18 January 2013

The PAP clown council political funding reform show

As the author of Illusio, I have only one operating principle:  the priestess of Ise never opines or offers analysis proffered elsewhere. Weeks or months after the eruption of a cause celebre, find much to say that no-one has pointed out, or an angle from which no-one has approached. It is not to keep a dead issue alive but to examine if consensus has been manufactured, a status quo hurriedly agreed upon, a veil and a gag brought down to shutter the eyes, the ears, the mind of a public unaccustomed to inquiry.

Over the last 3 posts, we have offered a thorough (though not exhaustive) analysis of the PAP-AIM town council clown show. No other blogger so far has walked you, dear Reader, step-by-step through this tangled web. It is one thing to say there is a conflict of interests; it is yet another to show you where that conflict lies, which part of it is legally actionable and which part merely unseemly, and at which point in the procurement process that conflict arose.

From a legal and procedural analysis of the PAP clown council-AIM scandal in our previous 2 posts, we ascertain that:
1. It is not in fact illegal for the PAP to own, directly or indirectly, the company AIM. It is also not illegal for AIM to be 'owned' indirectly by a different entity.
2. Both AIM and the PAP are not legally obliged to indicate to the general public the status and details of ownership. (*AIM would have to disclose this to their appointed auditors, nonetheless.)
3. As it stands, the law is silent on whether the conflict of interest between AIM and the town councils should have been reflected.

Nevetheless, Minilee has called for the Ministry of National Development to investigate fully the clown counil-AIM deal to ensure that 'trust in the system' is maintained.

Decoding Minilee, it should be apparent to Singaporean observers that for all the legalistic posturing by Teo Ho-pin, whether the clown council-AIM deal was technically legal (arguably true) or whether international standards of corporate governance had been adhered to (arguably false, see our immediate previous post), the mere fact that the clown councils engaged AIM to be a middleman to deal with the previous contractor NCS is enough to compromise trust in the system.

Perhaps people will eventually find the eloquence for their supposed disquiet and ask: Why do our laws permit a political party to financially back companies so that these companies accrue political advantage in financial dealings?

Follow the money trail

Last post, we left off with the question: What happens to the money AIM earns from its contracts with the town councils? Will the Ministry of National Development even investigate that?

In a procurement audit involving potential conflict of interests, it is a general rule to ask where the money goes. While Teo Ho-Pin is not a shareholder or director of AIM and Chandra Das and his co-owners and directors at AIM are not officials or employees of the town council, it remains that all the parties involved in the procurement deal are members of the PAP.

We have argued that Dr Teo issued a tender for a contract that was financially unfeasible and did not make business sense, and that AIM was awarded the contract on the sole merit that it was a PAP-owned or PAP-backed company. In other words, AIM accrued business advantage from its political affiliation to the extent that it could be the sole bidder, be a dormant company that had no public track record, put in a late bid. Yet it won the contract because Dr Teo, unlike most other Singaporeans, knew the political affiliation of AIM, and said that was sufficient cause to award the contract to AIM.

But what happens to the money AIM earns from its contracts with the town councils? On his part, Das acclaims that he doesn't take a single cent as salary, share dividends, or directorship fees from his position in AIM. That is curious until we read PAP's party constitution, which states in Article X:
No member shall except for professional services rendered at the request of the Central Executive Committee, receive any profit, salary or emolument from the funds or transactions of the Party.
We hypothesise that as party members who are shareholders and directors of a company backed by a letter of guarantee by the PAP, Das and his party colleagues, former and present shareholders and directors likewise, are subject to this stipulation.

But where does the money go to then? Who does it belong to? Does it sit forever in Action Information Management in trust of the People's Action Party? Or does it go eventually to the People's Action Party?

Note that if the earnings of AIM go back to the PAP, then it may be argued that it is Teo who has committed a legally actionable conflict of interest. By awarding the contract to AIM, which he knows to be PAP-backed, he has made it possible for AIM's income deriving from the contract to be transferred to the PAP (of which he, Das, and the AIM shareholders and directors are members), thereby awarding financial advantage from the deal ultimately to the PAP and its members.

Political financing reform drastically needed

A reading of the Political Donations Act affirms the extensive strictures limiting donations to political parties. There are limits to how much money a political party may receive from companies and other organisations, the nature of companies. Parties are required to account to minute detail the donations they receive each year.

Yet as the PAP clown council-AIM affair illustrates, there are sufficient loopholes in the laws of Singapore to allow political parties to 'own' private companies indirectly, and the incomes derived from these are, as a result of lacunae and silences in the law, not subject to scrutiny. Further, we now know that as written, the laws do not require political parties to declare even if they do indeed own indirectly private businesses, much less clarify on the legality of such arrangements.

To regain public trust in the system, a relook at political financing regulations needs to be performed. We believe that the Ministry of National Development does not possess the mandate and has not been tasked to examine this particular issue.

I suggest interested readers do their own research on the international legal norms concerning political ownership of private corporations.

The clown council-AIM affair is not a purely administrative matter; the conflict of interests ultimately rests on whether undue political advantage was accrued by AIM and whether undue financial advantage was accrued by the PAP. If this were illegal in the eyes of the law, it stands that there can be no damage to the people's trust in the system. The damage to the people's trust in the system stems from the possibility that such conflicts of interests are apparently not illegal as the law currently stands.

Hence, I call upon the president of Singapore to convene an independent board of inquiry chaired by the Auditor-general of Singapore and the Registrar of Societies to investigate the issue, and not the MND. Only these two regulators may request for a full and public account from the PAP of all private enterprises it directly owns or indirectly backs and the incomes derived thereof, and to ensure that these incomes are indeed reflected in the accounts of the PAP, and do comply with the Political Donations Act, (I)(3).

With the surprise revelation of AIM's ties to the PAP, the PAP's refusal to disclose whether it owns other companies, and AIM's refusal to disclose the details of other financial dealings it may have had in the past, it appears there is a legal loophole for a political party to own, however indirectly, private enterprises without traditional transparency and accountability mandated elsewhere in the law. Several lacunae in the law have coalesced such that these standards of transparency appear suspended when it comes to the very special case of political financing, where a party owns private enterprises.

Singapore's elected parliamentarians and other politicians must take this issue seriously and urge for a new Political Financing Bill that will clarify these blind spots currently existing in the law, and to harmonise Singapore's political financing regulations to internationally-accepted norms.

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