By NEIL HARTNELL
Tribune Business Editor
A Bahamian accounting firm was struck by a suspicious fire just as it began an internal probe that led to an employee pleading guilty to defrauding the Government’s housing initiative of $283,264.
Philip Galanis, principal of HLB Galanis & Company, told Tribune Business yesterday the night-time blaze occurred the very same day that the suspect was informed auditors were due to inspect records relating to the firm’s role as administrator for $10m in funding provided by the National Insurance Board (NIB).
These funds were employed by the former Christie administration to kick-start the government’s housing programme, which may have lost more than $400,000 based on an Auditor General’s report that was tabled in the House of Assembly yesterday.
Besides the $283,264 involved in the fraud, the report said a further $140,404 had been identified as “possible duplicate payments” to contractors working on the programme, meaning some may have been paid double for the same work.
It added that the person involved was the HLG Galanis & Company staff member “primarily responsible” for the accounting firm’s role as watchdog to protect all sides’ interests and oversee how the $10m NIB loan was spent.
The Tribune reported in February 2018 how Shukuanya Thompson, a corporate services supervisor at HLB Galanis & Company, was charged with 18 counts of falsifying accounting records between May and December 2016. The entries enabled five people to receive a collective $283,264 in fraudulent payments.
However, it was never disclosed at the time that these funds belonged to the Bahamian people as NIB’s beneficiaries, or that these actions had deprived the Government’s housing programme - and potential homeowners - of much-needed funding.
Mr Galanis, responding to the Auditor General’s report, told this newspaper that it was himself and his firm that initially detected the disappearance of monies. “We discovered the fraud, and notified the person that the auditors were coming in, and the fire happened that night,” he revealed.
The former PLP MP and Senator added that “based on the evidence” the police suspected the blaze was set to destroy any incriminating evidence, as “the fire jumped from the filing cabinets to the server room” - exactly where all critical documents were stored.
“It was clearly an attempt to destroy the records, and as a result of us preparing to do the audit,” Mr Galanis added. The Auditor General’s report said the blaze had prevented HLB Galanis & Company from providing key information to its own inquiries as key documents were destroyed in the blaze.
“During a follow-up meeting with the administrator [HLB Galanis & Company], we were advised that there was a fire at the offices of the administrator at the beginning of 2018 during which several documents were destroyed,” the Auditor General’s report said.
“In addition, prior to the fire, there was a discovery of a fraud committed by a former employee of the administrator [Ms Thompson] who was primarily responsible for the administration of the housing programme..... Our analysis of reports provided by the administrator indicated a number of payments that appeared to be duplicate payments made to contractors.
“The administrator advised that these two events may have contributed to the apparent ‘duplicate payments’ on the reports submitted and the now-inability of the administrator to provide original documents that were destroyed in the fire”
Crediting the probe carried out by Mr Galanis’s accounting firm, the Auditor General’s report said: “HLB Galanis conducted a separate internal investigation and have identified some $140,404 as possible duplicate payments and some $283,264 as fraudulent payments.
“HLG Galanis referred the fraud matters to the police, and a former employee has since pleaded guilty to the fraud charges.” Mr Galanis yesterday said: “I accept the Auditor General’s report because we’ve co-operated with them on it.
“The only thing I can say without reservation is all the expenditures made were with the authorisation of the Ministry of Housing. I think it’s under control and ended in a way that everybody recognises what went wrong.”
The Auditor General’s investigation into the tie-up between the Ministry of the Environment and Housing and NIB criticised both entities for failings in an arrangement that it branded “inefficient”.
It found that homes had not been built in the designated “locations”, while some had been constructed as single homes rather than duplexes without prior approval from the housing programme’s management committee.
NIB also came under fire for advancing $800,000 more to HLB Galanis & Company than required under the loan contract, with the Auditor General finding it “did not properly track the status of amounts advanced under the facility”.
The report also revealed that changes were made to HLB Galanis & Company’s “terms of operations” without the Memorandum of Understanding (MoU) with NIB being changed accordingly. As a result, the Auditor General, the Government’s main internal financial watchdog, found that the requirements to make regular financial reports, monthly bank reconciliations of construction payments, prevent “double payments” and ensure an annual audit “were not complied with”.
“Having regard to the resources available at the Ministry of the Environment and Housing, we have been unable to satisfy ourselves that the chosen structure for the administering of the arrangement was efficient,” the report said.
“Homes have been built in locations not previously agreed upon, and the styles of select homes have changed - from duplex to single homes - without formal prior approval of the housing programme management committee.
“NB did not properly track the status of amounts advanced under the facility, resulting in excess payments to the administrator of $800,000.” This meant $10.8m in total was received from NIB, and the Auditor General’s report said some $10.43m had been spent to-date with another $2.96m required to complete the remaining homes. It was also seeking to reconcile the $10.7m that HLB Galanis & Company’s records show as having been paid.
The Auditor General’s report concluded by urging the Government to put in place “an updated loan agreement” to cover the excess $800,000 advanced by NIB and the changes made to building designs and locations.
The Christie administration turned to NIB, the nation’s social security system with a $1.6bn reserve fund, after the cash-strapped, debt-laden Bahamas Mortgage Corporation was unable to play its traditional lead financier role for the Government’s housing programme.
The initial plan involved the Ministry of the Environment and Housing, via the Mortgage Corporation, obtaining $60m from NIB in three equal $20m instalments spread over 48 months. This was changed in February 2013 to a total $10m, split into four $2.5m slices, to be extended in the first year.
The funding was earmarked to construct a total of 73 homes in the Fire Trail Subdivision, Strachan’s Hill and Bahamia West. However, the initiative came under fire last year from current minister of the environment and housing, Romauld Ferreira, who said around 55 - some two-thirds - were completed. And, of those, just 31 were ultimately occupied.