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Press Release
NPP, May 24, 2012
THE CONSTRUCTION PIONEERS (CP) SETTLEMENT
AMOUNTS – THE ISSUES AND THE PAYMENTS…MAY 23, 2012
Ladies and gentlemen of the media:
We have invited you here to talk to you about the ninety-four
million euro (€94,000,000) settlement money given to
Construction Pioneers (CP). The former Attorney-General has
issued a statement in which she seeks to absolve herself from
blame. Further, the NDC tabloids have been striving, albeit
vainly to establish that the payment of settlement amounts to
CP has arisen out of negligence or lack of action by the NPP
administration. This media encounter is meant to disembowel
the GoG – CP saga and let the good people of Ghana know the
sequence of events. It is the contention of the Minority NPP
group in Parliament that as in the payment of several other
judgment debts by the NDC government, through the conspiracy
of a cabal, good money has been given away for free.
SUMMARY OF CP CASES
The three contracts of the Biriwa – Takoradi Road Project (BTRP),
the Assin Praso –Yamoransa Road Project and the Akim Oda Area
Roads contracts were all entered into between CP and the
Ministry of Roads and Transport on December 5, 1996 two days
before the Presidential and Parliamentary elections of 1996.
It is important to state, ladies and gentlemen, that the
Biriwa – Takoradi Road Project (BTRP), the Assin Praso –
Yamoransa Road Project and the Akim Oda Area Roads contracts
were all awarded to CP as part of the settlement of disputes
which had arisen out of earlier contracts awarded to self same
CP.
THE BIRIWA – TAKORADI ROAD PROJECT
The Biriwa – Takoradi Road Project (BTRP) was awarded to
Construction Pioneers (CP) in 1996. The contract provided for
the construction of an asphaltic concrete overlay of the
Biriwa – Takoradi section of the Accra – Cape Coast – Takoradi
Highway. CP and the Ministry of Roads and Transport, as part
of the contract negotiation, agreed on rates for the BTRP
project.
The Ghana Highway Authority (GHA) however later discovered
that CP had “loaded” or “padded” the rates in the negotiated
contract which action had increased the contract price by 44
million DM. Indeed, it later surfaced that the DM44 million
represented a so-called loss of profit to CP in respect of the
uncommenced Yamoransa – Assin Praso and the Akim Area Roads
Project. This loaded contract is what Dr. Ato Quarshie, the
then sector Minister, signed. When CP’s attention was drawn to
this, and, upon the insistence of the GHA, agreement was
reached that the “padded” rates should be unloaded from the
contract price.
In 2001, it was found out that some payments had been effected
to CP on the BTRP based on what Ghana government suspected,
were fraudulently “padded” rates. Clearly, therefore, the
“padded” rates which CP had promised to unload were after all
not unloaded! Accordingly, in mid 2001 government suspended
payments for works done under the BTRP contract when it
surfaced that the padded rates or loaded amounts were the ones
that had been captured in the Payment Schedule Agreement.
Works on the Assin Praso - Yamoransa Project as well as the
Akim Oda Area Roads Projects never commenced.
On 14th March and 5th April 2002, CP commenced arbitration
proceedings against the Government of Ghana. They sought to
claim the following:
1. €26,618,747.88 inclusive of interest up to that date in
addition to interest thereafter in respect of unpaid
certificates.
2. €8,637.03 (inclusive of interest through that date) plus
interest thereafter in respect of design fees.
It is significant to note, ladies and gentlemen, that all
three contracts name the laws of Ghana as the applicable law.
In effect, the BTRP contract provided that in the event of any
conflict the applicable law is the law in force in Ghana. When
the arbitration commenced, the Republic of Ghana claimed that
CP had engaged in fraud with the padding of the BTRP contract
rates which had resulted in the transfer of about DM48 million
to CP’s accounts and on 4th and 5th March 2003 Ghana argued
and requested the Arbitral Tribunal to decline jurisdiction to
enable the matter of fraud to be dealt with in Ghana under the
relevant law which is the Arbitration Act, 1961 (Act 38). Now,
Section 27(2) of the law provides:
“Where an agreement between the parties provides that
differences which may arise in the future between them shall
be referred to arbitration, and a difference which arises
involves the question of whether a party has been guilty of
fraud, the High Court may, so far as may be necessary to
enable that question to be determined by the court,
(a) Order that the agreement shall cease to have effect, and
(b) Give leave to revoke the authority of an arbitrator or
umpire appointed by or by virtue of the agreement.”
Following after the jurisdictional objection, Ghana applied
before the High Court to revoke the authority of the Tribunal.
The court granted this application on April 17, 2003.
On 16th July 2003 CP appealed against the High Court’s
revocation order. The appeal is still pending. Notwithstanding
the revocation order issued by the High Court of Ghana, the
Arbitral Tribunal went ahead with the arbitration and made its
first award on December 22, 2003 rejecting Ghana’s
jurisdictional objection.
On October 30, 2007, a District Court in Washington DC, USA
ordered CP to make a settlement proposal to Ghana on or before
November 13, 2007 and for Ghana to either accept or make a
reasoned counter offer on or before November 27, 2007.
Indeed on November 7, 2007 CP wrote to GoG to propose an
“overall settlement between CP and Government of Ghana” in
which they claimed a total of €153.546 million as at November
30, 2007. They however insisted that they were not keen to
pursue their total claims and called for mediation. Later CP
wrote GoG and proposed through their attorneys on November 13,
2007 that they would accept €95 million “in full and final
settlement of all outstanding matters”. Further, CP called for
“a resolution of the collateral disputes between CP and GoG
i.e. tax issues through the date of the settlement, conclusion
of the “fraud” investigation of CP, Robert Ploetner (MD of
CP), Bernard Ploetner, CP’s Ghanaian employees and any other
such matters”.
Earlier, we have spoken about the fraud issue involving
“loading” or “padding” of contract rates. CP had agreed to
unload the rates, Later it was discovered that CP had been
paid the loaded rates which had surprisingly been captured in
the Payment Schedule Agreement. Government insisted on
recovering the over payment. Did it make any legal or
financial sense to agree to settle and pay €94 million to CP
when government had insisted and CP had conceded to “loaded”
rates which had been used to pay CP?
The BTRP, the APYRP, the earlier Obuase Town Roads contract
and the Accra City Roads & City-Centre Rehabilitation
contracts did not allow for tax exemptions without
Parliamentary approval. There were no Parliamentary approvals
for tax exemptions, so it meant CP ought to have paid taxes.
Taxes were not paid. This also became a subject of litigation.
Indeed, the Public Accounts Committee has established that CP
owes GoG DM284 million (€145 million) and GH˘5.2 million in
tax liabilities at the time GoG entered into agreement to pay
the company €94 million as settlement payments (ref. Daily
Graphic March 2, 2012). In the face of the pendency of such a
strong case for the State why did anybody effect or cause to
be effected payment to CP?
On August 3, 2004 the Tribunal issued its second partial award
and ordered Ghana government to pay CP the sum of
€24,617,524.86 and (old) ˘22,168,951,015.83 including interest
as of March 1, 2004 in respect of the CP’s claim for unpaid
certificates. In addition, GoG was to pay €7,218.60 in respect
of CP’s claim for design fees.
On October 2, 2006 the Tribunal issued its third and final
award of €1,316,185.82 as costs and fees to CP against Ghana
but rejected 3 out of CP’s 4 remaining claims. CP was claiming
€15,225,359.23. The Tribunal also held that Ghana should pay
$270,000 in arbitration costs and $1,568,481.08 in attorneys’
fees.
When the Tribunal in October 2006 issued its final award on
the BTRP in which the Tribunal rejected 3 of CP’s claims and
drastically reduced the fourth claim, granting only €1.3
million out of €15 million, CP started to sense a weakening of
its position.
On November 2, 2006 exactly a month after the third and final
award issued by the Arbitral Tribunal in respect of the BTRP,
Ghana filed a motion in High Court to set aside these three
awards (the first and Second partial awards and the final
award). The motion is still pending before the High Court.
While CP’s appeal against the revocation order is still
pending before the Court of Appeal, and the motion to set
aside the awards is still pending before the High Court, CP
sought to enforce the awards issued by the Arbitral Tribunal
in a District Court in Washington DC, USA. The District Court
stayed proceedings pending the determination of either CP’s
appeal against the revocation order of the High Court or the
Government of Ghana’s motion to set aside the awards given by
the Arbitral Tribunal.
On April 10, 2007 in respect of the OTRP, the Tribunal issued
its final award. GoG did not contest liability in this matter.
Significantly, the Tribunal adopted all GoG’s arguments and
their method of calculation and awarded CP €1.7 million out of
the €5 million CP sought for interest payment. Clearly, this
ought to have further strengthened GoG’s negotiating capacity
in the CP affairs.
The May 25, 2007 District of Colombia Appeals Court ruling
gives deference to the High Court of Ghana as having primary
jurisdiction in arbitrations of such nature. Additional muscle
is thus provided to the hand of Ghana in its engagement with
CP in these contracts.
THE ASSIN PRASO – YAMORANSA ROAD CONTRACT
This contract was entered into by CP and the Ministry of Roads
and Transport on December 5, 1996 for the construction of the
asphaltic concrete overlay of the Assin Praso - Yamoransa
road. Even though the contract was entered into in 1996, CP
was not authorized to commence the execution of the contract
until December 6, 2000, a day before the general elections of
2000. This was however subject to the performance of certain
conditions precedent which required CP to submit a performance
security and also fulfill insurance requirements. CP did not
meet those conditions.
Later, however, CP submitted a claim for work done up to March
31, 2001. Additionally, CP made claims for expenses relating
to mobilization and some preliminary works as well as for
expenses incurred as a result of suspension of the contract
project. On July 5, 2002 CP requested for arbitration on these
matters. Indeed, subsequently, CP requested the Arbitral
Tribunal to stay the arbitration proceedings in this contract
pending the determination of the issues in the BTRP contract.
This position of CP notwithstanding the Tribunal is seeking to
proceed with the arbitration.
The claim of CP in the Assin Praso – Yamoransa road project is
three-pronged:
1. €665,441.24 (DM1,301,489.95) for the 1st certificate
inclusive of interest up to November 30, 2001 plus accruing
interest until payment is effected;
2. €944,356 (DM1,847,000) for demobilization and repatriation
of equipment and expatriate staff; and
3. €12,766,700.63 (DM24,969,496.10) for lost profits and other
damages.
The position of the Republic in this matter up to the time of
change of government from NPP to NDC in 2009 was that the
contract was never commenced because CP was unable to comply
with the performance security and insurance requirements which
operated as conditions precedent to the contract.
THE AKIM ODA AREA ROADS CONTRACT
This contract involved the construction of 207km of road from
Akim Oda to Nkawkaw, New Abirem to Asamankese and Akim Oda to
Kade. This contract was entered into by CP and the Ministry of
Roads and Transport on December 5, 1996. As in the Assin Praso
– Yamoransa contract, the Oda project was never commenced due
to failure of CP to fulfill the necessary pre-conditions in
respect of performance security and insurance requirements. On
September 6, 2002 CP requested for arbitration for what it
alleged as a suspension of contract even though no notice of
commencement had been issued in this contract. In the face of
the non-issuance of notice to commence work, the contractor,
CP, never took possession of the sites.
The claim by CP is for €45,881,531.63 (DM89,736,476)
representing what they claim to be profits lost by CP plus
accruing interest until paid.
The position of the Republic in this matter up to the time of
change of government from NPP to NDC in 2009 was that CP’s
failure to commence the contract is not attributable to
non-performance on the part of GoG but rather due to CP’s
failure to fulfill the conditions precedent stipulated in the
contract. CP, after GoG had stated their position, called on
the Arbitral Tribunal to suspend arbitration proceedings on
the contract. In spite of this the Arbitral Tribunal gave an
indication that they would proceed with the case.
THE OBUASI TOWN ROADS PROJECT
The Ministry of Roads and Transport and CP entered into an
agreement for the completion of outstanding works on the
Obuasi township roads. This was on July 12, 2000. All
construction works under the contract have been concluded and
GoG has made some payments. It is abundantly clear that there
are outstanding payments under the contract and CP has a
legitimate claim for which reason CP initiated Arbitral
proceedings for the recovery of amounts due. CP’s claim was
for a total of (old) ˘34,447,411,158.95. On April 10, 2007 the
ICC Tribunal finally ruled in favour of CP and ordered the
Republic to pay CP an amount of €7,752,898.39 plus prevailing
interest rates of German banks beginning October 1, 2006 until
full payment is made.
Arbitration cost of $420,000 and legal cost of $304,000 were
also awarded and Ghana was ordered to pay this within 30 days
from the notification of the final award which was on March
11, 2007. If Ghana did not pay up the legal and arbitration
cost was to attract an interest of 6.25% per annum.
The position of Ghana in this matter was that the Republic
accepts its obligation in respect of the Obuasi Town roads
project but argued that since substantial overpayments have
been made to CP in respect of the Biriwa – Takoradi Road
Project it will make sense to sort that major case out to
enable both GoG and CP to know their respective status of
obligations before any further payments by either party could
be effected.
Notwithstanding, following the failure of the Republic to
effect payment as directed by the ICC Tribunal in this matter,
CP sought to enforce the final award in a High Court in
London.
Ladies and gentlemen of the mass media, these are the hard
bare facts underpinning the GoG and CP engagement.
As has already been mentioned the first three contracts BTRP,
APYRP and the AOARC all named the Ghana law as the applicable
law. It appears very strange that the Arbitral Tribunal will
persist in relying on international law concepts. It is the
equally strange that despite a High Court of Ghana’s
revocation order the Tribunal proceeded and is proceeding with
its arbitration in the face of jurisdictional objection.
By a majority decision the Arbitral Tribunal has been issuing
orders and awards against GoG. It is instructive to note that
one of the arbitrators, Nana Dr. S.K.B. Asante dissented from
the Awards noting inter alia, that the majority’s reliance on
international law concepts was inappropriate, as Ghana law is
the law which is to govern the arbitration.
For the avoidance of doubt it is important to advert attention
to the following pertinent issues and to ask the relevant
questions:
1. First, the negotiations in respect of such capital
intensive negotiated contracts between CP and the Ministry of
Roads and Transport which was done in 1996 was poorly
conducted as GHA was not involved at the onset.
2. The agreements were international business transactions
and, by Article 181(5), Parliament ought to have approved of
them. None of the negotiated contracts had Parliamentary
approval.
3. The position of GoG had been that CP had evaded tax. It is
only Parliament which by Article 174 (2) can waive or vary tax
in favour of any person or authority. Parliament never granted
any waiver or variation so CP must pay tax for any works done.
4. CP insists that they had tax exemption. CP should tell
Ghanaians who granted the tax exemption to them. Was it the
then Minister, Dr Ato Quarshie who they had the negotiations
with? Even if it is true that Dr. Ato Quarshie granted tax
exemption to CP it would be null and void because it violates
Article 174(2) and (3). It is noteworthy that the same Dr. Ato
Quarshie gave evidence as CP’s witness against the government
of Ghana in arbitration proceedings in London.
5. CP had agreed to unload the loaded rates upon the
insistence of GHA so why did they not unload the rates after
all?
6. CP in all these made claims for design fees. Given the fact
that the contract involved asphaltic overlay which did not
involve any project design why did CP submit claims for design
fees? If any design of asphalt mix or thickness had to be
done, that was going to be part of CP’s own work design, and
hence would not and should not involve any claims. Why did
government cave in to make such payments?
7. Why should the NDC government proceed to make payments to
CP when GoG had earlier sought and obtained revocation order
from the High Court and filed motion to set aside the awards
by the Arbitral Tribunal?
8. A contract cannot be deemed to have been entered into if
the contractor, in this case CP, fails to provide performance
security and insurances for the works and other specified
matters. In both the Yamoransa – Assin Praso Road Project and
the Akim Oda Area Roads Projects CP failed to provide
Performance Security and Insurances for the works and that
explains why no issue of notice to commence work was effected.
That is why CP could not, and did not commence the works.
9. In the two contracts of the Yamoransa – Assin Praso Roads
project and the Akim Oda Area Roads project the contractor,
CP, never mobilized to site and hence there is no evidence
that:
(a) site camps were provided within the project corridor;
(b) plant/equipment were moved to the site
(c) physical works were done on any sections of the roads
There cannot be any liability on the part of Ghana or GoG to
CP in these circumstances and government had no business
making any payments to CP in respect of these. Even if CP
mobilized to site they did so at their own risk and expense
since their failure to satisfy the conditions precedent in the
contract rendered the contract ineffective and unenforceable.
10. It is abundantly clear from the above matters that in
respect of the Yamoransa- Assin Praso Road Project and the
Akim Oda Area Roads Project CP cannot legitimately make and
sustain any claim.
11. In the Biriwa-Takoradi Road Project some works had been
done but rates had been inflated or loaded which needed to be
unloaded and hence GOG was required to sort out any
overpayment to CP.
12. In the Obuasi Town Roads works had been done and payment
had to be done. Government dutifully accepted responsibility.
13. In the two projects which government acknowledged works
had been done and payments had to be affected apart from the
padded rates in the BTRP, taxes had to be paid because there
were no tax exemptions or variations approved by Parliament.
14. Clearly, the people who negotiated the settlement, those
who authorized or caused the authorization of payment and
those who effected payment of the dole out to CP amounting to
94million Euros have by their commissions contributed to
paying for wrongful claims and caused serious financial loss
to the State.
a. It is pertinent to note that in these claims by CP on GoG,
the country was represented by Mr. Bashiru the former Chief
Executive of GHA. Indeed, Mr. Bashiru was the Chief Executive
when Dr. Ato Quashie negotiated the contracts. He has retired
from GHA but is still alive. It is instructive to note that
Mr. Bashiru is the current chairman of the GHA Board. Why was
he not contacted before whatever settlement amount was paid
out? What was his stance on CP in the 2001 – 2008? What is his
stance now?
b. Mr. Swanzy Baffoe was the Deputy Chief Executive at GHA in
charge of Development. He has since retired from the Authority
but is still alive, why was he not contacted?
c. Mr. Asare of the GHA was a key officer with respect to the
project in question at the era of Dr Ato Quashie. He has been
part of the team that has been representing Ghana in the CP
contracts. He ought to have been contacted. Why would anybody
neglect to contact such a person and proceed to engage in any
so-called settlement?
d. Mr. Orleans is a retired principal State Attorney who is
one of the lawyers who represented Ghana. He would be of
tremendous service. Why was he not contacted?
e. Mr. James Quashie was a consultant at the Ministry of
Finance who was contracted by the former Minister of Finance,
Hon. Yaw Osafo Maafo to review and advise GoG on the various
claims by CP. He has retired. He spoke for Ghana and he will
speak for Ghana on this matter.
f. Ms Ama Gaizie, the Solicitor-General was the coordinator of
all the meetings that the Attorney-General summoned in respect
of the CP affairs. She knows a lot. She knows the position of
Ghana in these matters.
15. At this juncture one must know the role of the then
Attorney-General, Mrs. Betty Mould-Idrisu and the Minister of
Finance, Dr. Kwabena Dufour in this deal. The
Attorney-General, Mrs. Betty Mould-Idrisu was the one who
called for settlement in spite of the abundance of evidence
that CP has no strong case against Ghana.
i. How did the Attorney-General start negotiations to settle
when she knew that her predecessors had sued CP for fraud and
had in addition filed suits to vacate the awards to CP in
respect of the BTRP.
ii. How could the Attorney-General, Mrs. Betty Mould-Idrisu,
alone go ahead to negotiate such colossal amounts without
assistance or collaboration from the Minister of Finance?
iii. Apparently the initial instructions for such payment
emanated from the office of the Hon. Attorney-General. The
critical question is, does the Minister of Finance, Dr.
Duffuor take instructions from colleague Ministers or from the
President in such matters that do not ensue from the budget of
the A-G’s Department?
iv. Our investigations have established that there was no
cabinet approval for the CP payments. “The Daily Guide” of
Friday, May 18, 2012 quotes a response to the Public Accounts
Committee of Parliament signed by the Chief of Staff, Mr.
Henry M. Newman which states inter alia: “I regret to inform
you that we have not found any information in respect of
Cabinet approval of the (CP) settlement Agreement “…The letter
continues, “by a copy of this letter the Hon. Minister for
Justice and Attorney-General (sic) is expected to liaise with
you (PAC) on this to discuss possible issues arising therefrom”.
How did it happen that the Minister of Finance, Dr. Dufuor
effected or caused to be effected the payment of ˘2.25
trillion from the Consolidated Fund to CP without Cabinet
approval?
v. A decision to pay such a colossal amount of €94 million,
that is, over two hundred and twenty-five million Ghana cedis
(GH˘225 million) or two trillion, two hundred and fifty
billion (old) cedis which is not captured in the budget of any
MDA must be approved by Cabinet or the President. His
Excellency the President told the nation in January this year
that if provision is made in the Budget Statement for any
payment under any MDA he does not involve himself or his
office in the authorization of the payment. The €94 million
payment to CP is not covered in any line item under any MDA in
any budget. Mr. President, did you authorize this payment?
vi. Without any shred of doubt the President knew of the
payment of the over ˘2.25 trillion to CP and the circumstances
surrounding it. It is impossible for the Minister of Finance,
acting on his own accord, to pay out a colossal ˘2.25 trillion
from the Consolidated Fund and dole it out to CP without
President Mills’ knowledge and approval, in particular since
there is no line item provision for it in the budget of MDA.
It would only mean that the President is not in control.
vii. Finally, it is instructive to note that GoG has since
November 21, 2007 filed application to set aside the BTRP
awards. The question is why did the Attorney-General, Mrs.
Betty Mould-Iddrisu and the NDC government not see to the
final determination of this matter but rushed to settle?
Whose interest were the people who did the negotiation to
settle serving? Ladies and gentlemen of the media, there are
many more questions to be asked. Clearly, the nation has been
shortchanged to the tune of €94 million which is over GH˘225
million or ˘2.25 trillion cedis.
For Priority Intervention Programmes for 2012 fiscal year the
Government of the NDC could only allocate GH˘30 million to
SADA; for MASLOC it could only allocate GH˘35 million; GH˘28
million for removal of schools under trees; GH˘22 million for
scholarships to all Ghanaian students both home and abroad; GH˘10
million to the University of Health and Allied Sciences – Ho;
GH˘10 million – University of Energy and Natural Resources –
Sunyani; GH˘10 million for Malaria Vector Control Programme
countrywide; GH˘2 million each for the construction of
Maternity Hospital, Tema; Children’s block KBTH …….This same
government finds it convenient and appropriate to give a dole
out of GH˘225 million to CP. That is NDC government’s
priority! There is something wrong with the prioritization
agenda of the NDC.
Ladies and gentlemen, cabinet has denied authorizing the
payments to CP, so who authorized the payments? The then Hon.
Attorney-General, Mrs. Betty Mould-Idrisu and the Minister of
Finance, Dr. Kwabena Dufuor have many questions to respond to
in this dole out. The President, John Evans Atta Mills, cannot
be allowed to preside over such rot.
In Uganda, a case involving an over payment of sixty million
dollars ($60 million) has caused the resignation of both the
Attorney-General and the Minister of Finance. The two are
being prosecuted in court.
As a way forward it is important for the Ministry of Finance
to be strengthened with the relevant legal persons with the
necessary competencies in financial contract negotiations in
order for them to proffer the proper advice to the Minister.
Failure to do this might result in situations where
incompetent, self-seeking, fraudulent, negligent, inefficient,
corrupt, fraudulent, compromised, complicit ministers might
induce or convince misrepresentations to make gargantuan
claims on the limited resources of State. These are perilous
times for Ghana.
President Mills must immediately authorize the appropriate
agencies to plunge into this CP dole out which stinks to the
high heavens. The nation waits in bated breath. Or are we in
for a long haul in this era of selective justice?
Ladies and gentlemen, thank you very much for your indulgence.
Ghanaians are people of tremendous patience but this CP fraud
and dole out is simply intolerable!
Thank you for your patience.
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