Jul 18 - Auditor's Report Outlines OEM Government Loan Debacle
A Principal Auditor’s report, commissioned last year by the Government, regarding payments made by the Government to the OEM Group of Companies and Haymills (Gibraltar) Limited, was tabled in Parliament this morning.
The report follows a press release issued by the Gibraltar Government last year, suggesting that the former administration had made payments to OEM (International) Ltd (OEM) and Haymills (Gibraltar) Ltd (Haymills) in respect of a number of south district developments, that were used to pay creditors of the three developments. The Government repossessed the sites from the OEM group in December 2007.
The report notes that the amount of £7 million was claimed by the liquidator of OEM from the Government who agreed in principle subject to the south district housing developments not generating a loss. The net payments made on developments, by OEM, totalled £6.98m. The housing developments in turn made a loss of £2.8 million leading to the Government’s decision not to settle the claim.
The tender notice for the development of the project at Buena Vista Barracks and part of North Gorge was released in January 2005. OEM offered a premium of £15m on submission of their tender. The current administration noted in a press statement last year that OEM had no track record of building affordable homes of this kind in Gibraltar.
The tender was awarded in June 2005, with Government negotiations conducted by former Minister Joe Holliday, who, the Principal Auditor claims, had family interests receive payment for a property by OEM, around the same time. The property at 14 Mount Road was bought by Yogy Trading Ltd, a company that shared the same director as OEM and Prime Management Ltd, from Holliday Limited, for £1.7 million, when the market value was £750,000. Holliday Ltd had formally been directed by Minister Holliday in 2005, until he resigned and his mother was appointed on the same day.
Within a review of OEM’s accounts, it was noted that in October 2005 there were two transfers of moneys from OEM to Yogy Trading Ltd, recorded as loans. The Auditor’s report states that there was no mention of what the transfers of money were for. Within the payment instructions however, one of the transfers was a payment of £274,673.23, under special instructions stated ‘ Urgent – today if possible as funds are needed for property completion. Hassans are closed Tuesday and Wednesday. The documentation was dated Monday 3rd October 2005 and the 14 Mount Road property was bought on Thursday 6th October 2005.
Gibraltar Residential Property Limited granted a loan to OEM of £3m on 5 July 2006, to be repaid by 31st December 2006. A further loan of £1m was granted on 20th February 2007. Both loans were secured on the assets of OEM, but were never repaid. The Government reduced the premium by £3m from £15m to £12m. The Government then requested that the sales price be reduced by a further £3m in return of a five year licence over a site in Aerial Farm, on which a concrete plant was to be built and operated. By September 2006 only £4.5 million of the £12m premium had been paid. The Government agreed for the remaining balance of £7.5m to be settled through the construction of a Worker’s Hostel at Devil’s Tower Road.
In a review of OEM’s bank statements, obtained by Grant Thornton in order to determine whether payments made by OEM to Haymills and other creditors related to the south district developments following the Government’s loan was granted, the Auditor notes that £5.53m was paid to Haymills and £0.53m was paid to other creditors, relating to the three south district housing developments. The Auditor adds, ‘ it can safely be said that the £4m loan given to OEM was used to pay creditors related with the construction of the housing developments.’
He then claims that following the receipt of the £3m loan, OEM purchased a Bentley for £157,500, paid the company Barclaycard of around £50,000, withdrew £30,000 and €60,000 in cash. A total of £1.23m was transferred to Prime Trust and Prime Trust deposited £459,426 into OEM’s bank account.
By December 2007, OEM had no more funding to complete the projects and they had failed to comply with the provisions of the agreed negotiations, so all sites were repossessed, all licences were revoked and all leases were forfeited. By January 2011 Yogy Trading Ltd sold the 14 Mount Road property for £775,000.
The Government has today insisted that the report raises issues which the Government consider require further investigation.
