Government's team on PDS detects fraud at Donewell Insurance

The government’s delegation which went to Qatar to investigate the Insurance Guarantee submitted by Power Distribution Service (PDS) in the Electricity Company of Ghana (ECG) concession agreement, did not only come back with a confirmation of fraud, but reports that Donewell Insurance Company, has been issuing fraudulent insurance policies.

The delegation led by Interior Minister, Ambrose Dery, had discovered through Al-Koot that Donewell Insurance, had a number of purported packages with Al-Koot through Jo Australia as the broker, but they were all invalid having been procured through fraudulent means.

Some of the policies ,were related to property insurance, but one demand guarantee for the supply of petroleum products and gas in a contract with the value of US$25 million, in which Al-Koot was purportedly offered 14percent as the premium. This contract was also invalid for failure to comply with essential for a valid guarantee.

It is unclear, if the delegation has prompted the regulator; National Insurance Commission (NIC), about these findings from Qatar.

The report by the delegation co-signed by Mr Dery and the Deputy Attorney General, GodfredY eboah Dame, dated August 9, 2019, painted a bad image of Donewell Insurance, which incidentally has the catch-phrase; “if it must be done, it must be done well” but accounts captured in the Qatar report, clearly showed something is amiss.

Under the heading “Relationship with Jo Australia/Donewell Insurance Co. Ltd (Donewell), the Ghanaian delegation, said Alkoot, had indicated “that it had a previous working relationship with the Jordan based insurance brokers, Jo Australia”, but “the PDS matter compelled the company to review its previous transactions with Jo Australia”.

According to the report, “this review disclosed that, the only instances in which AlKoot had purportedly issued demand guarantees were fraudulent transactions involving Donewell, Genser and Barrack companies, all of which were done by Yahaya Al-Nouri with Jo Australia as the broker”.

“This came to the notice of the company upon the scrutiny of Al-Nouri’s email correspondence. It further emerged that the purported policies had expired before Alkoot became aware of their existence when it set out to review all transactions purportedly done by Al-Nouri and Jo Australia”, the report,authored 9 days after government’s disclosure of the fraud,said.

It revealed that Yahaya Al-Nouri, has since July 221, 019, been suspended without pay by his employers over his fraudulent conduct and “AlKoot indicated that it would make a report to the Qatari Police upon the conclusion of its internal investigations”.

According to the report, “When disciplinary measures commenced against him, he claimed that he was misled by Jo Australia on the nature of the demand guarantee, contrary to his earlier vehement denial of the documents”.

The delegation revealed that “AlKoot asserted that the first time the matter of the purported issuance of demand guarantees as security for the LLA and BSA came to its attention was when the company received the first letter from the Electricity Company of Ghana (ECG) dated 28th February, 2019”.

“This was a surprise to the company, as it had no record of such a transaction. No application for such a facility had been received by the company from any entity. Neither had there the delivery of any document regarding the LLA and BSA to AlKoot. They thus set out to ascertain the facts surrounding the alleged insurance guarantees”, the report said.

“Mr. Musa made enquiries of the officer of AlKoot whose signature appeared on the demand guarantees, Yahaya Al-Nouri. Al-Nouri initially denied signing any guarantees and promised to receive it with the broker, Jo Australia.AlKoot did not reply to the letter from ECG dated 28th February, 2019.”

“When asked about a letter dated 13th March, 209 in purported reply to the ECG letter of 28th February, 2019, AlKoot asserted that same was a fabrication and part of the fraud perpetrated by the proponents of the Demand Guarantees. The alleged signatory, Mr. Musa denied being the author of that letter. He claimed that his signature was forged by Yahaya Al-Nouri, and that, his signature is palpably different from what appears on that letter”.

“Yahaya Al-Nouri was until 21st July, 2019 at post as AlKoot’s manager of Reinsurance. The second from ECG dated 15th March, 2019, was intercepted by the said Yahaya Al-Nouri. Same was thus not received by AlKoot. The Millennium Development Authority (MIDA), did not, at any point in time, get in touch with AlKoot, nor made any enquiry of that company in respect of the purported demand guarantees”.

“AlKoot indicated that it was not possible for the demand guarantees in issue to have been issued by the company for the following reasons:The guarantee had the value of about $350 million. AlKoot does not have the capacity to engage in such a transaction. The company’s net worth was about US$170 million. The transaction was thus about 200% the size of the company’s financial capacity”.

“The company is not authorized to issue demand guarantee. It does not have the mandate to engage in counter party and trade risk contract which involve the issuance of demand guarantees. This is borne out by their constitutive documents and financial statements” adding, “Al-Nouri by himself did not have the capacity to commit the company financially in any transaction of big value. As Manager of Reinsurance, Al-Nouri had capacity to bind the company to the tune of only the equivalent of about US$15,000”.

“He (Al-Nouri) can only recommend for same to be approved, even in respect of regular reinsurance transactions. AlKoot has various levels of approvals, with bug transactions always requiring the approval of its Board of Directors.

The demand guarantee in question were signed by Al-Nouri, though he had no competence to execute same. There was no approval by competent signatories or by the Board. The guarantee were merely witnessed by a junior officer of the company who had been working under Al-Nouri for only a month. The transactions, accordingly lacked the due authorization and approval of the company.

AlKoot has an underwriting policy and guidelines which requires the approval of the Central Bank of Qatar. No such approval was granted by the Central bank of Qatar.

“AlKoot replied to the third letter by ECG dated 24th June, 2019, after necessary investigations had been undertaken and disciplinary action had commended against Yahaya Al-Nouri. AlKoot’s reply is dated 31st July, 2019”.

Mr. Hag Musa, the author of the said letter of 31st July, 2019, affirmed the contents of same. The company reiterated its denial of the existence of any guarantees in favour of PDS in respect of the transaction in question”.

“Mr. Musa stood by the contents of a letter dated 16th July, 2019 allegedly emanating from AlKoot and addressed to Jo Australia. He explained that he wrote the letter in light of what had already been established between AlKoot and Jo Australia. The relevant matters in his view were that:There had been no request or application for the guarantees in question; AlKoot was not aware of the purported guarantees until their attention was drawn to same by ECG;No payment of premium had been made to AlKoot, and therefore no claim could be made in respect of the guarantees against AlKoot.

A contract was not in existence in respect of the demand guarantees between AlKoot and any company”.

Interestingly, in the heat of the PDS agreement saga, Donewell Insurance had expressed disappointment and dismay that Al Koot, a reinsurance company in Qatar, had denied knowledge that it has issued an insurance bond guarantee to the PDS consortium as one of the conditions for taking over some assets of the ECG.

“We state with great dismay that Al Koot has not been truthful in its communications with the ECG by stating that it was shocked and surprised to know of the existence of the said guarantee, when it had actually received premium for the guarantee and also requested a retrocession.

“It is unfortunate for Al Koot to further allege that its reinsurance manager did not have the capacity to act on its behalf when he had held himself out as having the said capacity to do so as far back as 2017,” Donewell said in a statement last Friday, 9th August 2019.

Giving details, Donewell said it issued two counter-guarantees to cover the periodic payments required to be made by PDS under the Lease Agreement covering the assets of ECG and the second for the bulk supply of electricity sold by ECG to PDS under the Bulk Supply Agreement.

It said it received a premium of $7 million for both guarantees for the Lease Agreement, which was $100 million, and for the Bulk Supply Agreement, which was $250 million. The risk covered by DICL was premised on the assumption that should PDS be unable to meet its obligations under the Lease Agreement, ECG would call on the guarantee and the Bulk Supply Agreement.

It said a key component of the agreement was to find a Standard & Poor’s ‘A’-rated company to reinsure the guarantee for which Donewell’s brokers, Jo Australia Reinsurance Brokers, secured a cover from Al Koot Insurance and Reinsurance Company, an ‘A’ rated company in Qatar.

According to Donewell Insurance, prior to the payment of premium to its broker, it sought the requisite approvals from its regulator, the National Insurance Commission, to allow for the payment of premium for the reinsurance of the guarantees.

It said the premium was duly paid to the broker through a Swift transfer on March 21, 2019.

Donewell, in the statement, was essentially surprised that after Al Koot had acknowledged the deal and written to the reinsurance broker, Jo Australia, to remit its share of the retrocession – premium paid by a reinsurance company to another reinsurance company to carry part of a risk being insured – it turned round to cancel the same agreement which it described as bad from the beginning (void ab initio).

“On February 26, 2019, Al Koot made a request to Jo Australia to arrange a full retrocession of its share/portion of the risk/guarantee; which request was acceded to by Jo Australia.

“On April 16, 2019, Jo Australia sent a credit note to Al Koot notifying the latter that in accordance with the mutual agreement between the two companies, Jo Australia had credited Al Koot’s holding (client) Account as per a credit note dated April 16, 2019,” the statement said.

According to Donewell, Al Koot’s sudden denial that it was not permitted by its constitutional documents to underwrite counter party and trade risk when it had in the past accepted such a risk imposed upon it by Jo Australia at the behest of DICL, was most unfortunate.

Besides, Donewell’s shock stemmed from the signatory to the guarantee bond, which Al Koot said its Reinsurance Manager, Mr Yahya Ali Al Nouri, had no capacity to sign, when in the past, the same person acted on behalf of the Qatari company in the same transaction without any objection from the reinsurance company.

“It is important to note that in an email dated July 22, 2017 sent by Yahya Ali Al Nouri, the Reinsurance Manager of Al Koot, in which Osman Hassan Hag Musa, the author of the July 16, 2019 letter was copied, Mr Al Nouri, is designated as a signatory to the technical documents of Al Koot.

“It is surprising that subsequent to its denial of the knowledge of the existence of the said guarantee and the description of same as “void ab initio”, AlKoot decided to cancel the non-existent guarantee and its attendant retrocession in a letter dated July 31, 2019 on the basis of the non-receipt of premium from Jo Australia within a 45-day premium payment warranty.

“In view of the foregoing, DICL expresses its deepest shock and disagreement with the allegations made by AlKoot in its letter dated July 16, 2019,” the insurance company said.

The company had welcomed the decision of the government to investigate the allegations of fraud related to the transaction and further assured its stakeholders and the public that it followed due process at all material times during the transaction.The company also hinted of its right to commence legal action against Al Koot and any other persons involved.

The government hadannounced a full-scale enquiry into the suspended power concession agreement with PDS Ghana Limited.The enquiry, according to the government, would, among others, establish who made false representations to the government to drive it into the agreement.The suspension of the agreement had elicited statements from various interest groups, amid accusations and counter-accusations.

The PDS, had said it did nothing wrong in the whole transaction.A statement the company issued said: “The PDS has taken note of the statement issued by the government…. and wishes to state for the record that it had always acted and would continue to act in good faith at all times.”

MiDA, had also issued a statement that absolved itself from any blame over the suspension of the concession agreement. According to MiDA, it subjected the ECG Private Sector Participation (PSP) transaction process by PDS, to careful scrutiny and various stakeholder approvals.It indicated that several documents submitted for the ECG’s distribution and assets handover to PDS was clarified and scrutinized, as required for the transaction process.

“In line with best practice in International Business Transactions, all documents submitted as part of the transaction were accepted on the basis of good faith and the presumption in law as to their validity,” it said.While the authority described the PDS issue as an unfortunate setback to the progress of the concession, MiDA, nonetheless, welcomed investigations into the matter.

The team arrived in Doha, Qatar at 6am on Wednesday, 7th August, 2019. At 10am on the same Wednesday, 7th August 2019, the team, together with two officials of the Ghana Embassy to Qatar, Abdulai Alhassan ( Deputy Head of Mission) and Asana Shiraru (in charge of Regional Economic Affairs) met the top management of AlKoot on Wednesday, August 7, 2019.

AlKoot was represented by Ahmed Rafee Al-Emadi- Chief Executive Officer (CEO), Osman Hag Musa- Chief Officer, General Insurance, Kallaperumal Gopa- Chief Financial Officer, Rahul Kumar-Managing Partner, International Law Chambers LLC (External Legal Counsel, AlKoot) and Amit Shankar- Manager, Internal Audit, AlKoot.

The Ghana delegation had Ambrose Dery- Minister for Interior, Godfred Yeboah Dame – Deputy Attorney-General & Deputy Minister for Justice, A.C.P. Frederick Agyei- Head of Interpol, CID, Ghana Police Service, Chief Supt. Regina AntwiaahTency – Head of Financial Forensics Unit, CID, Ghana Police Service and Ofotsu Tetteh Kudjoe –Special Advisor, Minister for Finance