"The world is full of obvious things which nobody by any chance ever observes" –Sherlock Holmes
One should have smelt a rat the moment MTDC announced a dividend payment of Rf 90 per 100-rufiya share for year 2007. Where on earth would one find a company that returns 90% of the investment back to the investors within one year –that too before serving a single customer? It's fishy to say the least. And now Auditor General Naeem has pulled the lid off the mystery, exposing the dark secrets and ugly skeletons in the MTDC closet.
MTDC was formed in April 2006 to allow the ordinary man to participate in the tourist industry –a lofty aim no doubt, but too high to reach. The graph above tells it all. For year 2007 an ordinary man who bought shares up to the maximum legally allowed limit of 2645 would have received a dividend of about Rf 0.24 million –peanuts compared to Villa group's dividend of Rf 27.8 million and Champa group's Rf 5.2 million. These figures are based on the minimum number of shares controlled by Villa (309,207) and Champa (57,261) as estimated by the audit report, and the actual dividend paid per share –90 rufiyaa.
The audit report says MTDC acquired 10 islands at an average rent of $ 2738 per bed per annum, which is almost 10 times lower than the market value and 3 times lower than even the controlled rent fixed by Tourism Ministry ($6908). The report estimates that because of this low rent the exchequer loses a minimum of $ 11.8 million each year. And that's not all. MTDC has subleased the islands at rents considerably higher than $ 6908. This means the exchequer is losing far more than the $ 11.8 million estimated above. Where did all this money go? Part of the answer is seen in the graph. Part of the answer is the 70 million rufiyaa due to other private investors and the 135 million rufiyaa due to the government for its shares. But for a very important part one will need to investigate the subleases and who got them.
Now the question is, why did all this happen while there was a board of directors with 4 government directors in it to protect the rights of the public? The audit report explains how:
- Though the company was established for the public, two entities have controlled the company from day one by acquiring far more shares than the allowed maximum;
- Villa Group controls the board of directors of the company;
- All major decisions were taken for the company by a temporary board;
- The company was politicized at all stages in its formation and development;
- Conflict of interest because Tourism Ministry is both supervisor and regulator of the company;
- Managing Director is abroad on study leave and other people run the company;
- Company has dealings with firms where members of the board have interests;
- Family connections between a member of the board and a senior executive of the company;
- Inappropriate decision to pay a dividend of Rf 90 per 100 rufiyaa share, which is over and above company profits and reserves;
- Five persons own shares more than the limit of 2645;
- Exceeding the Herethere development budget of $ 30 million and spending $ 52 million;
- Herethere contracts were awarded without bidding;
- Over payment to Herethere sub contractors;
- The government has only paid one third of what it has to pay as paid up capital;
Based on the above findings the Auditor General has recommended dissolution of the company. He has also recommended prosecution of the people responsible for the malpractices.
"Where large sums of money are concerned, it is advisable to trust nobody." –Agatha Christie