Maldives Marketing and Public Relations Corporation – Special Audit 17 November 2013 – 27 October 2015

IntroductionThis report is an extraordinary audit into the financial transactions carried out by the Maldives Marketing and Public Relations Corporation (MMPRC) between November 17, 2013 and October 27, 2015. The audit was initiated at the request of the president’s office via its letter 1-EXE/7/2015/6 on October 27, 2015. This report has been submitted to the president and the parliament as per Article 213 of the Constitution, and will be presented to the MMPRC and the privatization and corporatization board so that action for reform can be taken. In addition, the report will also be submitted to the Anti Corruption Commission and the Maldives Police Services to investigate allegations of corruption and embezzlement.

An introduction to the MMPRCThe MMPRC is a 100 percent state-owned company established in 2011. With its establishment, the staff, assets and responsibilities of the Maldives Tourism Promotion Board, which functioned under the Ministry of Tourism, Arts and Culture were transferred to the MMPRC. The main responsibilities of the corporation were to assist in marketing and promotional activities work for the government and state offices, and to promote the Maldives among tourists to attract tourism, carrying out research to develop tourism, advertising opportunities for investment in tourism and improving the Maldives’ global standing in tourism.

On April 8, 2014, the MMPRC board added introducing vertical tourism and guest house island tourism in the Maldives to its mandate. The MMPRC’s charter allows it to carry out a wide range of tourism related activities, but on December 9, 2015, the tourism ministry informed the MMPRC that it could no longer lease islands and lagoons for tourism purposes.

Scope of auditThe audit looks into the following:

- The lease of islands and tourism for the development of tourist resorts and hotels via the MMPRC

- Assessing if MMPRC received the payments for the above mentioned transactions

- Loans and foreign exchange by MMPRC - Procurement and services- Management of MMPRC

Limitations of scope Since the MMPRC did not keep records of its financial transactions relating to the lease of islands, lagoons and other properties, this audit depended on documents provided by the ministry of tourism, private companies and individuals the MMPRC had dealt with.

The MMPRC’s lease of properties for tourism were opaque, and did not follow its usual procedures. Hence, it is possible that we did not receive all the documents pertaining to these transactions. This audit does not examine the properties leased by the tourism ministry that do not involve the MMPRC in the period of the audit.

Methodolgy

Executive summary 1. The state has to recover a total of US$79.37 (MVR1.22billion) received by the

MMPRC as lease acquisition fees and other payments 2. This amount includes some US$65.01 that was received as acquisition fees

and subsequently deposited to private accounts, US$6.31million obtained by the MMPRC and transferred to private accounts for dollar sales, US$6.15million issued to private accounts as loans, and US$1.90 deposited to private accounts for unspecified purposes

3. The amount to be recovered includes US$70.17 from SOF Pvt Ltd and US$7.5 from Millenium Capital Management Pvt Ltd and US$1.15million from Montillion International Pvt Ltd and US$550,000 transferred to two other private companies and an individual

4. The tourism ministry’s decisions on leaseholders for tourism development, and the offer letters it sent to these parties contravened the bid procedures outlined in the tourism law

5. The MMPRC embezzlement took place because the company used leniency in the law against the spirit of the law, and hence, a new stronger system needs to be set in place

6. Current information shows that a total of 59 properties were leased by the MMPRC, this includes 53 that were leased under an agreement between the tourism ministry and the MMPRC, and an additional six without an agreement with the tourism ministry

7. The total acquisition fees for the 59 properties is US$96.86. The MMPRC gave out receipts for US$79.61, and deposited US$65.01 to private accounts. Of this, only US$12.5 was deposited with the MMPRC’s account. The Maldives Inland Revenue Authority received US$300,000. MMPRC gave out receipts of having received US$1.8, but this money was not deposited to any account. The rest of the lease acquisition fees include US$11.25 that MMPRC delayed receiving payment for, and a further US$6million that was never collected

8. Some 9 properties were leased out at a reduced rate. It is not clear why the missing fee of US$7.21million was not collected

9. Two plots of land and a lagoon was leased for tourism without any charge, and the agreement for one of the plots of land included a corporate social responsibility component, of which details are vague, and one island promised to a private company was leased to two other parties

10. The board of directors of MMPRC were negligent; financial reports were not audited and the board never discussed or took action on a 2014 audit that alleged corruption in the company’s borrowing of money from other state-owned enterprises for foreign exchange

11. It appears that signatures on board resolutions authorizing the company to engage in foreign exchange, sublease islands, lagoons and other properties for tourism, centralize power in the hands of the company’s former managing director, and commercial display of fireworks for third parties were forged

12. MPL transferred a total of MVR205.21million in the name of buying US$13.31million, and US$5.52 of this amount has not been paid back. The date of paying dollars to MPL was delayed on several occasions, but MPL continued to transfer rufiyaa to MMPRC without considering risks

13. The MMPRC corruption took place because watchdog institutions, government offices and law enforcement agencies failed to act on an audit report published by this office in October 2014 alleging corruption in financial transactions made by the MMPRC and highlighting that some of that money had been transferred to a company linked to the then-tourism minister’s family

14. The former managing director of the MMPRC deposited checks made out to the MMPRC in private accounts by endorsing them with his signature. This contravenes a board resolution that says two signatures are required to endorse checks. It further does not appear that banks have controls on accepting endorsed checks, and so banks and bank regulators must introduce additional controls to stop such incidents in the future. The Financial Intelligence Unit, established under the Anti Money Laundering and Terrorism Financing Act of 2014 must be strengthened

First chapter

This chapter examines the details of money that was paid to the MMPRC for the acquisition cost for islands, lagoons and plots of land leased for tourism, and subsequently deposited to the accounts of privately owned companies.

It also examines money MMPRC received from Maldives Ports Limited and Maldives Tourism Development Corporation that was subsequently transferred to two private companies for dollar sales and loans. It further examines money that was transferred to private companies without documentation for unknown purposes.

The state must recover a total of US$79.37million (MVR1.22billion) from MMPRC.

This amount comprises of: - US$65.01million received by MMPRC for the lease of islands, lagoons and

plots of land for tourism development. This amount was transferred to private accounts

- US$6.31million transferred to two private companies for foreign exchange purposes

- US$6.15million issued as loans to two private companies - US$1.90million transferred to two private companies for unspecified

purposes

Details of these transactions are below

1.1.1: The state has to recover US$65.01million paid to the MMPRC as acquisition costs and transferred to accounts linked to private companies and individuals

Some US$65.01million received by MMPRC for the acquisition cost for islands, lagoons and plots of land for tourism development was transferred to accounts linked to private companies and individuals. Of this, US$59.46million was deposited to the accounts of SOF Pvt Ltd (SOF). Some US$5million was deposited with Millenium Capital Management (Millenium) and US$550,000 was deposited to the accounts of two other companies and one individual.

Of the money received as lease acquisition costs, a check worth US$800,000 was made out to SOF. The rest was deposited to SOF accounts after the then-managing director of MMPRC endorsed the checks.

1.1.2:The state has to recover US$6.31million that MMPRC issued for dollar sales

The state has to recover US$6.31million that MMPRC to SOF and Millenium to obtain dollars. The money was transferred under written agreements. This amount includes US$5.31million issued to SOF and US$1million issued to Millenium.

This money was given to the MMPRC from Maldives Ports Limited to buy dollars. The two companies were not able to pay MMPRC back on the dates specified in the agreements and the agreements were amended on multiple occasions to delay the payback date.

1.1.3: The state has to recover some US$6.15million issued as loans

The state has to recover US$6.15million from SOF and Montillion Pvt Ltd. issued as loans. This amount is inclusive of interest for the loans. SOF was loaned US$4.95million. This money came from money paid to MMPRC as lease acquisition costs. SOF has to pay the state a total of US$5million for the loan, inclusive of interest. Montillion was loaned US$1million. This money came from Maldives Tourism Development Corporation (MTDC). MMPRC obtained the money from MTDC saying it had to make an emergency payment to a foreign party and then loaned it to Montillion. Montillion has to pay MMPRC a total of US$1.15million, inclusive of interests.

The loans issued to SOF and Montillion was made under agreements.

These loans were issued in violation of the company’s charter, as the company’s board has to approve the loan amount unanimously. There was no board resolution to this effect. We also note that Montillion committed fraud by submitting fraudulent documents claiming it had repaid the loan.

1.1.4: The state has to recover US$1.9million paid for unknown purposes

MMPRC deposited US$1.9million to the accounts of two private companies for unspecified purposes. This includes US$1.5million deposited to Millenium’s account and US$400,000 deposited to SOF’s accounts.

Chapter 2

Details of the money transferred to private companies

This chapter gives the details the money the state has to recover from the private companies that received the bulk of the money received by MMPRC as lease acquisition costs, and money it issued to private companies as loans, and for foreign exchange and other unspecified purposes.

SOF Pvt Ltd

The state has to recover a total of US$70.17million from SOF. This amount includes US$59.46 received to the MMPRC as lease acquisition costs and deposited to SOF accounts, and US$5.31million of a total of US$8.31million transferred to the company for dollar sales and US$5million issued to the company as a loan, and US$400,000 transferred to the company for unspecified purposes.

Details Deposited Paid back To recoverLease of islands US$59.46million - US$59.46millionDollar sales US$8.31million US$3million US$5.31millionLoans US$4.90million - US$5millionUnspecified US$0.40million - US$0.40millionTotal US$73.07million US$3million US$70.17million

Of the money paid to the MMPRC as acquisition costs, SOF received a total of US$59.46million. The MMPRC’s then-managing director deposited these checks to SOF’s account by endorsing them (signing on the other side of the check). The MMPRC received one blank check that was then deposited to SOF’s account.

Although the parties awarded properties for tourism paid fees to the MMPRC, it is clear from the letters sent to them by the tourism ministry and the MMPRC that the lease acquisition costs belong to the state treasury.

MMPRC also transferred a total of MVR127.19million to SOF to buy dollars. This amount comes from the MVR205.21million paid to the MMPRC by Maldives Ports Limited to buy dollars. MMPRC made an agreement with SOF to buy a total of US$8.31million at the rate of MVR15.32 to a dollar. SOF has not paid back US$5.31million of this amount.

The US$3million that SOF did pay back in fact came from the money it had received from MMPRC as lease acquisition fees. So it is clear that SOF never made a payment from its own money. The following table shows the dates the funds were transferred and the delays in obtaining the money

Date funds issued

Amount (In MVR millions)

Amount of dollars to be bought

Amount not received

Delayed period

Delayed date

07/07/2014

22.79 1.49 0.49 21 months 31/07/2016

14/07/2014

19.84 1.30 0.30 21 months 31/08/2016

25/11/2014

59.75 3.90 2.90 16 months 31/08/2016

27/01/2015

24.81 1.62 1.62 15 months 31/07/2016

Total 127.19 8.31 5.31

According to the fixed term promissory notes made between SOF and MMPRC, SOF had to pay the dollar amounts to MMPRC by April of 2015. But the agreements were amended and SOF delayed the payments on multiple occasions.

MMPRC’s transfer of funds to SOF for dollar sales was not authorised by the company’s board and the delay to the pay back date was not authorised either. SOF was handed rufiyaa to buy dollars even though it had failed to make payments from previous transactions.

MMPRC also issued a US$4.95million loan to SOF on August 20, 2014 under an agreement, on the condition that it be paid back by December 2014. The date was later amended.

Date loan issued

Amount issued (US$)

Amount to be paid back (US$)

Date to be paid back

Period of delay

Date of delay

20/08/2014 2.95m 2.96m 12/01/2014

20 months 31/08/2016

20/08/2014 1.00m 1.02m 12/05/2014

20 months 31/08/2016

20/08/2014 1.00m 1.02m 12/10/2014

20 months 31/08/2016

Total 4.95m 5.00m

These transactions and the decision to delay the pay back date is illegal as MMPRC did not obtain a board resolution to do so.

On November 16, 2014, MMPRC transferred US$400,000 to SOF’s accounts. But there are no documents on the reasons for the transfer. The only supporting document was a payment voucher signed by four MMPRC employees, including two senior employees. Since there are no documents on the reasons for the transfer, we do not believe this transfer was made as payment for a service by or purchase from SOF.

Millenium Capital Management Pvt Ltd

MMPRC deposited to Millenium’s accounts a total of US$11.50million for different purposes and the state has to recover US$7.5million of this amount. This amount includes US$5million received to MMPRC for the lease of an island and transferred to Millenium.

Rufiyaa worth US$5million was deposited to Millenium’s accounts to buy dollars. Millenium has to pay back US$1million of this amount. MMPRC also transferred US$1.5million for unspecified purposes to Millenium’s accounts.

Details Amount issued Amount paid back RemainingFrom island lease US$5million - US$5millionDollar sales US$5million US$4million US$1millionUnknown US$1.5million - US$1.5millionTotal US$11.5million US$4million US$7.5million

MMPRC received US$5million for the lease acquisition cost of an island in Lhaviyani Atoll. This money was transferred to Millenium’s accounts. According to the documents submitted to this office by the company that was awarded the island, the check was received by a director at the MMPRC. Two days later, on June 9, 2014, the then-managing director of MMPRC endorsed the check and deposited it into Millenium’s accounts.

MMPRC also deposited MVR76.6million to Millenium’s accounts for dollar sales. This rufiyaa amount was given to MMPRC by MPL. Millenium paid back US$4million of the US$5million it owed from the previous US$5million it had received from MMPRC.

Then Millenium submitted fraudulent documents to claim it had paid back the remaining US$1million.

Millenium claimed that the US$2.25million paid to MMPRC by New Mood Resorts Pvt Ltd for the lease acquisition cost of Dhaalu Maagau on 15 May 2014 included the US$1.1million it owed to MMPRC.

In the process of this audit, MMPRC provided a letter that purported to be from New Mood, claiming that US$1.1million of the check was on Millenium’s behalf. The letter was dated 14 May 2014. But New Mood has confirmed to the audit office that the money it deposited was not on Millenium’s behalf, and that the amount it paid was for the lease acquisition cost for Maagau, and that it never sent a letter to MMPRC saying it was making a payment on another company’s behalf.

On October 16, 2014, MMPRC gave Millenium an additional US$1.5million. The purpose of this payment is not known. The only supporting document was a payment voucher signed by four MMPRC employees, including two senior employees. Since there are no documents on the reasons for the transfer, we do not believe this transfer was made as payment for a service by or purchase from Millenium. Montillion Pvt Ltd

On 13 April 2014, MMPRC issued a US$1million loan to Montillion Pvt Ltd as a loan.

The source of this money was Maldives Tourism Development Corporation. MMPRC obtained the money from MTDC on 10 April 2014 claiming it had to make an urgent payment to a foreign party.

MMPRC then transferred the money to Montillion under an agreement. Montillion was supposed to pay the loan back with interest, a total of US$1.15million, by May 10, 2014.

MMPRC went on to pay MTDC back from the lease acquisition cost paid by New Mood for Maagau. But Montillion has not paid back the amount it owes to MMPRC.

However, Montillion appears to have committed fraud by forging letters on behalf of New Mood saying that the US$2.25million it had paid for the lease acquisition cost for Maagau was in fact paid to MMPRC on behalf of Montillion and Millenium. New Mood has confirmed to the audit office that it never wrote such a letter and that the US$2.25million it paid MMPRC was solely for Maagau.

Maagau is an island that was leased to an Italian company for tourism development on May 21. 2014. This island’s lease was later transferred to New Mood. On 15 May 2014, New Mood paid an acquisition cost of US$2.25million to MMPRC.

On 22 May, 2014, a second sum of US$2.25million was wired to Montillion’s account from a foreign bank for the head lease rent for Maagau. Since Montillion is owned by the then-tourism minister’s family, this matter must be further investigated.

Transfer of US$550,000 to private accounts

The state has to recover US$550,000 that MMPRC deposited to the accounts of two privately owned companies and an individual. The MMPRC had received blank checks from a few parties that it had leased properties to. The names of these two companies and individual were filled in on these checks and the money was transferred to their accounts. It is worth noting that this individual is a shareholder in one of the two companies.

Chapter 3 The lease of islands, lagoons and plots of land

This chapter examines the practices employed by the tourism ministry and the MMPRC in the lease of islands, lagoons and plots of land, the fees that should have been collected and the actual figure that was received. It also details the MMPRC’s lease of properties at a reduced rate and the properties it did not collect a fee at all.

In the period between May 2014 and October 2015, the MMPRC leased a total of 53 properties (39 islands, 12 lagoons and two plots of land) under agreement with the tourism ministry. Before the MMPRC leased these properties, the tourism ministry had in fact offered them to different parties through offer letters. The offer letters from the tourism ministry were handed out before the head lease agreement was signed with the MMPRC. It said that if the party awarded the island agrees to the conditions outlined in the letter, the lease would be transferred to the party via the MMPRC.

There are two processes to lease properties for tourism under the Tourism Act. The first is through an open bidding process. Bids are exempted if islands are leased to joint venture companies that include a government stake. Hence, the tourism ministry can only hand out offer letters to private parties without a bid if the party is developing the island in partnership with the state.

In most of the above mentioned cases, it was the tourism ministry that made the decision on who to award properties to, and the MMPRC’s only role was to draw up agreements with the party that received the property and collect acquisition fees. It does not appear that the MMPRC had any role in choosing the investors, and neither the MMPRC nor the government had any stake in investing in or developing these properties.

The total value of the sales and purchase agreements for the 59 properties leased through the MMPRC is US$96.86million. According to receipts, the MMPRC received US$79.61million of this amount. The Maldives Inland Revenue Authority received US$300,000. While US$65.01million was deposited to accounts linked to private companies and individuals, US$12.5million was deposited to the MMPRC account. MMPRC records show it received an additional US$1.8million in checks, but this money has not been deposited to any accounts.

The remaining amount comprises of US$11.25million, for which payment was delayed on agreement, and another US$6million that has not been paid.

Details Amount (US$million)Amount received to MMPRC and transferred to private companies

65.01

Amount received to MMPRC and not deposited to any account

1.80

Amount deposited to MMPRC account 12.50Amount deposited to MIRA 0.30Total received as lease acquisition costs 79.61Amount to be received from parties where payment has been delayed

11.25

Amount to be received from parties who have an agreement but have not paid

6.00

Total to be collected for lease acquisition costs 96.86

According to the offer letters handed out by the ministry of tourism, the MMPRC can only sign a sublease agreement when the fee for the acquisition cost set by the ministry is paid to the MMPRC. The MMPRC’s records show that it received checks worth US$1.8million for four islands, but this money has not been deposited to the MMPRC account or any other accounts. These checks are no longer at the MMPRC. Some of the parties that issued these checks do not have the required funds. The table below lists these properties and their value.

Name of island Acquisition cost (in millions of dollars)

Amount paid (in millions of dollars)

Amount not deposited (in millions of dollars)

ADh. Heenfaru 0.15 0.15 0.15Lagoon in Kaafu Atoll

1.50 1.50 1.50

Lagoon in Vaavu Atoll

0.20 0.10 0.10

ADh. Alikoerah 1.00 0.05 0.05Total 2.85 1.80 1.80 ADh Heenfaru: The island was leased to BHS Pvt Ltd at the cost of US$150,000. BHS sent a letter to the audit office saying it had paid the amount to the MMPRC through a check from a law firm called Praxis, and shared a payment receipt from MMPRC. When BHS was asked to check if the amount had been transferred from Praxis’ accounts, they said by December 6, 2015, the amount had not been processed.

Lagoon in Kaafu Atoll: MMPRC leased a lagoon in Kaafu Atoll to Sea House Resorts for US$1.5million. A company called CICOE submitted a check for the amount on

behalf of Sea House Resorts. In a letter to the MMPRC managing director on July 21, 2015, CICEO said it was attaching a check for the amount Sea House Resorts owed the MMPRC for the lagoon, and that it had no issue with the payment voucher being made out to Sea House Resorts. This check was never presented to the banks by November 30, 2015. Further, CICEO bank accounts only had US$200, the amount required to open the account.

A company called Galadian Pvt Ltd owns a 33 percent stake in Sea House Resorts. Galadian is associated with the shareholders of SOF. And a shareholder who owns 50 percent in CICEO is an employee of SOF. Hence, it is believed that the check was never cashed in order to award Sea House Resorts a lagoon without a fee.

Lagoon in Vaavu Atoll: The US$200,000 owed for the lagoon was paid in two checks. According to the company, the MMPRC, handed one of the US$100,000 checks to the tourism ministry. It is worthy to note that an agreement was never made for the lease of this lagoon

Adh. Alikoerah: MMPRC issued a payment voucher for having received US$50,000 as advance payment for ADh Alikoerah, worth US$1million. However, the MMPRC never made an agreement for the lease of the island. The company awarded the island said it paid the amount in hard cash. This was never deposited in MMPRC’s accounts.

The MMPRC signed agreements with three companies for the lease of two islands and a lagoon without receiving the US$6million owed as acquisition costs. Two out of the three companies are linked to SOF. The third company is one that received large amounts of money from MMPRC. The details of these transactions are below.

Name Company Acquisition cost

Amount Paid

Amount to be paid

B. Hibalhidhoo Biznas Maldives Pvt Ltd

US$3m - US$3m

Lagoon in Kaafu Atoll

Lagoon World Pvt Ltd

US$1m - US$1m

Bodukaashihuraa Millenium Capital Management

US$2m - US$2m

Total US$6m - US$6m

Hibalhidhoo: According to the lease agreement, Biznas Maldives Pvt Ltd agreed to pay US$3million as the lease acquisition cost for Hibalhidhoo. There are no records at the MMPRC that show it received this money. Further, Biznas has not provided this office with documents of making the payment. A shareholder of SOF owns a 30 percent share in Biznas. Another 30 percent is owned by Galadian Pvt Ltd, a company linked to an SOF shareholder.

Lagoon in Kaafu Atoll: Although Lagoon World agreed to pay US$1million for the lease acquisition cost for a lagoon in Kaafu Atoll, there are no records at the MMPRC that show it received this payment. Lagoon World has not replied to letters asking for copies of payment records. The majority shareholder of Lagoon World, who owns a 90 percent stake, is related to an SOF shareholder.

Bodukaashihuraa: Millenium agreed to pay MMPRC US$2million as lease acquisition cost for Bodukaashihuraa, according to the lease agreement, but there are no records at the MMPRC that show it received the payment. Millenium, a company that received money from MMPRC, has not been able to provide proof that it made the payment.

Payments delayed

Offer letters handed out by the tourism ministry state that agreements can only be signed once the lease acquisition cost is paid. Meanwhile, there are no procedures to make the payment in installments or delay payments. However, it appears that the MMPRC delayed receiving payments US$11.25million of the US$18.45million it was owed from 12 parties. This has lead to discriminatory treatment between different parties awarded properties.

In some of the abovementioned cases, the offer letters or payment vouchers stated the date to collect the remainder of the payment. But in most cases, there are no documents announcing the delay in receiving payment. The table below contains details of these transactions.

Name Acquisition cost (US$m)

Amount paid (US$m)

Remainder (US$m)

1 V. Aarah 2.00 1.00 1.002 R. Fuhgiri 1.55 0.60 0.953 R. Huravalhi 3.50 1.75 1.754 R. Kandoogandaai Veyvah 0.50 0.30 0.205 Lagoon in Raa Atoll 1.00 0.35 0.656 B. Maamaduvvari 3.00 1.00 2.007 Th. Olhugiri 1.00 0.50 0.508 Lagoon in Thaa Atoll 0.20 0.10 0.109 V. Vashugiri 0.30 0.15 0.1510 Adh. Fushidhigga

(Rahdhigga)3.00 1.00 2.00

11 Adh. Alikoerah 1.00 0.05 0.9512 Lagoon in Kaafu Atoll 1.40 0.40 1.00

Total 18.45 7.20 11.25

Kaafu Atoll Lagoon: An agreement made between the MMPRC and an individual set the cost of the lagoon at US$1.4million. Of this, US$400,000 was paid in two checks

and the individual provided a post-dated check with the date 13 September 2016 for the remaining US$1million. But this check has not been found at the MMPRC and there is no record that MMPRC received this check.

The tourism ministry has written procedures on inspecting the financial standing of investors and setting acquisition costs for properties. The cost is based on the area of the property and its location. Different rates are set for different atolls. The regulations allow some leeway in setting rates based on an island’s area, lagoon, beach area and distance to the airport, and says that if an investor proposes a higher price, that price must be set as the acquisition cost. The properties leased through MMPRC were leased at a price lower than that outlined in the regulations. In nine cases, the price was reduced by a total of US$7.2million. The reasons for the reduced prices were not given. Details in the table below.

Name Actual acquisition cost (US$m)

Leased price (US$m)

Remainder (US$m)

1 Dh. Aluvifushi 0.4 0.30 0.102 ADh. Heenfaru 0.18 0.15 0.033 R. Kandoogandu and

Veyvah0.55 0.50 0.05

4 Lh. Maabinhuraa 5.08 5.00 0.085 B. Maamaduvvari 4.64 3.00 1.646 N. Medhufaru and the

small islands nearby6.49 3.00 3.49

7 Th. Olhugiri 1.12 1.00 0.128 GA. Vodamula 2.39 1.00 1.399 Th. Kalhudheyfushi 0.46 0.15 0.31

Total 21.31 14.1 7.21

Properties leased free of charge

The MMPRC leased three properties without any charge. This includes two plots of land and a lagoon.

1. The tourism ministry in 2015 leased a lagoon to a private party for the development of a resort, a yacht marina and a board yard, without a charge, on the condition that the company established a technical training center for Maldivians and provided 30 scholarships. But the agreement did not state what sort of capacity was required of the training center, the quality of the training center and the fields of study. Because of this omission, the value of the investment required from the company in exchange for the free lagoon is not clear, and allows the company to invest a much smaller sum than the acquisition cost in establishing the training center.

2. In 2010, the government leased the Nasandhura Palace Hotel for eight years to a private company, in exchange for US$800,000 as acquisition cost and another US$800,000 in CSR. This company sold its leasehold rights to another company in August 2014, with the tourism ministry’s permission.

Then the economic council decided to develop Nasandhura Palace Hotel along with the adjoining plot of land, H. Orchid Lodge, and terminated the lease hold rights on 27 January 2015. On the same day, the enlarged plot of land was transferred under the MMPRC under an agreement between the MMPRC and the tourism ministry. Then MMPRC leased the plot to the company that had previously bought its lease hold rights for a period of 50 years without any additional charges. The agreement between the MMPRC and leaser holder said the latter must establish conference halls and banqueting services and provide these services to the government under CSR. There are no other details in the agreement, such as the period for which banqueting and conference hall services would be provided to the government and if the government would have to pay or not for its events.

The tourism ministry usually charges additional fees for extending leases, but no additional charges were levied for the 50-year lease for an even bigger plot of land.

3. In 2015, the MMPRC leased a plot of land, with an area of 13,500 square feet, in Haa Alif Uligan to a foreign company for the development of a tourist hotel. The land was leased free of charge. We have received no information of this transaction, except for the agreement between the MMPRC and the lease holding company

Leases extended without additional fees

The tourism ministry amended agreements with two parties to increase the area of the leased property without any additional cost.

The MMPRC on June 8, 2015 amended an agreement made in March that year for the lease of Raa Atoll Filaidhoo to include a neighboring lagoon, free of charge, for the development of a seaplane platform.

The MMPRC on July 21, 2015, amended an agreement made in November 2014 for the lease of Meemu Atoll Uthuru Boduveli and Hurasveli to include a neighboring island, Gasveli, without any additional costs.

This practice deprives the state of additional revenues.

CSR component cancelled

Two private companies submitted a proposal for the lease of Alif Alif Mathiveri Finolhu, pledging to build water and sewerage systems on two nearby inhabited

islands in exchange. The president’s office approved the proposal and asked the tourism ministry to make the necessary arrangements through the MMPRC. However, the island was not leased according to the terms set forth in the proposal.

The companies pledged to build a water and sewerage system on Alif Alif Mathiveri and a water system on neighboring Bodufolhudhoo worth US$1.3million within two years of signing the lease. The resort development was to begin after the establishment of the water systems. However, the MMPRC asked the companies to pay US$1.3million as acquisition costs instead of establishing services on the inhabited islands. The lease agreement did not mention the services at all.

Offer letters

The tourism ministry and the MMPRC sent out a total of 102 offer letters handing out properties for the development of tourist resorts, hotels and yacht marinas, according to the documents received by the audit office. Of this, 59 properties were leased to 60 parties, with and without agreements, and acquisition costs were obtained. Some 21 parties who received offer letters have confirmed that they have not paid any fees. This office has not been able to confirm if 21 others who received offer letters made any payments.

Of the 59 properties that were leased, 53 were leased under a head lease agreement between the tourism ministry and the MMPRC. The MMPRC then signed a sublease agreement to a third party. For the remaining six properties, four islands and two lagoons, there is no record of the tourism ministry transferring the properties to MMPRC. However, the MMPRC received payment for them. The MMPRC appears to have handed out offer letters to these six properties without tourism ministry documents authorizing their leases.

The 59 properties include 43 islands, 14 lagoons and two plots of land.

The tourism ministry, via the MMPRC, leased 16 islands and 13 lagoons that had not been designated for tourism development, and sent out offer letters for other such properties.

Same property sold twice

The government in 2011 decided to sell Alif Dhaal Fushidhigga (also known as Rahdhigga) for tourism development under its corporate social responsibility program.

On January 20, 2015, the MMPRC decided to lease the same island for US$3million and obtained US$1million as acquisition cost from a private company.

In May 2015, the tourism ministry decided to lease the same island to a second company and asked for US$600,000. The company paid the amount to the MMPRC.

Fushidhigga was leased twice in 2015, when the government had already promised the island to a third party in 2011. This party contested the government’s delay in signing the agreement, and in September 2015 the court had ordered the finance ministry to do so without delay.