There is mounting evidence that Telecommunications Services of Trinidad and Tobago (TSTT) granted preferential contractual arrangements to CellMaster in a relationship dating back to 2011.
A continuing Guardian Media investigative series has unearthed the deals, although the company continues to defend Chief Executive Officer Dr Ronald Walcott handling of the issue.
After exclusive reports by Guardian Media over the past two days highlighted evidence of preferential treatment given to CellMaster and another one owned by the same person, TSTT issued a statement on Friday saying it was the former executive vice president Mobile Nicole Kerry LumKin who was responsible for the continuation of the deal.
LumKin raised the legality of the CellMaster deal in an internal audit she did during her tenure, citing several breaches of policy in the award of the contract
But according to another response by TSTT last Wednesday, their “records show that Dr Walcott was not the person who introduced CellMaster or its principles to TSTT.”
However, Guardian Media received two new documents from a whistleblower that show links between Walcott and CellMaster even before he became CEO.
Back in 2011 when Walcott was the head of Mobile Operations, Distribution and Prepaid Services, he negotiated a new deal for CellMaster, making them a flagship dealer for TSTT.
In a letter he penned dated March 27, 2012, Walcott said that CellMaster was under a new management contract and the retailer was being paid a flat fee of $750,000 per month for their five stores.
“This agreement supersedes the previously established management contract,” Walcott wrote back then.
“As a result, retroactive payment of $768,750 is applicable in accordance with the effective date of contract. Penalties and bonuses will also apply for surpassing or failed to achieve monthly evaluations and targets.”
Documents obtained by Guardian Media show that the internal audit department investigated a $30 million deal between CellMaster and TSTT which was brokered by Walcott. Under scrutiny, it was revealed that the deal breached several breaches of TSTT’s existing policies on contractual agreements.
This deal was also subject to another internal audit by former internal audit manager Maitland Daniels, after he (Daniels) received “whistleblower correspondence” about suspicious mobile handset sales in May 2013.
In that report, Daniels immediately noted that the master contract between TSTT and CellMaster differed from what Walcott had said previously. Daniels pointed out that although Walcott had said the $750,000 payment was for all five outlets, the master contract said that this money was paid for only the CellMaster store at City Gate, Port-of-Spain.
Daniels said in his report that he was also asked to investigate a “sales transaction of approximately $30 million between Walcott’s Mobile Division and CellMaster.”
“The sales transaction was alleged to be ‘manufactured’ to illegitimately achieve the Mobile Division’s annual revenue/performance targets for the year ending March 31, 2013 through its recording in the financials for the period,” Daniels said in the report.
What Daniels allegedly uncovered were several breaches of TSTT policy by Walcott in order to facilitate a mega-million deal with CellMaster.
“The agreement was for the purchase of 63,650 mobile phones with an estimated value of $30.6 million for aged stock held at CT Trinidad and Tobago on behalf of TSTT,” the report noted.
“When questioned regarding the sale of such a large quantity of mobile units to just one supplier instead of the full BMobile Channel network, Walcott suggested that CellMaster’s success at absorbing and moving high investor volumes and the fixed management fee paid to this premium partner in lieu of commission on each sales unit (as with other dealers) had in his view a proven and substantial benefit to TSTT.”
Daniels also found that CellMaster did not have a history of moving such a volume of units in the past.
The report, however, found that the deal was “legitimate in so far as it met all the criteria to be considered as a proper adjustment to the company’s revenue for the fiscal period ended March 31, 2013.” But Daniels dug further and found “significant breaches in the process” and described the agreement as “highly unusual.”
“Mr Ronald Walcott advised Internal Audit that the master contract between TSTT and CellMaster provided the required detail to guide the terms under which the $31 million sale was administered.
“However, Internal Audit found that given the value of the sale, to mitigate the undiversified risk, evidence of insurance cover, terms of payment and performance bonds should have been meted out and placed within the March 8, 2013 sales agreement since it represented a highly unusual transaction outside the scope and ambit of the master contract,” Daniels pointed out in his report findings.
“Neither evidence of the original performance bond, up to the credit limit ($1m) appeared to exist,” Daniels noted.
Daniels also found that there were no copies of the CellMaster insurance cover rendered along with the master agreement signed by TSTT and CellMaster’s senior representatives.
Daniels, in discussions with the head of revenue accounting, discovered another policy breach, in that the revenue department had “no knowledge” of the mega-million dollar sale. That lack of information “ran counter to the normal procedure/practice usually carried out by the Mobile Division,” he noted.
Further, Daniels investigated past deals from March 2011 to 2013 with CellMaster and found no evidence to suggest it could handle the massive volume of phones required. Daniels also found that this was another breach of the TSTT master contract.
“During that period, TSTT issued 199 invoices for purchases made by CellMaster totalling $17.1 million at an overall average of $86,000 per invoice,” Daniels said.
He also found that TSTT honoured 106 credit notes totalling $2.1 million.
“Internal Audit is of the view that the purchasing history of CellMaster with TSTT did not suggest that the company had the ability to absorb a credit purchase thirty times the $1 million credit limit,” Daniels wrote in his report.
At the time of the multi-million dollar sale to CellMaster, it was already owing TSTT $5.4 million in the zero to 30-day category and another $300,000 in the 31 to 60-day category.
“This moved to $1.6 million in the 0-30 day category and $4.9 million in the 31-60 day category respectively by March 31, 2013,” Daniels said.
Daniels also discovered that Walcott requested and received a backdated letter to fit into the sales agreement sequence.
The Internal Audit department found no evidence of a reversal of the massive purchase but saw an increase in the credit notes from CellMaster and suggested “continuous monitoring” of that situation.
In his final analysis, Daniels found that there was merit in the allegations made by the whistleblower. His opinion was that while all appeared well with the deal, there were anomalies in the supporting documents and that these were enough to “suggest and give strong credence to the appearance of impropriety on the part of the Executive Vice President Mobile.”
“Internal Audit views with grave, deep and abiding concern the appearance of such duplicity and impropriety by the Executive Vice President Mobile in the circumstances, since such actions negatively colour the overall ethical climate of the company,” Daniels wrote in the report.
“The current status is the poor debt servicing by the dealer, based on a credit statement as at May 15, 2013, threatens to push TSTT’s finance department into making a provision of $34.6 million based on the treatment of aged debt 90 days and over,” Daniels added.
“Whether anticipated or not, the actions of the Executive Vice President Mobile, in the view of Internal Audit, were accomplished without due regard for the cascading risks brought on by the expedient sale to CellMaster.”
Daniels also recommended that disciplinary action be taken against Walcott.