Audit of NEC reveals forged names, unauthorised people involved in scheme.
By Asha Javeed (Express).
How the $60M Scam Went Down
Blame First Citizens.
That's the conclusion of an audit conducted by the National Gas Company (NGC) into the $60 million wire transfer fraud at its subsidiary, National Energy Corporation (formerly NEC, now National Energy), in September 2011.
The audit, which was directed by then NGC chairman and now Finance Minister Larry Howai, who had recused himself on the matter, noted the bank did not follow due diligence before it transferred US$9,608,904.36 (TT$60.5 million) through three wire transfers out of NEC's US dollar account.
The issue, which is before the Fraud Squad, was re-introduced in the public domain by Opposition Leader Dr Keith Rowley at a public meeting on May 7. Rowley raised questions about where the money had gone.
With more questions than answers into who perpetrated the fraud and who eventually stopped First Citizens from going further to retrieve lost customer funds, the audit has unravelled how the fraud was executed.
The audit report is dated September 30, 2011.
The investigation team comprised Claire Gomez-Miler, then manager of Internal Audit; Wendy Jeffers, audit senior, Financial and Compliance; with support from Wendy Murray-Tomas, Suzette Ramadan and Rawle Philip.
On Monday, September 19, 2011, a wire transfer order was sent by NEC to its bankers, First Citizens (Point Lisas), to debit its US dollar account in the sum of US$1,250,187.36 for Central International Company Ltd in Boston, Massachusetts, USA.
On Tuesday, September 20, 2011, two other wire transfer orders were issued to US$4,633,717 to Steadroy CO Benjamin & Co in Antigua, and US$3,725,000 to Andrew James Thomas Newman Inc in Dubai.
They all contained the forged signatures of two authorised signatories-one of whom was the NEC president at the time, Andrew Jupiter.
After the fraud was detected on Monday, September 26, 2011, efforts were made to recover the sum.
National Energy has recovered about TT$35,090,000 with an outstanding balance of TT$25,410,000 in escrow in the National Bank of Abu Dhabi.
But the NGC audit pointed fingers at First Citizens for how its money was transferred out of its account.
"FCB's Indemnity Contract tendered for NEC's approval (re 'Andrew James Thomas Newman Inc, US$3,725,000'), transfers all blame for the fraudulent act on NEC, although the document used for the perpetration of the act was:
1. accepted by FCB personnel from an unauthorised person;
2. were not NEC's official letter of correspondence;
3. carried questionable signatures that could have been easily corroborated with specimen signatures provided to FCB for such purposes;
4. corrected by FCB without prior communication of 'error' to NEC (Payee Bank was stated on fraudulent document as 'National Bank of Abu Dubai'; FCB sent the money to "National Bank of Abu Dhabi"); and
5. processed by FCB without standard NEC/FCB verification protocol, there being no prior e-mailed, scanned and faxed copies of the instruction. These irregularities have made FCB a party to the incident and its personnel a main suspect in the fraudulent action, acting alone or in collusion with others. Also, there is no evidence that the fraud committed occurred within NEC's internal system, that the 'Wire Transfer Instructions' accepted by FCB carried valid authorisations/signatures, or were delivered by NEC personnel. It is therefore recommended that NEC reject FCB's Indemnity Contract until it reflects the true position of both FCB and NEC. It is also recommended that NEC continue collaborating with FCB to recover all monies, as quickly as possible," the audit said.
The report concluded all three wire transfer orders received by FCB on Wednesday, September 21, 2011, were:
1. fraudulently prepared outside NEC's Internal Processing System;
2. carried forged authorising signatures of NEC president and another manager with the intention of fraudulently receiving funds from NEC bank account;
3. were prepared on documents that were not NEC's official correspondence letter;
4. were made payable to beneficiaries/vendors unknown to NEC;
5. were delivered by a person unauthorised by and unknown to NEC management, and stated as being unknown by FCB personnel; and
6. were processed by FCB using a protocol that was not the standard protocol for validation and confirmation of NEC Wire Transfers. "As at date of this report, information and evidence indicate there was collusion between persons unknown who had sufficient intimate information of the wire transfer process and NEC's operations, business hours, and access to both NEC Wire Transfer Instruction Template and NEC Internal Stationery. Whilst the possibility remains that a third party acted alone in the preparation and presentation of the three fraudulent wire transfers, it is Audit's opinion that there are too many factual matters that prevent the elimination of FCB's personnel from the fraudulent act without further evidence," the audit said. "It is also Audit's opinion that there are factual matters that prevent the elimination of NEC's personnel from the fraudulent act without further evidence.
. It appears that the stationery used to generate the fraudulent documents were from NEC;
. The e-mailed correspondence used by FCB personnel to support 'confirmation' came from NEC personnel, but under circumstances created by FCB personnel that remain highly suspect," it said. The audit, however, noted there was opportunity for the fraud to be committed.
It noted:
"a. Wire transfers require a minimum of 48 hours to be cleared and NEC reconciles its bank account in the morning of each business day.
. NEC offices were closed for business on Thursday 22 and Friday 23; NEC's earliest reconciliation was scheduled for Monday, September 26, when the fraud was discovered.
. The fraudulent documents were 'received' by FCB on Wednesday 21, debited to NEC bank account on Thursday 22 when NEC was closed for business; and on Friday 23, FCB directed its corresponding bank to complete the wire transfers to the various recipients.
b. The commitment of the fraud depended on NEC having valid wire transfers or similar transactions being processed by FCB at the time of the fraud.
. NEC has no fixed schedule for requesting wire transfers and drafts, and for sending its courier to FCB; therefore an 'expectation' is only created when NEC notifies FCB via e-mail, fax or official telephone call.
. On Tuesday 20, NEC e-mailed and faxed four valid letters requesting US-dollar drafts (two in the morning and two in the afternoon); it is Audit's opinion that this event provided the opportunity to initiate the fraud.
. One of the fraudulent 'Request for Wire Transfer' letters was dated September 19 (Monday), but no valid transaction took place on that date. The remaining two fraudulent letters were dated September 20 (Tuesday), allowing all three fraudulent letters to be ready for 'presentation' to FCB on the date valid transactions were being processed (Wednesday, September 21)."
The audit noted that "processing of the fraudulent wire transfers was preventable if FCB personnel had exercised standard protocol, including scrutiny and corroboration of the documents, particularly when delivery was made by an 'unknown' person and without prior notice (e-mails, scanned copies and facsimiles) from the NEC.
"Valid NEC wire transfers are initiated by NEC forwarding to FCB its Wire Transfer Instructions via fax and scanned copies e-mailed to multiple FCB/NEC personnel. NEC sent no prior communication to FCB advising of such transactions during the period Monday 19 to Wednesday, September 23, 2011," it said.
The audit noted the only documents produced by FCB to substantiate its processing of the wire transfers were the fraudulent wire transfer documents claimed as being received by FCB personnel; and e-mail, sent on Wednesday, September 21, requesting information on whether the "wire transfers" were urgent.
"Said e-mail was sent only to NEC technician instead of the standard multiple FCB/NEC personnel; and sent under the heading 'Petty Cash Breakdown' instead of 'Scanned Payment Instructions'," it stated.
The audit added there were other contributing factors which enabled the fraud.
"There were four valid US-dollar drafts within the process for which e-mails, scanned instructions and facsimiles were disseminated to FCB Tuesday 20, and receipted by FCB on Wednesday, September 21, 2011. These 'work-in-progress' documents may have contributed to 'incorrect assumptions' being made, which further facilitated the fraud unintentionally.
"Audit is of the opinion that perpetration of the fraud was dependent on valid documents being within the system, and therefore person/persons with knowledge of these transactions intentionally used this opportunity to commit the crime," it said.
The audit noted that both FCB and NEC were State organisations and are prohibited from taking legal action against each other without prior approval of the Minister of Finance.
"Consideration should be given to providing FCB with a Letter of Comfort that stipulates NEC's agreement not to pursue legal action against FCB unless directed by the Minister of Finance," it said.
On Friday, September 30, 2011, FCB reported the matter to the Fraud Squad at the end of the joint preliminary investigation by NGC Internal Audit and a representative of FCB Securities Department.
"It is recommended that NEC make an official report to the Fraud Squad. NGC Internal Audit will continue to liaise with FCB Securities Department and the Fraud Squad until the matter is resolved," it said.
The Sunday Express understands the case remains a solvable one, but a decision was taken to not pursue the matter further by First Citizens.
National Energy has said it remains committed to retrieving the money held by the National Bank of Abu Dhabi.
Contacted on the matter, deputy chief executive of First Citizens Jason Julien said yesterday the bank had no comment at this time.