special investigation from the Internal Control and Compliance Division at the Water and Sewerage Corporation has revealed “high-level corrupt transactions” regarding multiple projects and accuses a former executive member of conflict of interest and fraud.
The special investigation is a part of an ongoing probe into the issuance of contracts and management of the corporation under the previous Minnis administration.
It is also a part of a larger audit of services contracts at WSC, from vender engagements in excess of $250,000.
The report, which was completed on March 18, 2022, and viewed by Eyewitness News, identifies two “red-flagged projects” that were of material value and required minister approval, but no such approval existed in the records of the board meetings.
Those projects included the Water Tanks Painting Phase 1 at the Corporation’s Blue Hills Low Level and Windsor Storage Tanks Facilities and the Painting of the E. George Moss Building and Somerset Housing Building on University Drive.
“This special investigation unveiled apparent conflict of interest, lack of due diligence, and poor professional judgment on the part of the former Board and former General Manager Elwood Donaldson in their respective capacities,” the report read.
“In addition, the evidence persuaded the auditors that there were high-level corrupt transactions that caused significant financial losses to the corporation under the direction of the former board and the former general manager, possibly motivated by self-interest, financial gain, or fraud.”
The report documented “significant irregularities” in the project initiation, project management, and payment process.
It further exposed “gross mismanagement in the valuation, supervision and inspection” of projects by the Board of Directors; along with “incompetence” in the procurement of the project costs estimates by the board and general manager.
Additional revelations from the special investigation showed a “violation of trust” by the board and the general manager in allegedly disclosing the competitive tender cost of the lowest bidder to favored vendors believed to be related to the parties.
GOVERNANCE OF BOARD
The report noted that there was a “high risk” that there were offenses contrary to the Prevention of Bribery Act that warrants an investigation into the beneficial owners of the companies of interest and whether the board of directors or general manager gained possession of pecuniary resources inconsistent with the income resources at or around the time of the project approval and throughout the project life.
As for the overall governance of the corporation, the special investigation revealed that board resolutions were inadequate and missing in many instances.
“Board meetings, the quorum for voting, and board meeting attendance records were missing or not kept”.
The report pointed out that Donaldson had previously held the position of Senior Assistant General Manager of Internal Controls and Compliance and would have been fully aware of proper policies and procedures.
“Notwithstanding this knowledge and experience, the General Manager directly instructed acts to be performed that were contrary to the established internal controls safeguards,” it read.
“The audit evidence was sufficiently persuasive to enable the auditors to draw conclusions of fiduciary breached, undue influence adverse to finances to the corporation and gross indifference to conflict of interest and the appearance of profit sharing or even fraud”.
Additionally, the report noted that while references were made to board resolution in secretary certificates, those certificates failed to name the board member that was present when the resolution was passed and failed to attach certificates for the named projects.
“High risk of fraud and high suspicion of fraud in the preparation of the subject secretary certificates arise,” it read.
RECOMMENDATIONS
The report concluded with recommendations for corrective action with the corporation including internal and an external investigation into certain companies.
Its internal recommendations suggested that “Executives and Management make a declaration of any related party transaction based on their role at any given time for works and parent processing approvals”.
The auditors recommended improvements to the internal controls, including ensuring that tax compliance requirements be completely satisfied before any payments are made to vendors.
The report revealed that Adams Landscaping, General Maintenance, and Elite Maintenance received contracts in excess of $100,000 in June 2020 while being a non-VAT Registrant.
The external recommendations included a need for an investigation to be conducted into the vendors Baha Maintenance & Restoration, Adams Landscaping, General Maintenance, Baha Maintenance & Restoration, and Elite Maintenance Incorporated Ltd.
The report also recommended that there be better documentation and filing of Board Minutes as per stipulated guidelines, which could include Water Storage Tank Management Files being created to keep track of maintenance of the equipment, which should become more periodic to prevent corrosion and reduce excessive costs.
Upon coming to office, the Davis administration advised that all government agencies and corporations were undergoing investigations.
Allegations against former WSC Executive Chairman Adrian Gibson suggested that Elite Maintenance Incorporated Ltd — a company purportedly co-owned by his former fiancée — received a series of payments from WSC totaling over $500,000 between November 2018 and January 2021.
In October, Prime Minister Philip Brave Davis indicated there is enough information in the public domain to “warrant an investigation” into contracts issued at corporations.
Water and Sewerage Corporation (WSC) General Manager Elwood Donaldson was been placed on leave amidst ongoing investigations at the corporation in December.
Eyewitness News reported that police officers were on-site to oversee Donaldson’s exit from the property.
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