Nexia BT featured in Wednesday's report by the National Audit Office on the Electrogas contracts, and had personnel involved in two key stages of the request for proposals process.
The auditing firm was infamously behind the establishment of the Panamanian companies and New Zealand trusts of then energy minister Konrad Mizzi and Office of the Prime Minister chief of staff Keith Schembri.
Stage 5 of the Request for Proposals evaluation entailed the aggregation of the scores arrived at by the Stage 3 and Stage 4 evaluation committees, which was to establish the Preferred Bidder and the Reserve Bidder. Nexia BT representatives were involved in stages 3 and 4.
The Stage 3 Evaluation Committee was composed of a team leader and five members. The Commissioner for Revenue was assigned the role of team leader. The technical expert on LNG Infrastructure was the Chief Officer Energy Policy within Ministry for Energy and Conservation of Water, while the commercial expert was employed as Head Advisory Services at Nexia BT, the NAO report read. "Letters of appointment were issued to the Stage 3 Evaluation Committee on 19 September 2013, and declarations of impartiality were signed on 23 September 2013 and 25 September 2013."
The NAO's attention was also drawn to the possible conflict of interest of the Stage 4 Evaluation Committee Team Leader. "More specifically, the NAO noted that the Team Leader was the Managing Partner of Nexia BT (Brian Tonna), which firm was the auditor of GEM Holdings Ltd, one of the shareholders of the ElectroGas Consortium."
The NAO notes that the declaration of impartiality signed by the Stage 4 Evaluation Committee team leader on 23 September 2013 stated that, "I am independent of all parties which stand to gain from the outcome of the evaluation process. To the best of my knowledge and belief, there are no facts or circumstances, past or present, or that could arise in the foreseeable future, which might call into question my independence in the eyes of any party, and, should it become apparent during the course of the evaluation process that such a relationship exists or has been established, I will immediately cease to participate in the evaluation process."
The NAO established that all members of the various Request for Proposals Evaluation Committees were aware of the bidders shortlisted at the Expression of Interest and Capabilities stage prior to the signature of the declaration.
"The Office sought to determine whether Nexia BT was the auditor of GEM Holdings Ltd at the time of adjudication of bids, as this would have been in clear breach of the declaration of impartiality. Queries to this effect were made with GEM Holdings Ltd and Nexia BT. The parties informed the NAO that Nexia BT were appointed auditors on 25 April 2014, which implied that the engagement of the auditors of GEM Holdings Ltd occurred after the conclusion of the Request for Proposals evaluation. An engagement letter to this effect was provided by GEM Holdings Ltd to this Office."
The NAO sought to corroborate that stated with the Malta Financial Services Authority (MFSA), but this was not possible.
"The MFSA indicated that specific information regarding the date of appointment of auditors was not available as companies were not required by the Companies Act to inform the MFSA of the appointment of the first auditors. According to Article 151(2), the first auditors of a company may be appointed by the directors at any time before the first general meeting at which the annual accounts are laid."
Stage 5 of the Request for Proposals evaluation entailed the aggregation of the scores arrived at by the Stage 3 and Stage 4 Evaluation Committees, which was to establish the Preferred Bidder and the Reserve Bidder. "The NAO noted that the weighting as determined in the Request for Proposals was correctly applied to the marks obtained at Stage 3 and Stage 4 of the evaluation. This Office acknowledges that the outcome of the Stage 5 evaluation was referred to the Programme Review Board for its consideration, hence bringing the Request for Proposal evaluation process to a close, with the ElectroGas Consortium proposed as the Preferred Bidder."
Not mentioned in the NAO report is that Nexia BT was used by Minister Konrad Mizzi to acquire his company in Panama, Hearneville. Leaked emails also showed that 17 Black was a main target client of said company, and also of OPM Chief of Staff Keith Schembri's company. The emails also said: "it is estimated that the companies (Hearneville and Tillgate) will generate around US$ 2m within a year."
It was also recently revealed that 17 Black, which changed its name to Wings Development, is owned by Yorgen Fenech, who is a Director and Shareholder in Electrogas. Yorgen Fenech is a shareholder of one of the Maltese companies that makes up GEM Holdings, and a director at GEM Holdings.
In a press conference Wednesday, Mizzi said the following when asked about his connections to 17 Black, that he had no association with the once secret company 17 Black. He said that the auditor general had found no instance of corruption in the granting of the contract for the Electrogas project, and added that there "is no relationship" between him and the companies 17 Black and MacBridge. "I invite you all to search all around the world and to chase every bank in the world instead of chasing me, but you are not going to find anything", Mizzi told media.
Some general issues were found with the Request for Proposals stage as a whole.
The NAO report mentions that of significant concern "was the lack of appropriate due diligence undertaken at the Request for Proposal stage of evaluation. The NAO acknowledges that an element of due diligence, consisting of basic Internet-based searches, was carried out at the Expression of Interest and Capabilities stage. However, it is pertinent to note that the Expression of Interest and Capabilities Evaluation Committee deemed it imperative that a detailed due diligence process be undertaken at the Request for Proposals stage. Notwithstanding this, in the review of the Request for Proposals evaluation process, the NAO noted no indication that a due diligence review of the two qualified bidders had been undertaken"
Queries raised in this regard resulted in Enemalta asserting that a due diligence process had in fact been carried out on the ElectroGas Consortium and the Endeavor Consortium. "Enemalta indicated that a summary of the findings featured in the evaluation reports. One aspect elaborated on by Enemalta was that, as part of the competitive process, bidders were requested to provide proof of their financial standing through a credit rating. In the event where no credit rating was available, bidders were requested to supply a letter from a reputable bank that provided claims on the financial robustness of each of the sponsors. In the absence of such a letter, the bidders were requested to submit financial statements."
Further down in the report, it reads that "overall, the NAO is of the opinion that the due diligence undertaken was insufficient. While the review of technical-related matters was comprehensive, with verifications appropriately extended to encompass downstream partners, other aspects of the due diligence process were lacking. The financial aspect of the due diligence process was not sufficiently robust and thereby deemed inadequate by the Office given the materiality of the project."
In terms of Stage 4, of the Request for Proposals process, the evaluation was based on a pre-determined financial model established by DNV KEMA, which model reflected the criteria specified in the call for applications. The NAO is of the opinion that the model was a valid tool for the financial evaluation of the complex bids submitted.
As part of its verification, the NAO reviewed the inputs plugged into the model by the Stage 4 Evaluation Committee and confirmed accuracy thereof with the relevant bid forms and clarifications. In addition, the Office also ascertained that the model calculations were uniformly applied in both submissions, which provided an element of assurance with respect to Stage 4 of the evaluation process.
Notwithstanding this, the NAO noted a few instances where the model mechanics were adjusted by the Stage 4 Evaluation Committee following submissions by both Consortia that did not fit the structure of the financial model and the structure specified in the bid forms. However, the NAO established that that these bore no significant impact on the outcome of this stage of the evaluation process and ultimately were of no consequence to the outcome of the selection process.
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