ICAC probe unveils $190m tendering fraud in HA projects
2000-9-15
Eight persons were arrested by the ICAC yesterday (Thursday) for allegedly defrauding at least $190 million from the Housing Authority (HA) through manipulating the tendering process in connection with the supply and installation of metallic gatesets for HA's housing projects.
Amongst those arrested are seven metallic gatesets suppliers approved by HA, and one employee of a gateset maufacturer. They were suspected to have offered bribes to employees of various main contractors to assist in the scam.
It is HA's policy that the main contractors for the construction of superstructures of housing estates developed by HA must use suppliers pre-approved by HA. The main contractors will usually select the pre-approved supplier for a particular project thro ugh tendering.
The ICAC had received a corruption complaint alleging that employees of various main contractors might have received advantages to turn a blind eye to a scam operated by nine approved suppliers to rip off the main contractors of millions of dollars.
Investigations revealed that since April 1997, whenever the main contractors invited tenders for the supply and installation of gatesets, the nine approved suppliers would meet together to agree on the "lowest" bidding price to be put up and decide who sh ould be the successful bidder.
It was believed that for every project, the suppliers would take turn to submit an agreed "lowest" tender price, which was in fact a normal price inflated by 60%.
All the other eight suppliers would submit a bid higher than this "lowest" tender.
It was also suspected that some employees of various main contractors had helped cover up the scam after taking bribes from these suppliers.
Investigations also revealed that after payment was received from the main contractor, the successful bidder would take back the "normal" contract fees, i.e. the production cost plus a reasonable profit margin.
The "surplus" or the 60% inflated amount would be deposited into two bank accounts held by two shelf companies.
The group also allegedly agreed that when the "surplus" in the bank accounts reached $4 million, the money would be taken out and equally shared amongst the nine suppliers.
Inquiries also revealed that between November 1997 and March this year, the nine suppliers had successfully secured from HA main contractors 83 gateset contracts worth $470 million through such fraudulent means.
It was believed that the accumulated "surplus" respectively marked up by the nine suppliers during the said period amounted to about $190 million.
The arrestees, aged between 39 and 58, will be released on ICAC bail later tonight. The ICAC's inquiry into the corruption allegation is continuing.
Amongst those arrested are seven metallic gatesets suppliers approved by HA, and one employee of a gateset maufacturer. They were suspected to have offered bribes to employees of various main contractors to assist in the scam.
It is HA's policy that the main contractors for the construction of superstructures of housing estates developed by HA must use suppliers pre-approved by HA. The main contractors will usually select the pre-approved supplier for a particular project thro ugh tendering.
The ICAC had received a corruption complaint alleging that employees of various main contractors might have received advantages to turn a blind eye to a scam operated by nine approved suppliers to rip off the main contractors of millions of dollars.
Investigations revealed that since April 1997, whenever the main contractors invited tenders for the supply and installation of gatesets, the nine approved suppliers would meet together to agree on the "lowest" bidding price to be put up and decide who sh ould be the successful bidder.
It was believed that for every project, the suppliers would take turn to submit an agreed "lowest" tender price, which was in fact a normal price inflated by 60%.
All the other eight suppliers would submit a bid higher than this "lowest" tender.
It was also suspected that some employees of various main contractors had helped cover up the scam after taking bribes from these suppliers.
Investigations also revealed that after payment was received from the main contractor, the successful bidder would take back the "normal" contract fees, i.e. the production cost plus a reasonable profit margin.
The "surplus" or the 60% inflated amount would be deposited into two bank accounts held by two shelf companies.
The group also allegedly agreed that when the "surplus" in the bank accounts reached $4 million, the money would be taken out and equally shared amongst the nine suppliers.
Inquiries also revealed that between November 1997 and March this year, the nine suppliers had successfully secured from HA main contractors 83 gateset contracts worth $470 million through such fraudulent means.
It was believed that the accumulated "surplus" respectively marked up by the nine suppliers during the said period amounted to about $190 million.
The arrestees, aged between 39 and 58, will be released on ICAC bail later tonight. The ICAC's inquiry into the corruption allegation is continuing.