As with some previous investigative reports by the Commission Against Corruption (CCAC), the report on the granting of MOP212 loans to Viva Macau published last week reads as another scolding to government officials but with no practical results or actual criminal indictments.
The investigation focused on five interest-free loans totalling MOP212 million granted to the bankrupt airline Viva Macau provided by the Administrative Council of the Industrial and Commercial Development Fund (FDIC) between 2008 and 2010 as part of efforts to salvage the airline from collapse as the economic crisis raged; loans that were never repaid to local authorities.
Just this fact is already interesting, only in 2018 did the CCAC take up the investigation, after a suggestion by the Follow-up Committee on Public Finance Affairs, with the final results only revealed this year, more than 10 years since the loans were granted.
Considering the time it took for the matter to be investigated, it is no wonder that despite its criticism of government officials at the time, the corruption watchdog considered that any possible crime would have already expired anyway.
The first support was requested in 2008 after the financial crisis, coupled with high fuel prices led Air Macau and Viva Macau to seek financial assistance from the Macao SAR Government.
At the time an extra MOP1.5 billion was allocated to the FDIC to strengthen support for the SMEs, but an exception was made for Air Macau – which received some MOP215 million – and for Viva Macau.
The CCAC considers that the public servants responsible for the vetting, approval, follow-up on and supervision of loan applications by Viva Macau failed in their duties, and most of the report’s criticisms fall on deficient oversight by the FDCI Administrative Council.
The council includes five members, the Director of the Economic Services Bureau – at the time Sou Tim Peng – a representative of the Financial Services Bureau and three members from the Economic Bureau.
The report also slammed former Secretary for Economy and Finance, Francis Tam Pak Yuen, who was said to have ‘unshirkable responsibility for the outcome,’ citing his ‘careless and neglectful acts and omission.’
‘Although there was no evidence proving that the Secretary’s acts to take forward the processes of the grant of loan to Viva Macau might be considered constitutive elements of crime, the careless and neglectful acts and omissions have turned citizens’ expectation about principal officials into disappointment,’ the report concluded.
No similar harsh words are uttered for the then Chief executive Edmund Ho, with the report noting that ‘the acts carried out by the public servants and principal officials who participated in the processes were not sufficient to be deemed as constitutive elements of crimes.’
‘However, in the investigation into the vetting processes for the loans to Viva Macau, the CCAC still can find out many problems that should be taken seriously from the perspective of legislation, administrative illegality, disciplinary liability and policy and regime making,’ the report underlines.
Concerning Viva Macau and its controlling shareholder, Eagle Airways Holdings Limited, the report found that the documents provided for the loan applications were disorganised, and bank transactions and accounting information was fragmentary.
The report considers that Eagle Airways used promissory notes as guarantees, but the competent authorities had never carefully scrutinised its repayment ability, as the financial status of Viva Macau was never checked or followed up.
In fact, most of the report’s timeline for the loans is repetitive and can be summed up in just one example:
On 17th December 2008, Viva Macau, having not repaid a first MOP75 million loan, wrote a letter to the Civil Aviation Authority of Macao SAR (AACM) and requested the government to provide additional temporary financial aid of MOP40 million.
The AACM submitted a report-proposal indicating that since Viva Macau had yet to provide officially audited accounts and was lacking yearly financial information, it maintained a very negative comment on the operating conditions of the company.
Chief Executive Edmund Ho then issued an order for follow-up work to the then Secretary for Economy and Finance, who then forwarded it to the FDIC. After a report submitted by the DSE, a repayment schedule was decided, and after approval by the CE, the loan is approved in January, 2009.
Subsequently, neither the DSE, the FDIC nor the AACM followed up on the financial status of Viva Macau nor monitored the repayment situation of the company.
The FDIC wrote several letters to Viva Macau requesting the latter to submit a report that might reflect its recent financial status so that the former would have an idea of the company’s financial condition and repayment ability.
No response or report concerning the use of the loans as well as necessary financial information was provided by Viva Macau.
The same process was repeated several times until Viva Macau reached MOP212 million; although it is interesting to see that loans provided by the airline shareholders themselves were quickly repaid by the company.
In any case, the CCAC considers that there was no sufficient indication that the shareholders and executive members of Viva Macau had used contrivance to mislead the FDIC or the Public Administration so that they would grant the relevant financial aids and cause a loss of assets to the SAR.
No strong indication that the shareholders or executive members of Viva Macau willfully led to the company’s bankruptcy and maliciously evaded debts through creating false impressions of lacking the solvency for the repayment was also found.
However, it does say that the people concerned did fail to strictly abide by the law to ensure that their bookkeeping practices and commercial transactions complied with the relevant rules.
But since the offence of unintentional bankruptcy is subject to a complaint that must be exercised within three months from the declaration of bankruptcy, the issue was not pursued.
In the end, what remains is a case of a serious lack of oversight by government officials some 10 years ago, officials so intent in keeping this airline, deemed so essential to the local economy that about MOP212 million were poured into it without an assurance they could even be repaid.
Let us not forget that, at the same time, Air Macau received some MOP215 million in financial aid.
In any case, the CCAC works as a nice historical document that could maybe be used as a reference on what not to do, in a time where financial aid is also required by local authorities for a different kind of economic crisis.
Or maybe that financial support for SMEs should maybe be granted to actual SMEs.