Harbor’s cooperation with PWC integrity probe “limited”

POSTED: 10/4/14 11:09 AM

PWC-report: Fueling company distorts market competition

St. Maarten – The Harbor Group of Companies and the Bureau Telecommunication and Post only gave “limited cooperation” to the consultants of PricewaterhouseCoopers for their integrity-investigation. One stakeholder, the Chamber of Commerce also gave limited cooperation, according to the integrity report. The harbor did not provide procurement policies and procedures and its articles of incorporation to the consultants. This contravenes a statement by harbor director Mark Mingo that the harbor cooperated with the consultants.

Mingo made the remark in a press release about the establishment of an integrity-board at the harbor group of companies (SMHHC). The integrity-report is highly critical of the government-owned company: “It appears to both regulate and operate within the commercial marine industry through several wholly-owned subsidiaries including the Simpson Bay Lagoon Authority Corporation (SLAC). This government-owned company competes with local marinas through the rent of slip space and fuel sales, while simultaneously regulating entrance fees to the Simpson Bay Lagoon where many non-government commercial marinas are located. This appears to create a conflict of interest as it may distort market competition and create an un-level playing field.”

The integrity-report gives as an example the Sint Maarten Harbor Fueling Company. It does not pay the 5 percent turnover tax on fuel sales, while commercial marinas do have to pay this. This enables the company to offer fuel at lower prices. In 2012, the fuel company sold “well over 5 million liters of fuel” for more than $5.5 million; the company saved $275,000 in unpaid turnover tax.

A civil servant emailed the PWC-consultants that the Ministry of Vromi could not find a hindrance permit for fueling activities belonging to the SMHHC dating back to 2000. “It was the employee’s assumption therefore that one does not exist,” according to the report.

Senior officials at the harbor told the consultants that SMHHC “does not appear to have resources dedicated to ethics or compliance.”

The harbor apparently also did not provide the consultants with its articles of incorporation. However, PWC obtained “a partial copy” from a third party. These documents contain provisions for the SMHGHC to adhere to the corporate governance code and that the supervisory board of directors must have a minimum of five members; currently there are only three board members.

The consultants found that the SMHHC “reportedly performs an annual self-evaluation of compliance to the corporate governance code.” The company also engages an external auditor to assess its compliance with the code.

The PWC-report further found that the harbor entered into a 30-year concession contract with the government on July 18, 2007. The Harbor agreed to pay the government an annual fee of 5.2 million guilders ($2.9 million) for the first ten years. From January until May of this year, the harbor did not pay part of the concession fee. There is an outstanding payment of 2.17 million guilders ($1.2 million). “Officials indicated that the harbor decided not to pay the concession fee to account for funding that was reportedly promised by the Ministry of Tourism, Economic Affairs, Transport and Telecommunication for the upcoming Florida-Caribbean Cruise Association conference.”

The PWC-report notes in a chapter about transparency that the SMHHC “appears to be non-transparent with its business activities and financial results.” The consultants report that several people they interviewed mentioned that repeated efforts to obtain financial statements had been unsuccessful, “but that the public should be able to obtain this information from the company by law. “The SMHHC discloses very little information in general about the thirteen companies that form the group through its website or any other means,” the report states.

The report found that government-owned companies are obliged to make their financial statements available to interested parties at their offices and that they have to notify the Chamber of Commerce about it. The Chamber told the consultants in an email that none of the government-owned companies has submitted financial information.

The financial supervisor Cft noted that, per August 3 of this year, none of the government-owned companies had submitted financial statements. The corporate governance code requires that the companies complete their financial statements within five months after the closing of the fiscal year.

In February, the harbor signed a $2.075 million contract with Windward Roads for the development of the Walter Plantz Square in Philipsburg. “A government-owned company appears to have awarded a USD 2 million contract to a company owned by a close relative of a supervisory board member and without conducting a formal bidding process,” the PWC-report says about this project – without identifying it by name.

Sources interviewed by the consultants said however that the company had paid close to $6 million for the contract.

In this week’s press release, SMHHC-director Mark Mingo stated, “As the current CEO, it is my responsibility to ensure that the people’s port and by extension the shareholder, the government of St. Maarten, is operated in a transparent manner and in alignment with leading practices and global standards.”

Based on the content of the PWC-integrity report, the harbor group of companies still has a lot of work to do.

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