An explosive internal report at the Telecommunications Services of T&T (TSTT) has detailed and raised questions about an over $500 million deal gone sour.
News of this deal comes against the backdrop of the dismissal of more than 500 workers over the past month, with high operational overheads being given as the reason behind the move.
Guardian Media has found that the mismanagement of a US$84.1 million deal with CT Miami was raised because it allegedly breached several of the company’s corporate policies.
But TSTT responded to Guardian Media queries about the report on Wednesday by blaming the contract lapse on junior management.
This is the second contract queried in the internal audit, which Guardian Media received a copy of along with a thick file of other documents from a whistleblower seeking to expose alleged financial mismanagement at the company.
According to the internal report, TSTT entered into a half a billion dollar contract with US-based CT Miami and never signed a formal contract. TSTT also let a three-year contract with the same supplier lapse, which left some 40,300 phones sitting idle in a Miami warehouse.
The details of the expensive lapse and high-level misspending are contained in a TSTT internal audit report completed by Chief Internal Auditor Randy Marcano and submitted on June 20, 2018.
Marcano’s audit revealed that the State enterprise had an agreement with CT Miami as a fourth party logistics provider (4PL) for three years between September 2017 and August 2020. That contract was valued at US$84.1 million yet the formal request for a contract negotiation was issued to the company more than a month after the contract was already awarded.
A 4PL provider is a company that is integrated into the supply chain. Under the arrangement, the external company is retained to assemble and manage all resources, capabilities and technology for TSTT’s mobile devices. The contract was allowed to lapse by TSTT.
Guardian Media learned that part of the agreement was the supply of 56,300 mobile phones valued at US$84.1. However, the absence of a formal agreement left CT Miami holding some 40,300 phones valued at US$29m for TSTT.
The audit report said TSTT Chief Executive Officer Ronald Walcott was not aware of the issue despite the size of the contract because it was never escalated by the senior manager.
According to the internal report, in May 2018 the owner of CT Miami, Samuel Ohev-Zion, met with Walcott, chief financial officer Rakesh Goswami and the vice president Mobile to discuss the “non-renewal of the expired 4PL contract.” At that meeting, the group also discussed the status of 40,300 phones ordered since October 2017 that were still at the CT Miami warehouse.
“TSTT’s CEO was not aware of these issues prior to this meeting,” the audit said.
The report also found a breach of the company’s policies, in that the orders for the handsets, despite being valued at millions of dollars, were “only signed by the Manager Mobile Supply Chain and the Senior Manager IOT and Devices” in an apparent breach of normal policy.
“Interestingly, there was no corresponding purchase order seen to cover the handset orders of the 56,300 phones,” the report noted.
“Further, if the 40,300 phone shipment was not accepted by TSTT, the company could be charged restocking fees and finance costs of approximately $12 million TT dollars.”
The company, however, denied that it paid any restocking fee but provided no further details. In fact, it said Walcott “managed” the process to eliminate the “possibility of any liability accruing.”
According to the audit, when Walcott learned about the issue he requested an independent review into how the CT Miami deal was delayed and left to expire and how TSTT ordered 40,300 phones from the company without a signed contract.
The 4PL contract was already running for some nine months by the time Walcott learned of it “despite CT Miami winning the Request for Proposal and being issued a letter of award on October 6, 2017,” the internal audit said.
There is a local arm of the CT Miami company—CT Trinidad—and according to the audit, the local records show that TSTT had ordered another $71 million in phones from that company after the contract expired in August 2017. This means that those orders were placed with no contract in place.
The auditor also asked why multi-million dollar phone orders were continually placed after the contract expired.
According to the internal audit document, on October 2, 2017, TSTT ordered some 40,300 phones from CT Trinidad valued at $29 million. That order was not filled and the phones were still sitting at the CT Miami warehouse. Despite that and the expired contracts, TSTT placed five more orders to the same company without a contract in place.
On October 3, 2017, one day after the 40,300 phone purchase, TSTT made another purchase of 4,400 phones valued at $15.3 million. One month later, by November 13, 2017, a third order was placed for 11,600 phones valued at $12.9 million.
“When questioned about the authority used to effect these purchases with an expired contract, the VP Mobile indicated that the contract was extended by virtue of the vendor continuing to provide services and TSTT paying for those services based on the pre-existing contract terms,” the report said.
Under the heading “Rationale for Purchases,” the auditor noted that according to information gathered during the investigation, the phones were purchased in preparation for an approved 2017 Christmas campaign.
“Even so, the number of handsets ordered were less than previous years, giving consideration to the extremely slow handset sales during 2017 arising from the removal of the prepaid subsidy, as well as the economic downturn,” the report said.
“Aggressive subsidies were planned for this campaign, but the implementation of austerity measures in November 2017 meant the intended subsidies had to be reviewed and the prices revised. Additionally, the lack of payment to CT Miami for prior orders jeopardised their ability to deliver the 40,300 phones in time for the campaign and resulted in the Senior Manager IOT & Devices unsuccessful request to cancel the order,” the report noted.
The report also pointed out that there was no evidence to suggest that either the status of the phones or the financial impact to the company was discussed with the TSTT CEO, the leadership or the board.
- by Renuka Singh