A security procedure involving the use of a password-protected e-mail account where oil trading companies made their bids was not observed at least four times, the Public Accounts Committee was told yesterday.
The PAC is probing the conclusions of an audit of Enemalta’s fuel procurement procedures carried out by the Auditor General.
The Auditor flagged serious shortcomings between 2008 and 2011, prompting Energy Minister Konrad Mizzi to order a criminal investigation.
The security measure in question came into force in April 2011, as part of recommendations to draw up a fuel procurement policy. From the Auditor’s report it transpired that, between April and December of that year, fuel procurement committee members awarded contracts on seven different occasions.
The new procedure dictated that the committee had to ask government IT agency Mita for the password to access the e-mail account immediately before the start of every meeting. A second request was supposed to be made at the end of the meeting to reset the password so that no one would have access to the bids between meetings.
However, according to Deputy Auditor General Charles Deguara, on four occasions Mita received no such requests from Enemalta.
On May 12, 2011, when Totsa’s bid was preferred to that by BB Energy, the security procedure was not followed.
Mr Deguara said calls were only made three days before the meeting and on the day after. However, Mita did not specify whether such calls were password related.
Asked by the Parliamentary Secretary for Justice, Owen Bonnici, to explain the manner in which the committee had gained access to the bids, Mr Deguara said Enemalta did not explain this.
Questions were also raised about a meeting held on July 5, 2011, when the password-related phone call was made the day before and there was no request to reset it.
During another meeting held days later, Mita received no requests at all, even though Enemalta produced a copy of a written request sent via e-mail.
This incident repeated itself on three other occasions and, each time, Totsa won the contract.
Mr Deguara referred to a meeting held on October 7, 2011, to award the contract for jet oil. He said that the request had been made almost a month earlier, on September 15, and a subsequent call – which was not password-related – was made on October 12.
Another incident flagged by the report occurred on January 19, 2011, when the committee held an urgent meeting following a late bid by Totsa, even though the contract had already been awarded to BB Energy the day before. The Auditor General, Anthony Mifsud, highlighted the fact that this bid was not made through the proper channels but through an e-mail.
Enemalta did not give any details on who had actually received the bid but, in any case, Totsa’s bid was not accepted.
Dr Bonnici pointed out Totsa won contracts even though it had not made the cheapest bid on four separate occasions.
Mr Deguara said this was the case with other oil trading companies as well, not just Totsa. Some of the lower bids at times did not meet the set criteria.
On this particular case, Enemalta said Totsa offered it better credit terms and its product was of a superior quality.
Mr Mifsud noted that only a handful of oil trading companies were bidding because the amounts involved were very modest in relative terms and, so, this was not deemed a lucrative contract.
Tranter to break his silence in next meeting
Alex Tranter, who served as Enemalta chairman between June 2005 and March 2010, will be breaking his silence on the Auditor’s report on September 10, when the PAC meets again.
Following the publication of the report last month, Mr Tranter declined to comment.
So far, the PAC has met five times in the space of a week to grill the Auditor General about his report. After more than 16 hours of meetings, the next step will involve hearing witnesses. A list of 60 names has been submitted by the Government and the Opposition.
Apart from Mr Tranter, the witnesses summoned for the next meeting are former Deputy Chairman Edmund Gatt Baldacchino, who succeeded Mr Tranter as acting chairman in 2010, Enemalta’s financial risk manager, Janice Mercieca, Philip Borg, assistant manager, petroleum division and Pippo Pandolfino, former Enemalta chief financial officer.
Debate on ‘policy vacuum’ rages on
Opposition members on the PAC are insisting that the Auditor’s claims that, before 2011, there was a “policy vacuum in the fuel procurement policy”, are “unfair”.
Opposition MP Beppe Fenech Adami yesterday again had long exchanges with the Auditor’s staff, insisting that the Chalmers report of 2006 had set the ball rolling to have a formal policy in place.
His argument was echoed by the committee chairman and Opposition MP Jason Azzopardi, whose insistence on this report at one point prompted Government MPs to question his impartiality, while remarking that he had overstepped his role.
Dr Azzopardi said that dismissing the report “which had been compiled by the country’s best brains” was not right.
He added that a policy was not about just nitty-gritty issues and tender procedures listed in the 2011 document but had also to include basic principles, like those listed in the Chalmers report.
On the other hand, the Auditor repeatedly insisted that the Chalmers report dealt specifically with the hedging process and so could not be considered a policy document.
At one point, the Deputy Auditor General remarked that Dr Fenech Adami seemed to be on a fishing expedition, saying that he was more intent on catching him off guard than establishing the facts.
‘CEO offered $500,000 severance package’
The Auditor’s report described a decision to award €820,000 in direct orders to Island Bunker Oils between 2008 and 2011 as “an affront to good governance”.
Apart from the fact that the contract was renewed several times with no call for tenders being made, at one point Enemalta acquiesced to a request by the company for an upward revision of the contract.
The company had justified this by saying that the new low sulphur fuel warranted bigger expenses to keep the storage tanks clean to avoid contamination.
Justice Parliamentary Secretary Owen Bonnici focused on this part of the report, saying: “By coincidence, Island Bunker Oils is also at the centre of the fuel procurement scandal.”
He said the company had been set up in 2002 by the same people who were now being investigated: disgraced Enemalta chairman Tancred Tabone, former Mediterranean Oil Bunkering Company (MOBC) CEO Frank Sammut, Francis Portelli and Anthony Cassar.
He referred to a report published in trade magazine Bunkerspot in 2004 that said that Mr Sammut had interests in Island Bunker Oils, which, at the time, was in competition with MOBC.
Then energy minister Austin Gatt had denied such claim in Parliament, Dr Bonnici recalled.
Eventually Mr Sammut joined Island Bunker Oils as he was no longer employed at Enemalta.
Dr Bonnici said Mr Sammut was offered a severance package of $500,000 in cash to leave Island Bunker Oils six months later in the wake of some disagreements with other company directors.
Dr Bonnici remarked: “All these coincidences occurred when Austin Gatt was Enemalta minister.”