The Tribune

• $1.9m scam sparked vigorous database clean-up

• But consultants say supplier scrutiny ‘rudimentary’

• BPL hits back; ‘gravely concerned’ over fairness

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light (BPL) scrubbed some 5,000 suppliers from its vendor database in response to the $1.9m “fraudulent cheques” scam that relied heavily on non-existent companies.

The state-owned utility’s immediate response to the much-publicised 2017 fraud is detailed in a consultants’ report, which argued that its procurement policies were still “lacking in several important areas” some two years after the near-$2m scam was detected.

The report by FTI Consulting, drawing on an interview with Ian Pratt, BPL’s chief operating officer, detailed how he “recalled that after the fictitious vendor fraud was uncovered in 2017, BPL’s IT department was ordered to identify all vendors [in the procurement database] whose record showed they had not done business with BPL within the past five years and deactivate their profiles”.

This was done to ensure they could not conduct further business with BPL without first registering in the system. Francina Beneby, an executive assistant in BPL’s legal department, who was entrusted with the task of vetting BPL’s legacy suppliers, “estimated that roughly 5,000 vendor profiles were deactivated as a result”.

The move was a direct response to the use of fictitious, or dummy, companies to perpetrate a “fraudulent cheques” scam that was estimated to have cost BPL almost $2m when it was uncovered on the day the Minnis administration was elected to office.

Detailing BPL’s other reforms, FTI Consulting noted assertions by the utility’s managers that they were even “requiring small ‘mom and pop’ businesses to register as vendors” through the creation of “kiosks in the Family Islands to facilitate the process for those without easy Internet access”.

Yet other executives indicated that the supplier registration drive was not foolproof. FTI Consulting reported Mr Pratt and others as “acknowledging that there may be some vendors that are able to to do business with BPL without first registering.... This mostly applies to vendors who were ‘grandfathered’ in because because they had been doing business with BPL before [the system] was implemented”.

While those vendors were being encouraged to register, Mr Pratt said they were “generally permitted to continue their business with BPL without doing so”. And the report added: “FTI asked Pratt if he was aware of any vendor ever registering to do business with BPL, but being denied due to adverse findings from the vetting process. He said he was not aware of any such cases.

“Pratt noted that BPL is in the process of creating a more formal vendor management policy that will address, among other things, how vendors are to be vetted before being approved to do business with BPL and the process for debarring them from future business as a result of malfeasance or poor performance.”

It is unclear whether further reforms/improvements have been made because BPL yesterday said it was impossible to comment on the FTI Consulting report’s findings since it has yet to receive a copy.

Nevertheless, BPL hit back via a statement saying it was “gravely concerned” that the contents were being publicly disclosed despite it not having a chance to review the contents. And it defended its procurement process as having “transparency, fairness and integrity at its core, as well as seeking the best evaluated bid and value for money”.

“BPL has to-date not yet received a copy of the FTI Consulting report ordered by the Office of the Prime Minister (OPM). That is to say neither the Board of Directors nor the executive committee at BPL has seen the report, and nor did anybody at BPL see a draft of the report before it was completed and handed in to the OPM,” it added.

Arguing that the facts detailed in the FTI Consulting report “have not been vetted or verified by BPL”, it added: “As such, BPL’s leadership is gravely concerned that statements about the company, its Board members, executives, and its practices are being made in the public arena in the absence of any objective review or comment from BPL.

“Until BPL has had a chance to review the report, we will refrain from further comment on the specifics alleged to be contained therein. However, BPL procurement generally follows a procurement process that has transparency, fairness and integrity at its core, as well as seeking the best evaluated bid and value for money.”

The disclosures came as Tribune Business learned that the Davis administration is set to name Pedro Rolle, the Exuma Chamber of Commerce president and a realtor by profession, as BPL’s next chairman. He will succeed Dr Donovan Moxey, who yesterday declined to comment on the FTI Consulting report when contacted by this newspaper.

Whitney Heastie, BPL’s chief executive, also could not be reached for comment. It is unclear, though, whether BPL has reached out to the Prime Minister’s Office to obtain a copy of the FTI Consulting report and, if not, why it has not done so. However, the document is due to be tabled in Parliament today.

This newspaper understands that BPL’s outgoing Board and management view both the process used by FTI Consulting and the report’s subsequent disclosure as “beyond unfair”. With regard to the former, BPL simply gave the consultants access to its executives and files as requested by the Prime Minister’s Office, while requesting that they come back to clarify any concerns or gaps.

No member of BPL’s Board or management was shown a draft report, and allowed to comment or seek clarifications/corrections, before the final version was sent to the Prime Minister’s Office. 

Ironically, BPL is raising exactly the same complaints as former chair, Darnell Osborne, and her fellow ex-directors Nicholas Dean and Nicola Thompson, who are also describing the FTI Consulting report as one-sided because it never interviewed them or sought their input despite speaking to members of their rival Board faction.

Tribune Business understands that FTI Consulting was originally engaged by the Prime Minister’s Office to conduct an investigation into the in-fighting and dysfunction that resulted in the Minnis administration’s original BPL Board splitting into two factions, one of which was headed by Mrs Osborne.

However, the final report’s contents suggest this assignment was relegated to a bit part, with the exercise morphing into an analysis and probe into BPL’s procurement practices and policies. BPL, though, in its statement yesterday said it remained committed to open tendering.

The FTI Consulting report, though, said that at the time it was written BPL “lacks a vendor management policy governing its vendor due diligence and onboarding requirements”, although it acknowledged that one was being drafted.

“FTI found BPL’s vendor due diligence to be inadequate,” it added. “BPL performs only a rudimentary level of diligence on its vendors. It evidently does not require the disclosure of ultimate beneficial ownership of its vendors or other risk-related information such as political exposure, debarments or criminal convictions.

“This likely exposes BPL to a significant level of counter-party and reputational risk.” FTI Consulting recommended that BPL require all suppliers to identify shareholders who own greater than a 5 percent equity stake; disclose the identities of their principals and owners, and if they hold public positions and are politically exposed; and if they have ever been “debarred form doing business”.

The $1.9m scam identified in 2017 involved collusion between multiple BPL staffers where fraudulent cheques were written in the name of fictitious companies or suppliers, then cashed at local commercial banks.